Taxi or not? Vietnam debate rages over Grab status

By Nguyen Hoai, Dat Nguyen   October 20, 2018 | 10:08 pm PT
Taxi or not? Vietnam debate rages over Grab status
A Grab motorbike helmet is displayed during Grab's fifth anniversary news conference in Singapore June 6, 2017. REUTERS/Edgar Su
Transport authorities and taxi associations have reiterated that ride-hailing firm Grab should be treated as a taxi service, but experts disagree.

Nguyen Cong Hung, vice chairman of the Vietnam Automobile Transportation Association (VATA), said at a recent meeting that it was incorrect to identify Grab as an electronic contract service firm.

Hung said that legal experts have affirmed that Grab and other ride-hailing services are taxi services, and ordering a car service via a phone call or a phone app are only superficially different modalities.

While some people believe that calling Grab a taxi service will hinder the development of technology, Hung disagreed.

“Identifying a car service as traditional taxi or technology taxi will guarantee authorities management power and fairness in terms of their responsibilities. Whichever service applies technology will have higher profits,” he added. 

Echoing Hung, chairman of the Ho Chi Minh City Taxi Association, Ta Long Hy, said that any service which sets transport fees collects money and spends a large amount of money on discounts is a transportation service, and not merely a software company.

Hy said that all car services that are 9-seaters or lower are taxi services in nature. “The Ministry of Transport should not create an exclusive playing field for a service that is basically a taxi service.”

He proposed that 9-seater or lower car services, whether Grab or traditional taxis, be identified by a mark on their license plates or a larger registration label on the car’s windshield. 

Earlier this month, the Transport Ministry released the latest draft of a transportation management decree under which under 9-seater car services be registered as taxi firms before they can apply ride-hailing technologies.

This means that Grab and other ride-hailing firms would have to register their services again as a taxi business and comply with corresponding legal responsibilities regarding their operating licenses, drivers’ profiles and tax duties.

Should the decree be passed, Grab and other ride-hailing cars will have to put a sticker labeled “taxi” on their windshields and carry a taxi legend on the top.

The draft goes against many experts’ requests to treat ride-healing services as a new business model that is different from traditional taxi service.

Nguyen Dinh Cung, director of the Central Institute of Economic Management (CIEM), had told VnExpress earlier that firms that primarily used software cannot be called a transportation business.

Cung said that the government should encourage new investment forms or business models with an open and fair environment in keeping with Industry 4.0 trends.

Lawyer Truong Thanh Duc said that the Ministry of Transport has been making changes with recent drafts without having a consistent viewpoint. 

The fact the ministry wants to identify ride-hailing services as taxi firms is against the government’s policy of prioritizing technology development in the Fourth Industrial Revolution, he told local media.

Marketing expert Do Hoa said that Grab and other ride-hailing services should be managed under a new law specifically written for technological services.

Traditional regulations related to taxi firms are not appropriate for Grab, as it is not a transport company, he said.

The heated debates and struggles between ride-hailing cars and traditional taxis have not cooled after the exit of Uber from the Southeast Asian market in March. Taxi firms have continued to complain about the unfair competition they are facing.

They have also joined hands to fight the market onslaught of ride-hailing firms. 

Grab has consistently been denying that it is a taxi firm, saying it only provides technological solutions to transport services.

The debate over Grab’s status as transport company is hardly new in Vietnam.

Vietnam’s top taxi company Vinasun sued Grab for $1.84 million in losses, citing “unhealthy competition”.

In Vietnam, local cab firms like Mai Linh and Vinasun have to pay value added tax (VAT) of 10 percent and corporate income tax of 20 percent, while Grab only have to pay some 3 percent.

The ride-hailing market in Vietnam has seen new entrants after Uber’s departure, including Fastgo and GoViet, which is an affiliate of Indonesia’s Gojek.

Current market dominator Grab has expanded its services to include GrabFood, a food delivery service, and GrabCar Business, targeting the corporate sector.

These moves pose further challenges for long-standing taxi firms like Mai Linh, Taxi Group and Vinasun.

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