Tuesday, 23 February 2010

KL’s taxi service and the New Economic Model

WHAT has Kuala Lumpur taxi service got to do with the New Economic Model? If we consider a number of issues relating to taxi services, we could see its relevance to the economic model, which would be made public next month. Among the issues are:


•    It is a component of the service sector;
•    There are issues relating to the business model applied by the industry;
•    Subsidies and the green economy;
•    Effectiveness of policy implementation; and 
•    People's attitude towards change

Taxi service is definitely a component of the services sector, the sector that is supposed to propel Malaysia into a higher income economy. While the key word here is service, the state of affairs of the industry, particularly in Kuala Lumpur, is less than satisfactory.


If we observe the behaviour of taxis around the Kuala Lumpur City Centre (KLCC), the icon of the city and the country, we could see something that would not make us, as a country, proud. Taxis waiting by the roadside where they are not supposed to, travelling slowly at the side roads around KLCC with the hope of being hailed by shoppers (perhaps this is the only place where they do not speed) and picking up passengers in places where they are not supposed to.

The problem of overcharging is something which we hear frequently, especially involving visitors from other countries. Ask any expatriate friends, and they will share with you how many times they were charged exorbitantly whenever they use taxi services in the city.

If service is the sector that will boost our economy, why is it that basic services like taxis cannot achieve an acceptable standard? Could it be that the business model applied by the industry is a reason for the taxi service being in its present state?

Taxi permits are mostly issued to companies, which in turn lease them out to drivers for daily rental. Although the reason behind such practice is to ensure high quality service, the practice inherently transfers the risks substantially to the drivers. 

Each driver has to earn a minimum income just to enable them to pay the daily rental before he starts to earn his "salary". The more permits owned by a company, the higher the income it would earn. Such arrangement do not work; otherwise, we would not have been hearing complaints about taxi services.

Is it not time to re-invent the business model so that risks and rewards are equally shared by the companies and the drivers?

To ensure taxi service is offered at an affordable rate, the price is controlled by the government. At the same time, the price of gas is also subsidised to reduce operating cost. Could this be a factor why the service level is not satisfactory?

Does the approved rate enable taxi drivers to earn the level of income that allows them to have a reasonably comfortable life in the city? If the rate is too low, we should not be surprised if the drivers start to apply all the tricks in the book to earn extra revenue.

Who ultimately pays the price of the subsidised gas? Although directly the subsidy is borne by Petronas, the oil company that is ultimately owned by the rakyat. The last thing that we want is a system that subsidises service providers who earn sub-optimum income and provide sub-standard service. Looks like it's a lose-lose arrangement!

A less then desirable taxi service would force people to use private transport, thus increasing our carbon footprint. This is something which will be more important going forward.

The prime minister had made a pledge in Copenhagen that we will reduce our carbon emissions. Could we achieve the target if our public transport is not efficient and private transportation remains at the level it is now, if not growing further in the future?

The issue regarding taxi service in Kuala Lumpur is not new. The question here is who is responsible and what happens to the people in the department which is supposed to solve this problem? Are they, at the minimum, not embarrassed as the quality taxi service deteriorates over time?

The situation around KLCC should be a clear indicator of the worsening situation and the failure of the relevant agencies in doing their work. Just imagine the consequences of failure if they were to work in the private sector.

While Kuala Lumpur citizens have accepted their fate and have to live with the existing taxi system, any attempt to shape our economy would require people to change. If change could not be instituted at a small component of the service sector, such as the Kuala Lumpur taxi services, the risks of resistance in larger and difficult components should not be underestimated.

This should be the concern of our economic planners in rolling out the new economic model.

I look forward to hopping into any taxi anywhere in Kuala Lumpur and being driven to any destination and charged the exact price as shown by the meter.

This article is also published on the Edge Malaysia website here:

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