6 Minutes To Read

Political Economy Analysis of the Ride-Hailing Platforms in Yangon: The Case of Grab

6 Minutes To Read

Thu Htet explores the political economy of ride hailing platforms in the taxi industry.

Featured image courtesy of Guerric, from Flickr Creative Commons

The recent development and penetration of ride-hailing platforms in Yangon has occurred due to a number of particular causes: the unregulated taxi industry, inconsistencies in taxi services and fares, and the liberalization of telephone sim cards and an increase in smartphone penetration, beginning in 2013. In Yangon, the taxi industry had seen a significant increase in the number of taxis since 2011, when the government lifted several cars import regulations, reducing taxes and allowing car substitution. Taxis were mostly unregulated in terms of services and fares; therefore, taxi fares were set by haggling based on several factors such as rush hours, heavy rain, passenger’s urgency, etc. With the regulation of taxis seen as a business opportunity, local ride-hailing platforms such as Hello Cab and Oway Ride began operating in the city in 2015 and 2016 respectively, but with limited success and penetration. It was after the entry of Grab and Uber, both multinational companies (from Singapore and the U.S.), that the ride-hailing platforms became more popular. When the latter retreated from Myanmar by selling its Southeast Asian Market to Grab in 2018, Grab remained the dominant ride-hailing platform in Yangon. This not only produced a market monopoly but it also produced, what I call “new forms of contested relationships” – between different stakeholders in the taxi industry, between Grab and local taxis, and between customers and other ride-hailing platforms, and the role of the government within the industry.   

With Grab the only remaining multi-national company in Yangon after Uber left the market, the case of Grab is unique in terms of its advanced technology, the nature of its business operation, and its capital when compared to other ride-hailing platforms in Yangon. Grab has been successful in operating in Myanmar; it is nowadays expanding its services—from taxis to three-wheelers, business rents and food—and also expanding its reach geographically—to other cities and tourist destinations such as Mandalay and Bagan. Despite its success in business operations and in changing how we use technology to commute, Grab, however, has also produced new forms of Yangon’s political economy landscape and contested relationships. This essay would focus on this latter point, asking: “How did Grab change Yangon’s political economy landscape and create new contested relationships?”

New Forms of Contested Relationships, Part I: Partnerships between Grab and Local Taxis

Grab officially entered Myanmar and the Yangon market, specifically in July 2017 after a successful four-month trial. Within this trial period, more than 5,000 taxi drivers registered with Grab and the company claimed that it saw their average income increase by 30 percent. In terms of registration, Grab partnered with existing taxis instead of importing new cars and drivers as full-time employees, as Yangon has long been a city congested with an excessive number of taxis and cars. This means that existing taxi drivers had the freedom to choose whether they would partner with Grab. The relationship between Grab and taxi drivers, therefore, is one of partners, not as employers and employees. As the registration process was easy, the number of taxis choosing to partner with Grab grew rapidly. Therefore, in Yangon, ‘Grab drivers are not born; they are made very quickly.’

As Grab partners with already existing taxi drivers, Grab is not in a position to directly compete with local taxis. Instead, it is up to the choice of local taxi drivers whether they partner with Grab to use its platform to find passengers. Moreover, despite their decisions to register and partner with Grab platform, those drivers are not entitled to drive exclusively for Grab. They can either drive for Grab passengers or find passengers on-road who are not using ride-hailing platforms. In other words, they have freedom to switch between Grab driving and regular driving.

In summary, already existing taxi drivers can choose whether to partner with Grab or not, and also whether to drive for Grab or to find passengers on-road, even if they are partners with Grab. The latter condition is more controversial – as, from Grab’s perspective, they do not have a full control over their drivers’ intent to drive for Grab platform.

New Forms of Contested Relationships, Part II: Grab’s Customer Acquisition and Commission Fees

Grab’s main business strategy is to attract more people to hire a taxi through their platforms by providing incentives such as promotions, discounts and redeemable rewards, as well as reducing concerns over safety and security of riding a taxi, especially among women passengers and others who use taxis at night, by tracking journey by GPS. Another pain-reducing incentive for passengers is that the fare price is shown on the screen before a taxi is booked, as fare negotiation and excessive charges have been one of the biggest concerns for taxi passengers. These incentives, among others, ultimately attract more passengers to use the Grab platform.

As more and more passengers are using the Grab platform for rides due to such incentives, drivers have become more willing to drive for Grab. Grab charge 20 percent of each ride’s fare as a commission fee to drivers. Drivers have to bear their own costs in car rental fees and petrol fees, and so, as a result, commission fees are additional burdens. Drivers often insist that a 20 percent commission fee is ‘unfair’ and ‘exploitative’, feeling that the portion of fares that is absorbed by Grab (the commission fees) should be theirs. While commission fees are ‘profit’ for Grab, they are ‘livelihoods’ for taxi drivers.

As a result, some local taxi drivers have expressed their dissatisfaction towards Grab by indirect means, especially through social media. Another way of expressing this frustration is through passengers: with drivers cancelling the trips booked by passengers if the destination is unfavorable for the driver or complaining to passengers directly. Some drivers try to save money by not turning on air-conditioning to save petrol, although air-conditioning is mandatory according to Grab. This then creates customer dissatisfaction and prompts complaints to Grab, which produces a vicious cycle and an additional set of contested relationships in the taxi industry of Yangon.

New Forms of Contested Relationships, Part III: Unfair Competition between Grab and Local Ride-hailing Operators

Local and joint-venture ride-hailing operators such as GetRide, Hello Cab, Oway Ride and OK Taxi complain about Grab’s business operation as amounting to ‘unfair competition’. Some were already operating in Yangon before Grab arrived. As one example, one latecomer platform, GetRide, positions itself as a ‘local entrepreneur and SME entirely run by locals,’ however, they find it difficult to gain more market share and compete with Grab due to the latter’s high capital investment and technology, as well as the incentives provided to riders and passengers. GetRide, as a startup, cannot afford promotions and rewards and so they cannot easily expand their market. This, in turn, makes taxi drivers less likely to use their platform as there are very few passengers available. Without the ability to attract passengers and drivers, local platforms cannot gain much profit and cannot invest in the development of their businesses. The phenomenon discourages local businesses and entrepreneurialism by putting them under pressure and unfair competition.

New Forms of Contested Relationships, Part IV: The Role of the Government?

As a result of these dynamics, local ride-hailing firms as well as taxi drivers have consistently urged Yangon Regional Government to impose rules and regulations so as to create a level playing field among both local and foreign firms. Local transport unions have been skeptical of Grab’s claims to transparency, its taxation, and especially its commission fees. The Yangon Division Transport Workers’ Union urged the government to set laws and by-laws for fair competition between international and local ride-hailing companies. Grab’s pricing model is also heavily criticized as a factor in the unfair competition, as when they do promotions, Grab’s price is lower than the market price. Taxi drivers, themselves, insist that while international investors like Grab receive tax incentives from the government to invest in the city, they simultaneously exploit taxi drivers who depend on the platform for their livelihoods.  Besides, without a level playing field, the situation also discourages local Small and Medium Enterprises and entrepreneurs as well as other investors to operate in the city.

Conclusion

Grab’s entry and operation in Yangon paints a partial picture of an overall transformation of Yangon’s political economy landscape due to globalization, democratization, and liberalization. Although liberalization and the welcoming of global businesses fosters economic growth, structural transformations can equally result in negative results for some stakeholders, creating unfair competition and contested relationships in this particular case. Urban planners and policymakers should, therefore, be aware of such conflicting dynamics and provide win-win policy responses to balance economic development and socio-economic equity in the city.

Thu Htet is currently M.Sc. candidate in Urban Strategies at Chulalongkorn University. He received his first-class bachelor’s degree in Political Science from University of Yangon in 2019. This essay is partially adapted from one of the author’s research essays submitted for credit fulfillment for the Master’s degree. The views expressed in this essay are solely of the author’s own.