Views in Hong Kong can change quickly. After years telling people outside Hong Kong how convenient and affordable its taxis were, I returned to a fierce debate over whether our taxis offer poor service and whether Uber can shake up a staid system. I wonder if those complaining have tried getting a taxi in the United States or India recently.

Uber's entry into a new city follows a clear pattern. Uber operates - not always entirely legally - in a city and builds a customer base. When it runs into regulatory trouble, its supporters argue that current taxi services are monopolistic and inadequate - a problem that, coincidentally, can be solved by allowing Uber to operate. Eventually, Uber's significant and usually affluent customer base forces governments to change their policies.

Much of the discussion about Uber centers around, well, Uber. Uber is seen as the problem and the solution. For its supporters, Uber's inability to operate in Hong Kong is the problem, solved by legalizing its operation; for its critics, Uber's disregard for regulation is the problem, solved by barring its operation. This focus misses the underlying issue. Hong Kong's taxi services are good compared to those of most other cities, and evidence of dissatisfaction is anecdotal. Nor is it that Hong Kong needs to accommodate the largely undefined "sharing economy".

Instead, the issue is how we best reform this public service to ensure that all stakeholders - passengers, drivers and wider Hong Kong society - benefit. It will be better for the Hong Kong government to implement rational change itself rather than be forced to change by a foreign corporation.

We need to think about what we want a changed taxi service to achieve. One clear goal is to ensure there are enough taxis on the roads to allow most consumers to hail one with little fuss. The current system of taxi licenses restricts the supply of taxis, meaning it cannot increase to meet demand.

While legalizing Uber would put more cars on the roads, such a "straightforward" solution would not achieve other goals. First, Uber is not necessarily a better deal for drivers, for instead of paying "rents" to the license owners they would still lose a sizable part of their fares to Uber as commission. Second, there is no way to ensure a minimum level of service. Uber hopes their internal rating system will weed out poor drivers, but, from the government's perspective, there can be no legal sanction against things which are now sanctioned, like refusing a fare or discrimination. Finally, and most importantly, abdicating the taxi fleet to Uber would mean losing government oversight over the taxi fleet. Uber maintains that it merely connects riders and drivers, and so has no oversight. Thus, if the taxi system is run by nominally independent drivers, we will be unable to regulate taxis to reduce pollution and congestion.

The first part of the solution is to change how taxi licenses are granted. If, essentially, drivers can receive a license for free so long as they follow certain standards, more drivers can act as independent operators. Taxi drivers could thus keep more of their income without hurting the consumer. This would also preserve government regulatory control, meaning the government could continue to regulate efficiency and service standards for the taxi fleet.

Uber is unnecessary even when looking at convenience. There is actually very little Uber does that is really "unique". The government or another local organization could develop a service that handles booking, navigation and payment, and tie this to a dedicated device given to taxis upon receipt of a license. This would also provide tighter monitoring of service standards, through centralized oversight of meters and payment. A model for this kind of government service already exists in Urbtix, whose operation is actually run by the Leisure and Cultural Services Department.

Expanding taxi licenses is admittedly easier said than done. Taxi syndicates use licenses as investment vehicles, and so do not want to see their value drop. However, taxi syndicates need to realize that the current taxi license system is unsustainable. One way or another, change is coming. Even if Uber's activities are suppressed now, the opportunity for arbitrage ensures that Uber, or another company, will try the same thing. Sooner or later, these services will be de facto legalized through sheer weight of numbers. Government reform can at least ensure that a new taxi system suits the interests of Hong Kong, rather than the interests of a private US company. If that is not enough, then syndicates should remember this: The government can compensate syndicate leaders for their losses, while eventually caving in to Uber will give them nothing.

An opportunity exists for the government to create an expanded license regime that preserves government oversight and keeps profits within Hong Kong. This opportunity will not exist for long.

The author is a researcher working for the Global Institute for Tomorrow, a Hong Kong-based think tank.

(HK Edition 09/23/2015 page9)