Taxi reform a nice try

The taxi regulation guideline released by the Beijing municipal authorities is a small step toward properly managing the controversial industry.

The core of the guideline is that the number of taxies will be increased to meet the increasing demand in the capital.

Moreover, it stipulates that taxi companies in the city will no longer have permanent licenses; instead, they will be subject to reappraisal every six years. It also said the profits of taxi companies will be controlled.

However, the guideline, even if it is well implemented, may find it difficult to break the current deadlock in the sector.

Taxi drivers have complained about the high fees they have to pay their companies - 3,000 yuan ($480) a month in Beijing - low pay and long working hours. Many of them opt not to work during the rush hours, when the serious congestion in Beijing makes driving unprofitable for them. The public, meanwhile, have complained about the increasing difficulty of hailing a cab when they most want it.

Beijing is not alone in facing such problems, and many other cities are also seeking ways to improve the lives of taxi drivers and passengers.

Seen from the latest guideline, Beijing has sought to use the "visible hand" of administrative power to strengthen the government's management of taxi companies and will increase the number of cabs to solve the shortage problem. But this may have unwanted consequences.

For example, it is almost impossible for the government to determine how many taxies the market really needs.

The government has better options for breaking the impasse.

Due to the strict government control of the taxi market, it is virtually monopolized by a relatively small number of companies.

Studies have found that deregulation would result in higher industrial efficiency; that is, if the government allows more companies to operate and allows more individuals to become independent cab drivers, drivers would no longer have to pay such high contract fees to taxi companies and more operators would enter the sector to fill the supply gap.

Encouraging more companies and more independent taxi drivers would benefit both the drivers and the public. In the meantime, Beijing and other cities facing similar problems should implement the guidelines and assess the results.

(China Daily 04/18/2013 page8)