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Sri Lanka Uber driver calls for protectionism, lauds regulatory capture

Oct 16, 2017 06:39 AM GMT+0530 | 12 Comment(s)

ECONOMYNEXT - In a remarkable reversal of roles, an Uber driver in Sri Lanka has called for domestic protectionism and lauded alleged regulatory capture, in a country where many businessmen lobby to exploit consumers with state interventions and import duties.

"Uber is destroying the taxi market in Sri Lanka," proclaimed a blogpost on medium.com.

Though not a new claim, the post was not from an ordinary taxi driver, hit by cheaper and better services from the US ride-sharing service, but an occasional Uber driver named Sanjiva Weerawarana.

The blogpost is an interseting example of how the special interests drive policy in Sri Lanka and how easily consumers can be exploited in the country, through protectionist narratives, says EconomyNext's columnist Bellwether.

Though an ill-educated rural vote base is blamed for the ills of the country, anti-poor policy which tend to be anti-free market and anti-competition as well, is driven by a mostly English speaking urban elite, says Bellwether.

Weerawarana railed against a new service called UberZip, a service cheaper than the ones currently offered in Sri Lanka

He took offence at Uber trying to reach out to people who were too poor to afford the existing price point.

"… [U]nless UberZIP is a synonym for tuk tuk (a three wheeler taxi found in Sri Lanka), this is simply lying or a way to bring Uber to a market who wants even cheaper," he wrote.

After taking a ride on an UberZip, he calculated that the UberZip driver got 383 rupees net, after paying a 25 percent commission to the ride sharing service for a half hour trip of 10 kilometres.

"This is beyond crazy," he commented.

He said people pay Tuk Tuks as much as 40 to 50 rupees per kilometre, which showed more money could be gouged from customers.

He speculated that the owner of the taxi probably made a loss while the driver got too little money.

There was no clear explanation why the owner would operate at a loss continuously, if he had a better thing to do with his car.

Weerawarana then took a different tack, saying Uber was running at a loss and it was targeting PickMe, a three wheeler taxi ride sharing company.

"It appears that Uber is trying to run its primary competitor in Sri Lanka, PickMe, to the ground. Uber of course has deeper pockets and can keep running at a loss," he wrote.

Weerawarana did not make it clear whether Uber was running at a loss with or without a 25 percent commission or whether a higher commission was needed to make Uber profitable.

In some markets Uber operates its own taxis to supplement independent drivers or gives loans.

Weerawarana declared that cheaper prices was "organized crime against legitimate business in Sri Lanka."

He called for domestic protectionism. It was time he said, for the state to intervene and bring price controls.

Not price caps, hurting drivers as advocated by some, but price floors, which will hurt riders instead.

He referred to an alleged incident of regulatory capture in Sri Lanka's telecom sector where the competition was stifled and incumbents protected.

"Some years ago when Airtel was going after the Sri Lanka mobile market, our Telecom Regulatory Commission put a rule saying no one can sell intra-operator calls below Rs. 1/min and inter-operator calls below Rs. 2/min," Weerawarana wrote.

Weerawarana alleged that the regulatory capture occurred at the behest of an incumbent.

Fortunately by the time of the incident of regulatory capture - a serious governance failure seen in hampered markets - complacent operators had to shave some of their fat, shed excess staff, and give some benefits to consumers.

Weerawarna expressed fears that an Indian firm would come and further disrupt the taxi market in Sri Lanka.

In Sri Lanka Uber has not expanded as fast as in other market, analysts say, because there was a free market in taxis, which had evolved rapidly.

Uber grows fast in countries with potential for 'regulatory arbitrage' where taxis are licensed by the state and there are fees or entry barriers, keeping costs high.

However many Sri Lankan businesses routinely call for protection from foreign competition and exploitation of customers with import duties has become the name of the game.

The concept of consumer sovereignty is unknown in Sri Lanka.

Many in Sri Lanka see no problem with either economic nationalism or state intervention, which originated in the West and saw its heights in Eastern European fascist-nationalist states.

Protectionism and nationalism in Europe was propagated by an articulate urban intelligentsia, and a rural base who cannot see fallacy and danger of such arguments then follow it.

In this decade the phenomenon is seen happening again in Trump's America.

However economist philosophers have pointed out that interventions in domestic business inevitably lead to the targeting of foreigners. The hate then turns to minorities, who also do not belong.

"A nation’s policy forms an integral whole," explained Ludwig von Mises, an economic philosopher who saw how Eastern Europe and Germany in particular, went from interventions to protectionism and to Nazism, writing over half a century ago.

"Foreign policy and domestic policy are closely linked together; they are but one system; they condition each other.

"Economic nationalism is the corollary of the present-day domestic policies of government interference with business and of national planning, as free trade was the complement of domestic economic freedom."

"In a world in which people have grasped the meaning of a market society, and therefore advocate a consumer’s policy, there is no legal discrimination against Jews.

"On the other hand, in a world of interventionism only a miracle can in the long run hinder legal discrimination against Jews.

"The policy of protecting the less efficient domestic producer against the more efficient foreign producer, the artisan against the manufacturer, and the small shop against the department store and the chain stores would be incomplete if it did not protect the “Aryan”against the Jew. (Colombo/Oct16/2017 - Corrected - name of blogger Sajiva Weerawana)


 

12 Comments

  1. Krishan October 21, 11:31 AM

    Ha ha. I also read the post. I think this economynext has been too kind in only highlighting the contradictions in taxis. What about Ebay?
    Surely ebay does not need cheap open source software? It can bear a higher price, like people pay more for tuk-tuks?
    And what about venture capital funding? How long did it take for WSO2 to make profits by selling cheaper open source software? Whose deep pockets helped?People in glass houses shouldn't throw stones.

  2. Ratne October 20, 05:56 AM

    We need more economics education in the country. Also people need to learn how to reason things out. Because we are taught rote-learning in school, we tend to believe anything people say.
    Taxi's are not operating in a vacuum. If taxi prices fall, more people will use them. This is what happened with three wheelers. People will shift from buses to three wheelers or to Uber Zip.

    If there is no case for UberZip it will die down.

  3. Niroshan October 20, 05:43 AM

    I went through the blog. It is not UberZip drivers who take business away from genuine taxi drivers, but part-timers who are not bothered about investment returns. For a part-time driver, not just Mr Weerawarana the car is a sunk cost.
    In effect they are ones who are 'subsidizing' Uber. Mr Weerawarana may be driving for fun, but the economics are the same. Not that there is anything wrong in it.
    It will increase supply keep prices down and get more people to travel in taxis.

  4. Nimal October 19, 10:43 AM

    I am a bit puzzled. The day job of the Uber driver is a separate issue. If the idea lacks logic it does not matter what the perso does at other times.
    There is relevance in this sense.

    If he exports to other countries, using free trade, (helping US customers get better or cheaper services, may be disrupting the mall system) why shouldn't our people get the same benefit?

  5. Tharaka October 19, 10:27 AM

    Your inability to identify Dr. Sanjiva is evidence enough of your understanding about Sri Lanka. Your know nothing economynext

  6. Dimple October 17, 02:38 AM

    Lol, That Uber driver is featuring on your own Magazine too. http://echelon.lk/home/sri-lankas-software-future/

  7. K- October 16, 02:02 AM

    Sri Lankan Politics in Uber? For your next headline : Uber gives up on yet another country in Asia

  8. Nimal October 16, 01:47 AM

    The budget taxi guys should have complained when Pick Me came. They should have said Pick Me investors have deep pockets and are running losses for such as such a period therefore the are killing us

  9. Withheld October 16, 01:28 AM

    What you guys missed is that this Uber driver is the CEO of one of the largest software company in Sri Lanka selling software to global US companies such as ebay. Just google and see.

  10. Sanjiva Weerawarana October 16, 10:53 AM

    If you guys are going to mis-report on what I wrote at least have the courtesy to spell my name correctly :-).If this is what you got from my blog your journalist needs to go back to English class

  11. Jack Point October 16, 09:43 AM

    Competition benefits consumers and is the stimulus to promote innovation. Who benefits from Ubers lower prices? Consumers. Yes drivers will earn less per ride but if the lower prices start brining in more customers they will gain through greater volumes and perhaps more regular businesses.
    If individual drivers cannot get an adequate return they can leave Uber-no one compels them to drive for Uber. PerhaPs more part time drivers will stay with Uber and fewer permanent drivers. There is no issue here as far as I can see.

  12. Bellwether October 16, 08:48 AM

    The Uber driver's blog is an excellent piece. It is something that can be used by economic students, those studying political philosophy and nationalism as a discussion piece, different ideas.It has many elements, competition, anti-competitive practices, regulatory capture.
    The telecom industry's alleged regulatory capture mentioned in it is particularly interesting because it involved foreign players (with only SLT having significant domestic ownership), with mainly domestic consumers as beneficiaries.

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