Sri Lanka Uber driver calls for protectionism, lauds regulatory capture

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.

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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 Sanjiva Weerawarana)

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