Yawning Bread. November 2007

Taxi problem the result of 3 deadly sins




Singaporeans have been grumbling about the taxi situation for years. At certain times, it is almost impossible to get a taxi, not even through radio booking. Queues at designated taxi stands are long; waits of 45 minutes are not unusual.

Yet, the government says Singapore actually has one of the highest numbers of taxis per capita.

It's true that at certain places, there is no shortage of taxis. The airport, for example, often has taxis waiting an hour or more to get to the front of the queue. Why don't the drivers mind the long wait? They are probably attracted by the $5 surcharge they can add to the fare for any trips originating from the airport.

That's just one of the many surcharges authorised in Singapore. In fact, surcharges have multiplied over the years until they are now confusing to commuters and a source of misunderstanding at the point of payment.

On the other hand, drivers perennially complain that they don't earn much at all, and have to drive long hours to make a decent living. 

* * * * *

Taxi stand at Lucky Plaza, Orchard Road. There were 30 - 40 people in the queue at 5 pm, and taxis were coming in about one or two a minute.

The more I think about it, the more I believe the taxi problem reflects 3 of the biggest ills of Singapore:

  • Elitism 
  • Over-regulation 
  • Protection of government-linked companies

I suspect it's been hard for the government to solve the taxi problem precisely because the problem has grown out of their own worst instincts.

In this essay, I hope to show you how it is derived from these three bad habits, but I will first make reference to an article by Han Songguang, published in the Straits Times, 21 Nov 2007. See Higher flag-down the fare way to go. Han is a researcher in the Geography Department of the National University of Singapore.

In his article, he pointed out these particular issues:

Supply and demand mismatch while overall we seem to have a good supply of taxis, supply/demand mismatches occur at different periods of the day. This is exacerbated by the unidirectional nature of peak demand

Convoluted fare system misallocates resources rather than address localised shortages. To imagine that central planners can fine tune a system of surcharges to balance demand and supply in a highly dynamic flux is unrealistic. For every problem we solve with a surcharge, we create a new one elsewhere.

Taxi drivers bear all the risk of not enough passengers, falling ill and not being able to work, traffic accidents and being without a vehicle for the period it is in the workshop, etc.

Public expectations Singaporeans see taxis as a form of public transport, when in fact it is a private chauffeur service. The reason people see it this way is that it is too cheap. A group of 3 or 4 persons sharing a cab may end up paying less per head than if they took buses or trains.

Han's recommendation is to raise taxi fares sharply. "I envision a fare structure at double the prevailing levels for there to be any real impact," he wrote.

In principle, I agree with him. Eventually, Singapore needs to have taxi fares much higher than they are now, and closer to the fares one would find in cities with similar GDP per capita. But like him, I also think it cannot be implemented without a major overhaul of many other related issues. Each of these issues spring from one or more of the three governmental ills.

Infrastucture underprovision

Currently, people rely on taxis because buses and trains either don't go where they want to go, or they are way too crowded. As Han pointed out, "Singapore has always had a policy of 'infrastructure overprovision'. Infrastructure is built way ahead of actual demand (think Changi Airport) to prevent undercapacity and overcrowding", but not with public transport. In the latter case, there is a severe reluctance to provide ahead of demand; with profitability cited as a necessary condition before new services are added.

What we therefore have is a, perhaps unconscious, policy of underprovision, in order to assure SBS-Transit and SMRT, the two bus and train companies, their profits. This shows up in constant "streamlining" of bus routes, long wait times at bus stops and sardines-packed trains and buses.

Why does the government over-provide some kinds of infrastructure and under-provide public transport? I will put it down to elitism. Infrastructure that serves the elite (e.g. air travel, expressways) are seen as more justifiable and urgent than infrastructure that serves the ordinary people.

I have argued before that for a city of our size, we do not have a dense enough rail network. As for buses, our public transport regulator seems very lax about insisting on better network coverage routes-wise, and higher bus frequencies. We don't even have a night bus service except a rudimentary one on Fridays and Saturdays. The regulator also seems dismissive of new competitors entering the market, as if its chief remit is to protect the incumbents.

One has to wonder if this is related to the fact that the incumbent transport operators, SBS-Transit and SMRT, are government-linked companies.


Supply guided by price, not by customer demand

As infrastructure lags, the unserved demand migrates to taxis, and horrendous queues build up at certain times of day. To address these localised problems, a host of localised surcharges have sprung up, but all they do is distort the market.

Over-regulation is a symptom of a mindset that believes that the boss or bureaucrat knows best. However, the commanded solution only appears to be a solution to the desk-bound planner, because the main problem is measured and one can therefore show the fix to be working. What planners seldom anticipate and even less likely measure are the side effects. Since they're not measured, they're not seen from the desk. But everybody else on the roads can see all the nasty side effects.

So a surcharge can direct taxis to a location where there used to be a shortage, but in so doing, creates a new, artificial shortage somewhere else, which isn't measured. Nor are price bewilderment, and driver-passenger conflicts measured. Unscrupulous drivers take advantage of the confusion to add surcharges at will and Singapore as a whole gets a bad name for cheating.

We should simply clean up the fare structure, raise it overall and use more information technology (IT) to tell drivers where demand is building up.

Radio bookings is a form of IT, but also, perhaps we can design a way to measure length of queues at various taxi-stands. When this information is displayed on monitors in taxis that are in the vicinity, drivers will naturally head towards the taxi stand for the next fare.

A taxi stand doesn't even need to be a taxi stand, at least not in the physical form we are used to. All major buildings, including condominiums, can install a taxi call point. From an IT perspective, a call point is indistinguishable from a taxi stand, and calls from such call points can show up on nearby taxis' monitors.

In other words, let the customers, not the surcharges, guide the taxis to where they are needed.

Main taxi company too protected

To begin with, our so-called taxi companies are in reality vehicle hire companies. They let out a vehicle to a driver at a fixed daily rate, typically $90 a day, and he is then left on his own to recoup the cost and earn something for himself.

It doesn't matter to the taxi companies if the hirer, i.e. the taxi driver, spends much of the day waiting at the airport or drinking coffee at a corner shop waiting for midnight when the bus services cease. Revenue-wise, the taxi-company gets the same amount, approximately $90 a day, even if commuters in various parts of town are fuming.

It doesn't matter if, regardless of how hardworking a driver is, he can't make enough money. As far as the taxi company is concerned, they still get their $90 a day.

Yet, it is the taxi company that sets fares, and one suspects that fares are set at a level that is politically acceptable, since the dominant taxi company and price setter, Comfort-Citycab, is a government-linked company. That being the case, it should not surprise us if drivers are squeezed between fixed hire rates and fixed, relatively low fares.

It would seem fairer to have a different system: the hirer pays a low basic hire fee, with the earnings split by percentage between the hirer and the taxi company.

That however, means that taxi companies' profitability won't be so stable anymore. Once again, one can't help but wonder if the fact that Comfort-Citycab is another government-linked company makes such a change unthinkable?

* * * * *

Basically the taxi problem is not a taxi problem. The need is transport ready, quick, efficient, reasonably comfortable transport. Elitism in setting priorities may be causing an underprovision of public transport, resulting in spillover to taxis.

Taxi fares are kept relatively low to be politically palatable, but taxi hire companies (of which the dominant one is government-linked) operate a fixed rate system, which makes profitability easier to ensure. The taxi-driver ends up as the one bearing most of the risk in the business.

Surcharges cause as many problems as they solve, but we resort to them out of habit. We seldom stop and ask if we are over-regulating. Over-regulation is so common an affliction in Singapore, we don't see it even if it's right before our eyes. 

Yawning Bread 






Why airport surcharge?

I have never been convinced about the need for an airport surcharge. Why do we need to attract taxis to the airport?

Logic tells us that the number of passengers arriving in Singapore should be roughly equal to the number of passengers flying off. As well, one can assume that a passenger is as likely to take a taxi to the airport for his departure as he is to take a taxi to his hotel on arrival.

It should balance out. There should be no overall shortage of taxis at the airport, and so no need to have a surcharge.

Instead the surcharge tends to induce taxis to go to the airport and wait. By so doing, they deprive other areas of taxis.

But isn't it again a facet of our elitism that we have a system where at the airport the well-off have taxis waiting for them, while downtown or in the suburbs, the average office-worker and mother waits for taxis?

And why doesn't Singapore have airport-to-hotel buses like other places? Hotels tend to cluster in certain parts of the city; surely it makes sense to run a route from the 3 airport terminals to each cluster of hotels on a half-hourly basis, for example.