HANOI: Malaysia’s GrabTaxi , which has secured $650 million through five funding rounds, has become the first peer-to-peer business to get a nod from the Vietnamese communist government to apply connection services to contract-based passenger cars. The GrabCar project has been approved by the country’s Prime Minister.
GrabCar, which uses “application of IT in supporting the management and connection of commercial passenger transportation by contract” will launch a pilot project.
According to the local transportation ministry, this project aims to help enhance the state management of IT-based passenger transportation, as well as create high standard pre-conditions for future science and technology application projects in the transportation sector.
GrabCar will be applied in five cities and provinces including Hanoi, Ho Chi Minh City, central Da Nang City, northern Quang Ninh Province and southern Khanh Hoa Province, for a two-year period.
Accordingly, GrabTaxi will, on a regular basis, report the list of licensed transportation entities and vehicles using its ride-hailing app, which will help the authorities manage tax payment and other regulatory responsibilities to passengers and GrabTaxi’s partner entities.
“GrabCar is revolutionary because it helps to further modernise the state’s management of passenger transportation by establishing the validity of e-contracts as substitutes or equivalents of traditional written contracts. Accordingly, e-contract based cars have installed route monitoring devices and have “contract-car” badges,” the document states.
Furthermore, the pilot project has the potential to reduce the costs associated with traditional administration work and will, as a result, produce lower fares for consumers. It will encourage healthy competition among passenger transportation service providers in Vietnam and inspire other domestic transport businesses to develop their own GrabTaxi-style connecting apps, which has been a long, controversial debate in Vietnam.
Although Vietnam has not provided a regulatory framework for ridesharing services like GrabTaxi and Uber, this can be a hint that the country is taking the first initiate to legalise this kind of disruptive technology to the taxi market, just like the Philippines has made. In other Southeast Asia countries like Singapore and Malaysia, they also enjoy smooth operation.
Since earlier 2014, when GrabTaxi and Uber entered Vietnam, traditional businesses, through the local taxi association, have claimed that the two foreign startups, along with the new comer EasyTaxi, violated Vietnamese legislation, as they were profiting on taxi operators’ labour, which is seen as an “unfair play”.
Nguyen Son, director of taxi company Song Hong (Red River), said in a meeting in March that such peer-to-peer services did not have sufficient legal conditions to be qualified to join the taxi market. President of the Hanoi transportation association was even harder when he said to prohibit member companies from connecting with GrabTaxi or Uber.
Meanwhile, Uber and GrabTaxi have repeatedly affirmed they are tech companies. “Uber does not directly compete with taxi firms, we offer complementary solution, not an alternative choice, to taxis,” Uber Vietnam CEO Dang Viet Dung reportedly said at the March meeting. Emily Thu Do, marketing director at GrabTaxi Vietnam, added that her company did not take away existing taxi operators’ market share, but wanted to cooperate instead.
Tran Huu Linh, the head of the industry ministry’s IT and e-commerce department, was giving the green light to develop tech-based taxi services by agreeing that while awaiting a legal framework from the government for this new type of business, taxi companies had better innovate their business models.
And local companies are doing so. Made-in-Vietnam apps like LiveTaxi, Vinasun, TaxiNavi, Ahamove and iMove have already replicated overseas model by creating proprietary e-contract apps. Meanwhile, taxi firm Phu Dong has another way to fancy passengers, by working with MobiFone to be the first to provide free in-car wifi service.
According to a report by the industry ministry in the first half of 2015, GrabTaxi took the lead with a 62 per cent share of the market, while Uber and EasyTaxi grabbed the remaining 21 and 17 per cent.