Sunday, July 30, 2006

Improving Taxi Service in Singapore

One of the hottest topics in Singapore recently is the increases in transport fees and while that of the public buses and MRT is in the processing of getting, almost confirmed actually, approval, that of our "deregulated" taxi fares have already gone up.

The justification for this round of increases is that of the raise in diesel prices and commuters are asked to help taxi drivers shoulder the burden of the higher costs. One glaring issue that the taxi companies had been intentionally quiet on is that taxi rentals, the most direct cost, has not been decreased despite the prices of Certificate of Entitlement (COE) dropping to multi-year lows and car prices trending lower every year.

Many consumers do question the logic of price increases when there had not been noticeable improvements in the quality of taxi services. How can taxi drivers increase their income when taxi companies are not adequately taking care of their drivers and consumers are not willing to pay more for what is perceived as persistently poor provision of taxi services?

Despite all the price increases and surcharges that had been implemented to try to better the taxi service quality, it has largely been futile as consumers are frequently unable to get hold of taxis when they most need it without making phone bookings (which promise greater income through booking surcharges). The focus had consistently been on shaping demand on the assumption that the supply of taxis is actually sufficient. However, have the policy makers been totally misguided in this assumption?

Perhaps it is time to completely rethink how to manage the quality of taxi service but shaping supply instead of demand. One suggestion that had been floated was to scrap the surcharges, booking fees, etc and instead bring up the flag down fares. There is then higher equity since the more passengers picked up, the more the drivers make and malpractices such as waiting for surcharge periods to kick in, passenger choosing, opting for phone bookings, etc will no longer be rewarding. This suggestion appears to be an extremely appropriate solution. As long as the flag down fare is not increased too much to be even higher than with the existing surcharges, the supply of taxis will be fundamentally altered. While the demand for taxis might face a slight dip initially, the changed supply will bring about changes in demand and most probably bring about an eventual increase in taxi drivers' earnings as consumers find it easier to hail taxis and not give up trying to flag down taxis in favour of taking buses or MRT as it is now.

Will such a drastic change be possible? It will only be if the largest taxi company, Comfort Delgro, takes the lead as it had always done when raising fares. If this virtual monopoly does not take the lead, even if the other smaller companies do it, the changes to the overall taxi service quality will hardly be noticeable.

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