Malaysia's 2017 Budget made Uber and Proton very Happy

...and Taxi Drivers not.

After a drawn-out period of uncertainty, it was only in August that the Malaysian Land Public Transport Commission (SPAD) announced that ride-hailing services - i.e. Uber and Grab - will be legalised under the Taxi Transformation Programme (TITP). A Driver’s Card system will be implemented starting 2017, and all Uber and Grab drivers will have to be vetted before being issued the card, subject to yearly renewal. This recent move made even more sense when Prime Minister, Najib Razak, announced the new Budget on Friday.

Real men wear pink.

Under Budget 2017, the government is encouraging the B40 Group – the bottom 40% of the household income group – to supplement their income by becoming Uber drivers. In his announcement, Najib said that part time drivers could earn up to RM1,500 a month while those who drove for more than 40 hours a week could stand to earn RM4,300 a month. To help them along, those who do not own a vehicle can use BR1M - the annual financial handout for households with low incomes - to make the downpayment for a Proton Iriz, and a further RM4,000 rebate will be given on the purchase. The starting price for the Iriz is almost RM42,000, which means that the rebate would almost cover the downpayment; after all, the highest BR1M handout is only RM1,200, and that is not nearly enough.

As we have written before, Proton launched the Iriz to claim back some of the market share, now dominated by Perodua, and this new incentive will certainly boost sales. Meanwhile, Uber was quick to announce on the same day that it was thrilled to be partnering with Proton.

We would be remiss to not point out a few things: after the state-owned investment arm, Khazanah, sold its stake in Proton a few years ago, the automaker subsequently received a soft loan from the government to pay off its vendors; Khazanah also has an interest in Uber, through a global growth equity investment, General Atlantic, and Malaysia’s second largest retirement fund, KWAP, had reportedly invested over RM120 million in the San Francisco-based ride hailing company. In the Budget announcement, there was no mention of the equally popular homegrown ride-hailing company, Grab, nor was there an option to purchase the arguably more suitable vehicle, the Perodua Bezza sedan, which costs less than the Iriz. Protectionism policies are not unknown in Malaysia, and were what Proton was built on in the first place. And see where that has gotten us...

Of course taxi drivers have been up in arms about it since Friday. Datuk Shamsubahrin Ismail, who owns the taxi company Big Blue Taxi Services, criticised the move, citing that the Iriz model was too small to ferry people around, and that the announcement clearly favoured ride-sharing companies with the intention of wiping out the taxi industry. Er, we think that he might be exaggerating just a wee bit, because the new budget also provides for individual taxi drivers, which includes an insurance scheme, a grant of RM5,000 for new vehicle purchase as well as individual permits, which could see up to 12,000 taxi drivers finally casting off the shackles, which up till now bound them to taxi companies. So, Datuk Sham, our government is not out to get your industry...just maybe taxi companies like yours.

Still, taxi drivers are worried that they are losing customers to the likes of Uber and Grab, and the new incentives will only make it harder for them to earn a living. Their concerns are legitimate, but if the grass is so much greener on the other side, what is there stopping them from crossing the fence?

top image: Malay Mail