Events have been unfolding with spectacular rapidity. Mr. Duterte may be in a sugar rush to install his ideal form of government.
From ABS-CBN News:
"Nagkakaroon tayo ng vicious cycle of over-regulation resulting in bad behavior, resulting in poor costumer service, resulting in more regulation. Tapos umiikot lang tayo doon," sabi sa isang forum nitong Lunes ni Grab country manager Brian Cu.
Or,
What we have is a vicious cycle of over-regulation resulting in bad behavior, resulting in poor costumer service, resulting in more regulation. Then, it loops back.
Mr. Cu’s statement gave me the initial impression that I was reading an article about Austrian economics. Then I realized that it was a grievance from actual developments. It was theory that had been expressed as a real-time event.
Mr. Cu was reacting to the dramatic rise in complaints by the commuters against Grab drivers for the inconveniences caused by booking cancellations.
In response, the Grab management suspended and banned several drivers.
From the Inquirer (bold mine)
Some 500 drivers of Grab in Metro Manila were suspended or banned by the app-based transport network company (TNC) in the wake of mounting complaints against its picky drivers.
The punishment came after Grab conducted last week an internal investigation of the complaints of booking cancellations from commuters.
“We will never tolerate any behavior that compromises the quality of our service. We apologize that our services fell short,” Brian Cu, Grab Philippines head, said in a statement on Monday.
The mismatch between supply and demand…
Some passengers have claimed that the behavior of the drivers creates an artificial surge in demand in their area. Grab, however,maintains that its current crew of drivers was not enough to address demand.
Cu said Grab expected more drivers to be disciplined in the coming days as the company intensified its monitoring of those who went beyond the allowed 10 percent weekly cancellation rate.
The company, he said, had rolled out additional and stricter measures to address cancellations.
While most Uber riders have already migrated to the Grab platform, Cu earlier said that the number of drivers in its system had gone up by only 30 percent.
Last year, Uber was reported to operate 66,000 vehicles. Grab initially expected 20,000 to 24,000 to migrate to them, however, the actual number was less than expected
When demand exceeds supply, naturally, prices MUST rise.
However, not only did political expediency dictate on policies, the National Government wanted to exercise complete control over the industry.
Thus by imposing a price cap on Grab’s dynamic (surge) pricing, the TNVS market hasn’t been allowed to clear (as discussed last weekend)
Further aggravating Grab’s situation was an order from the Land Transportation Franchising and Regulatory Board (LTFRB) last week for the company to suspend its collection of a P2-per-minute travel charge.
Without the travel charge, a number of Grab drivers now earn less, forcing them to drive less frequently, according to Cu. On Friday and Saturday, he said, driver cancellations rose to 11 percent.
And for Grab drivers, it is not merely about revenues but about cost as well.
From another Inquirer article
“Drivers have to buy gas, pay the monthly amortization for the vehicle, or the daily boundary, and when traffic stalls them, it is only the P2 per minute that saves their income. So with the P2 gone, many of our drivers earn less and drive less, if at all,” Grab Country Head Brian Cu said in a statement.
“No matter how willing they are to drive, they are left with no choice but to think of ways to recover their expenses. Sadly, most of them have resorted to cancelling bookings especially when they know they will traverse traffic,” he added.
So the LTFRB’s price caps have rendered some of the routes plied by Grab entrepreneurs-drivers unviable.
Thus, the unintended consequence of the NG’s price caps has been to reduce supply through diminished driver interests to service passengers AND from penalties for conducting such actions.
This sordid episode implicitly suggests of a TNVS driver’s revolt against LTFRB’s price caps. The drivers unwittingly vented their gripes on Grab’s customers.
Public policies produce incentives that skew people’s behavior.
As Professor Peter Boettke rightly pointed out
Everything we are seeing in market behavior is a rational response to the environment created by public policy. This is not a psychological problem we are dealing with, it is a public policy problem. Bad public policy produce bad incentives which in turn produce bad results. Ultimately, this is a problem of bad ideas which result in bad public policies.
But that is not how Grab and their drivers have been portrayed. They have been made to appear as ‘greedy’
And to appease the political gods, Grab’s management will institute measures to discipline its drivers by limiting their access to information
From another Inquirer article
Starting April 27, some Grab drivers will no longer see passengers’ destination before accepting bookings, Grab Country Head Brian Cu announced on Tuesday.
Grab Philippines will be initially rolling out the new feature to 25 percent of Grab drivers with historically low acceptance rate. Meanwhile, an auto-accept feature for bookings will be fully rolled out on Friday.
Cu, however, said that an option to see passengers’ destination would be available to drivers during the wee hours of the morning for “protection” purposes.
And the apparatchiks love it!
Remember, the root of the driver’s revolt stems from unfeasible routes.
Yet, limiting information means muddying economic calculation of Grab’s drivers. Grab’s management has opted to become nontransparent to its drivers.
Since Grab’s management now conspires with the government to mislead the entrepreneur-drivers, bad behavior of some Grab’s drivers have spread to the management.
The TNVS case demonstrates how arbitrary and repressive regulatory environment perverts societal mores
Grab’s management doesn’t seem to realize that their actions will impair the profit-and-loss discipline on their drivers
If their drivers feel that they have been compensated insufficiently to cover their operating costs and their sweat, they will discontinue from pursuing this endeavor.
Having said so, Grab’s supply base will most probably shrink. And the mismatch in supply with demand from the riding public would likely trigger more political problems. And driver behavior and or Grab’s quality of service will also deteriorate.
Rigorous supply and demand restrictions on the industry will mean that losses of entrepreneurs-drivers will mount.
Many will be idled and opt to sell their vehicles. If they are unable to liquidate their vehicles, foreclosure by creditors could be the next phase. Foreclosed vehicles will find their way to the markets, which may impact demand for new vehicles.
And the chain effects from all these would spread.
Grab acquired $700 million in debt for its Southeast Asian operations last year, without the Uber merger yet. Tight margins, low supply, capped revenues, rising interest rates, high regulatory costs, falling USD Php and rising energy prices may take the toll on the company from which its survival may be at stake.
If the miasmic regulatory environment persists, not even the entry of competitors will save the industry from decadence.
But that is just how a neo-socialist state would have it.
