Uber app splits Hong Kong government departments

12 Aug 2015

The Hong Kong Police have proven they're no fans of popular app Uber. This week, the police raided the company’s Hong Kong office and busted Uber drivers for, well, being Uber drivers. "Hong Kong police inspected the office of [Uber] following arrests of five drivers on charges of operating illegal hire car services," reported the Hong Kong Free Press (HKFP).

Not unexpected, given a July 6 statement from the Hong Kong Transport Department: "No matter using which means to arrange for hire car service, including joining those groups using smart phone applications (apps) as a platform, it is an offence for any person using a private car without a hire car permit to provide hire car service." Fair warning on "the practice of calling taxis through the use of mobile applications (Apps) ... to engage in the business of carrying passengers for hire or reward illegal car hire service" was given on April 15: "The Police have been keeping an eye on such illegal activities.Depending on the circumstances, the Police will deploy plain-clothes police officers for "decoy operations"."

So why did InvestHK hype Uber as an investment opportunity earlier this year? "Invest Hong Kong (Chinese: 投資推廣署) is the department of the Hong Kong SAR Government responsible for Foreign Direct Investment, supporting overseas, Mainland and Taiwanese businesses to set up and expand in Hong Kong," according to Wikipedia. Let's repeat that: InvestHK, a "department of the Hong Kong SAR Government."

Hype cycle
Here's a copy of a PDF InvestHK released in May 2015: a slick piece of promo with a professional photo of Sam Gellman, Asia expansion lead for Uber, who's quoted: "Hong Kong is an incredible city, combining global commerce and local culture, large industry and startup entrepreneurship and innovation. It makes a fantastic regional headquarters for us as we expand in the Greater China area.”

"Hong Kong is the number one business city in Asia. It is the perfect base for companies that want to do business in Mainland China and across the region," says InvestHK's website. Argue the former can or not lah, but HK's role as China gateway was, you'll note, cited by Gellman as a motivator for setting up shop here. According to the InvestHK PDF, the service "soft launched its trial services in Hong Kong in June 2014 and started full service operation in July 2014." And here's InvestHK's May 15 tweet hyping the deal.

"There are legal ways in Hong Kong for companies to offer car rental services via mobile applications, but not all mobile car booking applications can meet the legal requirements in Hong Kong," said a spokesman for InvestHK in an August 12 statement. "As Uber is now being investigated for allegedly operating outside of the legal ambit, as a standard procedure InvestHK has removed the case study from its website."

Due diligence
Why was a case study promoting Uber (referred to after-the-fact as "allegedly illegal") seen as a positive boost for Hong Kong? Why was it promoted by InvestHK after the GIA announced proactive "decoy operations"?

Has InvestHK heard the term "due diligence" before?

And research was essential – seldom has a mobile app produced such hubbub. In June, France's interior minister Bernard Cazeneuve ordered a ban on UberPOP (the French version) after a day of violent protests by taxi drivers, calling the service "illegal" and ordering police and prosecutors to enforce its closure.

Hong Kong taxi drivers protested such apps last month, according to the HKFP: "An investigative report by Now TV questioned the legality of mobile taxi-hailing apps ...[and] found that mainland taxi-hailing app "快的 (Fast Taxi)" receives an average of 25,000 taxi orders per day in Hong Kong." That app – developed by a Hangzhou-based company and available in both simplified and traditional Chinese – provides grey-area services like luxury cars, seven-seat vehicles, and discount coupons.

Legislative Councillor Mok weighs in

"While the legal issues about Uber's operation may still be in doubt (and this is similar to the situation in many locales), we expect our government agencies to help attract companies to come to Hong Kong," says Charles Mok, Legislative Councillor for Information Technology. "Government departments should help Uber work with other relevant government departments to try to resolve the problems, rather than be seen as disowning Uber."

"The whole matter sends a negative message to the international community as far as supporting innovative and disruptive ideas is concerned," says Mok. "A better approach: the government should act in a more coherent way to rapidly work out the issues and aim to put the new services under proper regulation rather than a blanket ban. This more coherent and proactive approach would provide more choices for riders and better services with more competition. Note that Singapore as already managed this– they introduced a new law in March that legalizes fee-based car-sharing."

"This is the type of coherent action and support that local and international investors and entrepreneurs in innovation and technology should expect from government," says Mok. "It will help remove barriers, balance interests, and create more competition – rather than simply becoming another obstacle."

Who's the alpha dog?
But both 快的 and Uber are dwarfed by Chinese-language app Didi Kuaidi – China’s dominant taxi-hailing platform. According to a July 8 Forbes article, Didi Kuaidi raised US$2 billion in two weeks: "Capital International Private Equity Fund and Ping An Ventures are among new investors participating in the current round. Alibaba, Tencent, Temasek, and other existing shareholders have also invested. Didi Kuaidi is now valued at about $15 billion, according to people familiar with the matter," said Forbes, adding that Didi Kuaidi provides three million taxi rides and another three million private car rides daily.

"Didi Kuaidi currently holds about 80% of China’s private ride service market, with offerings including premium cars, express cars and carpooling services. Uber, backed by Baidu, has about 11%, according to Beijing-based consultancy Analysys International," said the Forbes article.

As for Uber: "the San Francisco-based company has said it would invest $1 billion in China this year, as it spends heavily on driver and passenger subsidies to grow its user base."

New transport paradigm
Despite the tie-up with Baidu, Uber is clearly the underdog in greater China. Still, they say they're willing to spend to gain a foothold in the mainland market. A market that Forbes says "aims to serve more than 30 million passengers and 10 million drivers daily within three years."

"We aim to create a mobile transport ecosystem that will displace private car ownership and become a part of the daily life of Chinese citizens," said Didi Kuaidi CEO Cheng Wei in the Forbes article. "Didi Kuaidi ... may also tap into logistics, insurance, auto financing, mapping technologies and location-based services."

Can we unpack this thing?
My response? I signed up for an Uber account.

I had planned to get around to it anyway – while I respect Hong Kong's mostly helpful and hard-working cabbies, I've stepped into a few too many cabs reeking of cigarette smoke or piloted by guys who stomp accelerator-and-brake like Nigel Tufnel stomping pedals during one of his trademark guitar solos.

And there's the opportunists who drive around with a cardboard "out-of-service" over their service-light, and the guys hanging around Lan Kwai Fong looking to overcharge inebriated tourists. These tactics remind me of the Hong Kong seen in older Shaw Brothers films – modern dramas made before the creation of the ICAC in 1975.

Various government agencies can ignore each others' diktats and backtrack. Me, I want to get where I'm going. If there's an honest cabbie ready to pull over and get me there, they're welcome to the fare and the change. If not, you'll find me on my smartphone.

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