Drivers’ refusal to take passengers is the main problem with taxi services in Bangkok, accounting for 40% of all complaints statistics collected by the Department of Land Transport (DLT).
Reasons given for the refusal to provide the service vary – from the need to refuel the car to the necessity to change the shift, and from traffic congestion avoidance to the drivers’ unfamiliarity with the route towards passengers’ destination. Another reason arises from the reward-cost structure. The Thailand Development Research Institute’s (TDRI) on-the-ground research shows that the taxi business in Bangkok is on the verge of a crisis; hence the reason compelling drivers to illegally charge foreign tourists a high fixed fare instead of using the meter rate, as required by law.
A detailed cost breakdown shows the daily expenditure of the average taxi driver is around 1,000 to 1,500 baht, which is comprised of car rental, personal loan payments, fuel and maintenance costs and other items. Subtracting this daily cost from the average daily earnings of about 1,300 to 1,500 baht, a driver is left with a mere 300 to 400 baht of income a day. Their earnings are thus on par with daily minimum wage.
How can we explain this structural disproportion in revenue? One answer is to look at the DLT’s taxi fare regulation. Despite its good intentions of protecting customers, the regulation has failed to keep up with increasing operational costs. Introduced in 1992, the Bangkok taxi fare starts at 35 baht for the first 2 kilometres and then the fare adds up depending on the distance travelled. Since then, it has been revised three times. The latest revision in 2014 makes the starting fare of 35 baht applicable for just the first kilometre together with an increase in the distance-based rate. Despite the increases, Thailand’s taxi fare rate is still low when compared to those applicable in regional countries, such as Malaysia and Singapore.
In addition, the government-regulated, congestion time-based fare rate also poses a problem given traffic jams. The rate is set at 2 baht per minute when taxis move at speeds not exceeding 6 kilometres per hour.
However, this rarely happens in reality because even in congestion cars usually move faster than the set speed and stay stationary for only a short period of time. Hence, the congestion time-based fare rate reflects neither the real traffic conditions nor the increase in cost of time, resulting in low compensation compared to time invested in the traffic. This is also one of the reasons why drivers refuse to carry passengers to and through congested areas. Moreover, bad traffic conditions mean drivers must work longer hours to cover their daily expenses.
Another factor contributing to taxi drivers’ low income can be traced back to the inherent inefficiency of other service itself.
A unique characteristic that differentiates the taxi industry from other goods and services markets lies in the prerequisite for the service; that is to say, a functional taxi service requires taxis to be available at exactly the same location and time as passengers demand. Regardless of the number of registered taxis in the market, if the location and time of the pick-up service does not correspond to the demand, it would lead to passengers experiencing longer waiting times and thus poor service quality. In the case of insufficient service in high demand locales (for instance, concerts or exhibitions) passengers risk being charged higher prices if the fare regulations are not strictly enforced.
On the other hand, when a taxi driver drops off a passenger at their destination, the driver is unlikely to find another passenger right away. So, the taxi has to run a “deadhead” trip until supply and demand for the service is met.
This inherent characteristic of the taxi market could explain the currently low rate of vehicle utilisation and load factors. To make matters more complicated, drivers suffer not only from competition within the regular taxi market alone, which is already packed with 80,000 taxis, but also from the introduction of increasingly popular Transport Network Companies (TNCs) such as Grab Taxi, whose technology enables more efficient driver-passenger coordination.
This reflection on the fare regulation, service coordination inefficiency and increased competition helps elucidate the struggle faced by taxi drivers and the whole system. To increase their return, drivers must cope either by driving longer hours or through unlawful means. The disproportionate reward structure also obstructs taxi service improvement as it puts drivers salaries on par with the minimum wage, but with significantly higher responsibility. This means drivers do not have enough financial incentive to improve the quality of their service.
Solving Thailand’s taxi problem, therefore, requires taking both a means of improving the matching efficiency between taxis and passengers (such as through better taxi rank management or the use of smartphone applications) and, more importantly, of determining appropriate taxi fares into consideration.
One solution is to change the pricing mechanism from a fixed rate to a flexible rate and ensure that thenew pricing scheme properly compensates drivers for their operating costs and the traffic conditions.
Drivers’ earning should be at the level that of other jobs in the service sector to reduce their need to work long hours. In addition, new policy directions should lay out a minimum standard of services, as well as putting in place a monitoring and evaluation system through the introduction of a “Demerit Point System” – a system which keeps track and prevents repeated violations of taxi service regulations and helps with taxi driver screening.
Such a leap requires changes within the government, with regards to the way it operates, and its regulation related to the collection and management of an operational database which is vital to improving the service standard.
The government should establish a data centre in order to facilitate the transfer of the big data it needs to monitor, evaluate and plan future taxi policies.
Chonlavit Panpakdeediskul and Pornpimol Tinanoi are researchers at the Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.
First Publish: Bangkok Post on Wednesday, August 22, 2018