Regulating Ride-Hailing

The government’s recent crackdown on ride-hailing apps like Uber and Careem is short-sighted and represents a losing battle. A process of planned integration should be developed, in which new services are legalized, existing operators are protected, and the sector’s competitiveness is enhanced.

Last month, the traffic police began cracking down on car services Uber and Careem operating in Amman. Cars spotted dropping off passengers at certain landmarks were being seized, along with the vehicle’s and driver’s licenses. If a driver were stopped a second time, he would risk either being fined JD3,000 or spending 2 weeks in jail.

The crackdown was not sweeping, and both services have continued to operate. At the time of writing, the companies were negotiating a solution with the authorities, but it remained unclear how matters would play out.

Uber, the global transportation provider, entered the Jordanian market in April last year. A few weeks later, Dubai-based Careem began offering its services in the Kingdom. Both have since disrupted the urban transportation scene in Amman, offering services of a relatively high quality in a city in dire need of a transportation overhaul.

The companies offered their taxi-like services through rental cars, taking advantage of what some argued was a loophole or gray area in legislation pertaining to “tourism transport.” The argument was this: just as one could (legally) call a car rental company and ask for a car with a driver for a day trip to Petra, for example, that person could get the same service for a short trip within Amman.

As the services gained traction, Uber and Careem—despite the premium they charge—began creeping into the yellow taxi’s market share. Another factor that contributed to this trend was that Careem offered the option to pay in cash, in addition to using a credit card, and even Uber began rolling out that option in April this year.

Like public transport, Amman’s yellow taxi network—although less fragmented—suffers from antiquated regulations and a poor level of service. There are just under 11,000 taxis operating in the city today, and recent statistics indicate that about one in every 10 trips within Amman take place in a taxi. Aside from the introduction of Al-Mumayaz in 2009, the size of the fleet has remained unchanged for quite some time, as regulatory authorities were not issuing any new licenses. This created a market for existing licenses, in which the cost of a single taxi medallion rose to about JD50,000.

With the high license costs and complex guarantee (or ‘daman’)-based operating structure, taxi owners and drivers began to rightly view Uber and Careem as engaging in unfair competition.

This contributed to the government’s decision to issue a formal letter in November last year asking car rental companies to refrain from offering their vehicles for app-based services like Uber and Careem. The letter explicitly stated that these services were violating the law. From that point on, there were no gray areas. Although no actions were taken against the companies for a while, the crackdown finally began through the traffic police last month.

Uber and Careem should operate legally and abide by our transport and traffic regulations; there’s no question about that. However, the government’s haphazard crackdown (there were even reports that GAM had requested the Uber and Careem mobile apps be blocked in the Kingdom) is by no means the solution.

It is the government’s inability over the years to provide decent transportation services that is largely behind the success not just of Uber and Careem, but also of the fairly large informal transport sector operating across the country. Selectively cracking down on the former will not lead to any positive outcome. It is short-sighted; it prolongs the status quo and does not lead to improving services to the user; it deters investments into the Kingdom, and it represents a losing battle that goes against the tide.

Disruptive technological innovations are inevitable, and our government should embrace them. A clear framework for legal integration should be developed, in which new services can operate legally and the rights of existing operators are protected—all while improving the overall level of service to the user and enhancing competitiveness within the sector.

Jordan does not have to reinvent the wheel when it comes to integrating services like Uber and Careem. Other countries, even some in the region such as Saudi Arabia and the UAE, have successfully managed to legalize these services. Regulations could be introduced, for example, to add a new category of service for Uber, Careem, and other future entrants that potentially includes a higher licensing fee compared to that of the taxi, a minimum premium over taxi fares, and if needed, a cap on the number of cars for each company. This would be a smarter solution in which everyone benefits.