Three grievances against ride-sharing apps: A Vietnamese perspective

A few days ago, hundreds of Grab drivers turned off their app (smartphone application) and gathered in Hanoi and Ho Chi Minh City (HCMC) to protest Grab's latest fee hike against its drivers (from 28.375% to 32.841% for GrabCar, for example.) Grab explained that this is the result of a new tax code targeting ride-hailing apps that came into effect on the 05 of December; however, according to the protesting drivers, since this tax (VAT - value added tax) targets the end users, it should not affect the drivers' final income at all.

This is not the first time the Singapore-based ride-sharing app saw its drivers striking, nor will it be the last. Ever since its arrival in Vietnam in 2014, Grab -- and other ride-hailing apps -- has caused numerous social issues that directly and indirectly affected its customers and drivers, and Vietnamese society alike. Granted, ride-sharing apps also brought about many benefits to all parties involved; but this article will not focus on those. Rather, it will lay out three main grievances against these apps -- grievances which Grab and similar companies must seriously consider if they want to continue their business ethically and responsibly.

- A lack of social insurance and safety net. "Freelance" drivers are considered contractors under current regulations. That means they are entirely responsible for their own car insurance, health insurance, and social insurance -- costs that are fully or partly covered by traditional transportation companies. They are also more often than not unfamiliar with personal finance management, which means that once they are unable to drive for Grab and similar companies, they will have no unemployment aids to rely on.

- A lack of trade union. In taxi companies such as Mailinh or Vinasun, taxi drivers enjoy the bargaining power of unions to help ensure they have good working conditions and earn a livable wage. In comparison, "Hop Tac Xa" (HTX for short), a type of trade union freelance drivers usually participate in, only provides legal documentation for independent contractors. As a result, it is not uncommon to see drivers drive 10- or 12-hour shift to earn a livable wage, despite built-in mechanism to help prevent exactly that. Strikes and protests are also ineffective and incapable of effecting changes. As a result, ride-sharing apps have the power to dictate prices and control wages unseen since the 20th century.

- Car bubble. To drive for Grab and other ride-sharing apps, many drivers have taken out huge loans to finance their car -- in many cases up to 80% of the sales price -- in the nascent years of ride-sharing. Their math would check out if the percentage drivers received were unchanged, and if competition were not so fierce. Neither is true now: Grab, for example, has doubled the percentage that its drivers have to pay from 15% a few years back to more than 30% now. And since so many people took out loans to buy cars (Vietnam consistently consumed around 300,000 cars per year since 2016), competition between freelance drivers became fiercer -- which translated to fewer rides overall for each driver. Add all these together, and we have a car bubble looming on the horizon.

- Change in transport habit. There is no denying that ride-sharing makes transportation become cheaper and more available than ever before. But this also means that more people are riding motorbikes for distances that they would bike or walk before, and more are driving for distances that they would motorbike before. There are more cars and motorbikes on the road, while mass public transportation is still quite far away (As of December 2020, the first metro line in Hanoi just started test-running, and HCMC first metro line is still a year or two away.) The net result is increased gasoline consumption, carbon emission, and air and noise pollution.

- Increase in traffic congestion. Another palpable change, at least from a HCMC resident's perspective, is increased traffic congestion. Ride-sharing apps have greatly increased traffic volume at all hours, while infrastructure development is still slow to catch up. The result is longer and more frequent traffic congestion, which further complicates fossil fuel wastage and carbon emission.

Grab and similar companies registered with the Vietnamese tax department as a technology company. Since Vietnam offers many tax incentives for these companies, they can save a large sum of money compared to traditional taxi companies. However, the ride-sharing market is highly competitive, and these companies opt for the "burn money to grab market share" strategy pioneered by Uber. Thus, these companies are hardly, if ever, profitable, which means they contribute little in terms of tax. For instance, Grab contributed a measly 10 billion VND ($454,000) from 2014 to 2016, and 441 billion ($20 million) in its heyday of 2018. By comparison, Vinasun and Mailinh contributed thousands of billion VND a year to the national coffer. Instead of spending these savings on the betterment of its contractors or other pressing issues, Grab and similar companies chose to splurge on huge promotional programs. As a result, the consumers enjoy temporary but ultimately unsustainable benefits, the freelance drivers suffer, and none of the aforementioned issues are resolved at all.

Of course, it would be unfair to criticize Grab and other ride-sharing apps without recognizing the positive changes they bring. These companies have successfully utilized hitherto untapped potential and helped many people find work in hard times. They also gave the car industry a huge boost, and created economic activities in places where before there were none. However, their business also brought about many implications that are not immediately obvious. To survive in today's market, these companies must also think about their social responsibility -- not market share and bottom lines alone.

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