Why haven’t ride-sharing services taken off in UB?

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Anyone that has spent more than a day or two in Ulaanbaatar is unfortunately all too familiar with the city’s rudimentary and largely inefficient ride hailing and taxi service. The current taxi service sector is at its core the most primitive informal version of ride-sharing service like Uber and Lyft. Instead of hailing such services through smartphones or applications, people raise their arms as a signal to get picked up by any random car that happens to be driving on that particular road. Why is it that in 2018, when half of the population owns a smartphone, do we still insist on maintaining this outdated system?

This is certainly not a new problem nor is it a new proposition. Many capable and willing companies and start-ups have tried to tackle the problem, but for whatever reason, have largely failed. It is not as if there is no market for ride-sharing services, hundreds of thousands of people rely on the informal taxi sector for daily transportation. It is a common sight to see people lined up on roads with their arm raised, something that might seem peculiar to an outsider but all too common for UB residents. It has become such a normal sight that we do not even think twice about how inefficient the system is.

First off, the informal taxi service is a disaster for the consumer economically. When a person manages to hail a taxi, which is a rare occurrence during rush hour, prices are a wild card. There is no uniformity in terms of pricing, leaving the drivers the freedom to say any price off the top of their head. In addition, prices are an anomaly as it seems to depend on what the drivers think they can get away with. For example, foreign tourists often complain that drivers tend to overcharge fares in an attempt to exploit their ignorance in pricing. Albeit, that is an issue that is common all around the world. Those who have the time or the courage usually haggle with the driver but the majority seem to succumb to the price that the driver suddenly comes up with. To make matters worse, informal taxi drivers seem to never have change for larger bills, leaving the passenger to have to run to nearby stores to break bills. This is the sort of inefficiency that you could tolerate if it was the 20thcentury or the early 2000’s.

A mobile ride-sharing or ride-hailing applications like Uber or Lyft completely remove this inefficiency by making the service completely cashless and pricing transparent from the beginning. This is vastly more convenient for both the driver and the passenger. In addition, uniformity means that prices remain constant and makes the service exceedingly reliable. Looking at the issue macroeconomically, it is a disaster in terms of tax collection. At its core, the taxi service is a large shadow economy, which means that the state has no reach in this sector in terms of taxation or regulation.

To add onto the price discrepancies, is the availability, or the lack thereof. Especially during rush hour, taxis are hard to come by. A lack of taxis and traffic congestion force many people to brave sub-zero conditions to walk to their destinations. There are enough drivers willing to offer a ride to a passenger and there are obviously people who want such services, it is just a matter of linking these two parties together. It is all too common to finally hail down a taxi only to have the driver shake his or her head and drive off when you tell them your destination. Taking a taxi should not have to be a crapshoot.

Another major problem in the current system is safety. Having unregistered and random informal taxi drivers is obviously a safety hazard. There are currently hundreds of police cases that involve assault, sexual harassment, theft, and a plethora of crimes that involve taxis. Hitchhiking in a stranger’s car with no assurances of who they are or your safety is terrifying, especially for women. Although very much anecdotal, everyone seems to know a woman who has faced some type of harassment when hitching a ride in a stranger’s car. Even discounting for the economic and the availability factor, the safety issue should be reason enough for the people to demand change. It is even worse for children, no child under the age of 16 should be hitching a ride in a stranger’s car on their own. A system that identifies the driver and clearly shows their previous records and ratings in other rides in addition to all necessary information dramatically reduces this dangerous variable.

There is no good reason why Ulaanbaatar residents are still forced to deal with this primitive system. According to the National Statistics Office, more than half or 1.7 million people have smartphones as of March 2018. Most of the major telecom operators offer full coverage of cell reception and 4G LTE cellular coverage. Most of Ulaanbaatar is fully mapped in Google Maps. So why is it that when all of the ingredients are there, we just can’t seem to advance to a far superior system?

While there are no concrete evidence that points to exactly why we insist on maintaining this archaic system, unwillingness to adapt to a new digital based system on a large scale seems to be the reason. Many people don’t seem to be bothered to support start-ups that try to address this exact problem. Furthermore, the formal taxi sector is taxed compared to the informal sector. This means that informal taxi drivers can charge lower prices and official taxi companies charge relatively more. In all reality, it likely comes down to price.

According to Mongol Bank, more than 2.8 million people use a mobile banking application, which shows that if done correctly, people are willing to opt for better services. This is why a large corporation that can withstand initial losses must work with the city administration to enact more stringent regulation and taxation to economically incentivize transition into a better system. Fintech services like digital currencies could be the key in solving the issue. For instance, Mobifinance, a subsidiary of the largest telecoms operator in the country recently issued Candy, a digital currency. Services such as these offer an opportunity to gradually transition towards a better transportation system.

We have seen too many small companies and new startups fail to tackle the issue. It is up to us, the consumers, to urge larger companies capable of getting the sector off the ground to work with the city administration and the larger government apparatus to address this pressing issue.

Chintushig Boldsukh