Sunday 1 April 2012

The Great Taxi Non-Liberalisation

Sometimes the sheer stupidity of public policy-making in Greece is enough to make me wonder how anyone can tolerate it. Once of the many such examples is that of the great taxi “liberalisation”, which apparently has been at the top of the Troika’s priority list for the past 2 years.

Visitors to Greece last summer, and followers of Greek affairs, will no doubt remember the incredible damage to the tourism industry caused by striking taxi drivers. The pictures of tourists stranded at harbours and airports made their way around the world. Thousands of tourists left Greece, vowing never to return. The situation was such that striking taxi drivers even tried to prevent hotelliers from arranging private transfers of their guests.

Well, after two separate legal proposals, the third legal proposal was apparently passed by Parliamentary Committee on Friday, and is expected to be voted in full Parliamentary session in the near future. The only problem is that it has almost nothing to do with liberalisation.

According to To Vima, the measures included in the law are the following:

a.     In Athens, the maximum number of taxi licenses is set at 3/1000 inhabitants. This means that there will actually be a future reduction of the number of taxis in circulation, since these are estimated at 4/1000.

b.     In Thessaloniki, the number of licenses will be increased to 2.5/1000 inhabitants, meaning a small potential increase in new licenses.

c.     In other regions, licenses will be increased to 2/1000 inhabitants. Some regions will be able to issue new licenses.

The decision whether to increase to these limits is up to the regional administrator (περιφερειάρχης), who will be able to issue the increases in limits. The Minister of Infrastructure will also be able to review the license limits each two years.

A share of new licenses will be given to people with three children and more, or parents of handicapped children to a degree of 67% or more.

At least 100 licenses for special leasing of taxis will be issued in Athens, 50 in Thessaloniki,  and 10 each in Heraklion, Patras, and Larissa. Priority for this will be given to existing license holders.

It should be obvious to anyone reading this draft law just what a deft job the government has made of “liberalisation”:

·       There will be no large-scale increase in new taxi licenses. This means no competition, therefore no benefit to the consumer at least in terms of better service. This also means no entry of new people into this segment, so no employment impact.

·       In restricting the number of licenses, the government side-steps the issue of transferring licenses, which acquire an informal value in the market. The taxation of this value has been left to a separate law, to be passed in the future.

·       The minimisation of special licenses means that hotels are restricted from hiring cars for VIP transfers or excursions, which will continue to be the remit of other favoured classes (bus drivers and limousine drivers). The small number of licenses available across Greece means that there is no practical benefit of this clause.

As with the flip-flop on the labour reserve which occurred in January 2012, it is hard to exaggerate just how much credibility is being lost here. The government has essentially admitted that after incredible damage to Greece’s international reputation from the previous taxi strike, it will issue a pretend law which is anything but liberalisation.

I can well imagine the Troika reaction—assuming anyone is still paying attention to this absurd demand in the first place. As I have written in the past, there is absolutely no consumer or operator value in a liberalisation if it takes place in a recession, and if it takes place in a sector with regulated tariffs (taxi meters). I seriously question why this issue was put on the list in the first place.

However, if I had to make recommendations for “liberalising” the taxi profession in Greece, it would be based on the following set of regulations:

a.     The number of licenses will be set each 5 years by a public private partnership comprising the local Chamber of Commerce and Industry, the Consumers Association and the Union of Taxi Drivers, with each party having 3 votes. The licenses are owned by this partnership and leased to drivers in exchange for an annual fee. 

b.     The number of licenses in major cities will be based on an average of the population criteria of London, Paris, and Berlin, taking into account the fact that the Greek public transport net remains underdeveloped.

c.     All taxi vehicles must be no more than 5 years old and in good condition. They must pass an inspection each year for technical condition and internal condition. Taxis found to fail the standard will be given 1 month to make repairs, or their license will be revoked.

d.     All taxis will be tracked via GPS as a safety and security measure, and to put an end to unlicensed taxis.

e.     All drivers will have to pass a test of driving, street knowledge, cleanliness, and courtesy every five years, with random checks and customer feedback playing a role in evaluation in the interim.

f.      All drivers must be citizens or legal residents of Greece or the European Union, and must speak fluent Greek and one other language. They must pass a professional drivers’ license.

g.     The tariff will be set each 6 months, and will vary based on fuel prices and consumer price inflation. The same public private partnership that sets the number of licenses will set the tariff.

h.     All taxis must display average tariffs and avoid price-gouging of foreign tourists. Tourists should have the right to complain to the driver or, failing this, to the hotel, police force or other third party, with immediate resolution.

i.       Any taxi driver will be able to negotiate a special tariff with any professional or personal employer, at the discretion of the two partners. A standard written template for the contact will exist. Any disputes will be settled by arbitration by the local Chamber of Commerce and Industry.

j.       Any taxi driver can choose whether to license a 5-seater, 7-seater, 9-seater or 12-seater, or higher, as long as s/he has an equivalent professional driver’s license, and as long as these vehicles are rented by special on-the-spot contract (e.g. to ferry tourists from a hotel to a port), using the same standard template form. Any contracts are to be negotiated between the customer and the taxi driver, with no further state regulation or interference. It is the decision of the driver, with the license being adjusted accordingly. (Licenses will no longer be permanent for standard 5-seater sedans, but can be renewed upon demand).

k.     Any vehicle purchased for the purpose of being driven as a taxi should be free of VAT at the point of purchase. Any taxi over 5 years old should be decommissioned or sold without VAT.

l.       No individual or company should be permitted to own more than 5 taxi licenses.

m.   An independent complaints line will be set up and operated by the Consumers Association and paid for by taxi contributions. This complaints function will have the authority to undertake tribunal proceedings by the Chambers of Commerce or other organisations, and can result in fine or a loss of the taxi license under certain conditions. The GPS track of the taxi should be accessible in case of a complaint or legal action.

This would be something more similar to “liberalisation”, in that it:

a.     Provides the possibility for restrictions on the number of licenses (safeguarding the profession), but providing for increasing supply and demand via changing the mix of passenger vehicle capacities.

b.     Provides price flexibility, which is important for consumers and certain demand categories (e.g. hotels).

c.     Takes regulation out of the dead hands of the government and into a tripartite organisation where different parties are represented.

d.     Addresses the issue of tariff price variability in response to changing energy prices and inflation.

e.     Assures consumers of taxi services modern, cleaner vehicles and better drivers.

f.      Protects the consumer against price gouging-particularly of foreigners or tourists.

The only thing this proposal does not do is end the numerous conspiracy theories circulated by Greek taxi drivers, or their propensity to smoke in their vehicles, or their affinity for Derty FM. I suppose they wouldn’t be Greek taxi drivers if this were any different.

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17 July 2011

© Philip Ammerman, 2012

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