Singapore Economics – We Increase Competition to Create Monopolies

 

I decided to do something which I haven’t done for a long time and ended up going late last night. Went to chill out at a bar and didn’t finish until one in the morning. The bar was fun and I had a really good time.

However, once I left the bar and wanted to head back, I ran into one of the harsh realities of the laws of economics with a Singapore twist. I had a problem looking for a means of getting back. There was no public transport and the only option to get back would have been by car, which meant “Grab” (Southeast Asia’s answer to Uber) or taxi.

There was only one snag to this. Grab drivers have learnt the laws of supply and demand. They are well aware that after midnight, demand for transport goes up (there’s no bus or train) and so their rates go up. Like their cousins in the conventional taxi business, they have learnt to wait till after midnight when the rates go up.

However, the pricing of Grab has far greater fluctuations. For the metered taxis, the post-midnight surcharge is 50 percent of whatever the meter says. Hence, a S10 taxi ride would become a $15 ride. In the case of Grab is whatever the customer is willing to pay. To my horror, the pricing for Grab shoots up to past $40 for a ride that takes less than ten minutes. I thought I would try my luck and move to a prominent hotel, where I assumed would have more demand. Well, that journey proved that assume means making an ass out of you and me because the pricing was pretty much the same.

 

 

What made this journey particularly noticeable was the fact that I did try to hail down metered taxis, which were few and far in between. Whenever I saw a green light, which indicated that the taxi was available for hire, they would either ignore me and turn their lights red. It became frustrating when I hit a hotel lobby and say an entire row of taxis with taxi drivers happily chatting away. I was told “all of us are on booking.”

 

 I did get a taxi after almost an hour’s wait and contemplating if I should jump into a cheap hotel to wait until the public transport would start working again. That taxi ride cost me a grand total of $13.

 

 

I think of this frustrating effort to take a taxi because it reminds me of one of the weirdest facts about Singapore. We have managed to twist the laws of economics onto its head. We are on one hand a place that is exceptionally competitive but at the same time, we have too many monopolies that take fleecing the customer as a God-Given right.

At one stage, this was most prevalent in the media. You had Singapore Press Holdings (SPH) which owned the print and MediaCorp which owned the broadcast. When the government told them to encroach on each other’s territory, they bled money and then went squealing back to the government crying that Singapore was “too small for competition.”

The executives at MediaCorp and SPH spent their time snipping at whether readership or viewership was better and didn’t bother thinking of the consumer. So, the consumer decided to value neither readership or viewership and went elsewhere. SPH went from being a listed company to a non-profit at the mercy of the Singapore Government.

Media isn’t the only place where executives believe in the divine right of the monopoly and this is clearly seen in the taxi business. When the government allowed ride hailing platforms like Grab and Uber to enter the market, the metered taxi drivers complained that their business was being affected (Metered taxis being a business that is reserved for Singaporeans). Consumers rejoiced because suddenly there was a choice. You were not at the mercy of a single provider. You were no longer, for example, held hostage by the whims and fancies of cab drivers who didn’t want to pick you up when it rained or when they didn’t know where to go (Singapore being a place where taxi drivers need to be told which route to take).

However, Uber couldn’t hack competition and surrendered its position in the market to Grab. The end result is that Grab is to all intents and purposes a monopoly and sets the prices as it sees fit.

What surprised me in my post mid-night attempt to get a taxi was the behavior of metered taxi drivers. They didn’t seem to want to take my money, which I needed to give. Taxis that had flashing green lights turned away from me when I tried to hail them.

Now, I get the monopolistic behavior when you talk about say the media, which is run on a top-down model. The journalist in either SPH and MediaCorp can only do so much because they are employees with bosses to report to.

However, the taxi and Grab business is different. The taxi company owns the infrastructure but the taxi driver is a self-employed entrepreneur whose earnings depend on what he or she can get.

Now, given that Grab has a monopoly on the ride hailing side of things and jacks up prices up after midnight which are four to five times what the meter in a conventional taxi, you’d imagine that the after-midnight shift would be an opening for conventional taxi drivers. Entrepreneurs are after all, supposed to fill a niche that everyone else ignores.

However, that does not seem to be the case here. The metered taxi drivers are behaving like they have a monopoly and not rushing for customers. Let’s remember this is a group that complained that life had become harsher because of the ride hailing competitors. Well, they need to ask themselves why they’re suffering when they’re not taking advantage of a market niche.

Competition amongst businesses is good. It makes businesses remember that they have to look after the consumer, who pays their bills. As such you get innovation and product and service improvements. You get pricing improvements. Competition is not meant to turn one big monopoly into a myriad of small monopolies who then fix the market to screw ordinary consumers.