Posts Tagged ‘Uber’

In this Insights at the Edge of Government Analysis Flash, we look at the hyper growth of mobile data 3G/4G subscribers in Pakistan in the last 3 years. If you are wondering why Alibaba is currently in talks to buy a stake in Telenor Bank, PayPal and Alipay are planning their market entry, and other top technology firms like Uber have made Pakistan a priority, the huge growth in mobile data adoption is it. Mobile data subscribers have grown at a CAGR of 135% since 2014.

Mobile data subscribers have grown at a CAGR of 135% since 2014.

Pakistan’s e-commerce market is expected to reach $1 billion by 2020. However, a world-class regulatory framework for the digital economy will be critical to position Pakistan as an emerging technology hub, attract further foreign direct investment from global technology leaders, as well as speed Pakistan’s transition to a knowledge-based economy. Key regulatory reforms should include modernized business activity licensing classifications for e-commerce and the sharing economy, world-class consumer and data protection laws, clear policies that guarantee personal data privacy, and a sensible tax regime. A Prime Minister’s Committee for developing the digital economy, formed by representatives from leading global and home grown technology firms, would be an effective way of ensuring Pakistan gets its digital economy regulatory framework right and avoids inconsistent federal and provincial laws.

In this Insights at the Edge of Government Analysis Flash, we look at the unprecedented level of economic opportunities for MENA youth created by ridesharing companies. In Egypt, Pakistan, and Saudi Arabia alone, ridesharing firms have catalyzed 200,000+ economic opportunities. These opportunities, which have been created over the last 4 years, now exceed the workforce of the largest regional public sector employers as well as the expected job creation impact of many of the region’s in progress mega projects.

In previous blog posts, we have written about how sensible regulation of the sharing economy has the potential to contribute significantly to the MENA’s socio-economic development. Some countries, like Saudi Arabia, are getting sharing economy regulation right, while other MENA countries remain focused on more traditional policies to attract inward foreign direct investment flows for mega projects to create high skill, high wage jobs in knowledge-based industries and protect industry incumbents. Based on this analysis, technology-driven business models in the sharing economy have the potential to be a key tool for MENA governments to complement active labor market policies and large scale national economic opportunity generation strategies.

MENA ridesharing firms provide 300,000+ youth economic opportunities

When it comes to news on socio-economic trends in the Arab World, government and business leaders turn to Trends Magazine. Tahseen Consulting is honored to have its insights on regulating the emergent sharing economy in the Arab World in the publication’s October issue. We have posted the full article below.

Tahseen Consulting’s Chief Operating Officer, Wes Schwalje, spoke with Nikhil Inamdar, a leading voice on key business trends in the region, regarding the evolving role the sharing economy is playing in meeting the region’s youth employment challenge. In a wide-ranging discussion, Schwalje warns of avoiding heavy-handed regulatory approaches that might limit the socio-economic impact pioneering companies in the sharing economy such as Uber and Airbnb can have on the Arab region.

Despite the negative press attention the sharing economy has received, the Arab World has largely shied away from public and government debate over the policy issues that this major growth sector highlights as it disrupts mature industries. As the sharing economy has grown, it has puzzled global policy makers who are faced with the challenge of embracing innovative, digital services which can lower costs and increase convenience for consumers while balancing the continued competitiveness of incumbent industries.

The Rapid Growth of the Sharing Economy in the Arab World

The sharing economy includes a wide range of online platforms that help people share access to assets, resources, time, and skills. While there are a growing number of regional companies that have entered the sector, the dominant players in the Arab World remain well-funded, Silicon Valley-based startups. From Marrakech to Beirut, and many cities in between, sharing economy firms have rapidly scaled their operations across the Arab World due to strong consumer demand. However, regional policymakers, for the most part, have yet to consider how to regulate the sharing economy.

The Importance of Travel and Tourism to Regional Economies and Employment
CountryTravel and Tourism Total Contribution to GDPTravel and Tourism Total Contribution to Employment
UAE8.40%9.20%
KSA7.70%11.10%
Egypt12.80%11.60%
Morocco17.90%16.00%
Lebanon21.10%20.30%
Source: World Travel and Tourism Council

Early Attempts At Regulation

In considering how to regulate the shared economy, Arab policy makers face two options: dismiss new sharing economy platforms by regulating them out of existence and retaining legislation that favors market incumbents or embrace the efficiencies the sharing economy  can bring to increase innovation and harness the growth of the shared economy to promote socio-economic growth.

Dubai is ground zero for how regulation of the sharing economy might unfold across the region. For example, in the run up to Expo 2020, Dubai is attempting to broaden its range of accommodations. One market segment that has surged in the past several years is short-term apartment rentals. Until 2013, when Decree Number 41 was introduced, short-term rentals of holiday homes were largely unregulated. The Decree made it mandatory for operators and owners who lease out their apartments on a short-term basis to attain a license from the Dubai Department of Tourism and Commerce Marketing. (DTCM) In mid-2014, DTCM started accepting license applications from operators and owners. As of July 2015, a total of 37 operators and owners were licensed to rent out holiday homes in Dubai with 800 units registered.

It is unclear how Dubai’s renewed push to register holiday homes and impose fines on offenders who rent their properties without a license will ultimately affect sharing economy players operating in the short term rental sector. The licensing of holiday homes in Dubai is an example of a reactionary public policy response that could potentially erode the supply base of shared economy players in the short term rental sector by imposing a licensing process on landlords. A win-win solution which would have supported the growth of the shared economy as well as maximized government revenues would have potentially been to meet with sharing economy companies and short term rental agents to discuss how the Dubai tourism tax could be collected from intermediaries and paid directly to authorities. In France, Amsterdam, India, and the United States, sharing economy companies work with authorities to do exactly this.

A recent study suggests that the market presence of sharing economy players operating in the short term rental sector negatively impacts hotel room revenues. However, the competitive response from incumbent hotels often results in price reductions by lower-end hotels and hotels not catering to business travelers. In this respect, short term rental sharing economy firms have the potential to lead to lower consumer prices for hotel rooms as well as more flexible accommodation offerings. In so far as, lower accommodation prices can drive tourism numbers even higher, Dubai’s introduction of licensing requirements as a mechanism for regulating the sharing economy may ultimately have the unintended effect of reducing tourism by reinforcing higher accommodation prices.

Across the Arab World, overlaps between regulatory and operational functions of government institutions can result in significant inefficiency. When government entities provide a service, set delivery standards, and monitor compliance with standards, an unintended outcome is often reduced quality of public service delivery and lower service standards. This governance tradition in the Arab World has produced a number of cases in which regulatory agencies, which should be accountable to Ministries and focused on setting standards to ensure high quality public services, have become too involved in commercially motivated, operational functions. Over involvement of government institutions in operational activities has the potential to reduce the growth of the sharing economy and ultimately negatively impact consumer convenience and choice.

In association with the United Arab Emirates’ Smart Government Initiative, government agencies have been called upon to make their services accessible via smart technologies such as smart phones. The Dubai Road and Transport Authority’s (RTA) recent announcement of its e-limo system, which will require private hire vehicle operators to route transactions through its booking and dispatch system, is a potential example of a case where a government entity with a regulatory and policymaking mandate is extending itself too far into an operational role. By introducing their own limo application, which essentially competes with sharing economy transport networking companies and erodes market supply, RTA risks crowding out private sector innovation that can fuel entrepreneurship, private investment, and job creation.

Embracing the Sharing Economy for Regional Socio-economic Development

According to the World Travel and Tourism Council, travel and tourism contributes approximately $283 billion to Arab economies and employs 11 million people. This means that the contribution of the travel and tourism sector to regional gross domestic product is on par with the banking, chemicals, agriculture, and automotive sectors. It is clear that travel and tourism will play a strong role in generating economic growth and employment in the Arab World over the next decade.

The sharing economy, in so far as it is a key driver of travel and tourism, has the potential to contribute significantly to regional socio-economic development. While there have been no rigorous attempts to determine the socio-economic impact of the shared economy in the Arab World, limited data suggest that the sharing economy has a growing importance in driving the travel and tourism sector in the region. For example, 40% of Uber’s riders in Dubai come from outside the country. Statistics such as this indicate that sharing economy trends and penetration rates globally can have a significant impact on economies regionally.

A recent report on the sharing economy workforce in the United States found that 67.5% of sharing economy jobs are occupied by workers in the 18-34 age demographic. The youth employment impact of the sharing economy globally suggests that embracing the sharing economy in the Arab World could play a key role in government socio-economic development programs to address the Arab World’s youth unemployment challenge. This insight has important implications for how Arab governments should approach regulating the shared economy.

The Age of US Sharing Economy Workers
Age% Sharing Economy Workforce
18 - 2438.70%
25 - 3428.80%
35 - 4416.30%
45 - 5411.00%
55 - 644.30%
65 +0.90%
Source: Requests for Startups 2015 1099 Economy Workforce Report

The Future of the Sharing Economy in the Arab World

The future of the sharing economy in the Arab World is heavily dependent on how governments approach sector regulation. Knee jerk approaches to public policy will prevent the likely considerable positive socio-economic development impacts that can be generated by the sharing economy. In the GCC countries, entrepreneurship programs and wage subsidies offer significant potential to attract nationals and private investment to emerging sharing economy sectors that can reduce public sector employment. While in middle income Arab countries, the sharing economy can offer employment options for youth that can be combined with government finance and training programs that eventually lead to business ownership. Where other countries are limiting consumer choice by over-regulation of the shared economy, the Arab World has the opportunity to distinguish itself as a region that embraces the sharing economy through a well-considered public policy response that harnesses the sector’s potential growth for regional socio-economic development.

Unemployment By Age Group in Selected Arab Countries
AgeUAEKSAEgyptMoroccoLebanon
18-2433%52%63%42%45%
25-3432%45%36%40%32%
35-4415%3%1%12%8%
45-5412%0.50%0.06%5%8%
55-648%0.09%NA0.22%4%
65 +NANANA0.22%2%
Source: Latest available statistics from the International Labor Organization