Despite “Licensing,” Ride-Hailing Conundrum Continues

The government last month issued temporary approvals for the licensing of ride-hailing apps in Jordan. This is an important step forward, but much remains to be done before these services can operate legally in the Kingdom.

Many have lauded the government’s decision late last month to grant six-month temporary approvals for the licensing of some 19 companies that offer ride-hailing services through smartphone applications.

The decision came more than two years after Uber and Careem—the largest players in this market—had begun operating in the Kingdom and following many months of speculations, protests from yellow taxi owners and drivers, and crackdowns by the traffic police.

The temporary approvals certainly represent a positive step forward, but they should not be viewed as a resolution to the complex issue of regulating ride-hailing apps in Jordan. There remain many details that need to be fleshed out and negotiated among the various parties involved.

To better understand this, it is useful to think of the process of legalizing a ride-hailing service in two stages.

The first involves licensing the app itself. This starts with setting up a company at the Companies Control Department at the Ministry of Industry and Trade and then obtaining an approval to operate from the relevant authority—in this case the Land Transport Regulatory Commission (LTRC). This is much like having the Ministry of Health approve the licensing of a new private hospital or the Ministry of Education approve the licensing of a new private school. The approval of LTRC is regulated by a set of instructions officially released on March 1, 2017. These instructions relate to the licensing of the service of “supporting and facilitating passenger transport” (note that this is not the transport service itself but, rather, the support and facilitation of that service).

NSK

The second stage involves licensing the service itself. The government’s position on this has remained firm: ride-hailing services should only be offered by ‘commercial’ vehicles (3umoumi), not private, white-plate vehicles. Under previous regulations, the primary class of commercial vehicles through which ride-hailing apps could legally provide their service in Jordan was yellow taxis. However, on April 2, 2017, the government issued amendments to the instructions governing the yellow taxi market and added another class of commercial vehicles they dubbed ‘the smart taxi’. The conditions that govern this new class of vehicle remain a matter of contention between government and ride-hailing companies—namely in terms of the minimum technical specifications of the vehicle, who sets the level of supply (i.e. the number of smart taxis that can operate at any given time), who sets the criteria for fares, licensing fees, and so on. Once these details are agreed upon, each company licensed under “Stage 1” would sign an operational contract with the government—represented by LTRC. This contract also has its own set of details and challenges that need to be addressed.

The temporary approvals announced late last month essentially involve “Stage 1.” The companies have been granted a license to operate, but the details through which these companies operate remain under discussion. This is why the jubilant reaction to these approvals—as significant as they are—is somewhat premature. To draw a parallel: think of a manufacturing company that has obtained a license to establish a facility in Jordan. The company can technically open up a factory. However, there are no clear, agreed upon regulations that allow the company to install machinery or hire staff in that factory.

As negotiations continue with ride-hailing companies, the government must not lose sight of the greater objective of improving transport services in Jordan. Yellow taxis have failed in providing a decent quality of service, and I place the blame here largely on bad regulations—leading to poor driver economics—and weak enforcement. Technology and ride-hailing apps present an opportunity to correct old mistakes and improve services across the board, including on yellow taxis. They also present an opportunity to create jobs for thousands of Jordanians. This is an important byproduct that is often overlooked in the national discourse on this topic.