Innovation and regulation can often have a paradoxical relationship. Modern tech history has consistently highlighted the tug of war between regulators and innovators, from Google’s continuous brawls with worldwide governments to Uber’s and Airbnb’s controversial business antics.
But today’s sharing economy giants have shaken up far more than the high-level status quo. Their models’ wider social and economic implications - not to mention responsibility - are under international scrutiny; and not always by top-ranking officials.
On April 13, Ottawa-based taxi driver Tony Hajjar pleaded with the city council not to legalize Uber - it did - calling it a “criminal organization” that didn’t care about local laws.
In May, a study by the Pew Research Center highlighted the so-called sharing economy's increasingly elitist tendencies, noting that affluent US adults were more likely to have used peer-to-peer platforms than lower-income Americans.
Considering the collateral damage of the sharing economy, Rohit Mahji, senior manager at Monitor Deloitte Middle East, said that the pain point for worldwide governments has been to ensure that disruption works in favor, rather than at the expense of economy. “The guys at Uber will say that [they] are helping the economy and are creating jobs, but most Uber drivers probably don’t get health insurance [or] benefits. The money that is generated by Uber and Airbnb doesn’t always get injected back into the economy," Mahji told Wamda.
Globally, Airbnb's misuse by real estate agents in densely populated areas risks and has been "squeezing out people’s ability or regulatory possibility to own or rent a place", he adds. Indeed, the “disintermediation” of the Airbnb model was at the center of a recent report by the Financial Times, which flagged the invasion of the platform by property management professionals out to evade housing and taxation laws.
Looking at the global cautionary tales of the sharing economy, Ramzy Ismail, program manager at Flat6labs, said that two approaches to the complex regulator-innovator relationship have unfolded in recent years in the Middle East. “The Uber approach [launch first, collaborate second] where you go in there, make things happen and let the market speak for itself, or the Careem model, where you work with the government hand in hand. There's no right or wrong.”
Niche reach: the UAE’s limitations to the peer-to-peer model
"From the get-go, we decided to be collaborative [with the regulatory authorities] rather than disruptive," Christian Eid, general manager of Careem’s UAE operation, told Wamda. "Maybe we don’t have to compete but rather integrate – for instance, enabling [regular] taxi bookings through Careem. It’s an option we’re entertaining."
On Uber's operations in the emirates, Jambu Palaniappan, Uber's regional general manager for Middle East and Africa, speaks with a great deal of diplomacy. "The rules are what they are in the UAE and we’re complying with them," he said, explaining that "Uber’s model is about high efficiency and increasing the liquidity in the marketplace through technology".
Uber's prices undercut competitors' by an average of 20 percent in Saudi Arabia, and by a range of 5 to 15 percent in Egypt. With the current and future RTA regulations, its model remains limited by premium pricing in the UAE. "There needs to be a mass product, which we’re not part of right now. But I think that will come as part of the evolution of our relationship with the RTA," says Eid.
Better together: Uber and Careem’s collaboration with governments outside the UAE
Outside of the UAE, Palanappian says that Uber’s entry in Egypt and Saudi Arabia has been met with progressive thinking from governments on its potential economic and social benefits: the first being scaling job creation to driver-owned mini-businesses, and the second being economies of scale on public infrastructure investments."In Egypt, 40 percent of the drivers that sign up to Uber in Egypt are unemployed […] In Saudi Arabia, many more Saudi drivers are raising their hands and showing their interest in signing up as drivers on either a part time or full time basis," he added.
Egypt has formed a cross-ministerial committee that will collectively decide on the regulations for the car-hailing industry and define its regulating authorities - particularly in light of growing dissent among taxi drivers against both Uber and Careem, which they accuse of jeopardizing their livelihood. Still, Uber pushes on its social purpose in Egypt, having recently signed a MoU with Education for Employment, a NGO that provides people from marginalized areas in the country with vocational training, to help turn them into drivers.
In Saudi Arabia, the company is in talks with the ministry of transport to create a separate licensing model for Saudi drivers on its platform in line with the kingdom's Saudiization vision. "Culture is shifting. There is now interest in forming a new regulatory framework to accommodate the interest of the people," Palanappian told Wamda.
Similarly, Careem's close-knit relationship with regulatory authorities in Saudi Arabia has granted the company the first permit in the world legalizing the ride-hailing business. "Saudi Arabia’s been quite avant-garde in this respect. Even the US has not done that," said Eid, who speaks of a pre-Careem and post-Careem era in the kingdom. "We have Saudi nationals driving cars. Women use Careem heavily. We've liberalized movements."
Whatever the current model muddles may be, the UAE government seems to be warming up to the ride-hailing industry.
Careem was recently reported to have joined an alliance of ride-hailing apps, integrating into a global network that is sure to feed off of and into Dubai tourism. “I cannot confirm that we are part of this alliance,” said Eid. If Careem were to take part in it, he told Wamda, the alliance would work similarly to cross-country airline and mobile operator partnerships. Effectively, non-Middle Eastern tourists to Dubai can use their home country’s ride-hailing apps, such as US-based Lyft, and have them fulfilled by a local player, such as Careem.
Oddly, the alliance seems to have excluded Uber.