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Uber’s new headquarters proposal for Hong Kong comes with a big caveat

Uber has proposed relocating its Asia-Pacific headquarters to Hong Kong days after a controversial move from Beijing to impose “national security” laws in the Special Administrative Region jeopardized the future of the city’s business environment.

“Today’s announcement is not only about the future of Uber in Hong Kong, but the future of the city as a global economic powerhouse and technology capital where innovative businesses can thrive and grow,” Uber Hong Kong general manager Estyn Chung said in a statement Tuesday, confirming earlier reports the city was being eyed as the regional HQ’s next destination.

Although Uber says the company is “ready to move,” it also warns that the relocation comes with a major caveat: the Hong Kong government has to approve ride-sharing first.

City break

Uber’s APAC headquarters is currently in Singapore. The California company opened its Singapore office, where it reportedly employs around 150 people, in 2019. Last week, CEO Dara Khosrowshahi told employees that the company would close its Singapore office over the next 12 months and move to “a market where we operate our services.”

Uber ceded operation of its Southeast Asia business to Grab in 2018, taking a 28% stake in the six-year-old startup as compensation. (Grab is the predominant ride-hailing service in Singapore.) Uber struck a similar deal with China’s Didi in 2016, after burning billions of dollars trying to gain market share in the mainland.

With much of Asia already given over to rivals, Uber’s APAC division covers nine remaining regions: Australia, New Zealand, India, Bangladesh, Sri Lanka, Japan, South Korea, Taiwan, and Hong Kong.

Uber claims moving its regional headquarters to Hong Kong would help create jobs in engineering and data management, opening opportunities for forthcoming graduates. In Hong Kong, however, Uber has spent six years operating in a legal gray area. Local law prohibits transporting passengers without a license and illegal taxi operators face fines up to $1,200.

Uber attempted to bypass the regulations in March 2018 by launching a service called Uber Flash in partnership with a local taxi company. The owner of the taxi company pulled out shortly before the venture took effect, however, after reportedly receiving threats to his family from other taxi operators.

No fare

Hong Kong’s taxi driver union continues to frustrate Uber’s ambitions for Hong Kong. After Uber proposed relocating to the city, Chan Man-keung, chairman of the Association of Taxi Industry Development, told the South China Morning Post that the association would “definitely oppose any deal with Uber” if taxi drivers aren’t compensated for “losses.”

“The government needs to be fair to taxi owners. They all invested a substantial sum of money to get their licence. The government could buy back all our licences and then it can reform the market as it pleases,” Chan said.

There are 18,163 taxis in Hong Kong. That number has remained largely stable since 1994, when the government decided to issue new licenses “only when necessary.” The cap has kept taxi licenses at a premium. Currently, each medallion costs roughly $645,000. (A medallion for a yellow cab in New York City costs around $150,000.)

Licenses are typically owned by companies that manage small fleets, charging individual drivers fees to operate a taxi. Having spent millions of dollars on medallions, these operators oppose any change that could hinder the return on their investment—such as introducing modern competition.

Despite the challenges, Uber has managed to maintain a presence in Hong Kong. According to the company, close to 250,000 Hong Kongers have registered as drivers with Uber while the firm’s food delivery service Uber Eats has partnered with over 6,400 restaurants. Drivers that operate in Hong Kong do so illegally and risk getting hit with fines.

Hong Kong has also proven a bright spot amid the coronavirus, which has devastated Uber’s global business. Uber says trip numbers in Hong Kong have returned to 70% of their pre-pandemic level already.

“Uber wants to be a pillar of Hong Kong’s economic recovery, and send a signal to other global leaders that Hong Kong is ready to lead the next wave of tech innovation,” the company said. “We ask the government to work with us to help make this vision a reality.

Source: Fortune

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