A monopoly in the taxi industry is impossible and unnecessary

“These are mainly due to uncertain tariffs, low profitability of taxi drivers, artificial competition, poor service quality, lack of status of legal entities and individuals, call center operators. The Baku Transport Agency has developed a concept to eliminate such cases, regulate taxi activities, improve legislation, and create effective control mechanisms. The concept includes issues related to the establishment of a unified dispatch center, the application of the tariff system and quotas, as well as the improvement of entrepreneurial activity. Implementation of the concept will allow the organization of a taxi service which will be regular, legal, safe and comfortable for passengers, as well as a guaranteed for drivers,” the information said.

This information caused a negative reaction of people. The  statement of Hikmet Babayev, the head of the BNA  legal department , on the air of the Gündəm program on the ARB 24 channel further aggravated public sentiment.

The head of the department noted that it is wrong to turn a taxi into a daily, constantly used vehicle: “It should not be like this. You also know in the old days people used taxi services because  some people had  certain opportunities. You can use  taxi services, but it is wrong to turn it into a daily, constantly used vehicle. There is public transport for that."

The only sector in the country is taxi services, where there is more or less competition, and as a result of this competition, prices have dropped significantly, and low-income citizens can now use taxis. According to this information, the state wants to control this area as well. Most independent experts believe that the concept developed by the BNA will lead to the elimination of a healthy competitive environment in this area, rather than the regulation of taxi activities in the country.

By the way, Baku Taxi Service Limited Liability Company, which operates under the Ministry of Transport, Communications, and High Technologies, recently brought 100 new London taxis to the country. According to official data, 1,200 taxis of Baku Taxi Service LLC currently operate in the capital. In addition, there are about 50 independent taxi companies in Baku. According to government agencies, there are about 44,000 official and unofficial taxis in the country. According to the analysis, 27,000 of these taxis operate in Baku and 17,000 in the regions. It was noted that out of 17,000 taxis operating in the regions, 3,800 operate with a badge, and more than 13,000 operate unofficially without a badge. These are just known figures. If a unified concept is developed and unified tariffs are applied, many taxi companies and many individuals engaged in the taxi business will disappear and, at the same time, the competitive environment will be destroyed. This will lead to an increase in taxi fares, which will make this service inaccessible to low-income citizens.

Economist Natig Jafarli told ASTNA about the government's proposals on taxi service.

- Natig bey, Baku Transport Agency (BNA) is developing a unified concept for taxi services in Baku. What do you think is the purpose of this idea?

- Although the initial statement of the BNA contains information about the concept of a unified tariff, a single dispatch service, there is no information about its mechanisms and rules of implementation. In my opinion, the BNA does not have a detailed roadmap other than a general idea of ​​the implementation of this idea. Because we followed several statements of agency officials through the press. Those statements are nothing more than a general set of words. In fact, the methods of implementing the proposal on a unified tariff system and a single dispatch service are more interesting. Because some mechanisms, general principles must be defined for the application of the rules that will lead to its realization. In the current situation, given the diversity of taxi services, and the fact that there are more services over the Internet, it is not clear on what methodology and schemes this will be based on. In fact, it is already possible to say that this is a very difficult process.

- Taxi service could be considered the only area which has not been monopolized in Azerbaijan. Although they tried many times, they did not take this step. For example, before the Eurovision Song Contest in Baku in 2012, when London taxis were brought to the country, the Ministry of Transport raised the issue of the operation of taxi services with a unified tariff and the certification of taxi services. However, this step was not taken after the protests of taxi drivers. New red taxis have been brought to Baku again. And immediately the issue of concept was brought up. What could be the goal here other than the monopoly?

- In fact, it is impossible to create a monopoly in the taxi service. Even in Soviet times, when government agencies worked as precision and crushing machine like a clock and had strong control, when there was a unified taxi service, i.e. taxis with the same color, equipped with taximeters, there were individuals engaged in "khaltura", i.e. taxi business. It was impossible to control it even in Soviet times. At a time when the Internet is developing so fast, it is illogical to try to monopolize the taxi service. It is even impossible. It will only create additional problems for citizens. The state must have control mechanisms, and it is there. Distinctive sign, taxation - all of them are applied in Azerbaijan. Therefore, although this idea is presented in society as a monopolistic tendency (society accepts it like that and is right), the attempts to monopolize this service and act as a monopolistic service are in vain. These attempts will be in vain and will cause serious dissatisfaction. Taxi companies and individuals will look for ways to circumvent this decision. Therefore, such a step in this area is a serious surprise.

- Officially, the reason is given as improving the quality of taxi services and low prices for taxi services. Do you think this is a way to improve the quality of taxi service? And should prices be regulated by the state? Shouldn't the choice be made by the citizen? Shouldn't the taxi services that create the competition themselves regulate quality and price?

- If we look at the last 5 years since 2015, despite the rise in gasoline prices and two devaluations, taxi service is one of the few areas where prices have fallen. Perhaps the only area where the increase in the number of international and local companies has led to a competitive environment, price regulation, and lower prices in this area. It is very good to have a competitive environment in this area. The state has also other tools to regulate the issue of quality. In other words, it would be more expedient for the state to rationalize the rules of regulation than to monopolize this area using the opportunities available to it. Indeed, there is a unified tariff system and a unified taxi service in many countries and cities around the world. But these are areas related to municipalities. It is connected to metropolitan municipalities and the mayor's office. Metropolitan municipalities generate a large part of their budgets from transport services. The resulting budget is spent on voters, i.e. the urban population. If they want to do so in Azerbaijan, it is a good thing. But for this, they must change the Constitution, create a municipal institution, establish metropolitan municipalities, form a mayor’s office, and hold elections, the participation of city municipal councils in city governance should be increased, the transport system should be subordinated to municipalities, and so on. In this case, municipalities should begin to create infrastructure for urban citizens from the revenues generated by the application of general rules. Recently, our officials are referring to world experience. But the world experience is like I said. If they talk about the world experience in this field, then they should solve other issues, from constitutional amendments to the other abovementioned issues, and establish metropolitan municipalities.

- The newly brought red taxis have been transferred to the Baku Taxi Service. To what extent is it right to transfer taxis purchased at the expense of the state budget to any company? Why does the state discriminate in favor of that company? Isn't this a violation of the principles of competition, antitrust law? Can there be any personal interests in this issue?

- The state should not interfere in the taxi service. In general, the state should stay out of direct interference in the economy. That is, one of the main factors driving the economic development of the countries is the very limited opportunities for direct state intervention in the economy. Therefore, it is illogical to buy taxis at the expense of the state, to provide taxi service at the expense of the state. The latest bought red taxis will not play a significant role in the taxi market. Because only 100 taxis were bought. There are more than 40,000 car owners in Baku and Absheron who provide taxi service with a badge. This is just a known figure. In this regard, red taxis will not play an important role in the market. They are just taxis bought for the show, for PR. But in general, the direct participation of the state in this area is unacceptable.

- Can the State Labor Inspectorate and the State Antimonopoly Service intervene in what is happening? Why are these institutions silent?

- The state antitrust authorities, the Labor Inspectorate are always left out in making such decisions. Because they understand that such decisions are not made by the BNA. It is a decision made at higher levels, maybe even at the level of the President. Therefore, they are reluctant to interfere in such decisions, to comment on the issue. I do not think that there will be any official statement from those institutions soon.

- Poor people also engage in the taxi business to bring home the bread. What would you suggest? How can the taxi business in the country continue in a normal, high-quality, standard way so that neither poor drivers nor entrepreneurs are harmed, and citizens are satisfied?

- The number of people engaged in taxi service in Azerbaijan is large because there are no alternative jobs. Citizens buy a car at a low price and provide this service so that they can at least earn their and their families’ keep. That is, it is due to the scarcity of economic opportunities. Therefore, I think that even if there is a need to take regulatory steps in this area, these regulatory steps should not go directly through state intervention. These regulatory steps are possible with the proclamation of certain standards by the state. That is, certain standards can be set for the production year of cars, their technical conditions, the professionalism of drivers, the improvement of service culture. This is possible. But direct state intervention in this area is unacceptable. Even if the state makes this illogical decision, there will be thousands of citizens who will bypass this decision. Control mechanisms are not possible. There are usually neighborhood taxis. They are not officially registered as taxis but provide taxi services. How will the state intervene and control it? It is not possible. They can't put a police car behind every car. That is, even if the decision comes into force, it will not work. Therefore, it is better to abandon this decision without aggravating the situation. Some steps can be taken to apply common standards.