Following is a question by the Dr Hon Priscilla Leung and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (July 13):

Question:

     The Government is examining the introduction of the premium taxi trial scheme to be operated under a franchise model, which aims to provide members of the public with a service choice other than ordinary taxis, and to address the needs of those passengers whose demand for service quality and affordability are both higher.  However, the taxi trade is dissatisfied with the Government’s introduction of the trial scheme, as it will not only affect the livelihood of taxi drivers, but also create division in the trade.  Some members of the taxi trade have proposed the conversion of some ordinary taxi licences into franchises for premium taxis on a trial basis.  However, the Secretary for Transport and Housing has indicated that as the relevant proposal involves complicated legal, financial issues, etc., the feasibility of the proposal has yet to be explored.  In this connection, will the Government inform this Council:

(1) whether it has studied if the number of ordinary taxis at present is sufficient to cope with the service demand; if it has, of the details; whether it has assessed if the introduction of premium taxis will have impact on the room for survival of ordinary taxis and create unfair competition; if it has, of the details;

(2) given that the authorities have indicated that the proposal to convert ordinary taxi licences into franchises for premium taxis involves complicated legal, financial issues, etc., whether they have discussed such issues with members of the taxi trade; if they have, of the views collected; if not, the reasons for that; and

(3) given that some members of the taxi trade have relayed to me that ordinary taxis may also cater for the needs of those passengers demanding taxi service of a higher quality provided that the Government provides support for the taxi trade, e.g. designating special locations in places such as hospitals, etc. for picking up and dropping off passengers with impaired mobility, so as to allow taxi drivers sufficient time to assist such passengers, as well as providing relevant training for taxi drivers, etc., whether the authorities will consider such views; if they will, of the details; if not, the reasons for that?

Reply:

President,

     The policy objectives of introducing premium taxis by the Government are to provide passengers with an additional choice other than ordinary taxis and address the needs of passenger groups with higher disposable income.  It is thus basically a move to expand the customer base.  Ordinary taxis will remain the major source of supply of personalised and point-to-point public transport service.  Having different clientele, premium taxis will not and cannot replace ordinary taxis.  As premium taxis are a new type of service, we propose to introduce premium taxis on a trial basis.  The preliminary proposals mainly include:

(i) around three franchises will be granted to maintain healthy competition;

(ii) the fleet of a franchise comprises about 150 to 200 vehicles, adding up to a total of about 450 to 600 premium taxis, which is about 3 per cent of the 18 000-odd taxis in Hong Kong at present.  In this regard, we have taken into account the demand for this new type of service, the overall supply and demand of taxis in the territory, the operating environment of taxi trade and the impact on traffic management.  The fleet size of each franchise should not be too small to maintain operation efficiency;

(iii) the franchise will be time-limited lasting for about four to six years.  This period has taken into account the financial viability;

(iv) as it is anticipated that the operating cost of premium taxis is higher, its fare will be higher.  The Government has engaged a consultancy earlier to conduct a telephone survey to canvass public views on the introduction of premium taxis.  The survey findings indicate that over 3 per cent of the respondents will definitely consider using premium taxis even if the fare of premium taxis will be 60 per cent to 100 per cent higher than that of ordinary taxis.  However, the Government has not yet decided on the fare of premium taxis; and 

(v) basic service standards and vehicle price requirements in respect of vehicle types will be set under the franchise to ensure that the role and positioning of premium taxis will be different from those of ordinary taxis.  The aim is to address the needs of passengers whose demand for better service quality and having higher requirements on vehicle types.  For instance, franchisees will be encouraged to provide wheelchair-accessible taxis.  A requirement will be set on the minimum number of such vehicles to be provided.
 
     The above recommendations are only preliminary proposals which have not yet been finalised for implementation.  We will continue to liaise with the taxi trade and canvass the views of various stakeholders.

     My reply to the various parts of the Dr Hon Priscilla Leung’s question is as follows:

(1) At present, there are 15 250 licences for urban taxis, 2 838 for New Territories (NT) taxis and 75 for Lantau taxis.  The Transport Department (TD) conducts surveys on the overall taxi service level annually.  The surveys collect various data including passenger waiting time and occupancy rate of taxis.  The survey for 2016 is in progress.  According to the survey results of 2015, the service level of urban and NT taxis remained stable.  In respect of average waiting time, the average waiting time for urban taxis at taxi stands and roadside were about one minute.  As for NT taxis, given the larger geographical coverage of the region, NT taxis are more inclined to wait at taxi stands with higher service demand, such as at the centre of new towns, the Airport, railway stations and boundary control points.  In 2015, the average waiting time at taxi stands and roadside were about 1 minute and 4 minutes respectively.  During peak hours, the proportions of passengers having to wait at taxi stands for more than 10 minutes were 5 per cent for urban taxis and 1.2 per cent for NT taxis.  As for Lantau taxis, the average waiting time at taxi stands and roadside remained stable (one minute at taxi stands on weekdays and three minutes on weekends, and 14 minutes at roadside on both weekdays and weekends) in 2015.  Nevertheless, the proportions of passengers having to wait at taxi stands of more than 10 minutes were 18 per cent on weekdays during peak hours and 30 per cent on weekends.  Such proportions are higher than those of urban taxis and NT taxis.  In the second quarter this year, TD issued 25 new Lantau taxi licences, bringing the number of licences from 50 to 75, to increase supply.  TD will continue to monitor the overall service level of taxis through regular surveys, field observations, public opinions as well as maintaining close communication with the trade.

     Ordinary taxis and premium taxis have different clientele, fulfilling their different functions.  Ordinary taxis will continue to provide the major source of supply of point-to-point personalised public transport service so as to suit the needs of the general public.  Premium taxis will primarily meet the needs of a new group of passengers who have higher disposable income.  Introducing premium taxis is not to replace ordinary taxis.  It enables ordinary taxis and premium taxis to perform their own distinct roles to meet the needs of different passenger groups.  In fact, according to the preliminary proposal, the trial scheme will introduce a maximum of 600 premium taxis, accounting for only about 3 per cent of the total of 18 000-odd taxis in the territory.  This ratio matches the percentage of respondents (3 per cent) in the above-mentioned survey who indicate that they will definitely use premium taxis.  Moreover, according to the findings of the survey, over 40 per cent of the respondents indicate that they will use both premium taxis and ordinary taxis (albeit unsure about whether they will reduce the use of ordinary taxis) after the launch of premium taxis; more than 30 per cent of the respondents indicate that they will not reduce the use of ordinary taxis if they use premium taxis; only less than 20 per cent of the respondents indicate that they will reduce the use of ordinary taxis if they use premium taxis.  

(2) In the course of the study for introducing premium taxis, the Government has been maintaining close liaison with the taxi trade.  The trade has proposed converting certain number of ordinary taxi licences to the operating right of premium taxis.  This is not a simple issue.  From the theoretical and operational perspectives, complicated issues on legal, financial and passenger demand, etc. are involved.  For example:

(i) the trade mentioned that ordinary taxi licences can be converted to the operating right of premium taxis.  Two types of taxis are subject to different regulatory regime.  Ordinary taxi licences are issued under the Road Traffic Ordinance.  The licences carry a price.  They are permanent and freely transferable.  On the other hand, premium taxis will be operated under a franchise which is time-limited, non-transferable and revocable.  It requires a new legal framework for implementation.  Legally speaking, whether ordinary taxi licences can be converted to operating right for franchised taxis should be subject to further deliberation and in-depth study;

(ii) on the financial front, ordinary taxi licences are issued through an open tender and awarded to those who offer the highest prices.  As such, the taxi licences carry a price.  Moreover, as the licences can be traded freely, a market price also exists.  As the taxi owners bought their taxi licences at different prices, the costs of each ordinary taxi to operate under the premium taxi model are different.  Meanwhile, franchises will be time-limited and non-transferable.  We are still studying if a fee will be charged for the franchise.  Financially, the feasibility of converting the ordinary taxi licences to the operating right of premium taxis requires in-depth study; and

(iii) regarding passenger needs, ordinary taxis, charging a lower rates, will remain the major supply source of personalised and point-to-point public transport service, while premium taxis will mainly serve the passenger groups that have a demand for personalised and point-to-point public transport service of higher service quality and fare.  Premium taxis will not replace ordinary taxis.  The trade proposal involves issues on the role and positioning of ordinary taxis and premium taxis, demand and supply, etc.  These issues should be carefully handled and subject to further study.

     Prior to the meeting of June 21 of the Panel on Transport of the Legislative Council (the Panel), the Government has closely liaised with trade as mentioned in paragraph 29 of the relevant paper to the Panel.  After the Panel meeting, we have met with various taxi associations to canvass their views on the initial proposals.  We have also explained to them the complicated issues involved with their proposal for converting ordinary taxi licences to the operating right of premium taxis which require further examination on the feasibility and reasonableness.  If the trade comes up with specific proposals regarding the complicated issues involved, we would be happy to study further.

     In the course of the study in future, we will continue to maintain liaison with the trade through various channels.  After the policy framework and implementation details for premium taxis have been finialised, legislative amendments will be required for implementation.  As such, there will be ample time for discussion between the Government and the trade.

(3) The Government has all along been assisting the taxi trade in improving service quality.  We note that some members of the trade have been actively considering how to improve the service quality of ordinary taxis.  Measures in the pipeline include the launch of a smartphone application for hailing taxis which also allows passengers to rate drivers’ performance, the implementation of reward and penalty mechanisms for drivers, and discussions with a training institution for organising retraining programmes for taxi drivers.  In addition, some operators are providing pre-booked, hire-as-a-whole service and the fare will be agreed between the parties providing and receiving the service.  The Government welcomes the efforts of the trade to improve service and will continue to work closely with the trade.  Meanwhile, as we have mentioned at the Panel on Transport on June 21, the Government is considering the following measures conducive to improving the operating environment of taxis and the long-term, healthy development of the trade:

(i) at present, TD will issue permits to the trade on a regular basis to exempt taxis from peak hours and “7am to 7 or 8pm” no-stopping restrictions on roads with speed limits less than 70 kilometres per hour.  As the existing arrangement has not caused traffic obstruction on the whole and can enable taxis to provide better point-to-point service to passengers, the Government will study whether the no-stopping restrictions at the above restricted zones for taxis should be relaxed permanently;

(ii) at present, the law requires that a taxi driver identity plate shall bear the driver's photograph taken not earlier than 12 months before the day of display.  This in effect means that a driver needs to renew his/her identity plate annually.  Taking into account feedback from the trade, the Government will study whether the validity period of a driver identity plate should be extended so that renewal can take place less frequently; and

(iii) at present, applicants for taxi driving licence must hold a valid driving licence for driving a private car or light goods vehicle for three years and above.  The trade opines that the requirement should be relaxed so as to ease the problem of driver shortage.  The Government is reviewing the matter.

     Moreover, the Government will process fare increase applications submitted by the trade in accordance with the established policy and, in the course of doing so, will take into account a series of factors.  In addition to public acceptability on the proposed fares, we will be mindful of the impact of a fare increase on the financial viability of the operation, including the impact on income of drivers.  The Government is now processing the revised fare increase applications submitted by the trade to TD in April this year.

     Meanwhile, in response to public needs and requests from taxi trade, TD has been arranging taxi pick-up/drop-off facilities at appropriate locations where traffic conditions permit.  At present, there are about 280 taxi pick-up/drop-off points and about 470 taxi stands in Hong Kong.  Subject to the circumstances of individual locations, some of these facilities are located near hospital buildings (e.g. Kwong Wah Hospital) or within areas managed by hospitals (e.g. Pamela Youde Nethersole Eastern Hospital).  The Government stands ready to continue to liaise with the trade to consider any proposal which can further improve the operating environment of taxis.

Ends/Wednesday, July 13, 2016
Issued at HKT 16:30

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