President Moon Jae-in faces a moment of truth that will test the sincerity of his repeated pledge to promote innovation-led growth through sweeping deregulation.
He will probably find it hard to keep mum after last week’s parliamentary passage of a controversial bill that effectively bans Tada, a popular ride-hailing service.
Calls are rising from the local venture and startup business communities for him to veto the legislation and send it back to the National Assembly.
Launched in October 2018, Tada, which means “to ride” in Korean, has become the nation’s leading service provider in the category, attracting 1.7 million subscribers while employing 12,000 drivers and other workers.
With the ride-sharing service using privately-owned passenger cars not permitted here, Tada’s business is based on a legal provision that allows rental vans with 11-15 seats to be offered with drivers.
But taxi drivers have fiercely protested against Tada, condemning it as an illegal call taxi service. They have claimed that the new mobility platform business violates the Passenger Transport Service Act that forbids rental vehicles from offering rides in exchange for money.
The revised law passed by the parliament Friday calls for restricting the outsourcing of drivers for rental vans to tourism purposes only. Vehicles should also be rented for at least six hours and must be returned at airports or seaports.
The revised law also includes a proposal made by the Transport Ministry in July to oblige ride-hailing services like Tada to chip in a certain proportion of earnings to a state-managed fund to be established for the purchase of taxi driver licenses in oversupply.
The measure will take effect one year after it is proclaimed with a six-month grace period.
Lawmakers and Transport Ministry officials now claim that it will help ease social conflicts while allowing various mobility platform operators to stably push for innovative business within legal boundaries.
But the restrictions on service hours and location amount to a ban on Tada. Lee Jae-woong, chief of SoCar, which owns the operator of Tada, claimed that the revised law would force the service out of business.
The legislation will undermine the impetus of deregulation at a time when Korea is pushing to foster innovative sectors as its new growth engines.
It will set a precedent whereby an innovative services provider cannot take root in a field if existing players oppose its entry. More desirably, disputes between existing players and new entrants in an industry should be left to the market.
The amended act failed to reflect public interest and the growth potential of an innovative business in the era of new mobility platforms.
The legislation came after a Seoul court last month ruled that Tada was a legitimate rental car service based on a mobile application, acquitting its executives of charges of violating the transport act.
Lawmakers apparently passed the controversial bill to avoid irking the country’s 250,000 taxi drivers ahead of the general election on April 15. It is deplorable that legislators from the main opposition United Future Party changed their stance against the bill at the last minute and joined ruling party lawmakers to approve it.
President Moon has said he would do his utmost to enable innovative businesses like Tada to make inroads while guaranteeing the interests of taxi drivers.
He can no longer placate both sides with eloquent and vague rhetoric.
SoCar head Lee has appealed to the president to exercise his right to veto the law revision, which he argues not only blocks innovation but also prevents one from even dreaming of innovation.
If he is sincere about deregulation to promote innovation-driven growth, Moon should veto the amended law and ask lawmakers to deliberate on it again. If not, he should make it clear that he puts the protection of existing businesses ahead of innovative growth. This may at least help avoid consumptive confusions like the one over Tada service being repeated in the future.
Moon should not address the need to accelerate regulatory reforms to bolster the economy if he hesitates to overcome vested interests to take a very basic step forward in the country’s sharing economy that lags far behind the global trend.