Not the up-and-up we’re looking for
Sunday 6 October 2013, 6.00pm HKT
IF the cost of living isn’t astronomical already, two months from now my city is going to see another round of Warp Factor 4 financial space travel.
You suck … us dry
Don’t get the wrong idea. This post isn’t a bitchslapping rant about fare hikes.
The Naked Listener will now reveal to you the real cause of general prices that nobody wants to talk about.
Critical information for your daily life.
Going the extra mile … by every extra increment
Let’s start off with the ‘springboard’ for this post, and then we’ll get to the meat of things.
You cough up US$4.50 just to get the wheels rolling and the meter ticking.
Our taxi fares will be going up 10% across the board on 08 DEC this year. The last fare rise was in July 2011.
Full skinny in one of our newspapers (“Operating costs set to drive up taxi fares,” The Standard, 25 SEP 2013).
Let’s leave out the finer details of fare calculation. For the benefit of our metric as well as imperial cousins, hopping onto a taxi here immediately depletes your wallet/purse…
- HK$33 (US$4.26) for a one-kilometre ride (2/3rd mile) with one piece of luggage
- HK$36 (US$4.64) for a one-mile ride (1.61 km) with one piece of luggage
That’s HK$20 on flagfall, and the meter clicks and dicks HK$1.50 per 200 metres (or HK$8 every kilometre). Luggage surcharge is HK$5 a piece.
Clear? Crystal … like shards of glass
Governments the world over love ambiguity and secrecy. A true totalitarian regime achieves those by way of over-explanation.
Like a shifty cabbie shafting a nonplussed tourist, the authorities have come up with this driving-around-in-circles explanation:—
“…the fare increase is the result of higher operating costs, including expenses, vehicle maintenance and repair expenses, and insurance premiums. […] Because of an increase in operating costs of the tax trade since the last fare rise, the increase in gross operating revenue of the vast majority of frontline drivers has been more than offset by a rise in operating costs and inflation.”
— A government spokesman, quoted in The Standard news report
Hard to ignore the odd locution of that government PR flack — especially that word ‘offset,’ which has at least two alternative meanings.
Chopping through the forest of weasel words, try my PR speak-easy version:—
Various rising operating expenses and the normal effects of inflation have led to the need for a fare increase since the last one as long ago as July 2011. This should allow the most number of taxi operators to be better able to meet the requirements of gross operating revenue.
Can’t expect a government to be straightforward; no need to beat around the bush; mine sounds equally ‘governmental’ with cagey aftertaste.
Maybe the government should hire me as a public-relations writer…
Rent as a subset of pimping/prostitution
Here is the critical information for your daily living, straight from the laughing lips of The Naked Listener himself.
Nobody’s mentioning RENT.
In most other countries, wages (and associated employment costs) traditionally form the biggest slice of running expenses, followed by rent. In Hong Kong, it’s the other way round.
Fuel, rent, wages and annual licence fees are the four biggest running costs for a taxi operation.
Cabbies worldwide form syndicates (partnerships, if you like) for reasons of economy. Every syndicate has its own dispatch, the HQ station office that provides coordination, radio communication and office support. Cabbies deduct a portion of daily takings as contribution to the running of the dispatch, which also provides or arranges garaging and vehicle servicing.
Rent is for the dispatch and garaging premises. Wages are for the one or two dispatch controllers (required by some syndicates). Less expectedly, vehicle servicing is actually a relatively small cost point — car maintenance is quite straightforward and cabbies tend to do their own. Vehicle servicing only becomes significant if the syndicate runs minibuses or coaches as well.
In many ways, taxi syndicates resemble lawyers’ chambers, the set of professional rooms used by an association of barristers (or trial lawyers to our American cousins) to spread running expenses and share support services.
Short leases and no price control are the root of escalating prices all round.
The word from my accountant is that the current Hong Kong rate of rent hikes is median average 25½% annualised. This is high in world ranking. Actual averages vary from district to district, starting generally from 12% p.a. and hit a punishing 37% p.a. And unlike other countries, Hong Kong has no rent-control regime whatsoever.
(Median means the numerical midpoint between the higher and lower halves of all the averages. I’m using annualised percentages because it’s quicker to understand in yearly terms than in the more usual multi-year leasehold periods.)
Typically, Hong Kong leases are short — usually only 2½ or 3 years, compared with the usual minimum 5 years in most First World countries. So in Hong Kong’s case, frequent lease expiration results in rent effectively flying up 25½% every year. That’s the real reason why rent is the topmost outgoing for any business here rather than the worldwide convention of wages.
For those readers with basic numeracy skills, it’s obvious that 25½% annualised (analised?) rent increase virtually makes cabbies work for the landlord, so to speak.
After paying the fuel and the rent, in truth (and on the balance sheet), there’s virtually nothing left for anything else.
Everybody else in the other economic sectors are in the same boat.
So you see, women aren’t the only ones who menstruate.
You’ll be reminded in no uncertain terms that rent is an EFFECT, not a cause, of general price rises.
Just as in talking about pimping or prostitution, mentioning rent as the ultimate cause of price rises for everything else instantly brands you a troublemaker and the topic becomes taboo.
Price control is doctrinally contrary to the economic tenets of a capitalist free port that is Hong Kong. Our government is doctrinally positioned to regard rent as an effect and nothing else, and all statements contrary to that are inoperable for discussion purposes. No kidding.
Licensed to kill
To be strictly accurate, the taxi permit itself is arguably the No. 1 operating sinkhole.
As far as I could discover, the Hong Kong taxi permit is the world’s highest priced. It went stratospheric in 2009 to HK$7.66 million (nearly US$1 million), an 80% rise from before (“Hong Kong taxi licences hit record high of almost US$1m,” Bloomberg News via South China Morning Post, 07 AUG 2013).
Obviously, most people will normally have to arrange a bank loan for that price of a permit. That really revvs up the eventual running costs when loan repayment is at Hong Kong prime lending rate 5¼% p.a. (vs. US prime rate 3¼% p.a.).
And since our banks usually treat that loan size as a mortgage (because the taxi permit is ‘property’), so 5¼% for every million dollars — you get the idea of the financial impact.
- a basic London taxi permit costs roughly £1,100 (US$1,778) in all possible basic official fees (licensing authority: Transport for London)
- a basic New York City yellow cab taxi license adds up to US$353 in all possible basic official fees (the NYC Taxi and Limousine Commission).
(But NYC taxi ‘medallions,’ probably the highest licensing level there, have been known to sell for US$1 million, according to Reuters.)
With the exception of fuel, all other expenses as for batteries, tyres, insurance, sanitation, etc, just don’t make any kind of practical, meaningful financial impact when seen in the light of the two astronomical outgoings of rent and permit price.
So the obvious question has to be this:—
- Why bother with taxi fare increases or have price control over various other things when the deliberate absence of rent control is the very thing that causes all of the other things to become f@#kin’-hell’ingly expensive all the time?
“In order for one to be immortal, many must die. The poor is expected to die.
Why do you see the cost of living go up on the same day interest rates go up?
The poor die; the rich don’t live.”
— In Time (2011)
(Hat tip to Hongkie Town for the inspiration and the present verbal diarrhoea)
© The Naked Listener’s Weblog, 2013. (B13315)
Images: Hong Kong taxi via gohongkong.about.com | Star Trek BJ via Cheezburger.com | Weasel Award via Awards in Journalism | Pimping statue via Wikipedia | Menstrual Pad via Anion Sanitary Napkin | Expensive licence plate via eBay | “Fuckin Hell” by Far From Heavenly via Discogs.