Bernardo M. Villegas
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Impact of Grab’s Ride-Delivery Service (Part 2)

             The pioneering study of UA&P economists who tried to measure through the input-output method the impact of the ride-hailing and on-demand delivery on the Philippine economy (focusing on the case of Grab PH)  take on special significance with the report by Statista, a data provider, that the local ride-hailing market is forecast to hit $750 million in 2024 while the number of users are projected to grow to 16.65 million by 2028.

            The UA&P study showed that the total economic, household income and employment contributions of the ride-hailing and on-demand delivery industry as proxied by Grab PH (GrabCar and Grab Express including food deliveries excluding financial and insurance businesses) should take into account the following:  additional output, household income, and employment generated; catalytic impact through the payment of taxes; payment of salaries, allowances, and benefits; disbursement of driver/consumer incentives; and employment of drivers/driver partners as derived from annual financial reports. Grab’s total economic contribution from 2019 to 2021 is estimated to range from 0.07%-0.29% of current GDP and 0.07%-0.30% of constant GDP. These percentages are estimated to range from PHP 37 billion to PHP 165.6 billion. The average household income contribution of GRAB from 2019 to 2021 is estimated to range from 0.10% to 0.17% of total family income.  It is reasonable to expect that with the strong recovery from the pandemic (the Philippine GDP was one of the fastest growing in the region in 2023) there would have been a strong bounce back of the rides and delivery market.          

It must be pointed out that demand for the services of GRAB is derived demand, which means that the demand for the services of GRAB (and other similar rides and delivery services) occurs as a result of demand for another product or service.  For example, the demand for food delivery involves households and food outlets.  The supply of food comes from food outlets while the demand for food comes from households or individual consumers.  To account for the derived demand for transport network vehicle services, it is important to estimate the total economic value of the products and people transported by GRAB from their point of origin to their final destination.  The estimated total economic value transported by GRAB crashed by 60.5 % in 2021, the worst year of the pandemic for the Philippines.  The gradual opening of the economy, however, raised the total economic value of the transport services of GRAB by 44.5%.

            GRAB’s total household income contribution is the sum of its total household income multiplier effect and the amounts of salaries, allowances, benefits and driver/customer incentives that it pays.  Despite the catastrophic economic and business consequences of the COVID-19 pandemic, it appears that the amounts of salaries, allowances and benefits paid by GRAB still increased from 2019 to 2021.

            GRAB has driver partners on top of its direct or organic employees.  The company directly contributes to the upliftment of the standards of living and economic welfare of its workers through the payment of salaries, allowances and benefits.  These amounts increased by about 1.2% from 2019 to 2020 and increased by a hefty 24.4 % from 2020 to 2021, signaling the strong recovery of the economy a year later in 2022. Monetary incentives to drivers/customers represent another major contribution of GRAB to the national economy.  Driver/customer incentives increased by a hefty 110 % increase from 2020 to 2021.

            The so-called catalytic impact of GRAB is found in the taxes paid to the Government. Whereas the Government is still trying to find ways and means of taxing the entire digital economy, it has already benefited from the rides and delivery component of that sector. Income taxes accounted for 37 % of taxes paid by GRAB, 34% by withholding taxes and 29 % by other national and local taxes and licenses.  Because of the necessary regional dispersal of this sector, it can significantly contribute to the financing of LGU programs and projects. GRAB’s presence is especially felt in the NCR, CALABARZON and Central Luzon regions.

            The total employment contribution of GRAB from 2019 to 2021 took into account its total employment multiplier effect and average monthly active drivers per year. The total employment multiplier effect was added to the average active drivers per year to arrive at GRAB’s total employment contribution which is about 1.1-1.6% of average unemployed persons from 2019 to 2021. This is equivalent to a 0.13% to 0.60% average reduction in the total number of unemployed persons from 2019 to 2021. Given an increasing number of new enterprises entering the ride-hailing and on-demand delivery industry (including small Filipino start-ups), we can expect this sector to increasingly contribute to the reduction of the number of people unemployed or underemployed.  This industry can also make a small contribution to reducing the number of Filipino workers seeking employment opportunities overseas.

            The UA&P study shows that GRAB’s contribution to the reduction in unemployment is relatively greater.  Since the provision of jobs is a result of greater production, GRAB’s employment-generating potential is nurtured by vibrant business conditions, as illustrated by the strong recovery of domestic tourism after the pandemic resulting into what has been termed “revenge traveling.”  Furthermore, the jobs that GRAB creates throughout the whole economy results in greater accumulated household income that helps drive the virtuous cycle of wealth creation in the country. It can be expected that GRAB PH will continue to be the market leader for a long time to come.  There are, however, other ride-hailing and on-demand delivery enterprises operating in the Philippines.

            What have been determined in this study about GRAB can be applied to its major competitors, among which are JoyRide, a ride-hailing app that started operations in December 2019 and since has become one of the popular alternatives to GRAB. There is Angkas, a motorcycle ride-hailing app which has expanded by offering deliveries as well.  Another local start-up is called TokTok which has added car-hailing services called TokTokGo.  Avis Philippines has been in operation for years in the Philippines in the car rental business.  It recently launched its own super app platform called AVIS app which offers out-of-town transfers.  ePickMeUp is another promising ride-hailing app which offers primarily a taxi-hailing service as well as a motorcycle booking service.  OWTO is a wholly Filipino-owned TNVS which offers a private car ride-hailing service on its platform with a variety of private car options ranging from sedan, hatchback, subcompact or SUV.  One can expect many more entries into this very competitive market as the country transitions from a low-middle income to a high-middle income economy in the next decade or so. It is my fond wish that venture capitalists will be strongly supporting the funding needs of start-ups in this unquestionably “sunrise” industry in the Philippines and the rest of Southeast Asia.   For comments my email address is bernardo.villegas@uap.asia.