BUSINESS: Vietnam's taxi turf battles

june 1995

Battle in the Streets
All is fare in the ongoing struggle for Ho Chi Minh City's taxi customers

With a cheap Seiko dangling off his wrist and a plain yellow T-shirt clinging to his chest, 45-year-old Allan Ho obviously doesn't wear his wealth on his sleeve. Although his Ho Chi Minh City-based Vinataxi Ltd. pulled in millions of dollars in revenues last year, Ho doesn't have the time or the inclination to care what he looks like. One of his drivers has apparently just been roughed up by toughs from a rival taxi company and, for a moment, Ho doesn't care what he sounds like either.

"You're talking about competition? I'm talking about fair competition. Real competition,'' snaps an emotional Ho, flicking back a lock of unkempt hair. "I'm from Hong Kong, you know, and I know what's competition. I can win in fair competition any time, but they can't beat the hell out of our drivers."

No one said establishing market beachheads in Vietnam's commercial capital would be pleasant, although on paper it seems Ho has had it easy. A former Hong Kong property developer, Ho invested $ 2 million in the early 1990s to launch what he calls Ho Chi Minh City's first radio-taxi service. The investment is already paying off -- last year, Vinataxi generated about $ 3.5 million in revenues. Headquartered in an unused government aircraft hangar near the city's Tan Son Nhat Airport, Ho's Vietnamese partner is the formidable Ministry of Transportation and Communication.

Across town is the headquarters of archrival Southern Airports Services Co. (SASCO), which operates Airport Taxi. There, Director Pham Hoang Ha denies his company plays rough. "It is completely wrong to say that Vinataxi drivers are sometimes harassed and beaten up at the airport," says Ha. "Our company has no monopoly at the airport."
Nevertheless, despite the airport's proximity to the Vinataxi office -- and the absence of any rule designating it as one cab company's exclusive area -- Ho seems to consider Tan Son Nhat as Airport Taxi turf and urges Vinataxi drivers to leave as soon as they deliver customers. But while the airport situation is a sore point between the two companies, businesspeople are grateful for the recent warp-speed development of Ho Chi Minh City's taxi services.

Until a few years ago, the taxi choice came down to pedal-powered cyclos, which still jam the lively streets, or rickety 1950s and 1960s American and French cars kept running by creative roadside mechanics and the will-power of their drivers. "You should see those taxis," says a diplomat who frequently visits Vietnam. "You can still see them in the countryside. They are creaking, and I wonder how they still run."

Stealing passengers

Today air-conditioned taxis whisk away passengers and, in the early days of the rivalry, even the other company's fares. "Things had gotten so bad that the operators used to listen in on each other's radio frequencies and send a cab faster, to steal another passenger," says a banker who prefers the new taxis to driving along the city's dusty, congested roads.

Ho was attracted to Vietnam by the lack of taxi-industry regulation and the absence of services that businesspeople take for granted. "The taxis then had no meters, no air conditioning, no radio paging, no headlights," he recalls. He set up Vinataxi with 30 radio-equipped cars in 1992 and has since expanded to 180 modern Japanese vehicles. A truly competitive market was born in October 1993 when Airport Taxi set up shop. That outfit now sports 200 late-model Japanese and Korean cars, including limousines, says Ha. Scheduled to join the fray this year is Saigon Taxicabs, with 100 vehicles.

While the war for customers will likely escalate, the companies have already found themselves battling for drivers. Vinataxi cabbies keep 30 percent of the fare and all tips, adding up to paychecks of $ 300 to $ 500 a month. Airport Taxi, which used to pay a monthly salary of $ 80, recently launched a similar pay scheme in an attempt to stem what Ho calls a driver exodus to Vinataxi that occurs each time he advertises for new drivers.

Quality Vietnamese cabbies are a precious commodity. In a country with a downsizing state sector and a demobilizing army, unemployment is high, but Ho insists that his drivers must have at least five years' driving experience, possess no criminal record, undertake a driver's course and pass an English test, which he directs. Courtesy is paramount: two passenger complaints, and the cabbie is sacked.

While Ho's taxi venture has been successful so far, his luck has not been so good in another project. In 1993 his Hong Kong-based company, Golden Class International Ltd., invested $ 1.8 million in Pacific Airlines, which was to fly the lucrative route between Ho Chi Minh City and Taipei. But when official relations between Vietnam and Taiwan, Vietnam's largest investor, improved, state carrier Vietnam Airlines began flying the route, as did China Airlines. Such competition has made life difficult for Pacific Airlines. Golden Class, which Ho chairs, has lost about $ 1.2 million from this misadventure.

But Ho is fighting back, claiming he was denied access to the airline's books. His reaction reveals the tenacity with which he pursues his taxi business. "That is my character," he says. "I don't give up. I take a risk, I want a fair return. The feeling in my heart says that I should fight. Out of 100 investors who come here, 95 cry. I lost my shirt with the airline, but I'm still smiling. But notice, it is a small smile."

Says Philippe Colin, executive director of Beta Vietnam Fund, which has taken a stake in Vinataxi: "He is truly entrepreneurial, and even though he has faced adversities and problems, he has turned his operation into a highly successful company."

Airport Taxi's Ha is reluctant to talk about the competition with Vinataxi. "It is not completely right to say that the rivalry between Airport Taxi and Vinataxi is very hot," says Ha. "In business, we pay most attention to the service toward clients."

As for Ho, he plans to sell his company in a few years and retire to Canada, where he has citizenship. But before that, he wants to take one more gamble: setting up a jockey club in Ho Chi Minh City with Stanley Ho, the casino king of Macau. Only time will tell if that turns out to be as successful as Vinataxi.