Thursday 29 Feb 2024
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This article first appeared in Forum, The Edge Malaysia Weekly on February 14, 2022 - February 20, 2022

In January 2022, AirAsia CEO Tan Sri Tony Fernandes announced his intention for AirAsia to become Asia’s largest food delivery and ride-hailing company. The move was justified based on the demand for super-app services that have skyrocketed due to the pandemic and social distancing. The rise of multi-service super-apps, in general, has attracted huge interest: Grab was publicly listed with a merger valuation of US$40 billion 

(RM167 billion), while GoTo, another Southeast Asian multi-service app comprising Gojek and Tokopedia, raised US$1.3 billion ahead of their first initial public offering due later this year.

Yet while the pandemic has bolstered delivery services, it has hit the ride-hailing service and low-cost carriers hard, as people stayed at home and avoided close contact owing to health concerns: Air­Asia saw its revenues plummet in places hit hard by the coronavirus. It also reported a quarterly loss of US$5.9 billion in the third quarter of 2021: the largest in a continuous string of losses. Yet the company is still celebrated, with its brand strong enough to raise money to expand into ride-hailing, grocery deliveries and financial services by acquiring Gojek Thailand and other similar platforms across the region.

Part of the reason the company can continue this way is that the core of its business model involves underpriced and precarious labour in the form of the drivers: Many have no constant source of revenue and, as independent contractors and not employees, they cannot apply for any kind of unemployment or government protection. Governments around the world have been offering wage subsidies and cash payments across the harsher months of the pandemic to keep people employed and sustained, yet gig economy workers were often overlooked as their legal status is still debated in many countries — especially Asean, where policymaking has not yet caught on to the business activity of gig-based companies. Worse, as super-app companies pivot to food delivery and self-driving cars, these drivers — many of whom made significant purchases and lifestyle changes to accommodate gig economy demands — risk being made obsolete.

The strains of the gig eco­nomy were starting to show even before the pandemic. As far afield as China and the US, stories abounded of the workloads and tight schedules couriers and delivery people needed to operate under. Platforms set strict guidelines on how their workers would operate, penalising any slack in the system. Guidelines were also subject to change, as were the algorithms that would promote particular providers over others: There are countless groups of AirAsia Ride drivers, Gojek couriers, Airbnb hosts and YouTube video producers trying to decipher the impenetrable changes to the algorithms that govern their livelihoods. Big Tech is enabling the gig economy, and has for many of these people become the modern-day slave driver in more ways than one. Given the unusual business models of gig-based companies, many have gained their “licence to operate” through what in other business areas would be unethical or illegal terms.

The promise of the gig economy came from its ability to scale. For most companies, market expansion is a time-consuming process, and costly: Staff need to be hired, space needs to be procured and regulatory hurdles need to be overcome. The gig economy platforms need to do none of these things upon entering a new market: Even regulations can be ignored, as the burden of government attention would fall upon the workers and customers who use the service, not the platform itself.

Almost all of the tech firms in Asean that have garnered huge attention in the last several years have been gig economy platforms: Grab, Airbnb, Food panda, Gojek, Lalamove. Even the slightly older and larger tech companies have platforms as part of their business model: Lazada Seller Centre connects third-party sellers to Lazada customers, while TikTok allows content creators to find loyal viewers.

That’s not to say expansion wasn’t costly: Platforms have spent massive amounts of money on marketing to potential workers and customers. Yet, to backers, these costs are merely steps on the way to global dominance; giving gig economy workers decent protections, on the other hand, is not in the equation. They are simply fodder for the “valuation game” attached to the app.

This is an example of the warped view in tech financing. A company can go for years without a profit, yet still attract great interest from private investors so long as the promise of global scale exists. It is all about creating financial leverage with hundreds of millions of customers while having no loyalty to workers — and therefore never really running a successful company in the true sense. Discussions of how to better protect those that use the platform — customers or providers — are neglected and, sadly, regulators have been seduced to become party to these schemes.

This unsustainable model does not even make business sense: Part of the reason why these super-apps spend so much money on driver acquisition is that the unclear guidelines, unstable incomes and lack of protections have led to high driver turnover. Providers have no loyalty to their platform, or even to the concept of the gig economy itself. These subsidies are also sometimes the only reason why it makes sense for providers to be on the platform in the first place: when Gojek and Lalamove both decided to whittle down their subsidies, drivers launched a multi-day strike to force the companies to relent.

Asean governments need to look at which platforms are successful and why they should try to support alternatives not reliant on the scale-obsessed model of tech funding. For all their faults, the platforms do succeed at what they aim to do: connect providers and customers. A platform that allows a provider — whether it’s a restaurant, a handyman, a driver, an artist or a small business — to more easily provide goods and services to a customer would be a real asset to small- and medium-sized businesses who don’t have the resources to create a custom solution. This has been essential across the pandemic.

However, this views the platform as something akin to essential economic infrastructure, rather than a business from which to extract maximal revenues. Governments could invest in public or quasi-public platforms that connect providers and customers for a nominal fee while ensuring proper protection for both parties. And, by creating the platform, governments will ensure proper regulatory compliance — something Asean needs to take a firmer position on as technological developments remain steps ahead of policymaking.

Chandran Nair is the founder and CEO of the Global Institute for Tomorrow. This article is part of a series on key areas in which Asean, as part of a regional and global system, needs to consider transforming itself if it is to learn from the pandemic, identify future opportunities and achieve social change for the better.

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