Faring badly: Uber struggles to make inroads in Japan

In this picture taken on December 13, 2017, a man takes a taxi at Tokyo station in Tokyo. (AFP)
Updated 17 December 2017
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Faring badly: Uber struggles to make inroads in Japan

TOKYO: Uber may be shredding business models for taxi firms the world over but it is struggling to make inroads in Japan, where risk-averse passengers prefer to stick to their high-quality traditional taxi service.
Japan, with its wealthy customer base and megacities like Tokyo, should represent rich pickings for Uber.
In 2015, the national market for taxis had a turnover of 1.73 trillion yen ($15.2 billion), according to transport ministry data.
There are 50,000 taxis in Tokyo alone — instantly recognizable with their impeccable polished exteriors and doors that open automatically to let valued customers board effortlessly.
And with hailing a taxi rarely taking more than a few seconds in the major cities, there has been sluggish take-up of Uber, where consumers order an unlicensed car via smartphone.
“Japanese people don’t like taking risks, they are risk averse. They are quite strict when it comes to the quality of service,” said Ichiro Kawanabe, CEO of Nihon Kotsu, the main Tokyo taxi firm founded by his grandfather in 1928.
Given this, “when Uber tried to messily enter the market, no one wanted them,” Kawanabe, who is also chairman of the Japanese taxi federation, told AFP.
Uber also ran up against local legislation — it is strictly forbidden to operate a taxi without a license.
So it tried to enter the Japanese market via another route, setting up a pilot carsharing service in 2015 in the western city of Fukuoka.
Uber said it was a study into the needs of the local community but authorities quickly slammed on the brakes, saying it could be considered an unlicensed taxi service and raising questions of safety.
Kawanabe also pointed to safety issues as being among the reasons Uber had not enjoyed the same success in Japan as it has elsewhere.
“When an accident happens, they don’t take responsibility and say they are just a platform provider. Japan cannot accept this.”
An Uber spokesman said the company’s priority in Japan was to “partner with taxi companies to get licensed drivers using the app to connect with riders.”
The firm has started another pilot system in two rural towns connecting senior citizens with people willing to drive them around and this time the authorities have not clamped down, as it compensates for a lack of public transport and taxis in the areas.
Japan is also a “very important” market for UberEATS, its take-away food delivery service, the spokesman said.
And Kawanabe, a suave and charismatic 47-year-old known as the “prince of taxis,” admitted that Uber had been useful in foisting change on the conservative Japanese taxi industry.
Around nine out of every 10 cab rides in Tokyo is hailed or taken from a rank, with only 10 percent ordered via smartphone, said Kawanabe.
The main reason for this is that fewer than half of the taxis in Tokyo are connected to a smartphone, he said.
“They still use old feature phones instead of smartphones. It’s very difficult for us and app operators to convince them to use apps,” he complained.
In addition, around 80 percent of taxi fares are paid in cash.
This conservatism — combined with excellent public transport systems — led to a decline of one third in taxi passengers between 2005 and 2015, according to the transport ministry.
The industry is just starting to fight back — dropping fares for short rides around Tokyo, for example.
“It took me two years to convince them (to reduce fares) ... and there is still so much that needs to be done,” said Kawanabe.
He has set up a start-up subsidiary, JapanTaxi, to develop apps to connect drivers with passengers and aims to launch a carsharing app next year to push down costs.
But the competition is ferocious.
On the app front, Chinese app developer Didi Chuxing is expecting to launch in Tokyo next year, in partnership with a rival taxi firm.
And Uber is hoping for a large investment from Japanese communications behemoth Softbank.
Between Kawanabe and Uber, there is no love lost.
“They are just so rude, in every way. They think they are like gods and that we are so obsolete,” he said.
“From the point of view of the Japanese taxi companies, you can only call them ‘devils’.


Gulf companies challenged by debt and rising interest rates

Updated 22 April 2018
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Gulf companies challenged by debt and rising interest rates

  • Debt restructurings on the rise, but below crisis levels
  • Central Bank of the UAE has raised interest rates four times since last March

There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.

 

Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”

FACTOID

Four

The number of interest rate rises in the UAE since March 2017.