[Feature] Illegal Taxi vs. Creative Economy: “Uber” Controversy Rages on

Allen Penn, the head of Hong Kong-based Asia operations for Uber, held a press conference on August 6 and underscored the importance of the Korean market in his company’s expansion strategy.(image: Kobizmedia/Korea Bizwire)

SEOUL, Aug. 7 (Korea Bizwire) – “Uber,” a smartphone app-based private taxi service currently mired in a controversy after the Seoul city government banned the service for passenger safety concerns, will strengthen its presence in Korea.

Allen Penn, the head of Hong Kong-based Asia operations for Uber, held a press conference on August 6 and underscored the importance of the Korean market in his company’s expansion strategy. Throughout the conference, he repeated the word “creative economy” to hint that his company is one of the best examples of a creative economy that the Korean government is pursuing.

Uber makes agreements with limousine service firms and rental car companies for chauffeured services and connects them with passengers who make a hiring request through the smartphone app. Founded in 2010 in San Francisco, Uber is currently serving 160 cities in 42 countries worldwide.

The world’s most prestigious investment banks and venture capitalists such as Goldman Sachs, Benchmark Capital, and Amazon’s CEO Jeff Bezos have invested in the firm. Recently Google Ventures, a subsidiary of Google, and private equity fund firm Texas Pacific Group made an investment of US$258 million in the firm.

Uber Korea, launched in August last year, is the second unit in Asia after Uber Singapore.

Uber Korea, launched in August last year, is the second unit in Asia after Uber Singapore. Mr. Penn said, “Boasting more than 10 million population and the world-class economy, Seoul is one of the biggest markets for Uber. The number of users in Korea is quite high, with the degree of customer satisfaction higher than any other market.”

As for the recent controversy, he said Uber is not a public transportation service provider but a technology company. The Seoul city government earlier said that the current law prohibits the holder of a regular driver’s license from engaging in gainful activity by carrying passengers in his car, which means Uber is an unlawful activity under the current law.

To this, Penn countered, “Uber is just a technical platform and does not hire chauffeurs and buy or lease vehicles for passenger transport. We play a middleman’s role in Korea by linking customers who need a ride with those existing limousine service companies.”

About the safety concerns, he said, “The passenger already knows about the personal details of the driver through the smartphone alert. She doesn’t have to carry cash to pay for the fare. Even the passenger can share her location information with her friends and family and make comments on the driver right after the ride.”

He added that his company is complying fully with local tax laws, adding, “The fare income generated through the Uber app will go to partner firms and chauffeurs, with Uber taking a certain amount of commission. Most of the income goes to the partner firms and part of it is paid in taxes. Uber is also paying taxes proportional to the commission income.”

To a question whether Uber is taking business away from taxi operators, he said that his company creates much more economic value than taking it away. In the case of the United States, drivers working for Uber make an average of $70,000-90,000 a year, with 20,000 new jobs every month. The total contribution to the U.S. economy is estimated at $3 billion a year. “If it’s not a creative economy, what is?” he asked.

Still, Mr. Penn was unable to respond effectively to the argument by the Seoul city government that the Uber service is a violation of the current law that prohibits those without a commercial driver’s license from carrying passengers for a fee, except that Uber is legitimate as long as its local partner firms are legitimate.

By Sean Chung (schung10@koreabizwire.com)