Economists argue that the benefits this multibillion dollar company provides far outweigh the risks.

Responding to two PKR MPs who said that large companies like Grab exhibit “monopolistic” practices, a trio of economists told FMT that rather than admonishing Grab for its perceived stranglehold over certain business sectors, the company should be recognised for its ability to identify and exploit opportunities as a whole.

Speaking to FMT, Center for Market Education chief executive officer Carmelo Ferlito said policymakers should move away from discussions about monopolies — even if they spontaneously emerge in the market — and towards formulating an institutional framework where entry barriers are minimal.

“Therefore, new players would be in a position to try and break that monopoly if they want to and if they are able to,” he said.

“We need to discuss this beyond the issue of monopoly per se. If rules have been broken, then Grab should be judged and punished.

“But let’s be clear: to be able to offer a cheaper and better service when compared to traditional taxi services is not breaking the rules.

“It is being alert to profit opportunities and breaking the previous monopoly (held by metered taxis).”

Starting off as a ride-hailing firm in 2012, Grab has since moved into digital payments and food delivery services and is now worth US$16 billion (RM66.3 billion).

Its acquisition of ride-hailing firm Uber’s Southeast Asian operations in 2018 was investigated by Putrajaya in 2019 for “the risk of having a monopoly on e-hailing services”, according to then transport minister Loke Siew Fook. However, no charges were filed.

In a statement issued to the press in 2019, Grab said it had proceeded with the Uber acquisition “in good faith” as it believed it would create more efficiencies and benefits for the public in the ride-hailing sector.

Fast forward to 2021, GrabFood has carved a niche for itself in the food delivery services market. It is in stiff competition with Foodpanda. There are other competitors as well.

In the e-wallet sector, GrabPay is just one of 48 non-bank electronic money issuers registered with Bank Negara Malaysia. In terms of market share, Touch ‘n Go and Boost are the dominant players in the field.

The ride-hailing landscape is just as diverse, with the Land Public Transport Agency (APAD) recording 42 firms as at October 2019 — albeit operating with various degrees of success.

AirAsia has just thrown its hat into the ring, a move set to give the more established names in the business a run for their money.

All three sectors are regulated by the Competition Act 2010, which prohibits anti-competitive agreements and the abuse of dominant positions in the market.

Although companies such as Grab are regulated by the Act, it does not apply directly to the aviation, telecommunications, energy and petroleum industries — fields in which government-linked companies are provided effective monopolies.

While the Act does not define the word “monopoly”, Section 10 of the Act prohibits companies from engaging in conduct which amounts to “an abuse of a dominant position” in any market for goods or services.

However, the same section of the Act states that the fact that the market share of any enterprise is “above or below any particular level” shall not in itself be regarded as conclusive as to whether that enterprise occupies, or does not occupy, a dominant position in that market.

‘Breaking up the dominance’

During a webinar on Monday, Subang MP Wong Chen said that companies should not be allowed to reach a market size of above 50% “because it’s just wrong”.

Speaking at a webinar with Permatang Pauh MP Nurul Izzah Anwar, who talked about Grab’s “monopolistic tendencies”, Wong proposed that the government step in and “break” companies once they see them dominating industries.

This is an idea Sunway University economics professor Yeah Kim Leng disagreed with.

Yeah said that among the disadvantages of breaking up a dominant player are that it may not be able to achieve the desired economies of scale and scope which allow it to maintain operational efficiencies and pass on cost-savings to consumers.

He also noted that if such companies are not able to generate adequate profits, it will not be able to invest in research and development and innovation capabilities that benefit consumers through the continuous upgrading of products and services.

“Breaking up should be a last resort given the highly competitive global environment where Grab is up against other major global players in various market segments,” he said.

“The priority should be given to removing entry barriers and impediments hindering competition in each market segment — such as ride-hailing, food delivery and digital financial services — to ensure ease of market entry and exit, the curbing of unfair market practices and the abuse of dominant positions.”

On a societal level, Grab has played a key role in providing jobs and accelerating the digitalisation of micro SMEs during the Covid-19 pandemic, with more than 2,500 new merchant partners onboard its platform during its Micro and SMEs e-commerce campaign from July to September last year.

In the three-month period starting from when the first movement control order was implemented last March, Grab saw a two-fold increase in the number of new micro SMEs onboarded per month when compared to before the pandemic — allowing them to experience growth through exposure and access to millions of customers.

It also saw a 25% increase on average in online revenue for small merchant-partners. More than 100,000 driver-partners moved to deliveries so they could continue earning an income.

More than 10,000 income opportunities were created for new driver and delivery partners who joined Grab during the three-month period.

Stating that breaking up Grab would “chase investors away”, Goh Lim Thye, a senior economics lecturer at Universiti Malaya, said it would be more effective and “friendly” for policymakers to consider ways to encourage new players to venture into the same industry.

Apart from start-up incentives and loans, Goh also proposed that grant programmes and tax rebates could be used to spur more interest in any industry.

Citing economist Joseph A Schumpeter’s 1911 book titled The Theory of Economic Development, Ferlito said innovative firms and entrepreneurs could be defined as such because they break “the usual way of doing things”.

“When a firm introduces a new product, a new method of production or it discovers a new market, by virtue of ‘a higher sense of things’, which is the essence of entrepreneurship, it enjoys a temporary advantage which often takes the shape of a monopolistic position,” he said.

“This is the process of creative destruction, in which innovative firms fight against the old which try to survive. According to Schumpeter, this is the true nature of competition.”