The partnership between the Dubai Government and ride-hailing app Careem is a model for would-be disruptors, and their regulators.

By Xische Editorial, September 12, 2019

The so-called disruption economy can be a real thorn in the side of government regulators. It’s not called “disruption” for nothing. Consider rail-hailing applications. The US state of California ruled this week that drivers – that backbone of the gig economy – must be considered employees by companies such as Uber and Lyft. This is a landmark ruling that will reshape the gig economy and force these companies to reconsider their business models. 

When you take a step back to consider how the disruption economy is constructed, the overall picture is breathtaking. Uber, the largest rail-sharing platform in the world, owns no cars. Airbnb, the online lodging platform, doesn’t own any hotel rooms. WeWork, the company renting co-working spaces around the world, doesn’t own any property. While this all might be deeply innovative as these platforms all take advantage of the power of the smartphone, the fact is that it isn’t sustainable. Well, it’s not sustainable yet. 

That’s primarily because there are regulations in place dictating how taxi companies, hotels, and office owners operate. This is for the protection of the business owner and consumer. To be sure, some existing regulations need to be updated but amending laws to conform with the times is much different than simply ignoring laws altogether. Disruption has its limits. 

There needs to be a happy medium between the heavy-handed legislation from the likes of the state of California and the unchecked disruption of companies such as Uber. Consider the path Careem is taking. Careem is a rail-hailing application based in Dubai that covers the Middle East and North Africa. It was recently purchased by Uber for $3.1bn, in one of the largest-ever technology acquisitions in the Middle East. You can see why it’s one of Dubai’s tech unicorns. 

Last month, Careem announced that it would partner with governments instead of confronting them in order to find the right way to regulate their business. This simple solution is one of the most innovative we have seen when it comes to the challenge of regulation in the disruption economy. 

Careem will partner with Dubai’s Roads and Transport Authority (RTA) to make more than half of the RTA’s taxi fleet available on Careem’s application by the end of the Fall. By the start of next year, all 10,000 of the RTA’s fleet will be available to book on Careem. Under a new company called Hala, Careem and the RTA will work closely on this new project and find new avenues to expand the collaboration. 

According to Careem’s executives, there are plans to expand similar partnerships across all of the markets where the company operates. Careem currently operates in 120 cities across 15 countries including the UAE, Saudi Arabia, Bahrain, Jordan, Egypt, Pakistan and Turkey. As it expands into bike-sharing and food delivery, the possibilities for additional partnerships are endless. 

The genius in the partnership between Careem and the RTA is how both entities are looking at how they can expand services together instead of fighting. This is a fundamentally new concept for major actors in the disruption economy, who have generally taken a dim view of government services. 

Seeing governments that are too slow to implement changes needed to keep up with the fast-paced global economy, companies have simply tried to go it alone. Uber might have started the trend but virtually every sector of the economy is affected by these changes. Just consider Amazon’s mixed business practices in the US or the rise of ride-hailing scooters in cities like Washington, DC, which have led to injuries and deaths on the roads. 

Careem is bucking this trend while maintaining its innovative edge. It views the government, at least in the UAE, as a partner that can help grow its business. This is a critical ingredient in a sustainable knowledge economy. You want plenty of buy-in from the private sector. While it might not seem like a big announcement, the Careem-RTA partnership is clear proof that efforts to create a knowledge-based economy in the UAE are succeeding. 

Without a warm partnership between the public and private sector, it will be nearly impossible to attract the right talent needed to grow the knowledge ecosystem. Other countries with similar ambitions should pay close attention to how Careem and the UAE are making Dubai into one of the world’s most innovative cities.