Input-output analysis used to determine the economic impact of one sector of the economy on all the other sectors was first developed by a professor of mine at the School of Economics at Harvard University. His name was Wassily Leontief who immigrated to the US from Russia. Professor Leontief, a Nobel Laureate in Economics, defined input-analysis as a method of systematically quantifying mutual interrelationships among the various sectors of a complex economic system (another professor of mine in the same School of Economics who was also a Nobel Laureate was Simon Kuznets, the father of national income accounting). Input-output analysis is, therefore, based on a simple fact: an industry cannot stand alone. Indeed, an industry needs other industries in order to perform its function in the economy.
The rides-delivery industry is a perfect example of this reality.
Recently, a group of economists at the University of Asia and the Pacific used this highly quantitative technique to find out the economic impact of the ride-hailing and on-demand delivery industry on the whole Philippine economy, focusing on the ubiquitous Grab transport and delivery service.
Grab is a multinational enterprise within the Southeast region. Southeast Asia is a major component of the most dynamic economic area today: the Indo-Pacific region. In recent years, its economy has been undergoing a period of renewal primarily due to the changes in the market dynamics in the region brought about by globalization and the advent of technological advancements during this age of digital transformation. Fortunately, Southeast Asia has not succumbed to the tendency of some advanced countries in the West to turn inwards and to introduce protectionist measures.
In fact, as a sign of the very close economic relations among the so-called VIP (Vietnam, Indonesia, Philippines) countries, a unit of Vingroup, one of the largest private conglomerates in Vietnam, just announced its plan to enter the Philippines’ ride-hailing market to provide eco-friendly taxi services that only utilize electric cars. Grab itself originated in Malaysia.
The digital transformation actually intensified during the COVID-19 pandemic that accelerated the expansion of the so-called “new digital economy” because of the long lockdowns. More specifically, the region saw the developments offered by various technology-based mobile platforms that are serving the needs of a growing number of digitally savvy consumers. This phenomenon gave rise to the strong presence of and usage of “Super Apps” that offer a wide array of products and services across borders and key supply chain participants, e.g. customer network/segment. Thanks to Big Data that enabled the accumulation of vast amounts of information collected through these mega digital platforms, we can expect that in the post-pandemic period, existing markets will become even more competitive and new ones will emerge as companies exploit the benefits of “Super App Revolution” by generating insights from the vast amounts of data collected through these mega digital platforms.
Grab is one of the major products of this digital transformation. It is a registered transportation network vehicle service and on-demand delivery platform in the Philippines and a leading player in these industries. The TNVS industry – which for the purpose of the study has been proxied by Grab to cover transport of both people and goods – has one of the greatest multiplier effects on numerous sectors of the economy. The example of Grab PH illustrates the close economic linkages of the TNVS industry with other industries such as the food industry, hospitality industry, transport vehicles, and tourism in general.
The close economic linkages of the on-demand and ride-hailing industry with other sectors of the economy not only create livelihoods, but also facilitate transactions across different industries (B to B), which in turn drives economic activities, i.e. economic spillovers. This industry directly addresses the large underemployment problem (as large as 10 or more percentage of the labor force) by providing additional income opportunities to those who are only partially employed. It is a powerful tool that enables many households to move from low-middle income status to high-middle income level. In fact, Grab driver-partners can earn as much as six times the minimum wage, less the commission and excluding incentive or bonuses.
In 2023, Grab remained a dominant player in Southeast Asia, serving millions of users every day. According to a study by Euromonitor in 2020, Grab led all competition in the food delivery and mobility segments by gross merchandise value (GMV) and by total payments volume (TPV) in the e-wallets segment of its financial group services in Southeast Asia. In the August 2020 Securities and Exchange (SEC) filing of Grab in the US, it stated that it operates across three main industry sectors, including deliveries, mobility and digital financial services in over 400 cities in eight countries in Southeast Asia: Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. In 2024, Grab was able to grow its presence to over 700 cities. It has a consistent track record of revenue growth diversified across the eight countries in which it operates in the ASEAN region.
Indeed, Grab is a product of the Industrial Revolution 4.0 era. Its business model offers a variety of solutions to various electronic, energy and storage (EES) needs, including mobility, logistics, e-payments, financial and many more. By downloading its mobile app, Grab utilizes cutting-edge technology to connect its millions of app users with its extensive network/and or community of driver-, merchant-, and other business partners across the region. The Grab mobile platform enables millions of people each day to order food or groceries, send packages, hail a ride or taxi, pay for online services such as lending, insurance, wealth management, and telemedicine. All these through a single “everyday, everything” app. Grab differentiates itself from other similar digital platforms by prioritizing safety, reliability, and innovation which are the core of its operations. It continuously invests in technological innovations and proactively collaborates with local government units to develop app-based solutions that meet the unique everyday demands and needs of its key customer segments.
Grab is one of the leading multinational enterprises that adopted the triple bottom-line strategy of “impact investors.” Even before the advent of what is now known as social enterprise, Grab’s so-called “impact flywheel” business model has been promoting a triple bottom line strategy that encompasses three key pillars: People, Planet, and Partners. It aims to create positive impacts on the lives of its consumers, driver-partners, and employees, promote sustainable practices to minimize environmental impact, and foster strong collaborative partnerships with various stakeholders.
Even long before the pandemic, Grab already had been catering to the preference of individuals to be self-employed as freelancers. The company creates livelihood opportunities for different types of individuals especially through its ride-hailing and food delivery service segments. These developments have changed the whole transport ecosystem in the region, especially after the pandemic. Within the Grab ecosystem, many taxi operators (through GrabTaxi, private vehicle owners (through GrabCar), and food delivery and courier drivers (through Grab Express and GrabFood) are empowered through their access to the platform, helping them to attain viable earnings by using their own private vehicles. Most of the driver partners also get to enjoy the benefit of flexible working hours because the platform allows them to drive at their own time. The increased employment in the transport sector has also created numerous indirect jobs, such as those in the hospitality, tourism, and food sectors. (To be continued.)