The Legislative Yuan on Friday passed amendments to articles 77 and 78 of the Highway Act (公路法), sharply increasing the penalty for illegal operation of motor vehicle transport businesses, and such businesses may be ordered to suspend or close their operations.

However, Uber director of public policy for the Asia-Pacific region Damian Kassabgi recently said that Uber does not intend to pull out of Taiwan, but would carefully assess the development prospects for its business model and adjust its strategy.

When the amended law comes into effect it is sure to have a heavy impact on Uber, which will likely find it hard to recruit new drivers and will likely lose many of its registered drivers. Some passengers are also likely to shy away from the service.

A wise move for Uber would be to demonstrate its goodwill by talking to the Ministry of Transportation and Communications about how it can meet the ministry’s three main demands: that it accept government regulation, pay tax and pay insurance.

An opinion poll found that 76.4 percent of residents of the six special municipalities agree that Uber should stay in the market to give the public more choice, and 87.4 percent were in favor of the government holding public hearings to work out ways of managing new businesses like Uber.

The ministry should use its wisdom to turn the challenges that have arisen during Uber’s four years of operation in Taiwan into an opportunity to encourage innovative companies.

“Uber-like” businesses could be defined as network platforms for providing drivers and passengers with information about supply and demand and mediating between them. The authorities could plan for this sector to cover goods as well and include both commercial and private vehicles.

The government could also consider adding network transport services to the Highway Act, strengthening the taxation system for cross-border electronic commerce and creating new standards for mobile payments. It could also ease the provisions of Article 17 of the Company Act (公司法) regarding firms whose business requires special government permission.

Such measures would attract more international innovative enterprises to Taiwan, which would in turn motivate related Taiwanese businesses to pursue innovation and change so as to provide sustainable transport services that meet market demand.

The government can pro-actively integrate the kind of diverse taxi services that Uber offers and choose areas and conditions suitable for “Uber-like” services to operate. It can apply the principles of regulation, taxation and insurance in a diverse manner. It should stipulate that such businesses must apply for selection, certification, registration and management, and they should pay tax and establish insurance systems in accordance with the law.

Since a diverse taxi plan still involves special-purpose commercial vehicles and drivers, it lacks the advantages of shared use of transport resources. For this reason, it cannot completely replace Uber, so only if the two kinds of services are allowed to complement one another can Taiwan effectively upgrade its “quasi-public transport” sector.

This year China instituted a new law on taxi businesses, and the Chinese company Didi Chuxing acquired Uber’s legal operations in China through a share swap deal.