This article first appeared in The Edge Malaysia Weekly, on August 22 - 28, 2016..

Malaysia’s Land Public Transport Commission (SPAD) announced last week that it had received the green light from the Cabinet to push through reforms for the taxi industry, including legalising and regulating ride-hailing companies such as Uber and Grab.

Needless to say, the much-awaited announcement has been generally welcomed by the public. However, the traditional taxi companies are dead set against it and have threatened to stage a big protest and even throw their support behind the opposition if the government refuses to heed their objections.

Yet, amid all these noises, a question that first has to be asked is: can the sharing economy be regulated?

The sharing economy — boosted by the internet, social media and mobile phone infrastructure — has taken the world by storm. In today’s fast-paced lifestyle, if you need a ride, call Uber. Looking for a place to stay at the last minute? Check out Airbnb. Uber and Airbnb are indisputably the two most well-known sharing economy companies.

And you know what? They are just a click away on your smartphone.

Thus, the explosive growth of the sharing economy is not difficult to understand. The figures speak for themselves. A 2015 report by accounting firm PwC estimated that in 2014, sharing economy businesses raked in about US$15 billion in revenue, and the figure is expected to soar to US$335 billion by 2025.

Uber, Airbnb and their ilk have in one way or another disrupted many well-established industries, even to the extent of causing chaos. This is particularly true for the taxi industry worldwide.

Since Uber burst onto the scene, taxi drivers and public transport unions across the globe have been complaining that ride-sharing service providers are competing unfairly as they are not subject to the same stringent legal requirements.

As Uber and other ride-sharing service providers become increasingly popular, the livelihood of many taxi drivers has been affected. This has given rise to acrimony, which has sometimes erupted in violent confrontation.

Airbnb is in no better position. In October 2014, the New York State Attorney General released a report, which concluded that 72% of Airbnb rentals violated state zoning regulations or other laws. The company’s business model is built around allowing people to rent out rooms or apartments on a short-term basis. The New York case is among the ongoing battles Airbnb is engaged in with regulators across the world.

Closer to home, there have been a few reported cases in recent weeks of local authorities taking action against operators of illegal homestays — a mushrooming phenomenon in Penang island.

According to news reports, three owners of units in a condominium in Jalan Datuk Keramat were fined RM250 each for operating a business without a licence, following checks by officers from the Commissioner of Buildings and the licensing and building departments of the Penang Island City Council (MBPP).

MBPP issued the summonses under the 1991 MPPP bylaw for Trade, Business and Industries. An errant operator who refuses to cease operations can be taken to court and on conviction, be fined a maximum of RM2,000, or imprisonment of up to one year, or both.

The majority of house owners facing such problems are those who advertised their houses for short-term rent on Airbnb. The chief complaint against them is that they had not converted the usage of their premises from residential to business and thus have evaded tax from renting their homes. Besides, there are valid concerns about consumer protection and public safety.

However, these homestay operators have cried wolf, saying there are presently no laws that expressly forbid condominium or apartment owners from renting out their units for any length of time.

Apparently, sharing economy players in Malaysia, just like their counterparts in other countries, find themselves in a Catch 22 situation. On the one hand, they cannot continue to play by a different set of rules from their more traditional competitors, and on the other, even if they want to play by the book, there is no book for them to follow!

As a total ban of sharing economy companies is no longer a viable option, governments worldwide are moving to regulate it under the pretext of levelling the playing field and taking a slice of an ever-expanding cake.

However, any attempt to impose regulations on these companies is bound to court controversy, no thanks to the disruptive nature of the shadow economy, as evidenced by the intense debate over the move to regulate ride-hailing services here.

This is something to be expected because at the very core of the so-called sharing economy are freewheeling, innovation-obsessed, algorithm-driven companies that, by their very nature, resist regulation.

Thus, a valid question to ask about the regulatory framework initiated by SPAD is, will the regulations put the sharing economy at risk of losing all the things that make it appealing in the first place? Will Uber be just another cab company? In the case of Airbnb, will it still be cheaper than renting a hotel room?

As they say, the devil is always in the details.

Khaw Veon Szu, a former executive director of a local think tank, is a practising lawyer. Opinions expressed in this article are his personal views.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.