Indonesia’s plans to regulate ride-hailing rates threaten Grab, Go-Jek models

Author: 
Reuters
ID: 
1547193511731178300
Fri, 2019-01-11 07:53

JAKARTA: Indonesia is preparing to launch regulations fixing the
rates drivers and riders for ride-hailing services such as Grab and
Go-Jek receive, two government officials said this week, creating
potential obstacles for the companies’ expansion.
The regulations would meet drivers’ demands for more oversight
and higher rates but there are concerns that the rising costs to
the companies could stifle their development as they battle to
dominate the ride-hailing market in Southeast Asia’s biggest
economy.
Singapore-based Grab and home grown Go-Jek have been locked in
price wars in Indonesia, part of a wider fight to bring banking,
e-commerce, ride-hailing, food-delivery and other services to every
corner of Southeast Asia.
However, since 2018, motorcycle taxi drivers working for Grab and
Go-Jek in Jakarta have held protest rallies calling for higher
fares and better conditions.
Indonesia’s Ministry of Transportation plans to implement minimum
and maximum tariffs for car and motor bike ride-hailing that will
be “higher than Go-Jek and Grab’s current rates” and impose
limits on promotional price cuts, said Budi Setyadi, director
general of land transportation at the ministry.
“This is for the safety and protection of drivers,” he
said.
The ministry’s Public Transportation Director Ahmad Yani said a
dependency on incentive-driven payments and low fixed rates per
kilometer was a safety risk as it led to drivers overworking.
Yani said Grab paid 1,200 rupiah ($0.085) per km (0.6 miles) with a
focus on bonuses, while Go-Jek’s rate was 1,400 rupiah ($0.099)
per km.
The officials said fixed fare ranges for motor bikes were still
being finalized, but would be implemented from March.
Fixed rates for ride-hailing cars will start in June and be set at
3,500 to 6,000 rupiah ($0.43) per km in the islands of Java,
Sumatra, and Bali.
The drivers were pushing for increases to a standard fare of 3,000
to 4,000 rupiah per km.
The firms said they welcomed the new rules, though they had not
seen details of the motor bike regulations.
“Grab believes the government will develop the best regulatory
framework and hopes that all stakeholders will be included in the
process,” said the company’s Head of Public Affairs Tri Sukma
Anreianno.
A Go-Jek spokesman said: “We support the government’s spirit to
encourage our driver partners … and hope the regulation will have
a positive impact on the sustainability of drivers’ income …
and fair business competition.”
However, both transport officials said the companies are worried
about the pending regulation since they have spent heavily on
driver subsidies to slash their customer rates and build their
businesses.
“Grab and Go-Jek have told me they would prefer there was no
regulation,” said Yani. “Due to the competition between them
… they are scared what could happen if they don’t keep up with
each other.”
Indonesia’s Supreme Court blocked a previous transport ministry
attempt to fix ride-hailing rates in 2017 after drivers sued saying
the rules favored the taxi firms.
Both ministry officials said the new regulations met
anti-competition standards and followed extensive discussions with
driver syndicates.
Grab and Go-Jek drivers welcomed the prospect of standard
fares.
“I have been working for Grab since 2015. Before, I could earn
300,000 to 400,000 rupiah per day. Now, I can only get 150,000
rupiah,” said Grab motor bike chauffeur Hermansyah.
Another driver, who had worked for both companies, said neither
provided much protection, leading drivers to bear operational
costs. He asked not to be identified since he had a role in
organizing protests.
The fixed rates will be a challenge to a business model that has
depended on cheap passenger prices for growth and could undermine
innovation.
“Cheap fares has been the firms’ main way to attract
customers,” said Yayat Suprityatna, Urban and Transportation
Observer at Trisakti University in Jakarta.

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Indonesia’s plans to regulate ride-hailing rates threaten Grab, Go-Jek models