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Jakarta Post

Ride-apps, when remoras threaten sharks

Ride-apps, when remoras threaten sharks A man strikes a motorcycle taxi driver carrying a female passenger with a helmet during a March 22 protest rally to ban online taxi apps in Jakarta. (The Jakarta Post/Dhoni Setiawan)
Ayomi Amindoni
Jakarta   ●   Mon, March 28, 2016

Ayomi Amindoni

Remoras used to follow the sharks to eat the leftover foods, but when they get stronger and can eat the sharks’ food for themselves, the balance is challenged. The fittest shall prevail. Or not, in the case of ride-hailing apps versus conventional taxis in Indonesia.

Taking a position just like the remoras, app-based rides at first tried to take the "leftovers” market that big taxi companies ignored: those who need a fast economical ride. This kind of market has been ignored by the "big sharks" in the industry for years. They have been too comfortable with their established pricing system and conventional business.

As the remoras get stronger and change position in the food chain, nature then decides which is the fittest to survive. Initially, the ride-hailing apps seemed to be the ones, but as the taxi drivers started to protested heavily, the fittest ones must adjust themselves to be as "conventional" as possible.

The government has given two-months' notice to Uber and Grab to fulfill the requirements for operating as public transportation.

Business Competition Supervisory Commission (KPPU) head Muhammad Syarkawi Rauf said that the call has yet to settle the core of the problem: the disputed low fares offered by the app-based taxis. According to the antimonopoly body, conventional taxis must, as well, adjust their pricing.

“What should be done is all the regulations that create high costs in the spending structure of conventional taxis must be removed to create fair competition,” Syarkawi told on Sunday.

The basic principle of the competition, he explained, is that no barriers, neither regulatory nor non-regulatory, are allowed. Syarkawi underlined that app-based taxis are a widely accepted new business model around the world. This inevitably means their presence must be accommodated.

"If there is no regulation that rules them, a new regulation or a regulation adjustment needs to be made,” he said.

Syarkawi regarded the low fares as ‘going beyond common sense’ and said that they have created a predatory pricing. During the protest last week, taxi drivers complained that their earnings nose-dived from Rp 150,000 (US$12) a day to a mere Rp 50,000 since the arrival of ride-hailing apps.

To solve this, he proposed the government remove taxi price minimums, allowing taxi companies to set lower prices more flexibly as long as they do not harm their cash flow. Currently, taxi companies charge a starting fee of Rp 7,500 followed by Rp 4,000 per kilometer.

With this rate, customers will prefer the app-based taxis, which apply a 30 percent cheaper flat rate per kilometer.

Sharing economy

Atmajaya University economist Agustinus Prasetyantoko said technological advance has allowed ride-hailing applications to push aside conventional taxi companies by exploiting the concept of a sharing economy. A sharing economy enables a company to manage the providers of goods and services, without owning the assets, and connect them with online customers instantly.

“They are just connecting people with assets and people with demands,” he said. “It is a consequence of the advance of technology, so it is inevitable.”

However, generally, the public is not ready to face the changes, especially the “digital immigrants” who are not familiar with ICT usage, he said. Besides, the government has not prepared regulations to control the practice of a sharing economy on a daily basis.

The 2009 Traffic Law stipulates that the organizing of traffic and land transportation should be conducted in a coordinated way involving the government, local administrations, companies and society stakeholders grouped in traffic and land transportation forums.

A cultural anthropologist at the University of Indonesia, Nosa Normanda, said the public had been facing technological socio-economic disruption, in which technology had perturbed the well-established structure in the country.

“Don’t forget that taxi operators like Blue Bird and Express in Indonesia have also shown monopolistic practices in the past. With larger capital, they have pushed aside the operation of local taxis,” he said.

In the beginning both Uber and Grab, which claimed to be IT application providers and not public transportation companies, might have expected to have their competitive advantages bring their business model to the top.

Unfortunately, the government doesn’t seem to want to allow that, especially as the big taxpayer “sharks”, failing to create more efficient technology-backed businesses and pricing, have asked the government to protect their squeezed businesses.

The consumers, who take the benefit of the competition, are closely watching how far the government will meddle in this issue. The government should take the side of progress and innovation, not kill ride-hailing apps by forcing them to be another conventional, obsolete business in the name of "creating a level playing field". (vps/ags)