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Jakarta Post

COMMENTARY: Regulating ride-hailing business, regulating the future

  • Hasyim Widhiarto

    The Jakarta Post

Jakarta   /   Wed, April 5, 2017   /  10:21 am
COMMENTARY: Regulating ride-hailing business, regulating the future Defensive reaction: Hundreds of taxis parked in Semanggi area in South Jakarta during a protest on March 22, 2016. At least 10,000 taxi, bajaj and bus drivers demand the government to close down the growing ride-hailing applications that threaten their income. (Antara/Muhammad Adimaja)

Sometimes, there is almost no difference between taking public transportation and falling victim to street robbery in Jakarta.

I was recently in a hurry and was about to order an ojek (motorcycle taxi) to take me from Tanah Abang in Central Jakarta to an embassy less than 3 kilometers away. The ride-hailing app I was using said the trip would cost me Rp 8,000 but then my smartphone battery ran out.

So I approached some ojek drivers, but no one agreed to take me for less than Rp 35,000. I surrendered, muttering, “Damn, I’m being robbed,” throughout that 10-minute ride.

With public transportation’s infamous track record, ride-hailing apps such as Go-Jek, Grab and Uber, with competitive prices and traceable services, are the new darlings among Indonesian customers.

(Read also: Indonesia eyes fairness in ride-hailing regulation)

Like elsewhere, defensive reactions have emerged from the old players — operators of formal public transportation services such as taxis, buses and angkot (public minivans) and informal ones like ojek. Many of these operators are notorious for ignoring road safety and passenger convenience.

In March last year, thousands of members of the Land Transportation Drivers Association (PPAD) took to Jakarta’s streets, blaming the new technology for unfair business competition. Some protesters attacked other taxis carrying passengers.

Last month, violent clashes involving ojek and angkot drivers erupted in Tangerang, Banten and Bogor in West Java, reflecting heated, widespread rivalry between early adopters of the technology and the laggards.

Starting April 1, the government will enforce the revised version of Transportation Ministerial Regulation No. 32/2016 on taxi businesses that, among other things, regulates fleet quotas and establishes price floors for car-hailing services. Regional leaders have expressed support for the policy, which will determine the minimum and maximum fares that can be charged by ride-hailing app providers.

While a formal regulation of ojek is still absent, lawmakers recently signaled support for a limited amendment to the 2009 Road Traffic and Transportation Law to regulate two-wheeled motor vehicles as a kind of formal public transportation.

While I fully support the views of fellow disgruntled passengers of public transportation services who now enjoy a little comfort from ride-hailing apps, I believe that the government’s efforts to put the brakes on the robust industry are crucial. Here’s why:

First, the only way for customers to enjoy fair prices is to maintain the existence of multiple service providers. Letting alternative providers die will leave a few dominant providers who could then control the pricing mechanism.

While we complain about “overpriced” conventional taxi fares, once ride-hailing app providers become the only players in town, they could easily play the take-it-or-leave-it game, sacrificing consumers.

Furthermore, taking a regular taxi is sometimes more convenient than hailing private cars from smartphones. In emergencies, hopping in a stand-by taxi is better than waiting for your Uber driver to escape heavy traffic.

Second, there are reasons why formal public transportation providers must be regulated — mainly to ensure that they fulfil a set of minimum service and safety standards set by the government.

Passengers of budget carriers, for example, must have the assurance that the low ticket price does not compromise aircraft maintenance standards that could put their lives at risk. The same principle must be applied to ride-hailing businesses.

There should be a set of procedures to ensure that the fleet and drivers operating ride-hailing services are fit enough to hit the road. True, safety comes at a price.

The government’s idea to impose a tax on fleets offering ridehailing services and a quota for the size of the fleet should also be seen as an effort to protect the public, including other road users.

Taxes paid by taxi and bus operators are designed to anticipate the negative impacts of the industry. Today, with nearly everyone having a driver’s license and with private cars offering ride-hailing services, we could see even more pollution and congestion. So shouldn’t those contributors to such a mess pay more tax?

Third, despite being perceived as siding with the old players, the new regulation will only serve as a temporary lifeline for conventional service providers.

Failure to significantly improve their services and pricing strategy will force them out of the game when their younger competitors finally adjust their business plans to today’s regulations.

Conventional transportation services have repeatedly accused ride-hailing app providers of predatory pricing, in which customers are given low, heavily subsidized prices in order to gobble up market share.

The new regulations, such as the obligation for institutions that partner with ride-hailing apps to meet tax requirements and the introduction of the price floor, which can limit fare differences between regular taxi and ride-hailing services by up to 20 percent, should create a level playing field for all players.

Thus the old giants will have no more excuses to frown and should focus instead on improving their services.

While the government claims that the regulation stands to accommodate the interests of all stakeholders, implementing it will pose another challenge for a country notoriously known for weak enforcement.

The requirement for cars to undergo vehicle roadworthy (KIR) tests, for example, must be followed by better management at KIR facilities, where illegal levies are allegedly rampant. It would be a total joke to see buses with broken tailpipes emitting thick smoke roaming around despite bearing the KIR certificate.

Apart from promoting fairness among businesses, any regulation on public transportation must prioritize the rights of consumers. For now, the best way to achieve this is not by banning the ride-hailing industry, but by carefully regulating it.

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