Gov't Steadfast Despite Protest Over Plan to Limit Online Ride-Hailing Services

From left, Transport Minister Budi Karya Sumadi, National Police chief Gen. Tito Karnavian, and Communication and Information Minister Rudiantara pose for a photo after a press conference outlining the new regulations for online ride-hailing services on Tuesday (21/03). (Antara Photo/Risky Andrianto)

By : Tabita Diela | on 6:32 PM March 21, 2017
Category : Business, Corporate News

Jakarta. The central government will stick to its plan to curb online ride-hailing services despite nationwide protests from businesses and consumers, arguing that its decision is meant to protect stakeholders and set a level playing field for similar service providers.

Under the plan, the Ministry of Transportation will revise a 2016 regulation and outline several new requirements for drivers of app-based ride-hailing services, including meeting a mandatory minimum engine displacement, providing evidence of direct ownership of the vehicles in use, obtaining roadworthiness certificates and paying higher taxes.

The revision will also stipulate that online services will no longer be legally categorized as "car rental services," but will instead be recognized as unique services governed by a special set of laws.

Transportation Minister Budi Karya Sumadi and Communications and Information Minister Rudiantara participated in a video conference with local governments from Jakarta, West Java, Central Java, East Java, Bali and South Sulawesi at the National Police headquarters in Jakarta on Tuesday (21/03).

The Transportation Ministry outlined a few proposed changes on its official Twitter page on Monday.

"The regulation will provide legal protection for online-based rental transportation services and provide a healthy business competition climate," the ministry said. "[The revisions] were made based on considerations of safety, equality and the needs of the people."

The Twitter post also added that by creating a new category for online ride-hailing services, "the government will recognize [them] as legal."

Price Capping

One of the more controversial stipulations in the new revision, which will cap fares for the online-based services, has drawn vocal opposition from companies including Grab, Go-Jek and Uber. The app-based services argue that the new rule will force customers to pay steeper prices after it comes into effect early next month.

However, the ministry argued that capping fares will actually protect customers as online-based service providers will not be able to increase the cost of rides during peak hours. A minimum fare on the other hand, will prevent future price wars between providers.

"The online-based rental transports are still allowed to offer promotions, which benefit customers," the ministry's Twitter post said.

For example, Go-Car currently offers rides for Rp 10,000 (75 US cents) for every trip of up to 2.85 kilometers and an additional Rp 3,500 per km for rides in Jakarta, Bogor, Depok, Tangerang and Bekasi. The company also offers a 30 percent discount for every Go-Car ride paid with its Go-Pay e-wallet billing service.

Blue Bird, one of Indonesia's most recognizable taxi services, starts its fares at Rp 6,500 and charges an addition Rp 4,100 for each subsequent kilometer.

Fleet Size

Grab, Go-Jek and Uber previously said they opposed the implementation of a fleet quota and a requirement for drivers to transfer their vehicles' ownership to a cooperative under the new revision.

The Transportation Ministry addressed those concerns, arguing that "if the number of vehicles are not limited, then what happens next will result in oversupply. Drivers' revenue would be lower as too many transportation services would be operating."

"When [a vehicle] is carrying a paid passenger, the vehicle must obey public transportation laws and will no longer be recognized as a private vehicle," the ministry's statement said.

It also stipulated that local governments will determine the precise numbers of vehicles allowed to operate as part of ride-hailing services in their respective jurisdictions. The proposed fleet quota, according to the ministry, is the result of demands by public and private transit drivers in both Jakarta and Makassar, South Sulawesi, during so-called "public interest tests."

Cars used for the online-based ride-hailing services will also be required to have a minimum engine capacity of 1,000 cubic centimeters, compared to a minimum 1,300 cc capacity for non-app-based vehicles.

The Indonesian Transportation Society (MTI), a private organization that lobbies the central government on behalf of transport services, opposes a smaller engine capacity for app-based services as it feels the smaller cars will contribute to even more traffic jams.

Despite their protests, the country's ride-hailing services agreed to the government's plan to force drivers to obtain certificates of roadworthiness, recognizing the importance of passenger safety.

The upcoming revision will also require ride-hailing services to provide an area for drivers to store their vehicles and to create dedicated repair centers for their vehicles.

The companies will also need to pay higher taxes to the government and provide regular reports on the size of their fleets, the number of drivers they employ and their daily revenue.

The government has promised to penalize any app-based drivers or companies that fail to comply with the new revisions.

The upcoming ministerial regulation is scheduled to come into force on April 1.

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