TIS - Intelligence - Regulating a Ride-Hailing Business Constructively and Effectively

 JAKARTA (TheInsiderStories) – Indonesia’s ride-hailing companies continue to make significant strides. In addition to government encouragement, the new business had large capital investment from world-brand automotive companies such as Toyota Motor Corp., Honda Motor Co., Yamaha Motor Co., and Hyundai Motor Co.

Recently, the Toyota announced a new service called “Total-care Service” as a treatment set that works using special platform-based telematics data installed in vehicles, as well as fleet management, insurance, and maintenance packages.

The goal is to be increase road safety for our driving partners, and help Grab succeed in improving transportation safety standards. This Total-care Service will be installed on an online taxi fleet. By 2020, 25 percent of the total Toyota-branded Grab-Rentals fleet throughout Southeast Asia is predicted to use the service.

Based on available data, Toyota is one of the investors who has twice injected funds worth US$10 billion into Grab. In addition, there is Honda, which was the first automotive manufacturer to invest in Grab. In 2016, the car manufacturer invested $750 million.

Then followed by Hyundai in November 2018 which injected funds worth $250 million. And finally there is Yamaha, which in December deposited $150 million.

In Indonesia, GO-JEK, as a nation’ child products, did not escape the splash of automotive companies. Through PT Astra International Tbk (IDX: ASII), the operator received funding worth $150 million. Astra has become the only automotive company supporting GO-JEK.

The question is, why are automotive manufacturers competing to invest their capital in new companies?

Based on an analysis of automotive manufacturers’ financial reports, working with startup ride-hailing companies is one of the best steps to save the automotive business in the future. It allows automotive manufacturers to sell vehicle units, especially to ride hailing drivers.

Moreover, the number of ride-hailing drivers is quite significant. While, there is a new trend where people tend to use online vehicles rather than their private vehicles.

In the United States, a study says if a person travels less than 16 thousand kilometers per year, using ride-sharing services such as Uber is a wise choice rather than buying a private vehicle.

GO-JEK claims that it has more than one million Go-Ride drivers. While in Singapore, there are more than 23 thousand certified ride-hailing drivers. By cooperating with ride-hailing company, automotive manufacturers have a big opportunity to attract the drivers to buy their production vehicles.

The surge in investment in pilot companies urged the government to immediately regulate a regulation or law that could accommodate all online transportation issues, ranging from security and legal protection, welfare and tariffs.

Three years ago, the government issued a regulation to ban online transportation. Notification Number UM.3012/1/21/Phb/2015 dated Nov. 9, 2015, signed by former Transportation minister Ignasius Jonan.

The reason is that online transportation is considered to not meet the requirements as set out in Law No 22 Year 2009, concerning Road Traffic and Transportation and Government Regulation Number 74 Year 2014 concerning Road Transportation.

As a technology company, GO-JEK or Grab is not categorized as public transportation. Moreover, two-wheeled motors are not in accordance with the rules of public transportation which must be at least three wheels.

President Joko Widodo immediately dismissed the rules by saying that online transportation cannot be banned because it is needed by the public.

But it was not enough to solve the problem. The Road Transport Traffic Law remains unchanged, and therefore motorbikes still cannot be classified as public transportation. This condition was then responded to by drivers who gathered themselves in associations or unions to demand their rights.

The government then took the policy so that the issue of online transportation was handed over to the respective regional governments. However, each region has its own interests and regulations that can lead to incomplete rules.

Finally, as a service provider, the company accepts the demands of the driver by setting reasonable tariffs, Rp4,000 (US$0.28) per kilometer. But even this does not confirm the demands for living costs and conformity with the minimum wage such as in Jakarta amounting to Rp3.6 million.

Other problems also arise, namely the matter of the financial electronic transaction system, and the confidentiality of personal data. The government is also required to oversee this sector to reduce the incidence of accidents in the online transportation business.

Therefore the government has right to make special rules to ensure legal discretion to protect motorcycle ride-hailing drivers to improve welfare and ensure safety while operating and determine operating area boundaries, set minimum tariff limits, consider implementing, suspend and implement safety gear.

Indonesia can learn from from the way South Korea handles business competition between online and conventional taxis, namely by using regulations and the application of technology.

Regarding regulations, in South Korea online taxis are positioned as a complement to private vehicles, used for certain hours (commuting). While conventional taxis can use the application.

US$1: Rp14,500

Written by Daniel Deha, Email: theinsiderstories@gmail.com