Indonesia: Grab and Uber have 6mths to comply, or get out
By Masyitha Baziad April 22, 2016
- New ministerial decree defines ride-sharing apps as transportation providers
- Experts say these services operate under private law, government should not intervene
INDONESIA’S Transportation Ministry has come up with a new ministerial decree that defines ride-sharing services as transportation providers, requiring them to comply with the public transportation licensing regime within six months or be declared illegal.
The decree covers providers such as Singapore-headquartered Grab (specifically for its GrabCar service), US-based Uber Technologies, and even local player Go-Jek for its Go-Car service.
Ministerial decree No 32 (2016) was signed by Transportation Minister Ignasius Jonan on March 28 and will take effect six months after the signed date, or Sept 28.
The essential points of the ministerial decree are as follows:
Article 41 Clause 1 of the ministerial decree allows transportation-hailing apps that partner with legitimate public transportation companies to operate in the country.
Grab’s GrabTaxi service falls under this category because it acts as a third-party app for licensed taxi companies.
2) Ride-sharing apps defined as transportation providers
The explanation of what constitutes transportation providers is in Article 41 Clause 3: a) They set and define a tariff for their services; b) They recruit drivers; and c) They define the amount drivers are paid.
3) Uber, Go-Car, and GrabCar are not allowed to serve as public transportation providers
Article 41 Clause 2 states that such transportation-hailing apps cannot act as transportation providers.
4) Ride-sharing apps need to comply with public transportation provider regulations
Article 42 says that in order to operate, ride-sharing apps (or their cooperative partners) need to complete all the requirements of public transportation providers, including: a) Getting the required licence to transport people without an assigned route; b) This licence has to be renewed every five years; c) Have a monitoring card in every car they use to transport people; and d) These monitoring cards should be renewed annually.
Commenting on the new regulation, Uber Indonesia spokesperson Amy Kunrojpanya told Digital News Asia (DNA) via email that Uber is currently reviewing the regulation and “remains committed to full compliance.”
It was pretty much the same with Grab Indonesia managing director Ridzki Kramadibrata (pic), who told DNA that his company would assist its cooperative partners in fulfilling all the Indonesian Government’s requirements.
“We are aware that some parts of the new regulation will be of concern to our driver partners, and might even affect the industry’s business model,” he said.
“However, we hope that the Government will listen and consider the aspirations of our driver partners and look for solutions together,” he told DNA via email.
Yet another U-turn
The Indonesian Government has been struggling with the rise of ride-hailing and ride-sharing startups in the country, which have the support of the public but which have earned the ire of traditional taxi companies.
The Government itself has not been united on this front: Last December, the Transportation Ministry declared a sudden ban on motorcycle-taxi services (known as ojek in Indonesia) and ride-sharing apps.
But it had to reverse its decision less than 24 hours later after a public outcry and objections from even Indonesian President Joko ‘Jokowi’ Widodo.
In March this year, the same ministry demanded a ban on such apps, but was convinced to hold off on such a drastic move after talks with the Communications and Information Ministry, which has been a bit more supportive of these services.
While the two ministries tried to come up with a win-win solution for all parties concerned – the public, the ride-sharing startups and the traditional taxi companies – the situation continued to simmer, culminating in violent protests by taxi drivers in Jakarta later in March.
Private contract, public interest
The latest ministerial decree, however, defeats the entire purpose of ride-sharing apps and destroys the business model of such startups, argued Danang Parikesit, chairman of the Transportation Society of Indonesia (Masyarakat Transportasi Indonesia).
Danang (pic), who is also professor of transportation studies at Gadjah Mada University, told DNA via text that there needs to be a separation of public law and private law.
Public law protects the public interest, while private law protects private interests, he said, adding that ride-sharing apps operate under private law.
“Indonesian law guarantees the freedom to enact private contracts, including the freedom to enact business contracts. The state should not intervene in private contracts,” said Danang.
However, the Indonesian Government is arguing that this issue is of public interest because it involves public safety.
“We want to make sure our citizens are safe, that they are not hopping into somebody else’s car and putting themselves in danger,” Transportation Minister Ignasius said a few months ago.
Danang challenged this public interest notion, citing the motorcycle-taxis that have been operating in the country for years.
“Now, if the state wants to regulate this, then it should start with all the individuals offering peer-to-peer (P2P) motorbike rides, in every street corner,” he said.
There is a reason why motorcycle-taxis have flourished in this country, according to Danang – it was a business opportunity that arose from solving public transportation and traffic jam issues.
“Does this mean individuals should not think of a business model and try to make money out of it? Does this mean we cannot offer P2P services in this country?” he said.
Next Page: Conflicting interests, and a blow to the country’s tech aspirations