Slamming on the Brakes
Indonesia plans to cap Uber, Grab, Go-Car fares
By Dion Bisara
Friday, March 10, 2017
The government plans to set a fare cap on app-based ride-hailing services in its latest attempt to regulate the business.
The stipulation is among several proposed changes to a 2016 ministerial regulation on people transport.
Budi Karya Sumadi, the Minister of Transportation, said the government is considering the fare cap as a viable option to prevent Uber, Grab or home-grown Go-Jek from running out other types of public transport.
"The cap will be determined [seasonally] through a survey, to match fares charged by conventional transport. The fares should be comparable, it could be dangerous if they weren't," Budi said on Monday (06/03) as quoted by Kontan daily.
Budi did not say which conventional transport he was referring to. Last year, the ministry had taken the side of conventional taxi companies and made a half-hearted attempt to ban online ride-hailing services.
It eventually backed down after pressure from the public and President Joko Widodo, who demanded a leeway for innovations in public transport.
A fare cap, however, may remove the incentives for online services to offer more innovations, spelling the end of cheap app-based transport, Hizkia Respatiadi, a researcher at independent think-thank Center for Indonesian Policy Studies, said on Tuesday.
Hizkia said the government has had little success with its previous pricing policies — especially in the food market — mostly because it never involved the producer or service provider — or the consumer — when formulating the policy.
"And, how would the government enforce the fare cap? People ignore government regulations all the time, and that's because the stipulations often leave the public in the lurch," Hizkia said.
"I personally prefer to let the market set the right fares," he added.
Aside from imposing a fare cap, the proposed changes in the transport ministry regulation also require the likes of Uber, Grab and Go-Jek to pay tax in Indonesia, Budi said.
Indonesia is one of a growing number of countries which have been trying to pull in taxes from companies that provide online services but refuse to establish themselves as business entities within the country and pay tax on their income. These companies include the likes of online giant Google and the world's largest social media firm Facebook.
Budi did not explain how the government would go about trying to force Uber, Grab and Go-Jek to pay tax in Indonesia, merely saying that the mechanism is still in discussion.
Pudji Hartanto, the director general of land transport at the ministry said the proposed changes in regulation also allow cars with 1,000 cc engines to be part of a ride-hailing service's fleet, lowering the current requirement which only allows cars with at least 1,300 cc engines.
This would mean owners of cheap, small-displacement city cars like Toyota Agya or Daihatsu Alya can finally join Uber or Grab.
This article first appeared on the Jakarta Globe website on March 7, 2017.