Indonesia’s plans to regulate ride-hailing rates threaten Grab, Go-Jek models

Motorcycle taxi drivers working for Grab and Go-Jek in Jakarta have held protest rallies since 2018 calling for higher fares and better conditions. (Reuters)
Updated 11 January 2019
0

Indonesia’s plans to regulate ride-hailing rates threaten Grab, Go-Jek models

  • Since 2018, motorcycle taxi drivers working for Grab and Go-Jek in Jakarta have held protest rallies calling for higher fares and better conditions
  • ‘Cheap fares has been the firms’ main way to attract customers’

JAKARTA: Indonesia is preparing to launch regulations fixing the rates drivers and riders for ride-hailing services such as Grab and Go-Jek receive, two government officials said this week, creating potential obstacles for the companies’ expansion.
The regulations would meet drivers’ demands for more oversight and higher rates but there are concerns that the rising costs to the companies could stifle their development as they battle to dominate the ride-hailing market in Southeast Asia’s biggest economy.
Singapore-based Grab and home grown Go-Jek have been locked in price wars in Indonesia, part of a wider fight to bring banking, e-commerce, ride-hailing, food-delivery and other services to every corner of Southeast Asia.
However, since 2018, motorcycle taxi drivers working for Grab and Go-Jek in Jakarta have held protest rallies calling for higher fares and better conditions.
Indonesia’s Ministry of Transportation plans to implement minimum and maximum tariffs for car and motor bike ride-hailing that will be “higher than Go-Jek and Grab’s current rates” and impose limits on promotional price cuts, said Budi Setyadi, director general of land transportation at the ministry.
“This is for the safety and protection of drivers,” he said.
The ministry’s Public Transportation Director Ahmad Yani said a dependency on incentive-driven payments and low fixed rates per kilometer was a safety risk as it led to drivers overworking.
Yani said Grab paid 1,200 rupiah ($0.085) per km (0.6 miles) with a focus on bonuses, while Go-Jek’s rate was 1,400 rupiah ($0.099) per km.
The officials said fixed fare ranges for motor bikes were still being finalized, but would be implemented from March.
Fixed rates for ride-hailing cars will start in June and be set at 3,500 to 6,000 rupiah ($0.43) per km in the islands of Java, Sumatra, and Bali.
The drivers were pushing for increases to a standard fare of 3,000 to 4,000 rupiah per km.
The firms said they welcomed the new rules, though they had not seen details of the motor bike regulations.
“Grab believes the government will develop the best regulatory framework and hopes that all stakeholders will be included in the process,” said the company’s Head of Public Affairs Tri Sukma Anreianno.
A Go-Jek spokesman said: “We support the government’s spirit to encourage our driver partners ... and hope the regulation will have a positive impact on the sustainability of drivers’ income ... and fair business competition.”
However, both transport officials said the companies are worried about the pending regulation since they have spent heavily on driver subsidies to slash their customer rates and build their businesses.
“Grab and Go-Jek have told me they would prefer there was no regulation,” said Yani. “Due to the competition between them ... they are scared what could happen if they don’t keep up with each other.”
Indonesia’s Supreme Court blocked a previous transport ministry attempt to fix ride-hailing rates in 2017 after drivers sued saying the rules favored the taxi firms.
Both ministry officials said the new regulations met anti-competition standards and followed extensive discussions with driver syndicates.
Grab and Go-Jek drivers welcomed the prospect of standard fares.
“I have been working for Grab since 2015. Before, I could earn 300,000 to 400,000 rupiah per day. Now, I can only get 150,000 rupiah,” said Grab motor bike chauffeur Hermansyah.
Another driver, who had worked for both companies, said neither provided much protection, leading drivers to bear operational costs. He asked not to be identified since he had a role in organizing protests.
The fixed rates will be a challenge to a business model that has depended on cheap passenger prices for growth and could undermine innovation.
“Cheap fares has been the firms’ main way to attract customers,” said Yayat Suprityatna, Urban and Transportation Observer at Trisakti University in Jakarta.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 24 min 37 sec ago
0

Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

DUBAI: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”