In a potential blow to the way ride apps operate in southeast Asia’s biggest market, the Indonesian government has said that all online ride services including Grab and Go-Jek must register as transportation companies to ensure that they adhere to the rules and requirements of public transport providers.
The move will see the government go back on its previous policy issued in 2016 which required ride-hailing apps to work in partnership with a rental car cooperative or a company.
This means that, once the rule takes effect, ride-hailing app firms will be directly responsible for its drivers.
The latest decision forms part of the proposed Transport Minister Regulation No. 108/2017 on non-route public transportation, according to Transport Minister Budi Karya Sumadi.
“The (ride-hailing) applications (companies) are also to be transport companies so that there is good control. We will discuss this with the (ride-hailing) applications (companies),” Sumadi said, as quoted in the ministry website.
The decision comes after a meeting between Sumadi, presidential chief of staff Moeldoko and Information and Communications Minister Rudiantara and Manpower Minister Hanif Dhakiri last week.
According to Moeldoko, once they officially become transportation companies, ride-hailing players like Go-Jek and Grab would need to be directly responsible for its drivers and not have cooperatives or companies as intermediaries.
“We have agreed that the applications will be transport service companies as well as application (company). So the line will be from the driver straight to the application (companies),” he said.
Ride-hailing companies refer to their drivers as ‘partners’. The regulatory revision may change this and force the companies to treat drivers as employees, like other transport providers do.
Despite facilitating transport services for passengers, Go-Jek and Grab are currently classed as technology companies, which means they do not have to follow the rules and regulations imposed on transport providers.
The issue of the legality of ride-hailing services is a long-standing one in Indonesia. In 2015, following complaints from conventional public transportation operators, the Transportation Ministry banned all ride-haling apps in the country arguing that they do not fulfill the requirements for being public transport service.
However, the ban was revoked a day later after a public outcry and subsequent criticism by President Jokowi who said that the ride-hailing firms fulfilled public demand created by a lack of reliable public transportation.
There have since been calls for ride-hailing companies to register as transportation companies but all have maintained that they are technology companies and do not run a transportation business.
The decision by the Indonesian government comes four months after the European Court of Justice ruled that Uber should be regulated as a transportation company, and not a tech firm. The case against Uber was brought by professional taxi drivers in Spain who argued that the startup had an unfair advantage because drivers on its UberPop service didn’t have the taxi licences required by the city of Barcelona.
The ruling comes as a huge blow to ride-hailing services and may prompt governments across the world to review how it regulates such companies.