09May, 2017

Assessing the New Regulation on Ride-Hailing Apps

public relations, Assessing the New Regulation on Ride-Hailing Apps-Public Relations and Communications Business Portal News Indonesia

By: Thomas Franky – Managing Director of Fortune PR

Ride-hailing app services, which are well known for its cheaper fare and sophisticated technology, have been taken into an important role in the dynamics of Indonesians daily life, particularly within urban areas. Despite their rapidly rising popularity, these application-based transportation services have generated a lot of controversy and social conflicts.

Recently, the Indonesian government under the Ministry of Transportation issued a specific regulation to provide legal certainty so that every party involved in this business has its relevant protection. But then pros and cons have emerged from the revision of Transportation Ministerial Regulation No. 32/2016 on non-route public transportation (taxi).

Transportation Minister Budi Karya Sumadi stated in Kompas that this attempt was made to ease tension among drivers of both transportation modes due to clashes and damaged caused by jealousy. The government also highlighted the issue related to predatory tariff, as current practices of ride-hailing apps were not fair to conventional taxi companies as the operators could decide the fares. Ride-hailing apps were also criticized as they reduce the rates to attract passengers during the normal time, but then increased them during the peak hours.

As to this day, conventional taxi companies seems to agree with the new regulation, as stated in Kompas, claiming that this will give a legal framework for online taxis. They also highlighted that the new regulation can control fares of the ride-hailing apps and in return diminished the unhealthy competition between online and conventional taxis in Indonesia.

On the other hand, more parties seemed to oppose this regulation, claiming that it is one sided and can create a major disadvantage. As cited in The Jakarta Post, online transportation apps companies are the first party to reject, particularly regarding the fare and pricing system. Besides that, one of the opposing argument from ride-hailing app companies has concern over the fact that this rule would make it harder for Indonesians to access reliable transportation options and the flexible economic opportunities that ride-hailing offers.

This new transportation Ministerial Regulation consists of few major changes for online transportation. As published on The Jakarta Globe, the government now has the authority to set certain standards in terms of fares, fleet size, taxes, and salary rates for drivers. The most highlighted regulation is about the fares. The floor and ceiling prices will be determined by the governor of the province where the service is being rendered.

This new rule also regulates the vehicles as well as the drivers. Ride-hailing companies must now open pools for their cars or motorbikes to wait for passengers. Hanging out on street corners looking for passengers will no longer be allowed. Their vehicle must meet the minimum engine displacement requirement (1000 cc) and has been issued with a roadworthiness certificate and taxi sign stickers. The number of operating vehicles will also be limited to avoid oversupply, which can greatly reduce income for drivers. Stated on Bisnisnews.id, the Head of Online Taxi Drivers Alliance in Bali highly rejects this notion stating that the government does not pay attention to their aspiration.

Speaking on behalf of the costumers, the Business Competition Supervisory Commission or KPPU, has also aired its concern that the government’s revisions on its ride-sharing services regulation could undermine fair business competition in the country’s transportation market. Published in The Jakarta Globe, the commission said this regulation will only reinforce the existing oligopoly in Indonesia’s taxi market, which in the past had deprived customers from getting more affordable services.

It is important to highlight the effects of these regulations to all players involved in the game. If the government issued the rule of uniformity to muffle social conflicts between conventional and online taxis, it will be effective. Conventional taxis can no longer complain and show jealousy anymore. But as we analyze deeper, a new potential conflict can hit the digital business, as it does not favor ride-hailing app companies. The uniformity rub out the essence of crowdsourcing, that later can hamper online business.

Communicating “Tax” as a New Vocal Point

This regulation is proven to bring disadvantages for a lot more parties, particularly the point where the fares, flees, and vehicle attributes are being regulated. The government should first therefore try to view this issue from a wider scope and more from a helicopter view. A few questions for the government also needed to be raised. Did they first conduct in-depth research to find out what the drivers and consumers want? Were the benefits of technological innovations brought by ride-hailing apps taken into consideration? Will companies, drivers, and consumer be ready for these changes?

Second, the government should focus on regulating the tax for ride-hailing apps for instance. This includes giving a new vocal point when communicating this new policy, from buzzing about price uniformity to talking more about the benefit of implementing tax on ride-hailing apps. Ride-hailing companies has their drawbacks, and the reason why their fares are so much cheaper is because they do not pay and report their taxes. Therefore, the government should make them file tax report.

The tax paid by companies will eventually be used for the benefit of the country’s development. This new vocal point will be perceived as fairer from the consumer’s standpoint, which then forms a public opinion that favors the policy. Public opinion can play a positive role in policy making, and can have various effects on how a policy is made or viewed. Lastly, the government should see this opportunity to develop a healthy sharing economy.


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