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Indonesia: Dispute Over Ride Share Companies to Be Resolved

(Mar. 22, 2016) Companies that provide online ride-sharing applications for public transportation have grown in market share in Indonesia in recent years, and government officials have varied in their responses to the phenomenon. In November 2015, the Transportation Minister, Ignasius Jonan, sent a letter to law enforcement agencies indicating that app-based car and motorcycle services were banned; the President, Joko Widodo, quickly overruled Jonan. (Muhamad Al Azhari, Ride Sharing Apps Change the Face of Jakarta’s Busy Streets, JAKARTA GLOBE (Mar. 16, 2016).)

Dispute Background

As is the case in many other countries, there is a dispute in Indonesia between taxi and public transit drivers on the one hand and the ride share applications Uber, which is a company based in the United States, and Grab Cars, based in Malaysia, on the other. Drivers operating traditional cabs have complained that the online ride-providing services are operating illegally, having not registered as public transit vehicles, and that they are cutting into their customer base. Taxi drivers and public transit operators have held public demonstrations over the issue, with 2,000 cabbies participating in a street protest in Jakarta on March 14, 2016, and 10,000 protesting in various locations on March 22. (Callistasia Anggun Wijaya, Uber, Grab Car Told to Collaborate with “Legal” Transportation, JAKARTA POST (Mar. 16, 2016); Anton Hermansyah & Callistasia Anggun Wijaya, Taxis Plan Nationwide Strike if Govt Fails to Close Down Ride-Hailing Apps, JAKARTA POST (Mar. 22, 2016); Al Azhari, supra.)  As of March 22, according to the Land Transportation Drivers Association, a larger, nation-wide protest will be held if the ride share app companies are permitted to continue operations.  (Hermansyah & Wijaya, supra.)

For their part, Uber and Grab Cars representatives have said that they are essentially communications companies, not transportation businesses, and therefore the 2009 traffic and road safety legislation does not apply to them. (Al Azhari, supra; Undang-Undang Nomor 22 Tahun 2009 Tentang Lalu Lintas dan Angkutan Jalan [Law No. 22, 2009 on Traffic and Road Safety], HUKUMONLINE (click on link for .PDF of law).) While taxi operators have resisted the idea of providing a legal way for these online services to operate, reportedly riders have expressed a desire for more efficient and safer means of transportation. (Al Azhari, supra.)

Resolution Proposed

On March 15, 2016, following a Cabinet meeting with Widodo on the issue, the Indonesian government announced that it would aid ride-share app businesses in applying for permits to operate legally. Jonan had called for the Communication and Information Technology Ministry to block Uber and Grab Car for operating illegal public transportation businesses, but on March 16, he adopted a more conciliatory tone, advising the companies to collaborate with licensed public transit operators, including rental car services as well as taxis. (Wijaya, supra.)

For his part, the Minister of Communications and Information, Rudiantara (who goes by a single name) said that his office has been consulting with the Transportation Ministry and with the Cooperatives and Small and Medium Enterprises Ministry to settle the issue and smooth the path for Uber and Grab Cab to secure business permits. He noted that the two companies “as transportation companies, have agreed to establish a cooperative for their affiliations.” (Dandy Koswaraputra, Indonesia to Solve Grab, Uber Dispute This Week, JAKARTA POST (Mar. 16, 2015).)

The government hopes that the dispute can be resolved soon, after the ride-share businesses set up legal business entities that would be umbrella companies for their drivers. Speaking for Grab Car, Ridzki Kramadibrata approved of the government’s initiative and suggested that “[t]he most suitable business entity for them is a cooperative.” (Id.)