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Economy

Grab cozying up to government

Ride-hailing service wants Indonesia to loosen up a little

Grab CEO Anthony Tan speaks in Jakarta on Feb. 2.

JAKARTA -- Grab, the Singapore-based provider of a popular ride-hailing app, is trying to get close to the government of Indonesia in an apparent effort to push for looser regulations in the company's key market.

At a press conference in a Jakarta hotel on Feb. 2, Grab CEO Anthony Tan appeared alongside Rudiantara, Indonesia's communications and information minister, and Thomas Lembong, chairman of the Indonesia Investment Coordinating Board, among other government officials.

Tan said Grab will spend $700 million to hire engineers, set up a venture fund as well as establish a research and development center in Indonesia -- all by 2020. These plans come as the government shapes policies to train high-skilled workers, secure jobs and nurture entrepreneurship.

Tan said his investment plans are designed to facilitate a shift to a digital economy.

A Jakarta traffic jam

The use of ride-hailing apps got into full swing in Indonesia last year. Apps like Grab and Uber Technologies of the U.S. are becoming more popular. While motorcycle-hailing apps, such as locally born Go-Jek, have raised few issues -- there are virtually no entry barriers -- car-hailing apps are facing stiff opposition from taxi operators.

Although the use of car-hailing apps was judged legal last year, rules have been significantly tightened for app operators; Grab and Uber drivers are now required to obtain the same kind of license as taxi drivers, and their vehicles must be registered.

By underscoring its contribution to the Indonesian economy, Grab appears to be trying to win over regulators. In late January, Grab picked Badrodin Haiti, a former National Police chief, as president commissioner of Grab's Indonesian unit to oversee its management.

The decision was clearly designed to build a favorable relationship with the police over license approvals and other matters. But a local newspaper on Tuesday said Badrodin has also taken up a supervisory post at a state-owned company, contravening a ban on serving in concurrent posts. In an attempt to rectify the matter, Grab reportedly has since swapped out Badrodin's "president commissioner" title for "senior adviser."

Grab is not alone in trying to curry favor with the government. Go-Jek has significantly expanded its business in the country thanks to the support of President Joko Widodo and others who place great importance on employment. The company now has 250,000 drivers and is eager to start other services, such as home deliveries.

By the way, at Grab's press conference, a transportation ministry official referred to the possibility of relaxing relevant regulations.

Going easier on ride-hailing services might make things more convenient for commuters. But businesses that build unusually cozy relationships with the government risk distorting competition and adversely affecting consumers.

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