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Politics

Indonesia struggles to implement car-hailing regulations

Uber, Grab, Go-Jek strongly oppose new rules on fares, vehicle numbers

People queuing at an Uber motorcycle driver registration session in Jakarta.

JAKARTA -- Controversial new rules for online transportation operators can only be implemented gradually, the Indonesian transportation minister said on Thursday, giving some relief to ride-hailing apps like Uber and Grab.

The new regulations set maximum and minimum fares for four-wheeled-vehicle rides booked online, and cap the number of vehicles available. Although these are to come into effect on Saturday, Transportation Minister Budi Karya Sumadi said immediate implementation is unlikely, owing to the "magnitude of the technical rules" still undecided. He said there are ongoing "adjustments and discussions between the central and regional governments" regarding fares and vehicle limits.

Tensions between app-based and conventional transportation service providers have risen in the past few weeks after the government confirmed new regulations were imminent. A private car carrying a family was attacked in Bandung, West Java, by a group of public minivan drivers who believed the vehicle was an online taxi. Dozens of online motorbike taxi drivers clashed with public minivan drivers in Bogor on the outskirts of Jakarta, prompting the mayor to order a temporary ban on ride-hailing apps.

The regulatory holdup is expected to allow the top three operators -- Uber, Grab and Go-Jek -- to continue fighting for their slices of Southeast Asia's largest economy. The operators have been offering discounts for riders and subsidies for drivers in the hope of gaining market share and loyalty ahead of raising fares. In a joint statement issued earlier in March, the three companies criticized regulation. They said capping fares and the number of vehicles does not benefit consumers.

Syarkawi Rauf, chairman of Indonesia's competition watchdog, met with President Joko Widodo on Thursday to discuss regulations and tariffs that might impede competitiveness.

Regulations announced last April also fell short of implementation. The latest move highlights the Indonesian government's dilemma as it seeks to formulate a workable policy for ride-hailing apps. While trying to satisfy consumers, the Ministry of Transportation faces strong pressure from older taxi companies that employ tens of thousands of drivers who have been severely impacted by ride-hailing operations.

Blue Bird, the country's largest taxi operator, reported on Thursday a net profit of 507 billion rupiah ($38 million at current rates) in 2016 -- a 38% decline year on year. "The presence of online taxis that give rates and discounts that are very cheap makes competition unhealthy," said Sigit Priawan Djokosoetono, a director at Blue Bird.

With the ever-growing number of smartphone users, President Joko Widodo has meanwhile pegged booming internet technology as a new pillar of economic growth.

Sumadi pointed to the partnership between Go-Jek and Blue Bird as a "point of compromise" that other players should emulate. Blue Bird taxis can be hailed on Go-Jek's app, which also offers a nontaxi-vehicle-hailing service.

The regulatory changes are being closely watched because of Indonesia's large, youthful population and lack of public transportation. Grab is backed by SoftBank Group and has pledged to invest $700 million in the country over the next four years. KKR & Co. and Warburg Pincus led a $550 million fundraising round for Go-Jek last August.

Meanwhile, motorcycle taxi services, which are the main driving force behind the popularity of ride-hailing apps in Indonesia, remain unregulated.

Nikkei staff writers Bobby Nugroho and Erwida Maulia contributed to this story.

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