MANILA/JAKARTA -- Regulators in the Philippines have rejected Go-Jek's bid to offer ride-hailing services in the country because it would violate foreign ownership regulations.
The decision is a blow to the Indonesian ride-hailing operator's regional expansion and its bid to challenge its Singapore-based arch rival, Grab, in Southeast Asia. The ruling enables Grab for the time being to consolidate its position as the dominant ride-hailing operator in the Philippines.
The Land Transportation Franchising and Regulatory Board's accreditation committee denied an application from Velox Technology Philippines -- Go-Jek's local affiliate -- to start a transport network company "on grounds that it did not meet the citizenship requirement and the application was not verified in accordance with our rules," board chairperson Martin Delgra told Nikkei Asian Review in a mobile message on Wednesday.
Ride-hailing service providers are required to be accredited as transport network companies, which are classified as public utilities in the Philippines. Under the country's laws, foreigners can own only up to 40% of public utilities. According to some reports, Go-Jek owns 99% of Velox through a Singaporean subsidiary.
Go-Jek's spokesperson said via email: "We continue to engage positively with the LTFRB and other government agencies, as we seek to provide a much-needed transport solution for the people of the Philippines."
Delgra did not immediately respond to questions about whether Go-Jek can appeal the committee's decision.
Go-Jek, which counts China's internet giant Tencent as well as Google and private fund KKR among its backers, started expanding its services outside of its home market of Indonesia last year in a bid to go toe-to-toe with its rival Grab. The Singapore-based company holds a virtual monopoly of the regional ride-hailing market after taking over Uber's Southeast Asian operations last year. Grab's Philippine unit is 60% owned by local shareholders, a company representative in Manila said.
The Indonesian unicorn -- a private company with a valuation of over $1 billion -- announced last year plans to enter four new markets, and the Philippines remains the only country where it has not been able to launch operations. It started offering services in Vietnam through its local partner Go-Viet in September, while it launched a beta service in Singapore, as well as in Thailand through local partner GET, toward the end of 2018.
However, Grab has its own share of challenges in the Philippines, as its dominant status in the country is a concern for regulators. While its operational merger with Uber was approved last year, its virtual monopoly remains under post-merger monitoring for a year.
Nikkei staff writer Kentaro Iwamoto in Singapore contributed to this article.