Wednesday, 19 February 2020

Budi Karya: Without Regulation Online Ojek will be Disfranchised

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  • Transportation Minister Budi Karya Sumadi. TEMPO/Chitra Paramesti

    Transportation Minister Budi Karya Sumadi. TEMPO/Chitra Paramesti

    TEMPO.CO, Jakarta - Last month, the transportation ministry issued regulation No. 12/2019 on protection and safety for motorcycle users, the first ever regulation governing motorcycle taxi which previously was not recognized as a mode of public transport. The regulation sets tariff limits based on three zones and stipulates required safety gear. The tariffs for first zone covering Java (except Jakarta, Bogor, Depok, Tangerang and Bekasi), Sumatra and Bali are Rp1,850 and Rp2,300 per kilometer for lower and upper limits respectively on top of Rp7,000-10,000 base fare for the first four kilometer. The base fare for the second zone which covers Jabodetabek (Jakarta, Bogor, Depok, Tangerang and Bekasi) is Rp8,000-10,000 with lower and upper limit tariff s of Rp2,000 and Rp2,500 respectively. Central and eastern Indonesia as the third zone has lower and upper tariffs of Rp2,100 and Rp2,600 added by Rp7,000-10,000 base fare.

    The average rate currently set by the app providers is Rp1,500 per kilometer. “That leaves drivers with a very meager income,” Transportation Minister Budi Karya Sumadi said in a special interview with Tempo’s Reza Maulana and Angelina Anjar at his office last Friday. The regulation is set to go into effect on May 1.

    As the Road Traffic and Transportation Law No. 22/2009 does not recognize motorcycle taxi as public transportation, the transportation ministry used the Law No. 39/2008 regarding state ministries which gives ministers authority to exercise discretion. “Many people have taken up ojek (motorcycle taxi) driving as a profession; therefore, it needs to be regulated,” said Budi, 62. The deliberation that took place since last January involved drivers’ representatives, the app providers, Indonesian Consumer Association and other related stakeholders. The ministry helped find the middle ground for drivers who demanded a higher tariff of Rp3,000 per kilometer and the app companies which insisted to maintain the current rate of around Rp1,500 per kilometer.

    Besides the groundbreaking ojek regulation, Budi Karya also rolled out two new regulations on flight tickets: the transportation ministerial regulation No. 20/2019 governing ticket pricing and its derivative, the transportation ministerial decree No. 72 which sets tariff limits. He said that cheap fares the public enjoyed so far were the result of the price war. “In principle, one hour long full-service flight at the tariff of Rp1 million needs 60 percent occupancy to hit a breakeven point,” he explained.

    During the interview, Budi Setiyadi, the director-general for land transportation, explained tariff setting for online ojek and transportation for the upcoming Idul Fitri holiday.

    What is the rationale behind the online ojek regulation?

    Law No. 39/2008 regarding state ministries allows ministries to issue regulations at their discretion provided these regulations concern the public and no (similar) regulation has been in place yet. Online ojek exists among the public, something that is only available in Indonesia and a few other Southeast Asian countries. Starting from the initial concept of ride-sharing, now ojek driving has become a profession adopted by many people. Therefore, it needs to be regulated. Otherwise, drivers will be disenfranchised.

    Does the road traffic and transportation law not recognize motorcycles as public transport vehicle?

    Budi Setiyadi: As appropriately named ‘Protection and safety regulation for motorcycle users which should be applied for the interest of the public’, this regulation is more concerned with protection and safety. As you see, there is no mention of ‘public transport’ in the regulation and we use the term service fee instead of the tariff because tariff is a term used in public transport services.

    But, in reality, it mostly regulates the fares...

    If they earn sufficient income, drivers will be able to buy proper tires, replace brake calipers as needed, and so on. However; if they only earn a very meager income, for example, Rp1,000 per kilometer, let alone take care of safety aspects, they might even dilute the gasoline (chuckles)...This regulation also substantially stipulates protection and safety aspects for both drivers and passengers. Article 4, for example, requires drivers to be in good health, wear a jacket, trousers, shoes, gloves and so on.

    What is the basis for the service fees between Rp1,850 and Rp2,600 per kilometer?

    We used the public transportation tariff calculation formula. There are aspects of direct and indirect costs. Direct costs are costs incurred by the driver on the day, for example, to buy phone credits or fuels. Indirect costs include many components, 12 in total, among others, vehicle maintenance costs and taxes. The tariff is also net without other deductions. The app companies earn a maximum 20 percent of the fare which is charged to the customer.

    Must promo and rush-hour fares be also in that range?

    Yes. All fares must be within the set range.

    Why is zoning necessary?

    Budi Setiyadi: We considered the behavioral differences among the public in transportation use. In Jabodetabek, people primarily use online ojek to go to public transport hubs such as Transjakarta or MRT (mass rapid transit). In other regions, meanwhile, people use it to go from one point to another; therefore, we decided that Jakarta and its environs should be classified separately as zone II. Meanwhile, the fare for eastern Indonesia is the highest due to relatively higher commodity prices including those of motorcycles.

    What does the spirit of this regulation aim to accommodate: the interest of drivers, app companies or passengers?

    Both. I want drivers to get a decent income. All their demonstrations have been about tariffs. Hundreds of thousands of people depend on this business. Drivers want the tariffs to be increased to Rp3,000 per kilometer. They said passengers wouldn’t mind because the latter always give tips or round up the fares. However, tariff s should not burden the app providers also. High tariffs can cost them customers. Many drivers think for short-term gains while the providers consider long term effects. Companies argue that albeit lower tariffs, drivers earn not only from transport but also from delivering food, goods, etc. Well, we helped them find the middle ground.

    Where do customers stand in this?

    They are in the same position as the app providers. Assuming the fare is increased to Rp3,000 per kilometer, some economists predict a decline in buying power and customers’ switch to private vehicles… I’ve also done small surveys and found that people would stop using online ojek if the tariff goes up to Rp3,000 per kilometer as it is almost the same rate as the online taxi fare of Rp3,200 per kilometer. That’s why we apply an average rate of Rp2,000 per kilometer.

    Is it already an ideal tariff?

    This regulation is a non-binding recommendation or guideline. Let the police take care of sanctions via road traffic regulations. However, compared to the previous gross tariff of Rp1,600 per kilometer set by the app companies (less 20 percent deduction), this is a significant hike. Some drivers consider the tariffs to be still insufficient to fulfill their needs.

    Is there any possibility of revision?

    Every regulation can be evaluated. If, for example, all drivers go on strike or the app providers stop operations because they suffer losses, then we will review it.

    Read the full interview in Tempo English Magazine