NEWS DETAIL

04 Aug 2017
MOT REGULATION 26/2017: A CLEAR IDENTITY FOR TECHNOLOGY-BASED TRANSPORTATION SERVICES


Indonesia’s ride-hailing transportation services enjoy greater legal certainty following regulatory changes in 2016 and 2017. Operators and customer of these businesses will welcome the government’s endorsement over their legitimacy. The new regulations introduce clear definitions, sanctions, minimum tariffs, and procedures for cooperation with conventional operators.

 

New Ministry of Transportation (“MOT”) regulations respond to the rise of technology-based transportation (ride-hailing) services in Indonesia. The latest is MOT Regulation Number 26 of 2017 regarding Operation of Non-Designated Route Passenger Transportation Services Using Public Motor Vehicle (Penyelenggaraan Angkutan Orang Dengan Kendaraan Bermotor Umum Tidak Dalam Trayek) (“MOT Regulation 26/2017”). Issued on 31 March 2017, MOT Regulation 26/2017 revokes the previous MOT Regulation Number 32 of 2016 (“MOT Regulation 32/2016”).

 

MOT Regulation 26/2017 responds to developing public demand for alternative transportation and the popularity of ride-hailing services. The regulation aims to create legal certainty over safety, security, comfort, fairness, and affordability requirements. Through MOT Regulation 26/2017, the Government is willing to ensure equal opportunity for the growth of both conventional taxis and information technology-based transportation businesses.

 

Since ride-hailing services first appeared in Indonesia, conventional passenger transportation competitors have questioned their legality. Opponents argue that the information technology-based transportation services violate Law Number 22 of 2009 regarding Traffic and Road Transportation (“Law 22/2009”) and Government Regulation Number 74 of 2014 regarding Road Transportation (“GR 74/2014”). The rise of ride-hailing in Indonesia has significantly impacted conventional taxi drivers, who launched a powerful protest by blocking Jakarta’s main roads in March 2016.

 

The Government’s enactment of MOT Regulation 32/2016 and now MOT Regulation 26/2017 responds to these concerns, recognizing that the previous framework created insufficient legal basis for the operation of the information technology-based transportation services.

The most-highlighted substance of MOT Regulation 26/2017 is the introduction of “Special Rented-Transport,” (Angkutan Sewa Khusus) the term used for technology-based transportation service vehicles. The regulation explains the Special Rented-Transport to be door-to-door transportation services with a driver, which covers the city region, and uses an information-technology based application reservation system. MOT Regulation 26/2017 sets out services qualification that must be fulfilled by the Special Rented-Transport, which are as follows:

  1. Operation covers city region;
  2. Unscheduled;
  3. Door-to-door;
  4. Destination set by customer/services user;
  5. Tariff appears in the application;
  6. Tariff determination is based on the base and ceiling tariff as proposed by the Governor/Chairman of Agency which is then approved by Director General of Land Transportation on behalf the Minister of Transportation based on analysis;
  7. The use of the vehicle must be done through reservation or appointment, it is not allowed to directly pick up the passenger from the street;
  8. The services reservation must be done through information technology-based application;
  9. Must meet the services minimum standard to be applied.

The previous, now obsolete regulations did not explicitly recognize the technology-based transportation services with a specific term. Although MOT Regulation 23/2016 clearly states that the scope of the issues being regulated included the operation of the public transportation with information technology based application, MOT Regulation 32/2016 only stipulates the possibility for public transportation services using information technology-based application which can be done independently or in cooperation with an information technology-based application provider that has Indonesian legal entity form. The same stipulation is replicated in MOT Regulation 26/2017 with further additional detail requirements for the technology-based application provider.

 

Related to the arrangement of base and ceiling tariff, based on press release and socialization material by MOT, the tariff is divided into two regions i.e. Region I covers Sumatera, Jawa and Bali and Region II covers Kalimantan, Sulawesi, Nusa Tenggara Barat, Maluku and Papua. The following tariff rates will apply:

 

Tariff Region I Region II
Base Tariff Rp. 3,500/km Rp. 3,700/km
Ceiling Tariff Rp. 6,000/km  Rp. 6,500/km


The above tariff arrangement is effectively enforced on 1 July 2017. MOT Regulation 26/2017 is silent with regards to legal implication on reduction of cost which shall be paid by the customer through subsidy by either the public transportation company or information technology-based application provider.

 

MOT Regulation 26/2017 obliges the technology-based application provider to meet the following requirements:

 

  1. In the form of legal entity established under Indonesian Law;
  2. Conducting contract, selling, and/or delivery of services, and billing;
  3. Having bank account in Indonesian bank serving as instrument to receive the proceeds from the service sale or delivery activities;
  4. Having/Controlling server or data center domiciled in Indonesia;
  5. Conducting marketing, promotion, and other supporting activities;
  6. Providing customer services and complaint center.

As also firmly stated in the previous regulation, MOT Regulation 26/2017 prohibits technology-based application providers from operating business as a public transportation provider. In the event the technology-based application provider facilitates the providing of the passenger transportation services, it must cooperate with public transportation company that already holds the Transportation Services Operation License (Izin Penyelenggaraan Angkutan).

 

Furthermore, a technology-based application provider which has entered into cooperation agreement with public transportation company is required to give access of their Digital Dashboard to the authorized government institution which at least includes:

 

  1. The details of the information technology-based application service provider (e.g.: name of the company, the responsible persons, the address);
  2. The data of all public transportation companies that made cooperation with;
  3. The data of all vehicles and drivers;
  4. The monitoring access on the services operation in the form of the vehicle spatial movements and tariff; and
  5. The consumer complaint services in the form of telephone and email of the information technology-based application service provider.

 

MOT 26/2017 does not specifically regulates the mechanism or procedure if a technology-based application service provider would like to engage in the operation of non-designated route passenger transportation services using public motor vehicle. From a conservative perspective, the possible mechanism is to either establish a joint venture company or expand its business license to cover non-designated route passenger transportation services using public motor vehicle which subject to the following requirements the requirements:

 

  1. Such company must be established in the form of legal entity under Indonesian Law (For foreigners that intend to do this type of business, the negative list restrictions would be applied);
  2. Obtaining the Non-Fixed-Route Public Transportation Service Operation License (Izin Penyelenggaraan Angkutan Orang Tidak Dalam Trayek) which requires the following conditions:
    1. Having at least 5 (five) vehicles which evidenced by the Vehicle Registration Certificate (Surat Tanda Nomor Kendaraan or STNK) registered in the name of such company and certificate evidencing that such vehicles have passed the Motor Vehicle Periodical Test (Uji berkala kendaraan bermotor);
    2. Having/possessing vehicles storage with sufficient space/capacity for the number of vehicles being owned;
    3. Providing vehicle maintenance facility (workshop) which is evidenced by an ownership document or cooperation agreement document with other party.

 

Another important change introduced by MOT Regulation 26/2017 is a more detailed regime for sanctions. MOT Regulation 26/2017 introduces categories of violations (light – middle – heavy) which would trigger different type of sanctions. MOT Regulation 26/2017 also mentions the involvement of Minister of Communication and Information Technology to impose sanction on violation conducted by the information technology-based application provider.

 

MOT Regulation 26/2017 became effective on 31 March 2017. However, the implementation of MOT Regulation 26/2017 will be conducted gradually for adjustment process. (by: Rendi Prahara Septiawedi)