Go-Jek’s going places, but is it leaving its riders behind?

JAKARTA/SINGAPORE: After making waves at home, where it has over a million drivers, it has set its sights on South-East Asia – with its beta app in Singapore primed for launch today, Bloomberg reported yesterday.

Its investors, eager to accelerate its overseas expansion, include Google and Temasek Holdings.

Its chief executive officer and founder, 34-year-old Nadiem Makarim – who was born in Singapore – proudly claims that Go-Jek is “by far the largest job-creating entity in the history of Indonesia”.

READ: Go-Jek launches pre-registration portal for drivers in Singapore

READ: Go-Jek aims to raise US$2 billion for Southeast Asia expansion: Sources

But the country’s go-to ride-hailing option is no longer universally celebrated by its ojek (motorcycle taxi) riders. More and more of them are calling for high fares and tighter regulation of ride-hailing companies.

Since 2016, its disgruntled riders – and those from rival Grab – have taken to the streets to make their unhappiness known.

“It’s as if we’re forced to work,” one rider, Mr Arif, said. “We work as freelancers without legal protection. We’re helpless if something happens to us while we’re at work.”

How did Go-Jek get to this, from seemingly being the answer to the traffic-clogged roads of Jakarta, one of the world’s most congested cities and where the firm was founded in 2010?

After four months of negotiation, the programme Why It Matters got an interview with the man behind Indonesia’s first unicorn – a start-up valued at more than a billion dollars (its latest valuation was around US$5 billion) – for some answers.

And Mr Nadiem said the drop in earnings – a similar complaint heard among Grab drivers in Singapore – is a necessary reality of a maturing industry. (Watch the episode here.)

TWO WHEELS GOOD, WITH AN APP BETTER

Go-Jek is not just a ride-hailing phenomenon. Its app provides a suite of transactions, from shopping and courier deliveries to cleaning and even massage services – so users need not face Jakarta’s notorious traffic.

In the food delivery business, following Foodpanda’s withdrawal from Indonesia in 2016, Go-Jek has gone on to claim 95 per cent of the market.

To date, its app has amassed more than 105 million downloads and is processing over 100 million transactions monthly.

READ: Indonesia’s Go-Jek close to profits in all segments, except transport: CEO

READ: Commentary: When Go-Jek enters Singapore, what consumers, drivers and delivery services can expect

But the “precondition for Go-Jek’s beginning” was Jakarta’s motorcycle taxis, which Mr Nadiem said he took wherever he went in the Indonesian capital because they were a “much faster way of getting from A to B and beating traffic”.

“I was a big believer in ojeks, I think, before a lot of other people were … And because I took ojeks so often, I very quickly realised that these guys are smart, they’re customer-focused (and) they’re reliable,” he said.

“That was kind of the secret faith that we had in the most undervalued segment of society because they could do everything for you … And now that industry is five (times) what it was in the traditional market.”

Owing to Go-Jek’s diversified model, which includes its cashless payment service Go-Pay, its riders can earn income throughout the day.

“In the morning, they’re picking people up to go to work from their homes. During lunchtime, they’re delivering lunch to offices. During the afternoon, they’re delivering packages for e-commerce companies and then … they’re delivering people back (home),” said Mr Nadiem.

“In the meantime, they’re selling Go-Pay top-ups. So you’ve got a variety of services and revenue possibilities for drivers.”

TAKEN FOR A RIDE?

But are Go-Jek’s riders laughing all the way to the bank, or has it become a race to the bottom for them?

One who has enjoyed it so far is Mr Mas Bangun, a rider of three years. “I can choose whether to ride or not. If not, well, I don’t have to because Go-Jek is a way to earn side income,” he said.

If I’m unwell, I’d choose to take Go-Food orders. The distance is usually shorter; customers can only order food that isn’t too far away.

Others, however, are dissatisfied because of the downsides. Mr Krisna Wiharnanto, for example, said Go-Jek’s touted partnership with riders is now “just a term” because “we aren’t on an equal footing” and the current system “isn’t what was promised before”.

“In the beginning, it wasn’t bad … When the fare started decreasing, the income became insufficient. The bonus was increased, but the target to reach the bonus was also raised,” he said.

“For those who previously worked from 6am to 4pm, now they have to start from midnight to chase after the points … All that risk, just to get that bonus. It’s no wonder there are accidents every day.”

As with other ride-hailing companies, points and performance ratings can earn Go-Jek riders cash bonuses. Longer distances and certain jobs are worth more points.

But the way ride-hailing apps determine prices is generally a mystery. What is known is that their algorithms decide the prices depending on supply and demand. And the companies usually impose systems to ensure a minimum acceptance of rides.

When the Why It Matters team followed a Go-Jek rider for a day, they found that once a booking comes in, it is a race against time: The rider has 10 seconds to accept, otherwise the booking is considered cancelled.

Three cancellations within a minute causes the rider’s app to be suspended for five minutes. And at the stroke of midnight, the data is reset for the next day.

In the end, the rider had a 67 per cent rating and 16 points, meeting a target of 65 per cent and 12 points set by Go-Jek for a bonus of about 29,400 rupiah (S$2.80). For 10 hours of riding, his total earnings were 117,300 rupiah.

Mr Krisna highlighted that Go-Jek used to say its riders’ income could be as much as eight million rupiah a month. But even that is not the net income, he clarified.

That’s before we deduct the daily expenses: Fuel, phone and data bills, operational fee, bike servicing. We haven’t even talked about (what) if there’s an accident.

Ultimately, a rider keeps about 65 per cent of what he makes.

ANSWERING THE CRITICS

In theory, a ride-hailing app is simply a technology that matches drivers with passengers. In reality, a company like Go-Jek also monitors its riders through feedback and acceptance rates, determining their pay in the process.

To fight for the interests of riders, Mr Krisna co-founded Aspirasi Serikat Ojek Online Indonesia, a trade union that has been behind some of their protests.

“I still want to fight, even if there’s little hope. If we aren’t the ones fighting, who will?” he said.

Many Indonesians welcome the convenience of ride-hailing apps, but there is also a need for tighter laws, agrees Jakarta’s former Transportation Agency head Andri Yansyah, who was rotated to a new agency in September.

These are not in place, however, because the status of such apps has not been clearly defined yet. “Is this public transport? Is this special transport rental? Is this private transport? We ourselves aren’t sure,” he said.

Having traditional motorcycle taxis (available) online may have solved transport problems, but the fact is there’s no regulation of the sector yet, and that has become a problem.

While the government tries to lay down the rules of the game, what does Mr Nadiem have to say about the concerns and protests? “We love the dynamism, but it’s also not necessarily reflecting the views of all drivers,” he said.

“A lot of their demands is (about increasing) the price per kilometre. But there are other considerations. A lot of the pricing is also constrained by what your competition dictates.”

Then there is the importance of industry “discipline” through subsidy reduction. “I completely sympathise and empathise with a lot of drivers who used to be making a lot more … but that’s the reality of a maturing industry,” he said.

As for their feeling that they are expected to be subservient to Go-Jek, he pointed to the way the industry is structured.

“They’re using a platform to earn revenue. The great part about that is the flexibility … You can work whenever you want, so you can actually work harder in the times that you need more income,” he said.

“It’s very hard for the drivers to be able to see the macro picture. We as a company can see that: The balancing act … What’s most successful is that both these sides grow, right? More drivers, more customers. We’re perfectly aligned.”

FIRMS ACTING LIKE ‘MINI-GOVERNMENTS’

The growing pains of the ride-hailing industry are not unique to Jakarta. In Singapore, Grab also cut driver incentives after its merger with Uber.

Mr Victor Ang, a Grab driver of three years, said his weekly incentives dropped to S$250, when it used to be S$1,000-plus to S$2,000.

“(Grab) is a commercial company, so definitely it can’t be burning the investors’ money all the way,” he acknowledged, even as he could not but feel under the heel of the firm.

The Competition and Consumer Commission of Singapore has since directed the company to maintain its pre-merger pricing algorithm and driver commission rates. This does not include incentives, but ahead of Go-Jek’s entry, Grab has introduced new ones to retain drivers.

READ: The Big Read: Private-hire drivers face roadblocks as they seek way out of once-lucrative industry

READ: Singapore competition watchdog fines Grab, Uber S$13 million in total over merger deal

The road ahead, however, could still be bumpy. Insead associate professor of entrepreneurship and family enterprise Jason Davis, who has done field research at Go-Jek’s Jakarta headquarters, is concerned because ride-hailing companies “act like mini-governments”.

“We’re living in a very interesting age when technology and platforms are allowing companies to scale up very quickly. They have their own marketplace, and choices that they can make to encourage some behaviour or other behaviour,” he said.

“The worry is that these companies can grow so fast and the market can tip – that they could then extract all the value through pricing and discourage competition.”

He does not think, however, that private-hire drivers have been misled. Rather, “they were given a system in which they could work, and maybe they couldn’t expect what would happen in that system”.

Asked whether consumers can do anything to negate or minimise the negative spillovers, he said: “Perhaps the stronger levers lie with governments. Smart governments can carefully regulate what’s acceptable on the platforms. They can do things like discourage monopolies.

“There’s a problem though … because these companies are so innovative, they’re so dynamic, they’re creating so much employment, so many improvements in people’s lives, that (governments) don’t want to be overbearing in regulation and discourage that innovation and that entrepreneurship.”

So regulatory frameworks must both keep pace with the ride-hailing industry and have the right system of incentives and laws.

Watch this episode of Why It Matters here. New episodes every Monday at 8pm.