AT A GLANCE

• Indonesia ride-hailing giant Go-Jek is exploring the Southeast Asian market and has included the Philippines among its target countries for expansion this year.
• The Land Transportation Franchising and Regulatory Board has halted the accreditation of ride-hailing firms.
• Consumers are yearning for more options in the ride-hailing market as new players struggle to compete with the market leader.
• Smaller companies fear the entry of another well-funded player in the market, but experts say this would help local companies “innovate” and offer better services.

Part 1: Months after Uber left, where are the new ride-hailing firms?

MANILA, Philippines – Indonesian ride-hailing giant Go-Jek is poised to expand its services in Southeast Asia, bringing its rivalry with Grab to the Philippines.

Go-Jek started in Indonesia in 2010 as a call center for on-demand “ojek” or motorcycle taxi service. Two years after it launched its ride-hailing app, it became a unicorn in the industry. Currently valued at about $5 billion, Go-Jek functions as a “superapp,” offering services ranging from rides, logistics, and bills payment, among others.

Operating in 66 cities in Indonesia, it is backed by deep-pocketed investors in the tech scene such as Google, Chinese technology giants Tencent, and JD.com; as well as Singaporean investment company Temasek.

Go-Jek seeks to expand to Thailand, Singapore, and the Philippines by yearend as part of its $500-million overseas expansion. Go-Jek opened shop in Vietnam in August, capturing 35% of the market in just 6 weeks.

In the Philippines and the rest of Southeast Asia, Grab remains the dominant player for ride-hailing services, after Uber exited the region. 

There are 7 other ride-hailing firms in the Philippines – Hype, Owto, Hirna, MiCab, Go Lag, ePickMeUp, and U-Hop – poised to challenge Grab but have been struggling to do so.

The entry of the new players was seen as an opportunity to break Grab’s dominance in the country. Does Go-Jek stand a chance in the Philippine market?

Applications in limbo?

As early as May, Go-Jek expressed interest to enter the Philippines and met with Land Transportation Franchising and Regulatory Board (LTFRB) officials.

LTFRB Board Member Aileen Lizada expressed concerns then, saying that the entry of a foreign firm “would displace” the new local transport network companies (TNCs). Go-Jek plans to introduce ride-hailing services for sedans, SUVs, AUVs, and taxis around Metro Manila, Cebu, and Davao.

The LTFRB issued Memorandum Circular (MC) 2018-016 on August 9, freezing accreditation applications for new TNCs. It said it issued the order so it can focus on the pending applications and to monitor existing players.

As of the MC’s publication, there were 5 firms listed vying for accreditation. Go-Jek was not on the list.

“All applicants with applications for TNC accreditation pending before the pre-accreditation committee are hereby directed to submit their complete and compliant requirements within 10 days of receipt or on August 5, whichever is later, otherwise their applications shall be denied by the committee,” the order said.

The order was effective August 29.

In previous messages to the media, the LTFRB said that Go-Jek’s application was “on hold,” as it passed its accreditation papers on August 13 – days after the memorandum circular was issued.

Rappler clarified this with LTFRB Chairman Martin Delgra III, noting that Go-Jek’s submission date was before the MC’s effectivity date.

Delgra said that Go-Jek “did not apply” but Velox Technology Philippines did, along with two other firms. Velox is the local subsidiary of Go-Jek.

“The memorandum circular sets a deadline as to when they can file their accreditation requirements. They were able to make the cut. It is Velox applying,” Delgra told Rappler in a phone interview. 

The regulatory board chief said the fate of the applications rests on the pre-accreditation committee. There are 4 firms awaiting evaluation of the committee while one has a pending resolution on its application.

“The deliberations are ongoing. They are set to deliberate the first 4. The remaining 3 will be deliberated hopefully starting next year,” Delgra said.

More competition

Some local TNCs have expressed some reservation over the possible entry of another multibillion-dollar company in the Philippine ride-hailing market.

But Go-Jek believes that competition drives other firms to give better services to its customers.

“Go-Jek does not believe in a winner-takes-all approach to ride-hailing. That enough space exists for many different approaches and ideas from companies both large and small,” Go-Jek said in a statement sent to Rappler.

“Smaller companies have more of a chance to succeed, learn, and grow in a competitive market, than a market with a single player controlling most of the market,” it added.

Go-Jek was awaiting for the LTFRB’s green light “before anything else,” such as hiring employees for its local operations.

“Go-Jek is ready and waiting to provide the Philippines with a new mobility solution as soon as we are given the go-ahead,” it said.

Economist JC Punongbayan said that Go-Jek’s entry would be healthy for the market, given that new players have yet to make a difference in the market.

“We should actually embrace Go-Jek’s entry as a way for our local competitors to innovate. It has been a major player in Indonesia for quite some time. It could bring its expertise in technology and inform policies,” Punongbayan said.

He added that another big player would hopefully help bring down the average prices of ride-hailing services, as the firms would compete for riders.

On the part of the consumers, Laban Konsyumer Incorporated president Vic Dimagiba said that the best way is still to open up the market.

“If you really want the consumer to have better choices, then open up the market with those as good as Grab. But of course, we don’t know yet what will happen to the smaller companies,” Dimagiba, a former trade undersecretary, told Rappler.

Bring in what works

Was the LTFRB right in freezing the accreditation application of TNCs? The antitrust body Philippine Competition Commission would agree on some points.

PCC Commissioner Stella Quimbo acknowledged Grab’s dominance over the 7 other local firms. Asked if another big player poses a threat to the smaller players, Quimbo said, “There’s no one to threaten.”

“It’s all speculative. At this point, who’s going to be threatened? The 6 that can compete with Grab are not yet competing,” she said.

But Quimbo pointed that the test of viability in the market is important, and that might mean looking for other options outside the country.

“We want entry plus viability. [But] what’s the test for viability? In the history of the Philippines, we’ve only had two viable ones. If you want to look for an alternative that is also viable, we have no choice but to look outside of the country,” Quimbo said.

In August, the PCC approved Grab’s acquisition of Uber, but has bound the former to fair pricing conditions and service quality commitments.

The antitrust body may release Grab from the commitments if there is already “sufficient competition in the market.” Quimbo said, however, that the PCC can still hold Grab accountable “if they abuse their dominance” after the commitment period.

The LTFRB said that Go-Jek’s application may be reviewed in 2019.  This would mean more time for the consumers to wait for another option on the same scale as Grab.

As the new TNCs continue to adjust to the challenges of the ride-hailing market, until when will Filipinos wait for a viable option? – Rappler.com