When Uber was first introduced into Southeast Asia, the innovative e-hailing service became embedded into society and served as a perpetual reminder of the unlimited potential and benefits that digitalisation could bring to its citizens. However, it was not long before the infatuation of the Uber app faded, among both consumers and drivers alike.
On one hand, understanding the reason behind the compelling attraction for the e-hailing app industry is not difficult. EcommerceIQ, a leading Southeast Asian market research firm reported that “250 million Indonesians have rapidly embraced the rise of ride-hailing apps to add convenience to their lives.”The convenience of hailing a cab in an unprecedented short span of time is a landmark transformation for taxi passengers in this century.
The benefits of the app-linked taxi companies are not limited to consumers alone. Cab drivers enjoy the flexi-hours scheme and the reasonable pay of the ride-hailing services. With millennials struggling to battle unemployment and underemployment in Southeast Asia, it is not surprising that the e-hailing app industry saw a large proportion of cab-driver applications coming from fresh graduates. In 2017, roughly 20-30% in Singapore of Grab drivers were below the age of 30, whilst a quarter of Uber drivers were under the age of 30.
As ASEAN boasts of the highest growth rate of smartphones among the youth population in the world (34% growth in the Philippines and 48.4% growth in Indonesia), major e-hailing operators Grab and Go-Jek have emerged to benefit from the rapidly changing consumer landscape in the region. The e-hailing taxis have since then benefitted from the youthful, tech-savvy population in Southeast Asia, where Grab claims it has seen more than 90 million downloads since its launch.
This has led to incredible figures on a macroeconomic level. In 2018, Malaysia’s digital economy contributed 18.2% to Malaysia’s GDP, with services such as Grab being a key driver of the digital economy.
Grab’s presence is also felt in other aspects. ASEAN has long faced a prominent issue of poor road safety. The Head of Indonesia’s Traffic Police Unit reported that statistics regarding traffic-related deaths in Indonesia, 2018 have hit levels of roughly 30,000 per year – higher than crime-related and terrorism-related deaths.
Grab Indonesia used its influence to promote a controversial, gore-filled ad campaign to raise awareness on road accidents and highlight the importance of road safety in Indonesia. In the ad, Grab highlighted several key issues that all riders should take into consideration including ensuring the rider is licensed and properly trained.
Advocation for the e-hailing industry among environmentalists have also increased, where ride-hailing services have the potential to improve Southeast Asia’s environmental sustainability. The Strait Times in Singapore reported that a local startup S Dreams had “wheeled out an all-electric commercial car fleet to be used for popular ride-hailing service Uber” in 2017.
This is beneficial in the long-term for both businesses and the society. Millennial customers (the bulk of the e-hailing taxi companies’ customers, and who are labelled as the “Green Generation”) will flock to the newly environmental-friendly taxi companies in droves, boosting revenues for these firms.
Advancement of Innovation
The e-hailing industry has also been pushing innovation boundaries to the limit. Driven by the imminent threat of survival, e-hailing companies now orchestrate imaginative tactics to outdo their competitors. With Uber seemingly out of the picture for now, Grab has diversified its services to include a mobile wallet payment system, GrabPay and a food delivery service, GrabFood. Both services are increasing in popularity and are being launched in more countries across the region. Meanwhile, Go-Jek of Indonesia has ventured into the exciting territory of video streaming services where there are plans to launch a video subscription service, Go-Play.
Consumer Safety Questioned
Nevertheless, there have been several previous and recurrent issues that have been plaguing the e-hailing industry.
Although consumers save time from hailing cabs quickly and successfully, consumer safety may not be guaranteed when utilising these services. Reputation-ruining news have been floating around online regarding Uber, Grab and Go-Jek. Among them, alleged rape cases were one of the most frequently highlighted problems that have spurred controversies surrounding the industry. In June 2017, a report from The Star in Malaysia wrote about a 29-year old who had “claimed that the driver had sexually assaulted her but she could not fight him off because she was drunk.”
On another note, consumers can also be financially impacted. In 2017, Southeast Asia witnessed the bruising battle of two ride-hailing giants draw to a close with Grab emerging victorious, having acquired Uber for $6 billion. Consumers across the region have voiced their concerns at the outcome of the deal settlement where some have theorised that “If everything comes under one roof, Grab can start raising prices either overtly or discreetly”.
The acquisition of Uber has also meant that Grab now has access to consumer data from Uber, giving Grab a wider portfolio of data to conduct analysis upon and hence a competitive edge. Grab Singapore has started to utilise consumer experience and feedback data to plan routes that are better served by buses or bikes, potentially reducing the number of cars on roads. This is favourable for Grab, as many uprising ride-hailing infants in Southeast Asia including Riding Pink and PICKnGO in Malaysia do not possess the capital and resources to follow suit.
However, becoming a dominant player in the ASEAN e-hailing market may leave consumers with the short end of the stick. Innovation in the e-hailing industry may become stifled as Grab may eventually lack the incentive to further improve its service.
Similarly, drivers are not exempt from the negative implications of the e-hailing industry. The privilege of having flexi-working hours is neutralised by drivers having to incur the high maintenance costs of their taxis, including paying for repairs and fuel.
In 2014, a Malaysian Uber driver Dillon Chong complained that “Twelve hours of work every day would not yield the income one would get working at McDonald’s after factoring in all the costs. You’d be lucky to earn RM2,000 a month.” Today, Channel News Asia also reported that the post-acquisition of Uber saw ex-Uber drivers “feeling unsure about how they can continue with their business and obligations they are under”.
Although e-hailing apps do benefit the Southeast Asian economies, they also pose major headaches for the governments in the region.
Taxi-wars have been a problem for traditional drivers in the region for some time. In 2016, Indonesian citizens witnessed the rage and resentment of the ‘bajaj’ taxi drivers for the ride-hailing services. Extreme measures including setting tyres on fire, and stoning car rear-view mirrors were taken by ‘bajaj’ taxi drivers to display the level of unfairness and threat felt by themselves. Salahuddin, a taxi driver reported: “They are destroying us. We pay tax but because Uber uses private cars they don’t. I am fighting for my survival.”
There have also been uproars among local taxi drivers in other parts of the region; leading to governments such as Vietnam having to implement multiple restrictive regulations upon Grab and Uber to maintain the harmony among citizens. Uber and Grab’s carpooling services have also been banned in Vietnam. The Vietnamese government stated that it was done to “protect Vietnamese passengers from what could happen”. If defied, the ride-hailing drivers will suffer a fine of $175-260 per ride.
Read also ‘ASEAN Rides the E-Commerce Wave: Infrastructure, Human Capital and Regulatory Frameworks‘
In Indonesia, Go-Jek is creating a problem for pedestrians. It is a common sight to see “pangkalan ojek” or ojek stations (the place where drivers gather and park to waiting for another order) along sidewalks, blocking the paths for pedestrians who may struggle to walk safely on pedestrian sidewalks.
Furthermore, the e-hailing industry may not exactly be that green after all. The Strategic Review in Indonesia found that Go-Jek added more vehicles to the road as new drivers who do not have a motorcycle or car are encouraged and given access to microloans to afford one”. This increases carbon dioxide emissions from vehicles, worsening the already-critical pollution level in Indonesia.
The Golden Question
As of today, the e-hailing industry has undoubtedly altered the lives and digital landscape of the ASEAN region significantly. Yet, there is still a flurry of flaws surrounding this industry. Many wonder if regulations will adjust accordingly over a period of time to solve problems for local taxi drivers, e-hailing drivers, consumers and pedestrians alike. With the rapid development of the digital economy in Southeast Asia, the big question now is: what does the future of the e-hailing industry hold?
Carmen is an Economics student interested in learning and analysing the latest developments in the ASEAN region, ranging from technological developments to infrastructure developments. Her interest in the region’s affairs has picked up in recent years, where Southeast Asia has transformed into one of the most rapidly progressing parts of the world. She hopes to continue researching and tracking the latest landmark changes in ASEAN in future.
Disclaimer: All opinions expressed in this article are the author’s own.