Wednesday, January 9, 2019

Indonesian RIDE-HAILING Service GO-JEK Gets PHILIPPINE EXPANSION Blindsided by LTFRB Regulations

Ride-hailing services continue to grow and develop throughout the world, both businesses that have an international scope and those that focus more on specific regional markets. In Southeast Asia, many such services are hard at work in building up their markets across more than one country, such as Grab which was famous for prevailing over the SEA operations of Uber and acquiring the same in 2018. One notable rival of the Singapore-based Grab is Indonesian company Go-Jek, which is on its own regional expansion phase. After success in Singapore, Thailand and Vietnam, they have gotten into trouble in the Philippines.
Tech Crunch has it that Go-Jek has hit a stumbling block in the Philippines care of the Land Transportation Franchising and Regulatory Board (LTFRB). The board has denied the service rights to operate its ride-hailing in the country due to recent changes in Philippine commerce laws. All businesses in the Philippines, even local branches by overseas companies, need to be at least 60 percent own by Filipino individuals or groups. Velox Technology Philippines, which would represent Go-Jek operations in the country, has a majority ownership stake from their Singapore branch, Velox Southeast Asia Holdings, instead.
“We continue to engage positively with the LTFRB and other government agencies, as we seek to provide a much needed transport solution for the people of the Philippines,” a Go-Jek representative declared in an official statement from the ride-hailing service. Business analysts are trying to figure out how the Indonesian company failed to anticipate the regulation before setting up Velox Tech Philippines and they would not be able to change things around without needing to significantly alter their organizational structure. It is a bad blow to Go-Jek, which with assistance from Google and China’s Tencent has grown in value to over $6 billion, making it a formidable competition for Grab.
Prior to changes in the relevant laws, Philippine regulators would allow ride-hailers to set themselves up as “telecommunications services” in the country (owing to their app-based component), which is less restrictive in requirements. Now it serves as additional red tape that makes for more difficulty with this rising business sector.
In comparison, Go-Jek’s big rival Grab states that it is compliant with the 60-percent Filipino ownership rule for its local operations, much of which was gotten from their Uber SEA acquisition. The company however has not disclosed further details such as who are the majority owners of their Philippine branch.
Image courtesy of Rappler


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