Indonesia’s push for Grab-GoTo merger driven by politics, analysts say
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Talk of the Grab-GoTo deal was revived last week when Indonesia’s state secretary confirmed that a merger plan was indeed being discussed.
PHOTO: ST FILE
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- Indonesia's push for Grab and GoTo to merge is seen by some as an attempt to the control the ride-hailing sector's influence after the August protests driven by rider discontent.
- New regulations for active ride-hailing drivers, including benefits like health insurance, could reduce their numbers and increase government oversight.
- There are concerns about a potential monopoly as the merged entity could control over 91 per cent of the Indonesian market, which goes against free market principles.
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JAKARTA - Indonesia is pushing for a possible merger between Grab and GoTo, South-east Asia’s two biggest ride-hailing firms, in a move that analysts say is driven more by politics than commercial consideration.
With some seven million ride-hailing drivers forming a powerful and increasingly vocal workforce, President Prabowo Subianto appears keen to bring the sector under tighter control.
New rules are being drafted to grant benefits such as health insurance to active drivers, effectively treating them as permanent employees. This would potentially sideline less active drivers and trigger the natural attrition of drivers, which would give the government greater oversight of the industry.
The government has grown increasingly wary of the political clout of ojol – short for “ojek online” – riders, who played an active role in the August mass street protests
Mr Muhammad Nalar Al Khair, an economist with Jakarta-based think-tank Sigmaphi Research, said: “There are indications that the government is seeking to curb the influence of a group with a very large membership. This is an anticipatory move following the large-scale protest in August.”
In August, thousands of students, rights groups and other civilians joined protests against the government’s spending priorities, including pay rises for lawmakers.
The demonstrations later spiralled into riots and saw the homes of officials being looted after 21-year-old ride-hailing motorbike rider Affan Kurniawan
The violence, which spread to 32 of Indonesia’s 38 provinces, resulted in 10 deaths and at least 5,000 arrests, making it the deadliest outbreak of unrest in the archipelago in more than two decades.
“They are doing it (trying to curb the influence of ride-hail drivers) to maintain (political and social) stability, Mr Muhammad Nalar told ST.
GoTo and Singapore-based Grab, whose significant shareholder is Uber Technologies, have held on-and-off discussions
He told reporters that the discussions are part of a government effort to draft a presidential regulation governing online motorcycle taxi services and the future of the sector. He added that the country’s sovereign wealth fund Danantara was set to be involved in the merger plan and that several ministries were also involved in these talks.
But the revived plans for a merger have sparked monopoly concerns arising from the combination of the two dominant ride-hailing and food-delivery companies in the region.
GoTo’s Gojek unit alone has partnered with more than 3.1 million riders, and together with Grab, has dominated the Indonesian market for several years. A combined entity would hold a market share of over 91 per cent in Indonesia, according to data analytics company Euromonitor International.
Grab, which is listed on the Nasdaq in the US, has a market capitalisation of US$23.66 billion (S$30.8 billion), while GoTo, which is listed on the Indonesia Stock Exchange, is valued at 67.74 trillion rupiah (S$5.3 billion).
Mr Nailul Huda, an economist with the Jakarta-based Centre of Economic and Law Studies, took issue with the government’s intervention in private business matters, a move that goes against free market principles.
“Mergers and acquisitions are normal corporate actions, which the government does not have to endorse,” he said.
However, Mr Nailul suggested the government’s move is intended to ensure that any potential deal is protected from possible objections by the country’s anti-monopoly commission.
Financial analyst Henry Pranoto noted that GoTo provides a social safety net for people who have just lost their jobs, and that the government should therefore support the company.
“Social assistance in Indonesia is insufficient, and GoTo is among those that merit government support,” Mr Henry told ST.
“It’s similar to Singapore, where people who have just lost their jobs often take up taxi driving while they wait to secure a new stable position,” he added.
When contacted, deputy head of Indonesia’s presidential communication office Noudhy Valdryno dismissed speculation that the government is seeking to reduce the number of ride-hailing drivers.
He told ST that the government’s priority is to ensure that the ride-hailing industry remains healthy and supports the economy.
“Our focus is to serve the people, including the partner drivers of GoTo and Grab. Whatever the industry, we want everyone to be treated fairly, receive welfare and the economy grows,” Mr Noudhy said.
Mr Dimas Novriandi, head of communications at Grab Indonesia, declined to comment when contacted.
When contacted by ST, GoTo corporate secretary R.A. Koesoemohadiani said in a statement that as “a technology company founded and grown in Indonesia”, it welcomes the government’s efforts to strengthen the nation’s digital ecosystem.
It added that it “remains committed to supporting and complying with government policies and regulations aimed at building an industry that is efficient, fair, and sustainable for all stakeholders, including driver-partners... and consumers across Indonesia”.
