“Sharing economy” versus “informal sector”: Jakarta’s motorbike taxi industry in turmoil
10.7340/anuac2239-625X-3076
Comparing conventional motor bike taxi services in Jakarta (ojek) to their recent online-based competitors (GoJek), this paper contrasts a prime example of the classic “informal sector” with newly emerging forms of the “sharing economy”. It challenges the notion of “informal economy” as an umbrella concept for such two different business models.
application/pdf
2239-625X
3076
2
en
Mechthild von Vacano
Anuac
“Sharing economy” versus “informal sector”: Jakarta’s motorbike taxi industry in turmoil
Text.Serial.Journal
https://ojs.unica.it/index.php/anuac
6
Forum: In/formalization
2017-12-31
2017-11-24
2017-12-31
2017-12-31
97-101
1
Mechthild von Vacano
2017/12/31
10.7340/anuac2239-625X-3076
97
Freie Universität Berlin, Germany
2239-625X
2
en
101
“Sharing economy” versus “informal sector”: Jakarta’s motorbike taxi industry in turmoil
https://ojs.unica.it/index.php/anuac/article/download/3076/2799
6
                                            2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101




                                                                                       FORUM




Brindisi to the Brindisians, graffiti in Brindisi, Italy. Photo by A. M. Pusceddu.


In/formalization
Edited by
Alan SMART, Josephine SMART, Filippo M. ZERILLI

Contributions of
Stamatis AMARIANAKIS, Lenka BRUNCLÍKOVÁ, Dolores KOENIG, B. Lynne MILGRAM, Sarah
MUIR, Antonio Maria PUSCEDDU, Alan SMART, Mechthild VON VACANO, Filippo M.
ZERILLI & Julie TRAPPE.




This work is licensed under the Creative Commons © MECHTHILD VON VACANO
“Sharing economy” versus “informal sector”: Jakarta’s motorbike taxi industry in turmoil
2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101.
ISSN: 2239-625X – DOI: 10.7340/anuac2239-625X-3076
IN/FORMALIZATION                                                                        97




“Sharing economy” versus “informal sector”
Jakarta’s motorbike taxi industry in turmoil

Mechthild VON VACANO
Freie Universität Berlin




ABSTRACT: Comparing conventional motor bike taxi services in Jakarta (ojek) to their recent
online-based competitors (GoJek), this paper contrasts a prime example of the classic
“informal sector” with newly emerging forms of the “sharing economy”. It challenges the
notion of “informal economy” as an umbrella concept for such two different business
models.




   In cities across the globe the rise of ridesharing apps has challenged, if not
radically altered the taxi industry in recent years. The Indonesian capital is
no exception to this development. However, the largest turmoil in Jakarta’s
transportation system was not created by the advent of any global player, nor
did it occur in the formal taxi industry. It was the advent of GoJek, a home-
grown ridesharing app for two-wheelers, that shook the local motorbike taxi
industry in early 2015. The company’s name plays upon the English verb “to
go” and the local term for motor bike taxi (ojek), invoking just the right
amount of innovative globality and local flavour. Soon after, the Malaysian-
based company Grab followed suit and released its own motorbike taxi ser-
vice GrabBike, despite its original focus on the regular ridesharing market in
the region. Several minor companies followed, even Uber joined eventually. It
was, however, the pioneer GoJek that first conquered the market over the
mid-year 2015, exciting its consumers with irresistibly cheap promotion
schemes. Conventional ojek drivers soon felt threatened by this rapidly ex-
panding new business model. Banding together in protest, they put up ban-
ners across the city warning online-based ojek drivers to enter “their” territo-
ries; some even resorted to physical violence.
   Unlike regular four-wheel taxis, motorbike taxis do not constitute a formal
mode of public transportation, but have always belonged to the informal
transportation sector. The expansion of ridesharing companies into this sec-

                                           2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101
98                                         ALAN SMART, JOSEPHINE SMART, FILIPPO M. ZERILLI (EDS)


tor therefore fundamentally differs from the informalisation processes it is
causing in the regular taxi industries. The two competing models of motor
bike taxi services in Jakarta represent different forms of informal employ-
ment, the classical “informal sector” versus the recent “sharing economy”. A
brief comparison of these two models will lead me to question the usefulness
of “informal economy” as an overarching concept for such different eco-
nomic operational modes.

Conventional versus application based ojek services
   In Jakarta just as anywhere else in Indonesia motorbike taxis serve as a
common means of transportation. Most effectively cutting through the capi-
tal’s infamous traffic jams, ojek have become an essential mode of public
transportation for many of the 30 million residents of the Jakarta metropoli-
tan area. Legally, though, ojek operate outside the law: Ever since their emer-
gence in the 1970s, motorbike taxis have never gained legal status as a
means of public transport. This distinguishes them from regular taxis, and
various forms of motorized three-wheelers which are recognized under the
Indonesian law on traffic and land transportation (No 22/2009) as «unsched-
uled public transportation». After early attempts of banishing had failed, ojek
services have been tolerated by local administration and law enforcement
since decades. Their waiting posts (pangkalan) are highly visible, located on
strategically important entry and transit points throughout the city. But
these waiting posts are more than mere physical shelters, they are informal
institutions organising ojek services and regulating the market by distinct
membership rules and a codex of territory-based coexistence.
   This informal market regulation was disturbed by the advent of companies
offering application-based ojek services. Anyone possessing a motorbike and
proper documents could register as a driver with these companies, while the
new ways of online customer communication undercut the territorial organi-
zation of pangkalan. The hardest blow, however, came from the price dump-
ing initiated by GoJek’s first promotional during the Fasting Month of 2015:
10.000 IDR, roughly 70 European Cent, flat price for any destination within a
25 km radius. A conventional ojek driver would start at 5.000 IDR for a short
distance trip and easily charge 40.000 IDR or more for a 25 km ride. For Go-
Jek drivers these promotional offers were equally lucrative, since the com-
pany compensated the regular fare, then 4.000 IDR per kilometre. The Ra-
madhan offer was the onset of GoJek’s market conquest and the beginning of
a long and fierce price war between the big emerging ridesharing players. Go-


2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101
IN/FORMALIZATION                                                                    99


Jek and GrabBike were soon joined by American ridesharing giant Uber re-
leasing its own Uber Motor service, because the company did not want to
miss out on this highly promising market in the largest economy in South-
east Asia.
   The sudden expansion of an online-based ojek industry also raised con-
cerns within the formal transportation industry. In late 2015 its representa-
tives demanded the ban of any app-based ojek service, charging the platform
providers with coordination of an illegal form of public transport. Meanwhile
associations of ojek drivers called for the legalization and regulation of the
motorbike taxi industry. The controversial debate culminated in an official
statement by President Joko Widodo, in which he explicitly proclaimed a tol-
erating stance towards the ojek industry in general, and its application-based
innovation in particular. For the context of Jakarta especially one argument
prevailed: As long as the city’s formal public transport system fails to pro-
vide effective service to its citizens, motorbike taxis and especially the “mod-
ern” app-based ojek services are temporally needed. While the possibility of
full legal recognition resurfaces in ongoing debates, any kind of ojek services
in the meantime remain somewhere in the spectrum of «extralegality»
(Smart, Zerilli 2014): illegal in the strict sense, but officially tolerated - even
explicitly today.

When the “sharing economy” enters the “informal sector”
   In analytic terms, conventional and application-based ojek represent two
different poles within the broad range of practices subsumed under the term
“informal economy”. From popular culture to politics: ojek drivers serve as
emblematic representation of the “informal sector” in its original sense (cf.
Hart 1973). In dealing with ojek, local administrations perpetuate the image
of the “urban poor”: The toleration of ojek services is justified on purely so-
cial grounds, while any policy to support ojek drivers is framed as “poverty
reduction” measurement. When entering the market, GoJek founder Nadiem
Makarim was certainly wise to strike the same paternalistic tone and frame
his company’s mission in social terms: to empower informal sector workers
by offering ojek drivers a platform to effectively find clientele and reduce un-
productive waiting time.
   The business model of GoJek, Grab or Uber is covered under the common,
though highly debated term ”sharing economy”. More accurately, they repre-
sent the for-profit branch of peer-to-peer online platforms (Schor 2016: 11),
which have lead Arun Sundararajan (2016) to introduce the term «crowd-
based capitalism». The conditions of this crowd-based capitalism are in


                                       2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101
100                                        ALAN SMART, JOSEPHINE SMART, FILIPPO M. ZERILLI (EDS)


many ways informal, since they undermine employment standards of the for-
mal economy. Yet in comparison to its original offline counterpart, online-
based ojek services have led to some degree of formalization regarding em-
ployment and service, while simultaneously de-regulating the market.
    Officially, the online platforms are registered as technology companies
and ‘partner’ with self-employed ojek drivers. To register with any of the
companies requires a range of documents, which are sometimes difficult to
produce for those used to working in the informal sector. Registered drivers
are charged a service fee, GoJek for example cuts 20 percent. Company man-
agement determines the rules and fixes the pricing schemes, drivers there-
fore find themselves in a position of dependent self-employment. Reduction
of fares and performance bonuses have repeatedly led GoJek or GrabBike
drivers to protest their management. Form a customer’s point of view, online
platforms have formalized ojek services: Instead of them having to haggle
over fares with drivers, the application would calculate fares in advance. Ad-
ditionally, all major players provide accident insurance for passengers and
drivers. Drivers must comply with company rules and are held accountable
for their service quality by customer feedback on their personal online pro-
file. These shifts towards formalization were accompanied by the de-regula-
tion of the ojek service market. Even though conventional ojek services have
operated beyond governmental control, they were still regulated by the
pangkalan system, based on communal neighbourhood structures and often
connected to informal local authorities.

Concluding remarks
   Can the working conditions of conventional ojek drivers and those of ne-
oliberal crowed-based capitalism thus be grasped by the same analytical con-
cept of “informal economy”? Based on the brief comparison above, I argue
that the structural differences by far overshadow the commonalities, which
are limited to their negative distinction from “formal employment”. The con-
ceptual expansion of “informal economy” from those economic activities,
that exist beyond the scope or will of state intervention, to neoliberal forms
of de-regulation, where the right to free market interaction is guaranteed by
the state, has left the seal of “formal economy” for a (historically) specific,
welfare-oriented state-corporation-market relation. All changes brought by
neoliberalization had to be absorbed conceptually by the informal. We do not
need to regress to the stereotypical understanding of an informal sector, that
stands for the resourceful ways to make a living practiced by the urban poor


2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101
IN/FORMALIZATION                                                                    101


in the Global South. But we need to leave some conceptual space for the “un-
ruly” as opposed to the “de-regulated” and for non-state actors, such as local
communities, as alternative regulative institutions. While at the same time,
it is necessary to update and diversify our understanding of the formal to in-
clude governmental techniques and non-state actors, such as corporate in-
stitutions, as sources of formality.


REFERENCES
Hart, Keith, 1973, Informal income opportunities and urban employment in Ghana,
      Journal of Modern African Studies, 11, 1: 61-89.
Schor, Juliet, 2016, Debating the sharing economy, Journal of Self-Governance and
      Management Economics, 4, 3: 7-22.
Smart, Alan, Filippo M. Zerilli, 2014, Extralegality, in A companion to urban anthro-
      pology, Donald M. Nonini, ed, Malden, MA, Wiley-Blackwell: 222-238.
Sundararajan, Arun, 2016, The sharing economy. The end of employment and the rise
      of crowd-based capitalism, Cambridge & London, MIT Press.




                                        2017 ⎸ANUAC. VOL. 6, N° 2, DICEMBRE 2017: 97-101
