Indef Economist Says Rising Ojol Tariffs Will Raise Inflation: This Policy Also Makes Users Switch To Private Vehicles

JAKARTA - Economist Institute for Development of Economic and Finance (Indef) Nailul Huda assesses the new tariff for online motorcycle taxis or online motorcycle taxis (ojek) set by the Ministry of Transportation, can raise the national inflation rate, which is currently on an increasing trend.

"Transportation costs that are likely to increase can cause inflation in general. Transportation inflation as of July 2022 is already quite high, where year on year it is already at the level of 6.65 percent, the second highest after food, beverages and tobacco," Nailul said, quoted by Antara. from Antara, Friday 12 August.

Currently, the government is trying to implement various policies to keep inflation low, starting from maintaining fuel subsidies to food subsidies. This is done so that the economic recovery is maintained.

However, continued Nailul, in addition to driving inflation, the increase in ojol tariffs will also encourage ojol users to switch to other modes of transportation or even private vehicles.

"Using private vehicles will increase congestion and economic losses will increase," said Nailul.

Nailul said that online transportation, including ojol, is a multisided-market where there are many types of consumers served by a single platform. So, what should be seen is not only from the side of the driver partner, but also from the consumer or passenger side.

"According to economic law, from the consumer side of passengers there will be a decrease in demand. It is certain that the driver partners will lose because the total income will decrease. So this is contradictory to the welfare of the driver partners which is to be achieved with this tariff change," said Nailul.

Not only that, the increase in transportation costs can also have another multiplier effect, namely burdening micro, small and medium enterprises (MSMEs), for example the food and beverage industry on the MSME scale which can increase prices. The reason is, the use of ojol transportation has become a daily mode of transportation that is widely used for various community activities, both personal and business.

The increase in the cost of living is considered to ultimately reduce people's purchasing power. Moreover, the average increase in the national minimum wage in 2022 is only around 1.09 percent, unable to cover the potential for rising inflation.

"So I think the government needs to consider the policy of increasing the online motorcycle taxi fare and see how big the elasticity of the product or service is. Don't be, this policy creates a price war between platforms that will make the industry unhealthy," said Nailul.

The Ministry of Transportation issued the Decree of the Minister of Transportation Number KP 564 of 2022 concerning Guidelines for Calculation of Service Fees for the Use of Motorcycles Used for the Interest of the Community by Application. The rules were signed on August 4, 2022.

When compared to the previous regulation, only ojol fares in Jabodetabek increased, but service fees in the three zones increased by around 30-40 percent.

The ojol fare per kilometer in Jabodetabek is IDR 2,600 - 2,700 per km from the previous IDR 2,250 - IDR 2,650 per kilometer (km).

Application companies are required to adjust the amount of the fee no later than ten calendar days after the ministerial decree is issued.