This article first appeared in The Edge Malaysia Weekly on May 20, 2019 - May 26, 2019

INDONESIA’s ride-hailing operator, PT Aplikasi Karya Anak Bangsa, or Go-Jek as it is popularly known, is understood to be in the midst of setting up a company in Malaysia in what is seen as a precursor to commencing operations here.

In a recent interview with The Edge, Transport Minister Anthony Loke Siew Fook had said, “They [Go-Jek] came to visit me a month ago. They are looking to come into the Malaysian market. I said our country is open to foreign investment. If they want to open a company here, they are welcome to do so. I hear they are in the process of setting up a company here.

“I told Go-Jek that we have regulations for e-hailing operators, and they can inject more competition into the e-hailing market. If they want to come in and start their operations here, I don’t foresee any problems.”

Asked if Go-Jek had formally applied for the requisite approvals, Loke replied, “I’m not aware of that.” He declined to comment further on the matter.

The Indonesian company’s entry is likely to intensify competition for the incumbent ride-hailing companies, including Grab, the dominant player.

In January, Go-Jek co-founder Kevin Aluwi had said the company was contemplating operating in Malaysia but that it had yet to make a firm decision.

Go-Jek (the name is derived from ojek, the Indonesian word for a motorcycle taxi) has been around longer than Grab but only expanded beyond Indonesian shores last year — eight years after its formation.

It is now active in Vietnam and Thailand as well as in Grab’s current home base of Singapore, which it ventured into just six months ago. According to Go-Jek’s website, it operates in over 50 cities across Southeast Asia.

To recap, Go-Jek started out in 2010 as a motorcycle ride-hailing service in Indonesia, operating a fleet of motorcycles to ferry passengers around. It has since evolved into providing on-demand car transport as well and lifestyle services that include online payments, grocery shopping and food delivery.

While Go-Jek offers diverse services, it only provides ride-hailing services in Singapore. So, it remains to be seen what its plans for Malaysia are.

Grab too offers a variety of services in Cambodia, Malaysia, Indonesia, Myanmar, Thailand, Vietnam and the Philippines. In March last year, it acquired competitor Uber’s operations in Southeast Asia that saw the latter getting a 27.5% stake in the former as consideration.

The ride-hailing business is seen to have tremendous growth prospects and Go-Jek and Grab are slugging it out to be No 1 in this region. And they have attracted massive sums from investors.

Grab’s backers include SoftBank Group, Toyota, Hyundai, Microsoft and China’s Didi Chuxing. In March, Grab announced its most recent funding round, securing US$1.46 billion from SoftBank Vision Fund.

Go-Jek, meanwhile, has Singapore state investment arm Temasek Holdings, Tencent and Alphabet Inc’s Google in its corner. In February, it raised around US$1 billion in funds.

Grab dominates the Southeast Asian ride-hailing market, commanding 60% of it, and is valued at US$10 billion, according to news reports. This year, it is looking to raise a total of US$6.5 billion (RM27.3 billion) in a mix of debt and equity, and to make as many as six investments or acquisitions, co-founder and chief executive Anthony Tan is reported to have said.

Tan’s family is well known in Corporate Malaysia as it controls Tan Chong Consolidated Sdn Bhd, which owns a 40.42% stake in automotive player Tan Chong Motor Holdings Bhd, 36.02% of diversified Warisan TC Holdings Bhd and 37.52% of auto parts manufacturer APM Automotive Holdings Bhd.

Go-Jek is also valued at around US$10 billion and is reported to have raised in excess of US$3 billion thus far. It is said that the company’s co-founder and businessman Nadiem Makarim and Aluwi have known each other since their student days in Jakarta International School.

Although there is no denying the growth potential of ride-hailing companies, some have raised questions about their profitability and their gestation period. Their numbers are not publicly available but in a media interview last year, a Grab spokesperson said the group’s revenue was set to hit US$1 billion that year and that it was not profitable yet.

A random search online found a wholly-owned subsidiary of Grab Inc — Grabcar Sdn Bhd — here. It is said to be “engaged in carrying on the business of advisers on problems relating to the administration, management and organisation of transporting services, chauffeur services and customer services”.

In its financial year ended Dec 31, 2017, Grabcar suffered an after-tax loss of RM308.2 million on sales of RM187.93 million. In FY2016, it had incurred an after-tax loss of RM102.53 million on revenue of RM53.06 million.

Grabcar’s revenue growth of 3½ times is what has made investors flock to Grab and other ride-hailing companies.

It has been reported that Grab expects to double its revenue this year as it consolidates Uber’s operations and makes forays into bike-sharing and digital payments.

Go-Jek and Grab have accelerated the pace of their e-payment business as they seek to go beyond ride-hailing. In March, Grab rolled out several financial services across Southeast Asia, including an online checkout system that lets sellers accept Grab’s digital payment service GrabPay.

Go-Jek, through its digital wallet arm GO-PAY, accounts for 30% of the total electronic money transactions in Indonesia and has partnered more than 300,000 micro, small and medium enterprises across the country.

While ride-hailing companies have mushroomed, they have encountered difficulties in some countries. In January, Go-Jek’s plans for an investment in the Philippines hit a snag because the ride-hailing business there comes under public transport utilities in which foreign ownership is limited to 40%.

In March, the Land Transportation Franchising and Regulatory Board of the Philippines denied an appeal by Go-Jek to overturn an earlier decision that had denied its local unit Velox Technology Philippines an operating licence.

But Go-Jek is in talks with the powerful Ayala family for some sort of joint venture, according to reports.

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