Indonesia has one of the biggest economies in the Asia-Pacific region and its rate of internet adoption is one of the fastest in the world. So naturally, e-commerce in the region is starting to boom.
According to Alibaba Group Executive Vice Chairman Joseph Tsai, Indonesia’s per capita GDP is about the same as China’s was in 2009, when Alibaba’s marketplaces really began to take off. Alibaba has taken steps to get a stake in the region, investing US$1 billion in Southeast Asia e-commerce platform Lazada, a Singapore-based company with extensive operations in Indonesia.
To help help drive e-commerce growth in Indonesia, the government has made moves to open the country up to foreign e-commerce investment and expertise.
Indonesia’s Investment Coordinating Board (BKPM) is finalising guidelines for foreign e-commerce investment. The new BKPM regulations will allow 100 percent foreign ownership for e-commerce businesses with a minimum investment of Rp100 billion (about AU$10.3 million) or businesses that create 1,000 jobs.
The guidelines, however, limit foreign ownership to 49 percent for businesses investing below the Rp100 billion mark. The moves are designed to encourage big e-commerce investment from major players, while offering some protection to Indonesia’s local SMB e-commerce players.
The removal of e-commerce businesses from Indonesia’s ‘negative investment list’ (which outlines business activities that are either entirely closed or conditionally open to foreign investment) provides a significant opportunity for foreign investment into one of South-East Asia’s fastest growing e-commerce markets.
“I think this is the right time for Indonesia to aim to become the largest digital nation in Asia,” said Rosan Roeslani, Chairman of Indonesian Chamber of Commerce and Industry.
“What this country needs is not only money but also know-how, which is why we invited incubators to come to Indonesia,” he said.
“We have also talked about how we can get more start-ups to go through seed stage. One of the possibilities is to encourage big e-commerce players to spin their people off their company… We have not come out with the conclusion yet, but the government is very open for solutions,” he said.
Indonesian President Joko Widodo is looking to make the country South-East Asia’s largest digital economy by 2020. The lifting of foreign ownership restrictions has been praised by those in the industry who welcome the injection of foreign capital and expertise.
The removal of e-commerce from the negative list is part of Indonesia’s e-commerce roadmap, which was released earlier this year. The roadmap includes a list or proposals aimed at making it easier for e-commerce firms to operate in the country. Key elements of the roadmap include:
- Government financied developments of logistics facilities and improvements to communication infrastructure
- Government financing for start-ups in the form of grants and funds, as well as regulation for crowdfunding
- Streamlining business licensing processesand increasing consumer protection regulationE-Commerce Regulation
- Tax breaks for tech start-ups
- Increased cyber security