Indonesia opens up its e-commerce sector

Photo: Melwinsy/Wikimedia Commons

By Ardi Wirdana

The Indonesian government has vowed to be “as friendly as possible” to foreign investors looking to invest in the country’s e-commerce industry, to enable it to compete globally.

E-commerce was previously one of the industries included in the country’s Negative Investment List, a list of business sector that are not allowed to receive investment from overseas. Recently, however, the list has been revised. E-commerce has been taken out of the list and is now opened to foreign capital.

“We would like to be as friendly as possible to foreign investment because we have to be competitive, but at the same time, we would like to protect the interest of the country,” Communications and Information Minister Rudiantara said in discussion with foreign journalists recently.

To protect small Indonesian e-commerce players, the government has stressed that e-commerce is categorised as a small and medium sized enterprise (SME) sector reserved for Indonesians. The government has also set a minimum amount of capital for foreign investors to own Indonesian e-commerce shares.

Foreigners that bring in at least US$800,000 can own up to 49% of shares in an Indonesian e-commerce company, while foreign investment of more than US$8 million will be able to have full ownership of an e-commerce company.

The figure of US$8 million for e-commerce business ownership in Indonesia is considered unrealistic by some observers, given the financial vulnerability of many e-commerce start-ups. Rudiantara, however, begged to differ.

“If the figure in question is US$ 8billion rupiah, then it might be a problem, but this is US$8 million – that’s a piece of cake. Look at Tokopedia and GO-JEK, which have had US$100 million spent on them by foreign investors, that’s the fact. This is not a big issue,” he said.

The minister added that the government will make the business process as simple as possible for foreign investors that are serious about investing in Indonesia.

The government, Rudiantara said, is discussing plans to enable investors with an investment of US$8 million and hiring least 1,000 Indonesian as employees, to have their business permits sorted within three hours.

Silicon Valley-like ecosystem?

Rudiantara said Indonesia aspires to create an ecosystem similar to that of Silicon Valley. In order to achieve this dream, the Indonesian government has invited major Silicon Valley firms to help build the digital ecosystem.

“That’s why I invited Plug and Play and 500 Startups, big names in Silicon Valley to have some presence in this country and at the same time give them an opportunity to invest as well as a venture capital,” he said.

He explained that his ministry has also designed an e-commerce roadmap for the next five years, which includes spotting and supporting 200 technopreneurs every year, through various events.

“We acknowledge in Indonesia we have hackathon activities here and there and workshops, but its’ not constructed in structured way. We are trying to orchestrate it right now. 200 will receive seed capitals every year,” he said.

Rudiantara said that Indonesia can boasts having many tech talents, but they lack the business know-how to build a sustainable start-up. The government, he said, will provide assistance on things like marketing issues which many start-ups have trouble dealing with.

Out of the 200 start-ups supported every year, Rudiantara acknowledged that very few will actually survive. However, he said he would be happy if one of them evolves into becoming a tech unicorn.

While raw whizz kids in Indonesia are plentiful in numbers, Rudiantara said that the country still needs to attract experienced and proven tech talents into the country. This, he said, will be a challenge in itself.

The minister said that he has spoken to Indonesian diaspora living in the US and working for the likes of Google. He urged them to return to Indonesia to take advantage of the exciting opportunities that is slowly opening up in the country.

“I told them, if you consider yourselves as engineers, then help Indonesia develop the ecosystem, remotely. And once you feel that you’re comfortable with the ecosystem in Indonesia, then return to base.

“But if you consider yourself as an entrepreneur, this is the time for you to return to Indonesia. The more problem we have, the more opportunity we have,” he said.