Indonesian E-commerce market now open to Foreign Investors

As an outcome of the decree signed by the Indonesian President Joko Widodo earlier this year, electronic commerce (e-commerce) business in Indonesia is all set to witness a 100% exposure to the foreign investments. Decree No. 44/2016 on the Negative Investment List actually paved the way for the revised foreign investment exposure in the e-commerce industry of Indonesia.

As per the sources, the Indonesia Investment Coordinating Board (BKPM) is known to be in process of completing a new regulation to enable implementation of latest regulatory changes in this industry. BKPM also informed that the foreign investors who invest the minimum of IDR 100 billion (approx. USD $7.4 million) for the establishment of an e-commerce company in Indonesia, will be allowed 100% ownership.

The key driver of this FDI allowance by Indonesian government is identified as the fact that Indonesians are already using the services of big e-commerce companies, even when these companies do not have their physical presence in the country & the profits are being drained out of Indonesia. On the same lines Indonesian Information and Communication Minister Rudiantara mentioned that "Rather than letting all the profits go abroad, we will allow them to operate here with 100 percent ownership".

The foreign investment in the e-commerce industry below the IDR 100 billion will be limited to a maximum 49 percent stake. BKPM is drafting this new regulation which also deals with (mandatory) cooperation between the foreign e-commerce investor and local small and medium enterprises. In addition to this, Pratito Soeharyo, Board's Director for Business Empowerment, added that the foreign investor can even own the e-commerce business completely if the investment is below the IDR 100 billion & the condition is, the new employment positions for the local workers should exceed the figure of 1,000.

In the wake of these latest developments & the rise of internet and smartphone usage, Indonesia's E-Commerce Association (idEA) has predicted that the total worth of the country's ecommerce industry is expected to reach USD 1.4 billion in 2016. Based on the similar cues, the member of the Advisory Board of idEA Mr. Emirsyah Satar positively expects the e-commerce sales figures to reach USD $16 billion mark by 2020 from USD $1.1 billion in 2014.


Source: Thejakaratapost, idEA, journals & reports