E-Commerce in Indonesia Open to Foreign Investment; IPOs Welcomed
The move of the Indonesian government to relax foreign ownership rules regarding e-commerce businesses in Indonesia has also given rise to expectation that the country's major e-commerce players (including foreign ones) will be interested to list their companies on the Indonesia Stock Exchange through an initial public offering (IPO). Generally an IPO improves a company's transparency and corporate/financial management. E-commerce businesses are particularly in need of consumers' trust and confidence and therefore an IPO is considered a good corporate move.
Rudiantara, Indonesian Minister of Information and Communication, said the e-commerce industry of Indonesia will be open to foreign ownership for the full 100 percent if more than IDR 100 billion (approx. USD $7.4 million) is invested by the foreign investor. According to the minister this is a logical decision as large foreign e-commerce businesses - such as AliExpress or Jingdong Mall - are already active in Indonesia with their online services despite having no physical presence within the territory of Indonesia. In this structure profits simply flow abroad, whereas a local entity in Indonesia would bring in tax revenues.
In order to protect Indonesia's small and medium e-commerce businesses, foreign investment with a capital of less than IDR 10 billion (approx. USD $740,740) is prohibited. Meanwhile, for foreign investment worth between IDR 10 billion and IDR 100 billion, the foreign ownership is capped at 49 percent.
Minister Rudiantara added that the government will not force foreign e-commerce businesses to conduct an IPO on the Indonesia Stock Exchange but it does encourage such a move as it would not only enhance transparency of the company (hence positively affecting the company's performance particularly because online businesses are highly dependent on consumer trust) but will also give an opportunity to Indonesian parties to purchase a stake in the company.
Popular E-Commerce Products in Indonesia:
Source: Bisnis Indonesia
The government will soon release its e-commerce roadmap. This roadmap stipulates regulations regarding online trading of goods and services as well as online data and fund transfer.
One of the domestic players, online marketplace Bhinekka.com (operated by Bhinekka Mentari Dimensi), announced it may conduct an IPO on the Indonesia Stock Exchange in 2018 in a bid to accelerate its business expansion. This would make Bhinekka the first e-commerce firm to list its shares on the local stock exchange. Earlier, its competitor MatahariMall.com - operated by the Lippo Group - announced it is considering to conduct an IPO in the next three years.
Value of Indonesia's E-Commerce Market:
|E-Commerce Market Indonesia
(in billion USD)
Source: Bisnis Indonesia