Presidential Decree No. 44/2016 on the Negative Investment List opened room for foreign investment in the e-commerce industry of Indonesia. BKPM further informed that 100 percent foreign ownership will be allowed for those foreign investors who invest at least IDR 100 billion (approx. USD $7.4 million) for the establishment of an e-commerce company in Indonesia. Pratito Soeharyo, BKPM's Director for Business Empowerment, added that an e-commerce business can also be fully-owned by a foreign investor in case the investment is below the IDR 100 billion level but the number of new employment positions (for local workers) that are created through the foreign investment exceeds 1,000.

Generally, foreign investment in Indonesia's e-commerce industry below the IDR 100 billion level will be limited to a maximum 49 percent stake. The new regulation that is currently being drafted by BKPM also deals with (mandatory) cooperation between the foreign e-commerce investor and local small and medium enterprises.

Data from BKPM show that foreign investors invested USD $5 million in web portals in Q1-2016 (with a total of 24 projects) in Indonesia. Last year, Indonesia's e-commerce industry attracted a total of USD $19 million worth of foreign investment with a total of 67 projects. Emirsyah Satar, member of the Advisory Board of the Indonesia E-commerce Association (idEA), expects that by 2020 e-commerce sales in Indonesia will reach USD $16 billion from USD $1.1 billion in 2014.

There are three types of e-commerce businesses: (1) e-commerce business to consumer, (2) e-commerce business to business, and (3) e-commerce business to government. The one that is growing fastest in Indonesia is the e-commerce business to consumer type.

Supported by rising Internet penetration in Indonesia (which has reached 40 percent in 2016) as well as rising smartphone penetration, the e-commerce industry of Indonesia is estimated to grow significantly in the years ahead. The Indonesian Trade Ministry stated earlier this year that the domestic e-commerce business may control 20 percent of the conventional retail market by 2020 (from five percent currently), implying it is important to implement adequate policies and infrastructure to cater this growth. For example, domestic e-commerce businesses will need to register at the Trade Ministry. Meanwhile, starting from June 2016 the Indonesia E-Commerce Association (idEA) plans the accreditation of e-commerce sites in an effort to enhance the quality and credibility of local e-commerce businesses. The idEA said some 200 Indonesian web portals engaged in online retail trading will be assessed (regarding matters including the clarity of payment and customer service).

Popular E-Commerce Products in Indonesia:

Airplane Tickets
Mobile Phones/Smartphones
Vehicle Accessories

Source: Bisnis Indonesia

In April 2016 China's e-commerce giant Alibaba Group Holding Ltd acquired Southeast Asia-based e-commerce platform Lazada Group SA, a deal worth USD $1 billion. Besides tapping the rising customer base in Indonesia, Lazada has operations in Malaysia, the Philippines, Thailand and Vietnam (in total there are some 560 million online consumers in this region). For Alibaba, a company that is eager to expand beyond China, the Southeast Asian region is an interesting market because only 3 percent of retail sales in the region are conducted online, implying there exists huge growth opportunities. However, Southeast Asia is also a challenging environment for online retail firms given the region is plagued by tough logistical issues (partly due to the relatively weak state of infrastructure) while there exists a lack of warehousing outside more advanced markets such as Singapore.

With Alibaba in control of Lazada, two developments could occur: (1) the stronger ties between Lazada and China give rise to an increasing flow of Chinese products into Indonesia, hence putting pressure on Indonesia's trade balance, and (2) the position of local Indonesian start-up e-commerce businesses, such as Bukalapak or Tokopedia, is threatened because Lazada is expected to obtain a capital injection from Alibaba for expansion purposes (moreover Lazada has easier access to cheap - more competitive - Chinese products).


lugano |

.. in the long term - it is winning..

Lex McGuir |

But you cannot import goods for sale unless you go through a long procedure to get an import license. If you want an import license get huge amounts of money for the people in government because they will want more than you can imagine. Corruption in Indonesia is not cheap!

Lex McGuir |

With the highest electronic fraud in the world and the inability to order goods from other countries the E -commerce business is only going in one direction- DOWN.