E-Commerce Should be Open for Foreign Investment

Kartini L Makmur, Robert Sidauruk
 
In anticipation of the 2015 ASEAN Economic Community (AEC), the Government has issued Presidential Regulation No. 39 of 2014(2014 Negative Investment List), which renews the list of business sectors that are entirely or partially closed for investment.
 
As anticipated,  several provisions on the 2014 Negative Investment List have been criticized as not sufficient to accommodate investment flows into certain business sectors.
 
Ahmad Fikri Assegaf, partner at Assegaf Hamzah & Partners, noted that the 2014 Negative Investment List incorporates less sectors that are open for investment than its predecessor,  Presidential Regulation No. 36 of 2010(2010 Negative Investment List).
 
“However, this does not necessarily mean that the 2014 Negative Investment List excludes certain sectors. This is merely due to the merging of several sectors and for simplification reasons,” said Mr. Assegaf during a seminar held by Hukumonline in Jakarta on Tuesday.
 
Mr. Assegaf also highlighted several business fields that were opened for foreign direct investment (FDI) but are now only available to domestic direct investment (DDI). For instance,  power plant businesses of  1 – 10 MW, drilling services, certain support services for oil and gas, retail trading through post and internet business (e-commerce).
 
Specific to the exclusion of e-commerce from FDI, Mr. Assegaf contends this is an indication that the Government does not favor small businesses and startup companies. According to him, e-commerce businesses give many benefits as they reduce  dependency on supermarkets and retail outlets by directly communicating with consumers. As a consequence,  distribution expenses can often be reduced.  
 
“The Government needs to reconsider its decision. There seems to be an issue of cost and benefit analysis on this matter,” said Mr. Assegaf.
 
At the same event, Farah Ratnadewi Indriani, Deputy for Investment Development at BKPM admitted that the cost and benefit analysis in formulating the 2014 Negative
Investment List is not always optimal.  To address this, Mrs. Indriani anticipates the better involvement of all stakeholders to discuss the next Negative Investment List in an upcoming year.
 
In relation to e-commerce, Mrs. Indriani denied the assumption that the exclusion of this sector shows a lack of support from the Government for small businesses and startup companies.
 
In fact, the provisions are designed to protect local businesses from exposure to foreign competitors. Mrs Indriani did not, however,  exclude the possibility of a review of the provision on e-commerce.
 
“We need to perform further analysis on whether or not the e-commerce sector would be improved if it available for FDI,” concluded Mrs Indriani.
 
(For more information on 2014 Negative Investment List, see ILD No. 357)
 
(hot/kc)