E-Commerce: Deregulation and Infrastructure Development in Indonesia

Indonesian Version

 
Ricky Pratomo, Fathan Qorib
 

 

President Joko Widodo (Jokowi) encouraged the government to boost the growth of electronic businesses within the Indonesian e-commerce sector during a meeting on the development of the digital economy which was held at the presidential office last Tuesday. According to setkab.go.id, the meeting was attended by several important parties operating within the sector, including Coordinating Minister for the Economy, Darmin Nasution; Communication and Information Minister, Rudiantara; Minister of Trade, Enggartiasto; Head of the Indonesian Investment Coordinating Board, Thomas Lembong; and Head of the Creative Economy Agency, Triawan Munaf.
 
President Jokowi announced to the various attendees that Indonesia should play a central role in the developing digital economy, as the country has huge potential in this sector. In terms of population alone, Indonesia represents a huge market and can boast approximately 93.4 million internet users from a total of 250 million citizens.
 
The President then announced that by 2014, the e-commerce sales total in Indonesia had reached USD 2.6 billion, even as market penetration, at that time, stood at only 0.6% of the total number of retail transactions. Moreover, President Jokowi also highlighted how e-commerce was currently making a sizeable contribution to the Indonesian economy by assisting the businesses of 56 million of micro-, small-, and medium-scale enterprises (UMKM), as well as by contributing approximately 55% to state GDP.
 
In this context, President Jokowi is demanding that the government works to accelerate the development of e-commerce across Indonesia, so that the country is not left behind by its neighbours. The President even expressed his hope that Indonesia would eventually become a Southeast-Asian digital-economy hub.
 
President Jokowi is demanding that various channels be set up which will connect worldwide logistics platforms to products within rural areas. The President also stressed that novice entrepreneurs and start-ups should be prioritized and facilitated so that they can gain access to capital, and grow and nurture their businesses. With this goal in mind, business-capacity development training should become a priority.
 
“For this purpose, the government needs to implement deregulation measures,” President Jokowi suggested.
 
Ultimately, President Jokowi believes that e-commerce can be developed more effectively through an easing of the various laws and regulations which cover the sector. Moreover, any such deregulation will represent concrete action taken by the Indonesian government in support of the revolution in digital-based industry.     
 
Accelerating Infrastructure Development

During the recent meeting, President Jokowi also asked Communications and Information Minister (Menkominfo), Rudiantara, to accelerate the expansion of telecommunications-network infrastructure across the country, as it was urgently needed by e-commerce entrepreneurs. By way of example, President Jokowi referred to his visit to Alibaba headquarters in Hangzhou in the People’s Republic of China. During his visit, Mr. President learnt how Alibaba’s ownership of logistics and retail platforms has helped the company to dominate the world’s e-commerce sector.  
 
“Indonesia should also posses its own strong logistics and retail platforms,” the President stressed in his address.
 
Elaborating upon his statement, the President Jokowi stressed that the BlackBerry Messenger platform could be utilized as an original Indonesian platform, as this platform was now fully owned by Indonesia. Furthermore, the President stressed his hope that all of the country’s e-commerce related platforms, be they either logistics or retail platforms, would be able to connect to BlackBerry Messenger.
 
On a further note, President Jokowi also pointed to a number of acquisitions of Indonesian e-commerce companies by OLX or Alibaba and expressed his concern that Indonesia would ultimately be left behind if the country did not develop its own world-class e-commerce platforms.     
 
In this context, President Jokowi stressed that the various ministries under his administration, specifically Menkominfo, should pay more attention to this matter, as e-commerce would undoubtedly become a central pillar of Indonesia’s economic strength in the future.
 
“I think we need to protect and support [e-commerce entrepreneurs] so that we can really encourage small- and micro-scale businesses located in rural areas across our country to market their products. I also believe that it would be best if we had our own platforms, so that we will be able enjoy greater connectivity across Indonesia's various regencies, cities and islands,” President Jokowi concluded.
 
(cd/sp)