Indonesian govt taking steps to tackle growth of e-commerce industry

The volume of e-commerce transactions in Indonesia is still relatively small but the government is taking anticipatory steps in the face of e-commerce industry growth as it is developing as a global trade model.

Indonesias e-commerce transactions still account for about one to two percent of retailer transactions or much lower than the global average of eight percent. However, it is predicted that e-commerce transactions in Indonesia will increase drastically from US$12 billion in 2014 to about US$24.6 billion this year.

Therefore, the government sees that the e-commerce industry is one of the business sectors that has good prospects in the future, and for this it is issuing an e-commerce development roadmap through an economic policy package.

The roadmap is appearing in the 14th economic policy package announced by the government on Thursday, November 10, 2016.

“The policy package is aimed at encouraging people all over Indonesia to expand their economic activities efficiently and to connect them to the rest of the world. With this roadmap, they will be able to enhance their business in a better way,” Coordinating Minister for Economic Affairs Darmin Nasution said while announcing the package at the Presidential Office along with Communication and Information Minister Rudiantara and Cabinet Secretary Pramono Anung.

Therefore, the next economic policy package is expected to sufficiently address the issue.

“E-commerce should not be treated as a general form of trading. The tariff should be lower as it is a fledgling industry, an early adopter,” Industry Minister Airlangga Hartarto underlined while speaking on the sidelines of the launch of a book on “Developing Populist Economy and Winning ASEAN Economic Community” recently.

Indonesian businesses hope that the tax tariff for e-commerce business will be lower than that of the non-e-commerce industry.

The Indonesian Employers Association (Apindo) hailed the issuance of the package. Businesses badly need the governments support, particularly on the fiscal system with regard to the issuance of the economic policy package on e-commerce, Fredy Ongko Saputro, chairman of Apindo for East Nusa Tenggara, said.

“The tax tariff should be lower than non-e-commerce because this is a new industry. We hope the tax traffic is set at a modest rate,” the Apindo chairman for East Nusa Tanggara, said.

The regulation to be issued would determine the success of e-commerce in Indonesia as it has the potential to guarantee the survival of fledgling businesses using e-commerce, economic observer Agustinus Prasetyantoko said, elaborating the point.

Agustinus is also of the opinion that tax exemption would help boost e-commerce in the country.

“In certain cases, tax could even be abolished during the start-up phase,” he underscored.

Singapore could be used as the reference country to study ways to develop and expedite the expansion of e-commerce. It provides tax facilities and a low tax for start-ups in addition to assistance in the form of access to cheap capital.

The e-commerce market has begun to grow in Indonesia. In 2014, transactions were valued at $12 billion. E-commerce spending in Indonesia was only 1 to 2 percent of the total retail sales as against 16 percent in South Korea, 12 percent in the United States and the world average of 8 percent.

However, it is worth noting that the performance in 2014 represented a significant increase from $8 billion in 2013. In 2016, the value of transactions is predicted to rise to $24.6 billion.

Therefore, it is being predicted that Indonesia would be among the top ranked countries in e-commerce in the future after China and India in Asia, which is why the government drew up a roadmap.

Chief Economic Minister Darmin Nasution expressed the hope that the roadmap for the development of e-commerce industry will encourage younger generations to come up with new and innovative products and services.

The roadmap is also expected to induce certainty in business besides facilitating the e-commerce industry. Therefore, with strategic direction and guidance, the electronic-based national trade system can be put in place during the 2016-2019 period, he noted.

The roadmap is also expected to accord priority to and protect the national interests, particularly the interest of small and medium entrepreneurs and startups, he commented.

“It will also help the human resources and e-commerce agents to improve their knowhow. Also, it will provide terms of reference to the government and all stakeholders for determining or adjusting sector-based policies as part of the effort to develop the e-commerce industry,” he explained.

Darmin pointed out that the policy package deals with at least eight issues, including funding, taxation, consumer protection, human resource development and education besides cyber security.

Meanwhile, Communication and Information Minister Rudiantara underlined that digital economy has a huge potential in Indonesia.

“The Indonesian digital economy is so huge that all transaction services using digital technology will continue to develop,” he observed.

He reminded that the package also covers several provisions to address seven key issues, including human resources and education, access to capital, tax incentives, consumer protection, cyber security, logistics and communication infrastructure.

Source: Antara News