Indonesia allowed foreign investors to open post and delivery service in Indonesia, showed by the new Government Regulation Number 46 of 2021 concerning Post, Telecommunication and Broadcasting - Photo by Pixabay

JAKARTA (TheInsiderStories) – Indonesian government officials have revealed that all e-commerce transactions that are concluded in Indonesia will become subject to import tariffs in the near future. At the same time, the government plans to lower the threshold of duty-free imports from US$ 100 to US$ 75.

The ruling is likely to cause headache to the e-commerce players given that significant portion of retail goods sold in the e-commerce platforms are imported.

The imposition of import duties are aimed at imposing controls on goods imported into Indonesia, and creating a level playing field for conventional ‘bricks-and-mortar’ traders here. Today, approximately 90 per cent of imported goods dominate the online market operating in Indonesia, according to the Indonesian Ministry of Trade.

With the regulation, the government will be able to collect revenues from major e-commerce players like Google, Lazada and others, to ensure a healthy trade balance and reduce pressures on the rupiah exchange rate.

Currently, based on international regulations, only relatively cheap e-commerce products (valued below US$100) are free from an import tariff in cross-border traffic that involves Indonesia.

General Director of Customs and Taxes Heru Pambudi said the ruling should be discussed first among the conventional businessmen are demanding the regulation. This indicates that the ruling will only serve the best interest of conventional retailers.

The government’s decision to impose higher import duty has merits. However, for e-commerce players, the decision could threaten their business. Indonesia’s e-commerce industry is still infant stages, therefore they need to be given ‘carrot’ not a ‘stick. The decision could be ‘too soon’ for them.

The higher import duty and lower threshold on duty-free imports to US$75 per imported item would also be a burden for consumers. The decision will limit the accessibility of customers to obtain goods they want at affordable price.

It appears that the new ruling only serves the interest of conventional retail players, who are threatened by the presence of e-commerce industry growth in the country, not the e-commerce players.

The Indonesian Employers Association Chairman Hariyadi Sukamdani has welcomed the ruling, adding that the regulation will be good for Indonesia’s small and medium trade sector.

Indonesian Finance Minister Sri Mulyani Indrawati added that the Indonesian government is currently discussing cross-border trade because Indonesian consumers are ordering many foreign products through the Internet.

Indonesia posted an US$11.84 billion trade surplus in 2017 — a five-year high — thanks to improving exports to key trading partners and a global economy that continues to recover, as commodity prices improve.

China remained Indonesia’s biggest trading partner in 2017, buying up 13.94 per cent of the country’s exports and delivering 26.79 per cent of its imports; it was followed by Japan.

The internet-based economy is growing significantly in Indonesia. Its economic potential is huge and can become one of the backbones of the national economy. Indonesia’s digital transaction data grew rapidly over the last 5 years. According to Data from eMarketer, Indonesia’s e-commerce transactions reached US$5.6 billion in 2017.

Startups in Indonesia are also growing in number. According to Google-Temasek research data (2016) the number of startups in Indonesia alone amounted to 2033, or about 29 per cent of the total in Southeast Asia. This number is more than Singapore, which is ranked second with 1,850 startups. This demonstrates the potential of e-commerce in Indonesia.

Written by: Staff Writter ; Edited by: Elisa Valenta