JAKARTA (TheInsiderStories) – Indonesian President Joko Widodo has finally certified the long-awaited ‘e-commerce roadmap’ first drafted in 2016. The main objective of this guidance is to boost e-commerce sector growth, with a long-term goal of stimulating the overall digital economy of the nation. However, it appears that some homework remains undone.

The e-commerce roadmap contained in the government’s 14th Economic Policy Package was launched in November 2016, and enumerates national priorities, focusing on the development of the e-commerce potential of the country. The main source of interest will most likely be available tax breaks for tech-startups.​

Nonetheless, clear and concrete signals of what the government is intending, with well-defined targets and achievements, are necessary to measure the benefits.

When President Widodo met executives from Silicon Valley, and specifically Google CEO Sundar Pichai, in 2016, he forecasted the Indonesian e-commerce market would grow to $130 billion by 2020. The government is also working towards its agenda by nurturing 1,000 ‘technopreneurs’ with a total business valuation of $10 billion by the same year.

However, the public is at a loss as to whether the program is directly undertaken as a government initiative, or meant to be shouldered by the community, because if the government does not carry the load then the target is difficult to achieve.

The Institute for the Development and Empowerment of the Indonesian Information Society and IndoTelko Forum Development Index of Technology recorded Indonesia’s position as having been upgraded from 115th to 111th, but still it has not altered the reality that this country continues to lag behind regional peers.

While developmental disparity has always been a huge issue for the nation, and not something that exclusively affects the tech community, the government also needs to look into decentralizing resources from Java outward to other major Indonesian islands, by actively approaching untapped markets.

In the roadmap, the government designed regulations for e-commerce players to be allowed to leverage on the national logistics system. Local and national courier companies are to be strengthened and logistics routes from rural areas to cities developed. The Government also intends strengthen communications infrastructure through national broadband development.

Source: Ministry of Communication and Information

However, lack of quality infrastructure in Indonesia considerably increases the cost of transportation, adding to the price of shipping and delivery of goods. Once away from the major urban centers there are often power outages which can last up to several hours.

There is in fact no reliable e-payment system in Indonesia currently in universal usage. Payments are complicated and are often declined by customers. Instead, customers prefer the reliability and familiarity of a bank transfer or ‘C.O.D’ (payment upon delivery). To implement a reliable payment system supported by mobile devices, is user-friendly and safe, will be key to the further development of e-commerce.

The Indonesian government recognizes the importance of the progress and development of its e-commerce industry, a development which signals the country’s desire to attract foreign investment.

The removal of e-commerce from the list of prohibited sectors in the updated version of the negative list of investments opens the door, step by step, for international entrepreneurs who shied away from Indonesia in the past.

Tax Dilemma 

In 2016, a central theme was taxation. Minister of Communications and Information Rudiantara threatened to ban internet giants such as Google and Facebook from operating in this country unless they set up a permanent legal entity in Indonesia. Ironically, this strong Indonesian government statement to the two giant tech firms will result in spurring the development of our information technology sector.

This issue was finally resolved in June, when Minister of Finance Sri Mulyani Indrawati announced that Google and the government have reached a tax settlement.

Meanwhile, the Ministry of Finance recently admitted that they are overwhelmed searching for an appropriate tax collection protocol for online retail transactions (e-commerce) because the business model is so varied.

Deputy Finance Minister Mardiasmo said the complex business model inspired the government first to lay out a general plan for e-commerce tax rules, following up by publishing rules for each specific business model. Until now it is still concocting rules for tax collection.

In detail, there are at least eight e-commerce business models to consider. In addition, the government is also bewildered in its search for e-commerce tax schemes on intangible products, such as electronic books (e-books), and for entertainment software that can be downloaded.

Finally, the government must strike a balance between its ambition to fill the state coffers and continue positive support for a growing e-commerce industry packed with startups.

Written by Elisa Valenta, email: elisa.valenta@theinsiderstories.com