Employee Picking at Eighth Generation FC - Photo by Amazon

JAKARTA (TheInsiderStories) Amazon, an American electronic commerce and cloud computing company (NASDAQ: AMZN), aims to invest Rp14 trillion (US$965.52 million) in ten years period to grab Indonesian growing e-commerce market, said its official last week.

The company also plan to introduce its cloud computing business Amazon Web Services to the Indonesian market. On Friday (21/09), Amazon’s Vice President, Werner Vogels met President Joko Widodo accompanied by Finance Minister Sri Mulyani Indrawati at the Presidential Palace.

She explained, with the investment plan, President was assigned her to complete various needs to realize it.  “We have already resolved a number of issues regarding taxation, and it seems like we have already finished everything,” said Indrawati.

She was reluctant to specify related tax incentives for Amazon. But referring to the Minister of Finance Regulation Number 35 Year 2018 on the Corporate Income Tax Reduction Facility, Amazon as a technology pioneer industry could enjoy tax holiday for 10 years.

Indonesia is the second country in Southeast Asia to be the target of Amazon’s business expansion, after Singapore. Previously, the company stated that it plans to target the potential of 600 million consumers in Southeast Asia, and is ready to compete with other e-commerce players such as China’s Alibaba Group and South Korea’s Lotte Group.

Commenting on the planned, observer from the Institute for Development of Economics and Finance Bhima Yudhistira, said that if Amazon wants to invest in Indonesia must use high domestic content if the government want to have a positive impact to the country.

He added, that the current portion of e-commerce in Indonesia is still in the range of one percent of total national retail. The government also needs to ensure that the 10 percent of value tax rules in each transaction can be obeyed.

However, the plan is considered to be facing stiff competition with Alibaba. Earlier this year, the company owned by Jack Ma had opened the main cloud service provider center in Indonesia as part of the company’s plan to support local start up in the archipelago. Alibaba has also invested $1.1 billion in Indonesian retailer like Tokopedia and Lazada.

The digital economy in Indonesia is projected to be worth more than $300 billion by 2025, with Indonesia being the largest economy in Southeast Asia. With this growth is the potential for significant energy savings in Indonesian data centers.

On the investor side, Indonesia is home to a cloud data center and technology development business as the return on investment capital (ROIC) reaches 11.6 per cent, or the highest in Asia Pacific. In Singapore, the ROIC rate is only 9.5 per cent, while in Australia, due to expensive urban facilities, the ROIC is only 3.8 per cent, or the lowest in the region.

According to a Bain and Company survey, a business consultancy agency, there has been an increase in global cloud technology usage from one per cent in 2010 to 16 per cent by 2015, worth over $17 billion. In addition, based on McAfee’s report, a global cyber security service company, the use of hybrid cloud computing has also jumped from 19 per cent in 2015 to 57 per cent in 2016.

The Synergy Research Group report calls Amazon Web Services the largest public cloud player, with 34 percent of the global market share. Next is Microsoft, which controls 11 per cent and Google 5 per cent.

In Indonesia, the biggest player at this time is Telkomsigma which is a subsidiary of PT Telkom Indonesia Tbk (IDX: TLKM). Telkomsigma has 100 cloud computing clients, ranging from SMEs to large national companies.

In 2014, the central market value of flat transactions and cloud computing Indonesia amounted to Rp 4.4 trillion. According to the Ministry of Communications and Information Technology, Indonesia’s data center market is predicted to grow around 20 percent per year in the 2015 to 2107 period, in line with the development of digital and online technology.

With an estimated population of 250 million, Indonesia is the fourth most populous country on earth and the largest economy in Southeast Asia. Data centers there have some ground to make up, but they are expanding rapidly.

Of course, the growth of data center facilities in Indonesia will be influenced by the development of national infrastructure, especially in the outer islands. Currently, the data center industry in Indonesia can be categorized as in an early phase, with 60 per cent of its activities centered in Jakarta.

US$1: Rp14,500

Email: linda.silaen@theinsiderstories.com