Indonesia: E-commerce investment

Author: | Published: 11 Jul 2016
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Ali Budiardjo Nugroho Reksodiputro

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Graha Niaga, 24th Floor Jl. Jend. Sudirman Kav. 58 Jakarta 12190

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+62 21 250 5125/5136

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+62 21 250 5001/5121 Visit Website
Oene-Marseille Emir-Nurmansyah
Oene Marseille Emir Nurmansyah

In late May this year, Indonesia issued an updated list of business activities that are subject to foreign investment restrictions. This list, sometimes called the negative list, includes a catalogue of businesses that are either closed or conditionally open to foreign investment. This version of the list replaces the previous list, issued in 2014.

The current revision is issued by way of a presidential regulation, which is consistent with past practices.

Under the new negative list, e-commerce activities that were formerly closed to foreign investment have now been liberalised or subject to fewer restrictions.

E-commerce designates the retail sale of products on electronic platforms via the internet.

Foreign investment in e-commerce business is now permitted up to 49%, if the total investment in the business is IDR 100 billion or less (approximately $7.5 million). If the total investment is more than IDR 100 billion, foreign investors are allowed to own up to 100% of shares in the business.

This represents a significant liberalisation: before this revision there was a total ban on foreign investment in e-commerce business in Indonesia.

The new list specifically includes four business categories of e-commerce activities that are being liberalised: (i) platform-based marketplaces; (ii) daily deals sites; (iii) price grabbers (presumably, sites that display price-comparison of products sold elsewhere); and, (iv) online classifieds.

Currently online sales still represent a relatively small portion of overall retail transactions in Indonesia. However, it is expected to grow significantly over the next few years. This growth is expected to be fueled by the rising number of internet users due to the increased internet penetration in Indonesia (including smartphone users). Opening up foreign investment in the e-commerce arena is expected to bring much-needed capital into the sector to help growth.

Oene Marseille and Emir Nurmansyah