T

he government'€™s move to allow foreign investors to have 100 percent ownership in Indonesian e-commerce companies has drawn criticism with claims that the policy will threaten local players.

The controversial policy is part of an e-commerce roadmap which aims to improve and develop the country'€™s e-commerce industry.

The policy proposal was originally leaked by Communications and Information Technology Minister Rudiantara before the official announcement of the roadmap. According to the minister the roadmap will allow foreign e-commerce players to have 100 percent ownership in a Indonesian companies.

Foreign companies will potentially have to pay higher tax rates and will be required to invest more than Rp 20 billion.

Indonesian Information and Communication Technology (ICT) Institute founder and IT expert Heru Sutadi said the policy had drawn concerns because it would put local players in a difficult position to compete in the market.

'€œThe government lost its way when drafting the roadmap [...]. Even if allowances for foreign players are made, it should not be this open and liberal,'€ he said, referring to foreign consulting firm Ernst & Young, which was approached to draft the roadmap'€™s preliminary guidelines.

'€œIndonesian SMEs [small and medium enterprises] should be the priority, but with 100 percent investment for foreign players, it will be hard for local SMEs to compete,'€ he added.

Heru suggested that because e-commerce was set to become the heart of the trade industry in the future, the government should reconsider or review this aspect of the roadmap in order to ensure that local SME'€™s maintain their economic independence.

'€œThere is time for the government to revise this point before the roadmap takes effect at the end of January, in order to ensure that this does not benefit foreign players more than locals,'€ Heru added.

Indonesia'€™s e-commerce roadmap was supposed to be finished and announced at the end of 2015, but additional reviews such as that of the negative investment index (DNI) to exclude e-commerce firms caused delays.

Among the initiatives are measures to minimize job cuts in the transition to the internet economy and the addition of new jobs in the sector. It also tries to underline the priority of securing the development of local SMEs through law revisions among other measures.

Rudiantara previously explained that with a proper roadmap, Indonesia would be able to earn up to US$130 billion from the industry by the year 2020 if the policies were implemented as soon as January.

The drafting of the roadmap began in December 2014. After one year, the Office of the Coordinating Economic Minister, along with several other related government institutions, agreed on a formal roadmap that aims to benefit and develop the nation'€™s e-commerce industry.

The plan, which is made up of 31 initiatives, aims to develop the country'€™s burgeoning e-commerce industry via various measures, such as the encouragement and promotion of technological skills necessary for e-commerce access for all Indonesians.

It is set to legally come into effect by the end of January and also stipulates the formation of a program management unit that will coordinate all related ministries and institutions in monitoring the roadmap'€™s progress.