T

he government'€™s policy to open the country'€™s e-commerce sector to foreign investment has received
a positive response from local e-commerce companies.

Indonesian E-commerce Association (idEA) chairman Daniel Tumiwa welcomed the government'€™s measure, saying e-commerce '€œshould have never been included in the DNI [negative investment list] in the first place'€. He explained that the presence of foreign investors would help the country'€™s e-commerce business, which has grown rapidly in the last three years.

'€œWe appreciate the intensive efforts of the government to make progressive steps in opening the door for foreign investment. It used to be '€˜no entry'€™ and '€˜no exit'€™ [with regard to investment],'€ Daniel said on Friday.

Although foreign investors are only allowed to set up e-commerce companies with investment of at least Rp 10 billion, their presence would still help start-up businesses, he said.

'€œOpening the DNI will enormously boost the industry, as what it needs now is '€˜smart money'€™: Money that comes with experience and knowledge, to run fast and do things effectively and differently. Local investors did not have a framework for incubating and accelerating startups before. They had the tendency to take majority shareholdings from the start,'€ Daniel added.

Last week, the government announced that foreign investors would be able to have full ownership in business areas such as cold storage, crumb rubber, sports centers, restaurants, pharmaceutical ingredients, toll roads and the film industry.

Although e-commerce has been removed from the DNI, not all e-commerce companies could be 100 percent owned by foreign companies, Communications and Information Minister Rudiantara said.

According to the minister, foreigners can hold 100 percent in a business only if their investment exceeds Rp 100 billion. For e-commerce businesses with investment between Rp 10 billion and Rp 100 billion, foreign ownership is capped at 49 percent, while investment of less than Rp 10 billion remains off limits for foreigners.

At least 50 small and medium enterprises are involved in e-commerce, such as the online marketplaces Bukalapak, Bhinneka and Traveloka.

The foreign investment cap in small and medium-scale e-commerce companies should be strictly imposed to ensure that the removal of the e-commerce business from the negative investment list would not hurt small and medium scale companies, said Heru Sutadi, the founder of the Indonesian Information and Communication Technology Institute.

'€œMost e-commerce marketplaces are owned by small and medium-sized businesses. If the entire e-commerce sector is opened to foreign investors, our local players risk losing [market share] to foreign players. This is because we are relatively far behind other countries when it comes to implementing e-commerce,'€ Heru said.

Meanwhile, Japanese e-commerce company Rakuten Inc reported last week it would close down its local unit in Indonesia, Rakuten Belanja Online (RBO), on March 1.

According to an announcement on www.rakuten.co.id, the website will be shut down by the aforementioned date, and customers are urged to redeem their existing shopping points by Feb. 29.

In addition, Rakuten will reportedly close down its operations in Singapore and Malaysia.