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Jakarta Post

Indonesia aims to be regional digital technology hub in 2020

  • Rachmadea Aisyah

    The Jakarta Post

Jakarta   /   Wed, February 20, 2019   /   05:59 pm
Indonesia aims to be regional digital technology hub in 2020 Regulatory framework for FDI: Financial Services Authority (OJK) chairman Wimboh Santoso (center) speaks at the Next Indonesian Unicorn (NextICorn) Summit in Nusa Dua, Bali. (JP/Zul Trio Anggono)

The government has vowed to improve the regulatory framework related to Indonesia’s digital economy as it aspires to become Southeast Asia’s digital hub next year.

In the near future, digital technology will deeply influence the country’s development, said Rudy Salahuddin, an official from the Office of the Coordinating Economic Minister.

For that purpose, the government has vowed to issue or revise at least five regulations related to the sector. They are a government regulation on e-commerce, a personal data protection bill and a tax office regulation on the e-commerce tax.

There will also be revisions of Presidential Regulation No. 74/2017 on the e-commerce road map and Government Regulation No. 82/2012 on the management of electronic transactions and systems.

“The utilization of digital technology will not remain limited to certain sectors but [affect the country’s] development as a whole,” Rudy said in a recent discussion. “This requires a more comprehensive strategy in preparing Indonesia’s development in the era of digitalization.”

His view is in line with a new report on Indonesia’s digital technology industry, which says the sector will become the largest supporter of the country’s economy by 2030 by helping conventional industries open market access online.

The report, which was carried out by AlphaBeta, the Hinrich Foundation and the Centre for Strategic and International Studies (CSIS), estimates that the digital trade sector could create Rp 2.3 quadrillion (US$172 billion) worth of economic opportunities by 2030 for the domestic economy alone.

The report titled “The Digital Komodo Dragon: How Indonesia can capture the digital trade opportunity at home and abroad”, said the figure was equivalent to 9 percent of Indonesia’s projected gross domestic product and marked an increase from only Rp 125 trillion in 2017.

Rudy, undersecretary for the creative economy, entrepreneurship and SME competitiveness at the Office of the Coordinating Economic Minister, said the draft regulation on e-commerce had been in the government’s pipeline since 2015. However, its issuance had been delayed due to significant changes in the industry, thus constantly making the points in the draft irrelevant.

“The revision of Presidential Regulation No. 74/2017 on the e-commerce road map faces a similar challenge,” Rudy said, adding that the revision would include new elements, such as cross-border transactions of digital goods and services, data protection and empowerment of local micro, small and medium enterprises (MSMEs).

At the same time, the personal data protection bill has been listed in the House of Representatives’ 2019 National Legislation Program (Prolegnas), meaning the law is likely to be deliberated this year after it missed the deadline set by the Communications and Information Ministry for 2018.

Indonesian E-commerce Association (IdEA) vice chairman for the digital economy, Bima Laga, said the tax office regulation would be derived from the Finance Ministery Regulation 210/2018, which had initially been met with rejection from players upon its issuance.

“[The regulations] are still targeted to take effect by April 1,” Bima said at the same occasion. “We are having discussions every week with the directorate general of taxation [to improve the regulations].”

Meanwhile, Coordinating Political, Legal and Security Affairs Minister Wiranto had suggested that President Joko “Jokowi” Widodo delay his approval for the draft revision of Government Regulation No. 82/2012, as it would become a “political” matter given that Jokowi is seeking reelection in April.

The minister said Jokowi’s rivals could use the revision to attack the President as “pro-foreigner”, because the draft eases stipulations on the obligation for digital companies to build data centers in Indonesia.

AlphaBeta associate Genevieve Lim, who was involved in the aforementioned report, said its projection comprised several sectors that could benefit from digital trade, such as agriculture and food, education and training, consumer goods and retail, infrastructure, resources, financial services, manufacturing and health.

Digital exports, she said, were expected to grow by a whopping 768 percent to Rp 240 trillion by 2030 from Rp 28 trillion two years ago, provided that Indonesia and its trade partners were willing to reduce barriers related to digital trade.

“Digital trade could help businesses [...] identify and enter new markets easily,” Lim said earlier this week. “[Physical] market identification used to be costly and risky, but now all an enterprise has to do is register through any existing [digital market] platform and begin selling.”