Indonesian e-commerce roadmap to guide segment's development


The 2017 release of a mid-term e-commerce roadmap marked an important step forward for e-commerce development. Under development for more than a year, the roadmap established a policy framework and action plans across a host of relevant areas, including taxation, consumer protection, human resource development, communications, management, logistics and start-up funding. It set targets and deadlines for various government entities expected to play an important role in future e-commerce growth. As the plan’s implementation period is ending, the government has also made good progress to establish the National Payment Gateway (GPN), which expanded rapidly in mid-2018, reducing bank fees and improving transparency, as private sector stakeholders call for reforms.

Roadmap Released

In August 2017 President Joko Widodo’s long-awaited e-commerce roadmap was finalised, establishing long-term priorities to promote digital economic development over the next two years. The roadmap introduces regulations for technology and offers solutions to challenges facing e-commerce expansion, including logistics, cybersecurity, taxation, human resource development and consumer protection. The roadmap also encourages wider access to community-based business loans and alternative funding schemes, such as crowd-funding and seed capital. The roadmap had been under development since 2016, when President Widodo instructed ministries to support a broader goal of transforming Indonesia into South-east Asia’s largest digital economy. Eight ministries and institutions collaborated to draft the roadmap, including the Ministry of Communication and Information Technology, Bank Indonesia (BI), the Coordinating Ministry of Economic Affairs, and the Ministry of Finance.

Consumer Protection

The e-commerce roadmap can guide central and regional governments to establish policies and various action plans to develop the segment, and providing guidance for industry stakeholders. One of the eight pillars identified by the roadmap concerns consumer protection, which has already been an issue in other areas of digital economic development, most notably peer-to-peer lending. The government is also keen to reduce banking costs for its citizens and to improve national financial transparency by transforming Indonesia into a cashless society. With that in mind, the e-commerce roadmap’s consumer protection pillar called for the creation of the GPN, in addition to government regulation of electronic transfer transactions.


Indonesia has made steady progress in GPN development since launching the e-commerce roadmap. In December 2017 BI launched the GPN system, which offers shared payment infrastructure on a nationally integrated electronic payment channel. Managed and operated by a consortium of Indonesian interbank switching companies, the GPN will introduce interoperability for the payment platforms of Indonesia’s four biggest banks: Bank Mandiri, Bank Central Asia, Bank Rakyat Indonesia and Bank Negara Indonesia. Although a memorandum of understanding signed in 2013 had already enabled interbank transfer processing at any ATM machine, transaction costs were elevated because banks’ payment systems were not integrated. Foreign investors also complained when BI issued a regulation requiring all switching companies participating in the system to be at least 80% domestically owned. However, BI’s payment gateway is expected to bring transaction costs down from between 2% and 3% to 1%, meaning customers can now withdraw money from ATMs that are not owned by their bank without paying high fees. BI also encouraged foreign payment systems including Visa and UnionPay to join the GPN, although private sector stakeholders such as UnPAY and Tencent have called for reforms to encourage private sector participation.

Phase Two

GPN activities have been progressing steadily, with BI announcing in March 2018 that it is launching the project’s second phase, which will establish transaction standards and consumer fees for bank transactions, allowing lenders to cut cross-bank transaction costs through more efficient processes. Transaction standards will also play an important role in supporting the development of a planned multi-lane free flow system set to be implemented on the country’s network of toll roads, meaning that drivers will no longer have to tap their cards to pay at toll gates.

However, there still is work to be done. Logistics capacity constraints remain a challenge, with Indonesia positioned below middle-income neighbours Thailand, Malaysia and Vietnam in the World Bank’s Logistics Performance Index in 2018, despite rising 17 places since 2016 to rank 46 overall. Global consultancy firm Accenture noted that Indonesia’s logistics network is the main constraint on its booming e-commerce market, as it pushes up delivery costs, particularly in more remote regions. Meanwhile, the country’s unbanked population will likely remain above government targets in 2019, which could mean delays in realising the full potential of GPN reforms. However, the GPN’s establishment demonstrates promising progress in digital economic development, putting Indonesia on track to make a full transition into a cashless and more transparent society while also supporting sustainable e-commerce growth.

Regional Integration

The potential for e-commerce to emerge as a key engine of economic growth and wider financial inclusion is clear. Indonesia has the largest internet economy in the region, estimated to be worth $27bn in 2018. A report by Google and Singaporean investment firm Temasek found that the Indonesian e-commerce market also led the way in South-east Asia, valued at $12bn in 2018, which represents $1 in every $2 spent via e-commerce across the region. By 2025 the e-commerce market has been anticipated to expand to $53bn. With this being said, Indonesia’s e-commerce market will not develop in isolation from its neighbours. “E-commerce players rely on the implementation of regional strategies,” Steven Calvin, vice-president of iLotte, a local online marketplace, told OBG. “In Medan, which is close to Singapore and Malaysia, products in the offline market are different than those in Jakarta as some of these are directly imported from Singapore. The same applies to Manado, which is located close to the Philippines. E-commerce market players have to align their strategies to develop the market; the added value of e-commerce is to introduce local products to other regions.”

In an effort to capitalise on the greater potential of the regional e-commerce market, ASEAN trade ministers inked an agreement regarding e-commerce at the 33rd ASEAN Summit in Singapore in November 2018. Following nine rounds of negotiations, the final agreement concluded with the following objectives: to facilitate cross-border e-commerce transactions; to create trust and confidence in e-commerce usage; and to expand cooperation among member states to ensure that e-commerce emerges as a growth driver for not only Indonesia, but also for surrounding ASEAN nations.

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The Report: Indonesia 2019

Retail & E-Commerce chapter from The Report: Indonesia 2019

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