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Article Indonesia: Limits on Foreign Investment in E-Commerce Proposed

(Nov. 27, 2015) According to a November 23, 2015, report, Indonesia’s Ministry of Trade is developing a new, more restrictive policy for foreign ownership of e-commerce businesses in the country. The new rules, designed to favor domestic online companies, would apply to online shopping and service businesses. (Govt Prepares Foreign Ownership Limits in E-Commerce, JAKARTA POST (Nov. 23, 2015).) The Director General for Domestic Trade, Srie Agustina, said that the government has been working to revise the negative investment list, the itemization of market sectors that are closed to foreign investment. The list is established in a presidential regulation. (Id.; Negative Investment List, Indonesia Investment Coordinating Board website (last visited Nov. 23, 2015); Presidential Regulation of the Republic of Indonesia, No. 39 of 2014, List of Business Fields Closed to Investment and Business Fields Open, with Conditions, to Investment, Indonesia Investment Coordinating Board website.)

Agustina stated, “[i]n the initial phase, foreign entities would be allowed to have a minority ownership in the e-commerce and marketplace [businesses].” (Govt Prepares Foreign Ownership Limits in E-Commerce, supra.) She added that eventually the plan is to have a cap of 30-40% foreign ownership in a business, but that the new rules would not be applied retroactively to companies that currently have a majority of shares held by foreigners. (Id.) Bambang Heru Tjahjono, the Director-General of Informatics Application at the Ministry of Communications and Information, noted that under the new regulation being considered foreigners would be permitted to invest in existing e-commerce companies, but not new domestic enterprises just starting operations. Foreigners could, however, create new e-businesses based in Indonesia. (Id.)

The marketing communications manager of the online business Global Digital Niaga said that the Indonesian e-commerce industry would benefit from the proposed changes; that favorable view was echoed by Gaery Undarsa, managing director of another Indonesian company, Global Tiket Network. Online businesses in Indonesia are projected to generate Rp49 trillion (about US$3.56 billion) in revenue in this year; that amount is expected to increase 26% in 2016. (Id.)

In a separate move concerning the negative investment list, last month the Indonesia Investment Coordinating Board, a government agency that assists foreigners planning to invest in the country, called for public comments on possible revisions to the list. In addition, the Board’s Frank Sibarani said that the Board “will be more open to investment in manufacturing, forestry, etcetera.”  (Hidayat Setiaji & Gayatri Suroyo, Indonesia Seeks Public Submissions for Revised Negative Investment List, REUTERS (Oct. 16, 2015); Our Services, Indonesia Investment Coordinating Board website (last visited Nov. 25, 2015).)

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Chicago citation style:

Johnson, Constance. Indonesia: Limits on Foreign Investment in E-Commerce Proposed. 2015. Web Page. https://www.loc.gov/item/global-legal-monitor/2015-11-27/indonesia-limits-on-foreign-investment-in-e-commerce-proposed/.

APA citation style:

Johnson, C. (2015) Indonesia: Limits on Foreign Investment in E-Commerce Proposed. [Web Page] Retrieved from the Library of Congress, https://www.loc.gov/item/global-legal-monitor/2015-11-27/indonesia-limits-on-foreign-investment-in-e-commerce-proposed/.

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Johnson, Constance. Indonesia: Limits on Foreign Investment in E-Commerce Proposed. 2015. Web Page. Retrieved from the Library of Congress, <www.loc.gov/item/global-legal-monitor/2015-11-27/indonesia-limits-on-foreign-investment-in-e-commerce-proposed/>.