Indonesian e-commerce players face Catch-22 situation

By Masyitha Baziad September 13, 2016

Jokowi asks Jack Ma of Alibaba to be e-commerce advisor
Local players ask for protectionism measure, tax incentive

Indonesian e-commerce players face Catch-22 situation

INDONESIA's e-commerce market is expected to hit US$81 billion (RM328 billion) in 2025, accounting for 40% of the total market in South-East Asia. These statistcs are enticing enough to have reeled in giant e-commerce players such as Alibaba, and Amazon with its rumoured US$600 million investment plan.

In his visit to Alibaba Group Campus earlier this month, President Joko ‘Jokowi’ Widodo explored the idea of bringing more Indonesian SME products to the AliExpress platform.

According to a tweet by the Alibaba Group, the trip resulted in Alibaba’s chief executive officer (CEO) Jack Ma accepting Jokowi’s offer to be an advisor to Indonesia’s e-commerce development steering committee.

By accepting the offer, many suggested that Jack Ma would also leverage on the partnership to strengthen Alibaba’s presence in South-East Asia.

However, with local e-commerce players such as Tokopedia, Bhinneka, and MatahariMall competing with each other to sit on the throne, the possible entrance of Alibaba will serve the further heighten the competitive pressures.

“When journalists ask, ‘what is your stance on Alibaba coming to Indonesia’, I would usually answer ‘bring it on, we are ready and we will do everything we can to win the market.

Indonesian e-commerce players face Catch-22 situation “But behind the spunky answer, local players are concerned,” Andi S. Boediman (pic, right), Ideosource’s managing partner told the local media in Jakarta.

Ideosource is an Indonesian venture capital (VC) firm that invested US$22 million in local online marketplace Bhinneka last year.

Andi argued that the Indonesian government is relatively open to foreign e-commerce players, as only a few protectionism measures are needed to protect local players.

“We learnt from India. Amazon’s US$1 billion investment crippled local players. In our case, we need to remember than Alibaba is already here with Lazada,” he said.

“While the government is encouraging foreign players to come, it should also protect local players with some sort of incentives, perhaps a tax incentive, otherwise all local players will vanish,” Andi warned.

He also feels that protectionism measures should not be merely associated with prohibiting or limiting foreign companies from operating in the country.

According to Andi, if Alibaba enters the Indonesian market with an approximate investment of US$1 billion, it will scare other investor who wish to invest in the country’s e-commerce sector.

“The giants have a big amount of money. Not many companies have the same or a bigger amount to challenge them. Everthing then remains status quo,” he added.

Taking a different view, managing partner of Convergence Ventures, Donald Wihardja told Digital News Asia (DNA) that being an advisor to the Indonesian government does not mean Alibaba gets a free ticket to enter the market.

“What the Indonesian government wants to get is the know-how from Alibaba's Jack Ma about how, with e-commerce, he can empower the manufacturing industry in China.

“Indonesia wants to learn how to support the e-commerce industry, what initiatives we need to be take. Jack Ma is the right person to advise us on that,” he said.

As a close advisor to the government, Donald is confident that Indonesia will ‘pick and choose’ from all the advice from Alibaba's leader.

“We are not going to accept every suggestions and input as they are. We need to ensure that we have filtered the right input based on our local knowledge,” Donald continued.

In addition, he said, China is also one of the most consumptive markets in the world and Indonesia wants to push its SMEs product to that market by partnering with Alibaba.

“The idea of a digital economy is to actually empower the small and medium business owners to reach the global market, and by partnering with Alibaba we are giving our SME players the chance to compete on the global stage,” he added.

He advised local players not be too worried, as he believes the Indonesian government will not kill its own local champions. Instead, they are trying to empower the e-commerce sector in the country.

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