Hold your horses: Indonesian government hasn’t approved any new regulation to halt foreign investments

Credit: Frontier Strategy Group

Indonesia’s e-commerce scene recently got rocked by Ambient Digital Indonesia president and TokoBagus co-founder Remco Lupker’s discovery a couple of weeks ago that the Indonesian government apparently has extended its regulations for offline retail to also include online retail as well.

The regulation comes as a shock to a lot of people because, if it is indeed enacted, online retail needs to be fully locally-owned if it wants to operate in Indonesia. Or the companies need to have a store at least the size of 2,000 square meters to be exempt. That is definitely a huge blow to any foreign companies looking to expand their operations to Indonesia, and would halt the investment pouring into the country, too. This could well be a lose-lose situation for both parties.

Is there any way for foreign companies to work their way around the new regulation? Fortunately, the answer is a resounding “Yes!”

We spoke with Vichi Lestari, a lawyer from Trias Consultant, who has handled numerous tech companies as her clients as well as being a legal consultant of Indonesia’s ministry of industry. She gives us a breakdown about the disputed new regulations that have been circling around the e-commerce industry. It has been confirmed that the regulation has not been passed yet.

The new e-commerce regulation is not yet official

First things first: Vichi told us the aforementioned e-commerce regulation is not yet approved by anyone. This is what she said:

My associate has confirmed with the minister of trade (legal department) that that is just a proposal and has not yet come to pass and that is why that has not been confirmed and passed to other ministerial (ministry of industry).

So therefore, it is not regulated yet and not yet become a regulation.

The confusion about the e-commerce regulation seems to have sprung up from the letter in Remco’s possession. The letter was written by the secretary general of the ministry of trade with the reference 689/SJ-DAG/SD/6/2013. It is an official letter of intent instructing the Indonesian Investment Coordinating Board (BKPM) to execute the regulation, and it has also been confirmed by the BKPM’s own investor relations unit that the letter does exist.

The letter of intent is a document outlining an intention to suggest a regulation, so it’s not related or binding to any parties. Not only the regulation is not finalized, it hasn’t yet reached the desk of the other ministries for discussion.

The letter however, doesn’t seem to be open to the public. We, as well as Vichi, have tried asking for that letter from BKPM to no avail. Vichi reiterated that the e-commerce regulation has not been passed. For a regulation to be passed, it requires approvals from the other ministries. In this case, even if the ministry of trade has passed the regulation, it will still not be enacted yet.

What if the proposal passes?

If it passes, who will be affected?

Is there a way around it?

How likely is it “web portals” will also be regulated?

Conclusion