Diving into Indonesia's E-commerce Export Potential Part 3

This is part 3 of our Indonesia eCommerce Export Potential Series which covers Indonesia’s government’s efforts to help local e-commerce exports.

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Part 1 covers Indonesia’s fashion and processed food e-commerce export potential

Part 2 covers Indonesia’s cosmetics e-commerce export potential

Government-Planned Support and Initiatives

Indonesia’s government has highlighted e-commerce as a way to help boost its national exports while boosting national economic growth. According to a report by Redwing Asia¹, e-commerce contributed only 1.6% of Indonesia’s GDP in 2015 but has the potential to contribute US$ 657 billion dollars to Indonesia’s economy by 2030, with an average growth of 25 per cent in the next 17 years.

To help the local Indonesian businesses sell more overseas, the Indonesian government is planning a quite a few initiatives:

Indonesia eCommerce Roadmap

In 2017, Indonesia released Presidential Regulation (Perpres) Number 74 2017 aimed at boosting the local e-commerce scene’s growth. As of the time of this writing, the plan is being revised to help boost the export potential of local Indonesian e-commerce companies.

The original Perpres Number 74 2017² contained the following provisions:

Funding - microcredit programmes for MSMEs, startup mentorships, and more.
Taxation - lower tax rates for local startup investors.
Consumer protection - The government will regulate electronic transactions in order to allow for transactions and government spending through e-commerce and develop a national payment gateway (which will be under the supervision of Bank Indonesia).
Education and human resources - The government will start a national e-commerce awareness campaign along with a national incubation programme, and e-commerce education programme for all stakeholders.
Logistics - e-commerce players will be allowed to leverage on national logistics system (Sislognas). Local and national courier companies to be strengthened and logistics routes from rural areas to cities are to be developed
Communications - Further develop communications infrastructure via national broadband development
Cybersecurity - To set up a national surveillance and e-commerce monitoring system, educate the Indonesian public on cyber threats, standardise data collection.
Management - Form an operating management structure to manage, monitor and evaluate the implementation of the e-commerce roadmap.

While the above was aimed at boosting the local e-commerce scene, particularly in areas such as regulating payments and developing a national payment gateway, the Indonesian government decided to add revisions to help out exports of local Indonesian e-commerce products. The updated version of Perpres Number 74 2017 contains the following revisions³:

Data protection
Cross-border protection
Cross border transactions
Digital goods and services
Strengthening the competitiveness of local products and Micro, Small and Medium Enterprises (MSMEs)

This displays the Indonesian government’s commitment to improving e-commerce exports in the country, with some of Indonesia’s ministries actively working with tech companies to make their roadmap a reality.

However, as of the time of this writing, the revised plan will only be released after the WTO⁴ releases its own rules regarding e-commerce as the plan currently conflicts with a recent WTO ruling. The plan is being looked into again with the WTO regulations as a foundation.

Building Industry 4.0 Capabilities for SMEs

Indonesia has also been looking to modernise its local economy via its ‘Making Indonesia 4.0’⁵ plan. This is part of Indonesia’s plan to prepare the country for the shift to Industry 4.0, which requires the development and integration of connectivity, technology, information and communication. If all goes well, Indonesia’s government is hoping this can improve Indonesia’s economy by six to seven percent a year from 2018 to 2030.

This roadmap prioritises five sectors for development and hopes to see them boost the country’s future exports, two of which are discussed in this series. These five sectors include the following:

Food and Drinks
Automotive
Textiles
Electronics
Chemicals

Indonesia’s Making Indonesia 4.0 roadmap includes ten cross-sectoral national initiatives⁶:

Improve the flow of goods and materials - reduce Indonesia’s reliance on imported materials
Develop a roadmap for comprehensive and cross-sectoral industrial zones
Improve sustainability standards
Empower the small and medium-sized entrepreneurs
Build national, digital infrastructure
Attract foreign investment
Boost the quality of local human resources
Boost the development of ecosystem innovation
Design incentives for investment in technology
Harmonize regulations and policies

Other Initiatives to Help E-commerce Exports

Education

As part of Indonesia’s Industry 4.0 roadmap, Indonesia is aiming to educate SME’s so that they increase their involvement in e-commerce.

This program is called ‘Program e-Smart IKM’⁷, with IKM standing for ‘Industri Kecil Menengah’ (Small to medium industry). The goal of this program is to help 10,000 SMEs adopt digital technology.

The government’s role in this is to organise the training and education sessions while industry experts take the lead in educating the SME participants. Here, participants can learn how they can bring their businesses online and also how they can use online platforms, such as marketplaces, to list and sell their products overseas.

Some of the industry experts the government is working with include:

Tokopedia
Bukalapak
Lazada
Blibli
Google
Ralali
Blanja.com
Shopee
iDeA (Indonesian e-commerce association)
And more

So far, the Indonesian government has acknowledged Shopee’s efforts in educating selected MSMEs through the Shopee campus⁸ with also features a special export curriculum. Google has also committed to training⁹ 100,000 Indonesian mobile developers by 2020 who will be able to help bring more Indonesians online and also cater to rising global smartphone penetration.

Improving SMEs labelling and packaging

The Indonesian government is looking to improve the quality and presentation of local SME products and help the economy to shift its focus away from commodities. Part of their plan to achieve this is by aiming to improve local SMEs’ labelling and packaging, which can greatly help its packaged food businesses.

Part of the e-Smart educational workshops provided to local SMEs includes package design sessions. Through this program, e-Smart SME participants will be provided with package design help¹⁰ by the Klinik Desain Kemasan dan Merek Ditjen IKM (Packaging and Brand Design Clinic of the Directorate General of SMEs) to increase the quality and standards of packaging designs.

In addition to this, the Ministry of Industry has facilitated the construction of 24 packaging houses spread across 22 provinces under the management of the regional government. This packaging revamp programme is also seeing usage of QR codes and barcodes to help bring SMEs onboard a more up-to-date payment process.

The inclusion of barcodes and QR codes on SME-manufactured items means is that manufacturers and SMEs will now have an easier time controlling stock, production dates and expiration among other data, which is especially helpful for local packaged food products. These standards also help SME products get sold more easily on both offline retail markets and online channels.

Bringing Broadband to More Places

In an effort to bring internet connectivity to more parts of Indonesia, the Indonesian government has plans to improve the country’s internet infrastructure.¹¹ By bringing faster and more reliable connectivity to more parts of the country, more SMEs would have access to e-commerce and tech-enabled solutions.

Currently, the government plans to lay more fibre optic cables to connect Indonesia’s main islands to the internet by the end of 2019. A high-throughput satellite has been planned to be ready by early 2022.

Indonesia’s fashion, packaged food, and personal care industries show great potential to do well in terms of e-commerce exports. Products from each of these industries have already found demand overseas, and the international coverage from selling these on international e-commerce platforms is undeniable. With the help of initiatives from the Indonesian government and e-commerce players like international logistics partners, Indonesia’s e-commerce exports definitely have a lot of potential to grow in the coming years.

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