TEMPO.CO, Jakarta - The considerable attention the government is paying to the development of digital business needs to be regarded with caution because it could end badly if it is accompanied by regulations aimed solely at increasing tax revenues. Conversely, government attention could reap benefits if it leads to concrete policies to help digital entrepreneurs expand and improve the market.
Unfortunately, the digital business roadmap drawn up by Communications and Information Minister Rudiantara at the start of this year shows that the government does not have a scale of priorities. The government says it wants to increase the benefits that digital technology brings to the Indonesian economy, but at the same time it clearly wants to increase tax revenues from this sector. On the ground, these two aims frequently come into conflict.
Just look at how the Jakarta administration has been busy pursuing the Uber transportation service, using the excuse that the San Francisco-based digital app company does not have a representative office in Indonesia. Three months ago, the Trade Ministry released a rough draft of a governmental regulation on e-commerce, which would have obliged all digital businesses to be Indonesian legal entities. However, digital businesses are still on the list of sectors closed to foreign investment. This means there is no chance for digital startups to obtain fresh funds from overseas.
The government should understand that the online market in this nation could grow significantly. This year alone the value of e-commerce transactions rose US$4 billion to US$12 billion, or about Rp168 trillion. Many are convinced that the economic value generated by the growth in Internet connections could increase by 20-fold over the next five years.
Therefore the effort to obtain taxes should be a secondary priority. There is no need to be dazzled by major players in the digital arena such as Tokopedia, Lazada, Djarum and Lippo. There are some 75,000 small and microbusinesses now dependent in the digital sector. Although this seems like a large number, it is only 0.0015 percent of more than 50 million small and medium-sized businesses in Indonesia.
What the government needs to do is bridge the digital divide in this nation. Everybody must have equal access to the Internet to allow them to reap the huge benefits of information technology. The bounty must not be confined to a few wealthy individuals.
So there are two things the government must put right: the development of digital infrastructure and the reinforcing of the culture of innovation. Indications of corruption like that seen in the project to supply Mobile Subdistrict Internet Service Centers at the Communications and Information Ministry two years ago must not be repeated. If necessary, law enforcers should be involved from the outset so that there is no corruption in the development of Internet access at the village level.
The development of a culture of innovation is closely linked with the way information technology specialists are educated. At present, many digital companies employ programmers and developers from Malaysia and India because of the shortage of experts in Indonesia. No less important is a business climate that is friendly towards digital innovation. The system used in Silicon Valley in the US could serve as an example.
One aspect that is often neglected when an industry or a business activity shows a great deal of promise and is immediately taken up by entrepreneurs, high and low, is the ethics of doing business. Often, the victims of unscrupulous players are usually the unprotected and the defenseless, on both sides of the fence, the small traders and consumers. Fraud and other kinds of cybercrime is on the rise and only until the government makes sure that rules exist to ensure the rule of the law, will the online or digital business get off to a good start.
When the government has done all this, will we be able to dream of digital giants like Facebook and Google emerging in Indonesia. (*)
Read the full story in this week's edition of Tempo English Magazine
