Rudiantara: The rules of the game need to be established

TEMPO.CO, Jakarta - The positive trend on digital economics has caught the attention of President Joko Widodo. This lucrative business has been expanding in the past few years and is expected to continue growing in line with the increasing numbers of Internet users with their smart-phones. The Indonesian E-Commerce Association (idEA) recorded at least US$12 billion worth of online commerce in 2014. This has led the President to urge Communications and Information Minister Rudiantara to prepare the necessary steps to ensure Indonesia can benefit from the rapid growth of online businesses.

Rudiantara himself is optimistic that digital transactions in Indonesia can reach US$137 billion or eight to nine percent of national gross domestic product (GDP) by 2020. "We must establish the rules of the game so Indonesia can benefit from it," he said. Rudiantara shared his views on this new economic phenomenon with Tempo reporters Akbar Tri Kurniawan and Ursula Florence at his residence in Jakarta last week. Excerpts:

Is the government late in responding to the problems faced by the growing e-commerce in Indonesia?

We are learning from (the experiences of) China and the United States. I was instructed by President Joko Widodo to take steps in pushing for a digital economy. I've spoken to the Indonesian E-Commerce Association, and I've also asked the assistance of (CPA company) Ernst & Young to provide us with a roadmap. There are seven multi-dimensional obstacles, and they're not from this ministry. Problems include payment gateway, investment, taxes, delivery logistics, consumers protection and broadband. Our task is to provide connectivity, to ensure the Internet does not slow down and to ensure security. The plan is to have the roadmap completed by the end of September.

Is the payment gateway the biggest obstacle?

About 74 percent of e-commerce settlements and transactions are done by inter-bank transfers through the ATM. (Currently) the buyer scans his receipt and sends it to the seller. This is complicated and not efficient. There must be a national payment gateway. It requires the (monitoring) of monetary authorities on all transactions. In the US, payments can be done through Paypal, in China it's the Alipay. Payment will include the tax component. We have spoken about this to Bank Indonesia to set up a regulatory system and we asked that it be accelerated.

When small and medium enterprises (SMEs) took the initiative, no government agency came to help them. Yet, when they started to expand, the tax people were immediately after them.

The government should not think about taxing anything to death. We cannot look backward, but forward. All this must be organized. Entities that have grown must not be killed and start-ups should be given assistance. The Brunei Darussalam government, for example, are allowing foreign digital start-ups with capital if they are willing to set up shop there. Indonesia should not stay idle. Don't let smart Indonesian kids be hijacked by outsiders.

Is the government willing to provide capital?

We don't have a program yet especially to encourage start-ups. It's not easy to convince people that this needs funding, because out of 100 model start-ups, maybe two or three will succeed. We recommend that funding for start-ups be carried out by the Public Entrepreneurs Credit bank. It's been noted but not yet reported to the President.

Of the e-commerce transactions valued at US$12 billion last year, how many paid taxes?

The largest (income) came from ticketing. Big companies have paid their taxes. All entities that do their transactions on networks, including online stores, are taxed and they get a lot of help in processing them. We take care that in calculating incomes and outcomes, the final amount taxed is not like those in the stock market. (*)

Read the full interview in this week's edition of Tempo English Magazine