Don't let 'overprotection' cramp Indonesian online retail, say researchers

INDONESIA'S booming e-commerce market risks being tripped up by "overprotection" and an "unpredictable" regulatory regime, a pair of researchers have said.

In a report released on Monday, they argue that heavy regulations on vendors could compound structural barriers such as poor infrastructure connectivity, a tech skills crunch, and e-payment immaturity.

Siwage Dharma Negara, a senior fellow at Singapore's Iseas-Yusof Ishak Institute, and Endang Sri Soesilowati, a senior researcher at the Indonesian Institute of Sciences in Jakarta, therefore conclude that "a conducive ecosystem supported by a clear regulatory framework is needed".

The report cited two rules specifically: the one requiring businesses to have operating licences and tax numbers, the one requiring traders and platforms to give buyers at least two working days to exchange goods and services or cancel purchases.

Rules like these two may burden the micro-, small and medium-sized enterprises (MSMEs), even as they have headed online during the Covid-19 pandemic, the authors said.

Meanwhile, foreign e-commerce operators may stumble in the face of measures that are meant to protect domestic enterprises, the researchers added. They noted a regulatory provision for platforms to use Indonesian Internet domains and a requirement for foreign platforms to appoint representatives in Indonesia.

The report also pointed to regulatory efforts at levelling the playing field between domestic and imported products, as well as between offline and online sales.

"The relevant authorities have enhanced regulatory efforts to ensure data protection, quality assurance and protect local industries against unfair competition from imported products," the researchers acknowledged. "Yet, overprotection by restricting online imports would harm both domestic consumers and micro-retail enterprises."

Noting Indonesia's potential to produce billion-dollar tech "unicorns", they added: "The rapid advancement of digital innovation and technology will require flexibility and adaptability, which means regulations should not become bottlenecks and should be constantly updated."