There is this whole thing about Internet investment in Indonesia that seems to be generating a lot of confusion. Most recently, TechInAsia picks up on the subject and went on with an extensive post. Allow me to stir the water a little bit…
[disclaimer] First off, it should be said that anyone who plan to invest 250k USD in the Internet Industry in Indonesia should not rely on bloggers and wanderers. Checking with a proper law firm won’t cost you much and generally should get you some reliable answer.
(I’m curious how a legal consultant work both for the ministry as well as for the’ foreign companies to work their way around the new regulation‘, maybe that’ll work, but I’d recommend you to work with a real law firm).
Regulation… What Regulation?
The TechInAsia post, like the DailySocial post before that, was not clear on what regulation are they talking about. I’m assuming that TechInAsia is referring to the DNI – Daftar Negatif Investasi/Negative Investment List – which is a Presidential Regulation and maintained by the BKPM (Foreign Investment Board), the gov’t agency in charge of approving each individual applicant.
Quite a surprise this morning, renowned tech blog TechInAsia apparently did some solid research that you might expect from a journalist, thumbs up! Well, at least for the effort. The headline is clear (and long): “Hold your horses: Indonesian government hasn’t approved any new regulation to halt foreign investments“. Raise the flags, we’re all saved! Honey, here’s my credit card, go shop whatever you want! Justice is done, we’re all gonna be rich.
Well, to quote TechInAsia: “HOLD YOUR HORSES”!! So, the source for this conclusion is Vichi Lestari, a lawyer working for Trias Consultant, who has handled numerous tech companies as her clients as well as being a legal consultant of Indonesia’s ministry of industry.
Newsflash! I’m not a journalist. This blog is not a newspaper. Really. I’m actually an entrepreneur doing some small investments here and there in Indonesia. Weird thing though. Apparently this blog was the first bringing the news that online retail in Indonesia is now closed for foreign investments. Weird because again, I’m not a journalist. Weird because this is actually not “news”, unless you consider changes to the interpretation of the law that came effective on june 28th 2013 is still regarded news more than 1.5 months later.
So what happened next? Well, Dailysocial contacted me asking for some “proof”. Well, I have the “proof” in the form of an official letter of intent from the BKPM but so far my legal adviser requested me not to publish this document as it was sent to him directly and not me. Now, even though I think this letter is an official and public document, I consider myself a smart person by never upsetting lawyers, period.
What happened next was Dailysocial writing a post with the title “Indonesia’s Ministry of Trade MAY Have Banned Foreign Investment for E-Commerce Companies“. “MAY have…”. What the hell do you mean with “MAY have..” ? Is any artcile with “MAY have” in the title even news? Followed by comments like “…but if what Lupker said is true…”. This was then soon reblogged or posted on sites like Yahoo and some tech blogs like SGE, because DS is “the authority”.
UPDATE: Anyone doubting what I write below please read this post and stop asking me for “proof” or quoting me as an unconfirmed souce! Much appreciated.
Wow, this is kind of a shock indeed. Coming home from summer holiday to find out that e-commerce, or online retail as you will, is now completely excluded from ANY foreign investment/ownership in Indonesia. This was already so for offline retail (unless the shop size is larger than 400m2, 1200m2 or 2000m2 depending on the kind of retail), but until now the online industry was excused for this regulation.
But this all changed on June 28th 2013 with a letter from the Secretary General of the Ministry of Trade with reference 689/SJ-DAG/SD/6/2013. Google it. You won’t find it. But basically all the rules that already applied to offline retail now apply to online retail as well. Check page 61 of Perpres 36 2010 where you find the DNI (list of negative investments) for retail businesses. Now if you think your company type is actually not listed there then don’t get your hopes up. Apparently, any company selling directly to consumers (as in private persons) is only allowed in case of 100% local ownership.
It’s a pretty new phenomenon in Indonesia. I have two paid sim cards from Telkomsel and XL. For both I pay a monthly subscription fee and obviously I pay for the usage. So far no problem. However, both Telkomsel and XL decided to monetize their paying customers just a tad bit more. When you now access the Internet using 3G changes are you will get to see a Pop ad which is basically a complete page take over. Something similar as in this screenshot.
Annoying to say the least. Also pretty much illegal in most of the rest of the world. And for good reasons I think. Why? Well, first of all, I pay for this service.
It’s not like I use a website like Tokobagus for free and Tokobagus in return shows me some ads to pay for the bills. No, I actually pay for this service and at the time when I subscribed their service did not include any pop ads. Next, I never did an opt-in for this service, which in my understanding is required by law. But even when not required by law, it would be the proper netiquette. Right? Also, as far as I know and can remember I never got any instructions on how to opt-out.
I will share the opt-out methods in the end of this post.