13 December 2021
Indonesia

The State of E-commerce in Indonesia

E-commerce in Indonesia has already taken off with platforms already active such as Bukalapak. Afriyan Rahmad explains that the current e-commerce regulations are continually changing. So, before investing in Indonesia, investors should be aware of the most recent regulatory updates.

Governing legislation/ framework

E-commerce is mainly regulated under Law No. 7 of 2014 on Trade as further implemented by Government Regulation No. 80 of 2019 on Trade Through Electronic System, and Ministry of Trade Regulation No. 50 of 2020 on Provisions on Business Licensing, Advertising, Guidance, and Supervision of Businesses in Trade Through Electronic System (“E-commerce Law”).

Other applicable laws are on consumer protection, and information and electronic transaction.

Regulatory authority

E-commerce in Indonesia is under the purview of the Ministry of Trade.

Licensing & market entry requirements

  • Types of Entities: E-commerce business actors in Indonesia are divided into (i) merchants that conduct commercial transactions using electronic systems, (ii) E-commerce Providers that provide electronic services and/or communication facilities to facilitate E-commerce transactions, and (iii) Intermediary Service Providers (“ISPs”) that provide electronic communication facilities other than telecommunication, functioning only as intermediaries of electronic communication between senders and recipients; (“E-commerce Business Actors”). E-commerce Business Actors encompasses domestic and foreign persons/ entities.

Domestic E-commerce Business Actors can be set up by (i) individuals, (ii) business entities (e.g. civil partnerships, limited partnerships, sole traders, firms, etc) or (iii) legal entities (i.e. limited liability companies, cooperation (koperasi), foundations, associations (perkumpulan berbadan hukum) or an individual company (perseroan perseorangan).

For foreign E-commerce Provider, they must appoint or establish a trade representative office if within one year period, has (i) concluded more than 1,000 transactions with consumers; and/or (ii) delivered more than 1,000 packages to consumers.

  • Licenses:
    • E-Commerce Business License (Surat Izin Usaha Perdagangan Melalui Sistem Elektronik or “SIUPMSE”) is the main business license issued by the Online Single Submission Agency (“OSS Agency”) on behalf of Ministry of Trade. Certain type of ISPs may apply for exemptions from the obligation to have SIUPMSE.

To obtain SIUPMSE, the relevant entity must first obtain NIB (Nomor Induk Berusaha/ Business Identification Number) issued by OSS Agency, immediately after incorporation of such entity.

    • Business License for the Representatives of Foreign Trade Companies (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing or SIUP3A) for trade representative office appointed or established by foreign E-commerce Provider.
    • Registration of domestic E-Commerce Provider, which is required for any foreign merchant.

Foreign equity restrictions

Foreign entities can set up E-commerce companies and be majority foreign owned – depending on the type of E-commerce Business Actor that may fall under different business classification, i.e. E-commerce retailer classification for merchants, or web portal and/or digital platform with commercial purposes classification for E-commerce providers, or hosting for ISPs.

Foreign equity participation is largely driven by Positive Investment List regulated under Presidential Regulation No. 10 of 2021 on Investment Business Activity, which may restrict foreign equity ownership in each business classification.

Payment solutions, foreign exchange administration and merchant acquiring services

  • Payment solutions: According to E-commerce Law, the banking system or other electronic payment systems can be used for E-commerce payments, in addition to conventional payment methods. In practice, various payment solutions, both electronic and conventional, are available on Indonesian E-commerce platforms, such as e-wallets, credit/debit card, bank transfers, escrow account, and cash on delivery.

However, the Government through Bank Indonesia issued a Bank Indonesia Regulation No. 20/6/PBI/2018 on Electronic Money, specifically prohibiting payments using virtual currency, a digital money that is issued by party other than Indonesian monetary authority (e.g. Bitcoin, Dogecoin, etc).

  • Foreign exchange administration: In principle local currency (Indonesian Rupiah/IDR) can be used for both offering and settlement. However, it is not a common practice for settlement using IDR for foreign E-commerce Provider (or platform) that do not have local presence (or domain) in Indonesia.

While the use of Indonesian Rupiah is mandatory pursuant to Law No. 7 of 2011 on Currency, further regulated under Bank Indonesia Regulation No. 17/3/PBI/2015 of 2015 on The Obligation to Use Indonesian Rupiah within the Territory of Indonesia (“Currency Law”), there are certain exceptions where the mandatory use of IDR is exempted for international trade activity including foreign transactions.

  • Merchant acquiring services: Merchant acquiring services is regulated under Bank of Indonesia RegulationNo.18/40/PBI/2016 of 2016 on Operations of Payment Transaction Process.

Product liability

Product liability is regulated under Law No.8 of 1999 on Consumer Protection (“Consumer Protection Law”), which applies in respect to all goods and/or services provided to consumers.

Data protection

The following information shall, at least, be stipulated in the user agreement for the use of E-commerce website:

  • identity of electronic system operator (penyelenggara system elektronik);
  • object of transaction;
  • worthiness or safety of the electronic system used;
  • guideline to use the website;
  • terms of contract;
  • procedure to conclude an agreement;
  • privacy policy and/or personal data protection; and
  • contact centre phone number.

The privacy policy shall at least comply with the following protection standard that personal data:

  • must be obtained truthfully and legally from the owner of the personal data concerned, accompanied by the existence of choices and guarantees for the safeguarding and prevention of loss;
  • must be owned for one or more purposes that are described in a specific and valid manner, as well as cannot be further processed in a way that is not in accordance with the said purposes;
  • must be proper, relevant, and not too broad in relation to the purpose of their processing as previously conveyed to data owners;
  • must be accurate and must always be up-to-date by way of giving opportunities to data owners to update their personal data;
  • must be processed in accordance with the purpose of its acquisition and allocation, as well as cannot be possessed longer than the required time;
  • must be processed in accordance with the rights of data owner;
  • cannot be sent to another country or area outside of Indonesia, except if the said country and area has been declared as having the same protection level and standard as Indonesia; and
  • parties who stores the personal data must possess a proper security system to prevent leaks or any unlawful utilisation or processing of such personal data, as well as be responsible for unexpected losses or damages to the same.

Use of data is generally consent based. Such use covering data acquisition and collection, process and analysis, storage, correction and update, display, announcement, transfer, dissemination or disclosure; and/or erasure or removal.

Terms and conditions, agreement, policy, consent, or notice, must be provided in Bahasa Indonesia.

Consumer protection

In general, the information shall cover information on the terms of offering and/or acceptance, and the traded goods and/or services.

Under the E-commerce Law, electronic offering shall at least include the following information:

  • specifications of goods and/or services;
  • price of goods and/or services offered;
  • terms in the agreement;
  • payment mechanism and system, and payment term;
  • mechanism and system of delivery of goods and/or services;
  • unexpected risks and conditions; and
  • limitation of liability if the unexpected risk occurs.

In addition to the above information, the offer shall be made clearly within a period, and the terms and conditions for acceptance of such offer by electronic means must be clearly stipulated.

Further with regard to information of goods and/or services, under Consumer Protection Law, business operators are mandated with a set of obligations, including among others, the obligation to provide correct, clear and honest information regarding the condition and guarantee of goods and/or services as well as provide an explanation for the usage, repair and maintenance.

For more information about e-commerce across ASEAN, download the comparative guide, ASEAN Insiders: Electronic Commerce in ASEAN.