Alibaba Founder Jack Ma Agrees to Advise Indonesia on E-Commerce

Coordinating Economic Affairs Minister Darmin Nasution, center, and Communications and Information Technology Minister Rudiantara, right, meeting with Alibaba founder Jack Ma in Beijing on Tuesday (22/08). (Photo courtesy of the Communications Ministry)

By : Tabita Diela | on 4:22 PM August 23, 2017
Category : Business, Economy, Featured

Jakarta. Jack Ma, the founder of Chinese e-commerce giant Alibaba, has agreed to become an advisor to the Indonesian government to help the country tap the rapidly growing sector.

Ma relayed his acceptance to Coordinating Economic Affairs Minister Darmin Nasution and Communications and Information Technology Minister Rudiantara during a meeting in Beijing on Tuesday (22/08).

The Indonesian government is struggling to come to grips with the growing e-commerce and service market, which shows promise of increasing the wealth and income of the country's population, but which currently contributes very little to state revenue and disrupts existing businesses.

Ma will advise a steering committee chaired by Minister Darmin.

"Jack Ma said he will come not as a Chinese company, but [he] will develop the ecosystem so micro-, small and medium enterprises – people living in suburban areas and villages – can get additional economic value by using technological development," Rudiantara said in a statement.

The committee's responsibilities include making a roadmap for the development of the digital economy, which includes logistics, funding, consumer protection, communications infrastructure, taxation, education and cybersecurity.

Ma and the Indonesian government agreed on the importance of ICT infrastructure and payment systems for the country.

"A breakthrough must be made by using the 'channel' in which approximately 175 million Indonesian people have at least one phone," Rudiantara said.

President Joko "Jokowi" Widodo met Ma in September last year while on a visit to Huangzou during a Group of 20 meeting. The president asked Ma for help, telling him at the time that Indonesia had 56 million small and medium enterprises, which he wanted to enter the global market.

However, about two months later, Ma was reportedly placed in a difficult position after being offered a similar role by the Malaysian government.

Alibaba has invested billions of dollars in Southeast Asia's e-commerce market, seeing potential growth in the region. In June, it injected $1 billion in the Lazada Group, which operates Indonesia's largest e-commerce website. Last week, Alibaba also led a $1.1 billion investment drive in Lazada's local rival, Tokopedia.

Indonesia's e-commerce sector is expected to grow rapidly over the next decade as the country's young population embraces the mobile internet and online transactions.

Projections by Google and Temasek predict that Indonesia's e-commerce market may grow 27-fold to $46 billion by 2025 from just $1.7 billion a decade earlier.

However, the government has so far seen little tax revenue flowing into its coffers from the sector, while at the same time, traditional retailers – which have so far been the backbone for tax revenue – saw their sales suffer due to the new competition.

"The tax and customs office is formulating tax on e-commerce," Finance Minister Sri Mulyani Indrawati said on Monday.

Sellers and buyers may live in different regions that impose different tax rates on particular goods, adding complications for the tax office to levy taxes, Sri Mulyani said.

"The problem with digital business is not how to detect them, but it's about how to determine a dynamic taxation system," the minister said.

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