Indonesia Calls for FDI in Digital Economy

Indonesia is home to Southeast Asia’s largest digital economy. After a period of rapid growth, the government now eyes at increasing FDI to further grow the sector.

Building “10 New Balis” – the Indonesian government has called for foreign investors to invest in the digital economy and the development of tourist destinations.

According to the Indonesia Investment Promotion Center (IIPC) in New York, Indonesia’s digital economy has reached a market size of $27 billion in 2018, making it the fastest growing and the largest digital market in Southeast Asia. Google and Temasek expect this number to grow to $100 billion over the next ten years.

The government seems highly motivated to support this trend and supports the build-up of the digital economy through its 14th economic policy package. The goal is to help tech startups get access to funding, provide tax incentives and HR education and strengthen consumer protection.

eCommerce roadmap aims at global interconnectivity

The 14th economic policy package was released in 2016 and entailed an eCommerce roadmap. Minister of the Economy Darmin Nasution said in 2016, “The package aims at boosting the expansion and improvement of people's economic activities across Indonesia in an efficient and globally-connected manner so that the economic activities can reach further and wider."

Government removes FDI restrictions

In 2016, the government announced its plans to become the largest digital economy in Southeast Asia by 2020, a goal that has already been achieved. But now, the digital sector needs more foreign direct investments (FDI) to bring both, funds and technological know-how into the industry.

In November 2018, the government announced to relax FDI rules. The revised rules will allow 100 per cent FDI in 54 business sectors that up until now were closed or restricted for FDI. The industries currently restricted include mainly energy and natural resources, technology, media, and telecommunications, life sciences and health care, manufacturing and transportation.

Moreover, the government announced it would remove requirements for foreign investors to partner with local small and medium-sized businesses.

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