Indonesian government launches food stocks monitor app

Source: en.tempo.co

In another digital initiative from the Indonesian Government, The National Economic and Industry Committee, which advises President Joko Widodo on economic policies, is developing a mobile app to collect data and information on food production and stock levels, reports The Jakarta Globe.

The app will collect food stocks data directly from farmers, distributors, storage centers and markets across Indonesia in order to provide the government with accurate and timely data. The app will be called “Logistik Tani”, which is translated to “Farmer’s Logistics” and is currently being developed with state-controlled Telkom, Indonesia’s largest telecommunication company.

This initiative will attempt to clean up conflicting data retrieved by the Ministry of Agriculture and the Central Statistics Agency. Prices of rice, corn and beef are often inaccurate and spiked, despite results suggesting that Indonesia should have a reasonable amount of food stocks. Inaccuracies in data often cause conflict within the government, as it affects their policies on importing goods. The app will provide more clarity to the confusion, and allow the government to track any sudden changes in the field.

Prices of rice, corn and beef are often inaccurate and spiked. The food stock app will attempt to clean up conflicting data retrieved by the Ministry of Agriculture and the Central Statistics Agency

Farmers will be able to download the mobile version of the app, allowing them to make real-time inputs on their crop and livestock situations. This is part of the government’s initiative to boost Indonesia’s manufacturing sector, as previously seen with the announcement of their e-catalogue site which provides real time prices of goods and supplier details. However, not a lot has been covered about whether farmers are equipped with mobile data to fully utilize this app. Digital Government initiatives are always encouraging, but it also must go hand in hand with full co-operation from its target groups.

A version of this appeared in Jakarta Globe on June 30. Read the full article here.

e-catalog in Indonesia will help commodity visibility rice farmers

An e-catalog has been set up by the Indonesian government to list goods and services online that provides buyers the list of prices, suppliers and contractors. The catalog is set to reduce corruption, as prices of goods are often marked up by distributors to poor buyers (often farmers or SMEs) who don’t have visibility on market rates. The real price of goods will be displayed online, increasing transparency. The catalog is also expected to promote local businesses through online listings.

The e-catalog in Indonesia is now set up for Gorontalo province, Semarang in Central Java, Yogyakarta and Badung district in Bali in further efforts to save the government more money. The Services Procurement Policy Institution (LKPP) expects the digital initiative started last year to grow further as it encourages the government to do online shopping thus cutting out unused transportation, human resources and accommodation costs as everything is digital.

Prices of goods are often marked up by distributors to poor buyers (farmers or SMEs) who don’t have visibility on market rates.

Prior to the new scheme implementation, procurement took a longer time as the regional government needed to propose the procurement details to the central government before following it up to LKPP.

E-catalog to also promote local businesses

The Indonesian government hopes that the launch of the e-Catalog will also open up opportunities for local businesses, as they would be directly listed on the website. Businesses will have the chance to contribute to the development of their own region. As the website will encourage regional connectivity, local production will have a chance to be exposed to a wider market.

The e-catalog is expected to open up opportunities for local business to contribute for the development in the area. In addition, it would enable the local production to boost the wider market and also become a pilot project for other regional governments, showing the sign of a breakthrough to support national program.

LKPP-procurement, Indonesia e-Catalog

Source: e-katalog.lkpp.go.id/

A version of this appeared in Jakarta Globe on June 18. Read the full article here.

Out of 189 countries, Indonesia ranks in the bottom 30% of worst countries to do business in according to the World Bank in 2014. Nonetheless, with its quarter billion population and largely untapped ecommerce potential, the archipelago is still pegged as the next big thing after India and China. Some even call Indonesia China’s little sister.

Since President Jokowi came into office in 2014, one of his main goals was to attract more foreign direct investment to Indonesia and on May 12, the President signed Presidential Regulation number 44 of 2016 that changed the rules of the Negative Investment List, a list that stipulates which sector is open to foreign investment in Indonesia as well as the percentage of foreign ownership permitted. Specifically, it changed foreign ownership laws in ecommerce business.

Now, 100% foreign ownership is allowed for business and companies approved under the Investment Coordinating Board (BKPM). The caveat is that the ecommerce business in Indonesia needs to have a value  of at least 100 billion IDR ($7.3 million US). If a foreigner has a great idea for an ecommerce venture but without the minimum investment, they can own a minority stake in a company, up to 49% with an Indonesia counterpart.

The Investment Coordinating Board’s (BKPM) director for business development, Pratito Soeharyo, said that since October last year, any company, including ecommerce businesses worth 100 billion Rp or more could be established in just three hours under the so-called three-hour licensing facility. Since the three hours licensing facility has been introduced, any company not in the list of Negative Investment List category could be established in three hours compared to the previous 23 days it required. Ecommerce business is now one of them.

Who Benefits the Most

1. Enterprise level ecommerce corporations 

Regulation 44’s valuation threshold will encourage large and established foreign investors to set up operations in Indonesia, such as Amazon, which just announced its expansion into Indonesia on June 16 2016. 

2. Local Indonesian ecommerce startups 

The other major winners and perhaps most important of all are smaller ecommerce startups from Indonesia. The regulation will ensure that foreigners who don’t meet the threshold of $7.3 million USD will have a joint venture with a local partner. The maximum foreigners can own is a 49% stake. 

 This will help level the playing field for both foreigners and local players as they will be able to easily attract more foreign investors.

Definition of “ecommerce business”

“Ecommerce business” is defined as online marketplaces, daily deals websites, price-grabber sites, and online listing platforms. Ecommerce enabler services such as logistics companies and on-demand transportation services are also included in the category, which falls under the jurisdiction of the Ministry of Communications and Informatics.

The change in regulation is part of a larger ecommerce roadmap that is being drafted by the government. The few key topics proposed are about consumer protection, including payment gateway and estimated delivery time, and also fiscal and business entity surrounding the industry. The roadmap plan will be finalized this year.

How Ecommerce Regulation 44 in Indonesia affects current e-business

Foreign ecommerce players operating in the country were using loopholes by splitting business units in the company and registering multiple entities.

For example, one local company is established to handle fulfillment where it owns the inventory and handles everything related to delivering the product to the consumer. Another separate entity holds the IP and is registered as a web portal. The fulfillment company can have an exclusive contract with the web portal legally by Indonesian regulations. But this process of setting up multiple entities takes a lot of money, time and requires a lot of trust.

Overall, the new regulation will enable an easier process in setting up an ecommerce business or injecting new capital to the existing players. And in future cases where foreign ownership exceed the allowed percentage, they will have two years time to comply with the rules with three options:

  1. Sell their shares to the local investors,
  2. Sell their shares through the domestic capital market, or
  3. Buy the exceed ownership portion from the investors and treat it as treasury stock.  

Indonesia Ecommerce Market Potential

The changes in this regulations are expected to serve as a strong foundation to level out the playing field, giving local companies more foreign know-how and foreigners a chance to have a localized best practices as well as stimulate job growth. 2015 saw the total ecommerce sector reach $19.7 million US and employ 3404 people. With the new regulation, 24 projects were listed in Q1 2016 and the government expects to see ecommerce sales in the country rise to $25 billion US by the end of the year and reach $130 billion US by 2020.

The government expects to see ecommerce sales in the country rise to $25 billion US by the end of the year and reach $130 billion US by 2020 with Regulation 44.

Sales estimated with the expectation that the number of internet users in Indonesia will reach 280 million by 2030. It is already up to 100 million users this year according to data from the Association of Internet Providers (APJII).

Ecommerce Regulation in Indonesia - Ecommerce Foreign Investment Value in Indonesia

Source: Jakarta Post, May 2016

Indonesia versus the world of ASEAN

According to A.T. Kearney, Malaysia and Singapore have the best-established ecommerce laws in Southeast Asia. Philippines has allowed 100 percent foreign ownership for ecommerce. In Thailand and Vietnam, despite the law restricting foreign investment in various sectors, ecommerce in both of these countries is one the sectors that get the most support or promotion by the local government to attract foreign investors. Ecommerce Regulation 44 in Indonesia was taken to entice more foreign investors.

Ecommerce Regulation 44 in Indonesia - Foreign Ownership Regulations for Ecommerce in Southeast Asia

Singapore is considered the easiest country in the world to do business, whereas Indonesia has traditionally been among the hardest

With the door opened for the foreign players to play solo in the open field, it certainly attracts The Giants with a lot of money to burn. But even Goliath can be beaten by David and local players have the advantage of their market knowledge. It will take more than big capital to conquer Indonesia but no one can say that the reward won’t be worth it. 

By Rara Kinasih

Tweet your feedback to @ecomIQ and @ARKRara 

Firms in Vietnam Adopt IFRS

Source: dealstreetasia

As the demands from World Bank, IFC and foreign investors become unavoidable, firms in Vietnam are required to adopt International Financing Reporting Standards (IFRS) in 2020. The application of the international system will be required first by firms listed in HCM City and Hanoi’s stock exchanges.

Evidence showed that the switch to IFRS brought important economic results, with long-term benefits outweighing short-term costs and implementation challenges. The benefits include transparency, accounting quality, comparability and market liquidity among others, a finance ministry official has said. By 2018, Vietnam should have the required legal framework for applying international financial reporting standards.

Inefficient financial regulatory controls

In Vietnam, accounting standards are issued by the Ministry of Finance of Vietnam and are known as “Vietnam Accounting Standards”. The Department of Accounting and Auditing Policy of the Ministry of Finance has formed the Vietnamese Accounting Standards Board (VASB) to develop and approve the standards.

The Ministry of Finance states that it takes International Financial Reporting Standards (IFRS) into account in developing Vietnamese Accounting Standards . However, the IASB website states clearly that Vietnam has not yet adopted the IFRS or the IFRS for SMEs. Some Vietnamese companies prepare IFRS financial statements for the purpose of reporting to foreign investors. However, those IFRS financial statements are supplementary financial statements published in addition to – not instead of – financial statements prepared using VAS. 

The lack of the international reporting standard subject businesses in the country to additional work for their statutory reporting commitments and harm the domestic Vietnamese business by restricting their access to foreign capital.

This change in regulation hopes to attract more foreign investment in Vietnam.

A version of this appeared in AmCham Vietnam on June 17. Read the full article here.

SingPost Releases New Code of Conduct

Source: SingPost

Postal Service Operator, Sing Post announced that five of the company’s directors have resigned. This comes after the news of CEO Wolfgang Baier and Deputy Chairman Goh Yeow Tin’s abrupt departures. Chairman Lim Ho Kee and Non-Executive Director Tam Yam Pin are also not seeking re-election once their term ends at the end of July.

In May, Director Keith Tay also stepped down after a corporate governance audit report found that his interest in a 2014 acquisition was not disclosed. Although the company has remained tight lipped about reasons behind the directors’ resignations, the pattern is indicative enough.

SingPost’s announcement comes after the Accounting and Corporate Regulatory Authority (ACRA) said it was investigating SingPost for possible breaches of the Companies Act.

Four remaining directors will re-seek election at the next Annual General Meeting in July.

“The SingPost saga has shown that perception is as important, if not more important, than the reality, when corporate governance is called into question,” said Joyce Koh, Executive Director of Singapore Institute of Directors to Straits Times.

The slew of resignations have caused SingPost to introduce a new code of business conduct and ethics for its board of directors. The new code of conduct will require the identification and disclosure of conflicts of interest, maintaining confidentiality and reporting unethical behavior. Directors will also now be expected to serve for no more than six years on the board.

Following the internal reshuffle, it shows that directors should never get complacent in their positions, and companies can benefit from internal audit or regular self-assessment

A version of this appeared in Channel News Asia on June 16. Read the full article here.