Amazon in talks with govt to enter Indonesia’s burgeoning e-commerce market

“I want to make sure they meet the regulations in Indonesia, especially the readiness to pay taxes,” said the minister.

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American e-commerce powerhouse Amazon is currently in talks with Indonesian Finance Minister Sri Mulyani Indrawati regarding market entry plans, said the official at a forum in Jakarta on Monday as reported (in Bahasa Indonesia) by local media source KataData.

“I want to make sure they meet the regulations in Indonesia, especially the readiness to pay taxes,” he said, adding that the country has been successful in collecting taxes from tech conglomerates such as Google.

Amazon has always had its eye on Asia, although its past track record has not been a successful one in this part of the world. In China, it is struggling to beat local giants like Alibaba, and JD.com, amongst smaller newcomers.

According to Business Insider, the company’s market share in the Chinese e-commerce space dropped from 2% in 2011 to 1.3% in 2016, while Alibaba controls more than 40% of the market.

In Southeast Asia, it has started operating out of Singapore since late-2017, with media reports in March indicating that it has plans to enter Vietnam. Its strongest market in Asia is India, where it is looking to operate at least 50 fulfilment centres nationwide by December 2018.

Takeaways

  • Although Amazon might be a latecomer to Indonesia’s burgeoning e-commerce market, it’s still a titan with enormous resources for a good fight with incumbents, including numerous local and regional e-commerce companies, of which a number are currently owned or backed by Chinese giants like Alibaba, Tencent or JD.com, like Lazada, Tokopedia, and Shopee. Many of these firms are on a cash-burning spree, which means that if Amazon wants to find success in Indonesia, it may need to follow suit.
  • While Indonesia might have been able to get Google to pay local taxes, a rarity since there were only three other nations managing to do so, one wonders if Amazon will comply in order to enter Southeast Asia’s largest market. Amazon was also recently called out by UK anti-trust watchdog for manoeuvring taxes through overseas operations in order to pay less, and consequently, crush smaller, local and independent competitors who are not able to do so.

Editor: Ben Jiang