Best Paper from IDF 2019: Nika Pranata Pushes Restrictions on Individual Imports and Formation of E-commerce Villages

Nika Pranata

With just a touch of a finger on a smartphone, every individual can now import goods from abroad via e-commerce platforms. In a survey conducted by the winner of the Best Paper at the 2019 Indonesia Development Forum (IDF), Nika Pranata found as many as 87.8 percent of respondents were aware of the convenience of the import. In fact, 45.96 percent of respondents said they had imported individually.

"Shopping directly abroad has the potential to erode the market share of our online sellers," said Nika, an Economic Researcher from the Indonesian Institute of Sciences (LIPI).

Through a research entitled "How Should the Government Promote Competitiveness of Indonesia's Micro, Small, and Medium Enterprises (MSMEs) in the Borderless Trade Era?" Nika received an award from the Minister of National Development Planning / Head of Bappenas, Bambang Brodjonegoro. Nika's research related to Sub-Theme 5, Developing Globally Competitive Micro, Small and Medium Enterprises.

Nika is a graduate of the Master of Economics and Public Policy program from the National Graduate Institute for Policy Studies (GRIPS), Japan and the Masters program in Applied Economics from Padjadjaran University. In 2018, she also received the Best Paper Winner award in Indonesia Development Forum 2018. She has published various scientific papers and policy texts and presented them in various international and national forums.

In the IDF 2019p resentation on July 23, Nika presented the results of a shopper survey from 34 provinces.  As many as 45.96 percent of respondents who claimed to have imported goods individually, they bought through e-commerce platforms from China and the United States namely Alibaba 55 percent, AliExpress 49.1 percent, Amazon 46.3 percent, and eBay 36.36 percent.  Other global markets where they shop include Rakuten 17.6 percent, Taobao 16.7 percent, Gearbest 15.8 percent, Banggood 12.4 percent, and several other foreign markets by 3.9 percent.

"The reason they buy from abroad, the products they buy are not available or are very limited in Indonesia and the prices of products in foreign markets are cheaper," Nika added.

According to Nika, local e-commerce players are also aware of the competition in the import market. The products that most import buyers buy are accessories, electronic devices, fashion, and beauty products

"Of course, this situation will develop competition between national sellers and global sellers even more fierce which can threaten their survival in e-commerce," Nika continued.

Maintaining the Glory of MSMEs in the E-commerce Era

Nika said that the presence of e-commerce is still important for the survival of MSMEs. According to Nika, policies need to be able to optimize e-commerce for the sustainability of MSMEs in Indonesia. In her research, Nika conveyed a number of recommendations related to domestic protection and increasing local competitiveness.

"At present, the opportunity is still greater. But it does not rule out the possibility later in the future, with individual import trends increasing, going forward becomes a potential threat to our online sellers,“ she said.

For domestic protection, the main points provide import restrictions for individuals because so far it has not been restricted. The only barrier is the US $ 75 threshold as the maximum value that qualifies for no import tax and Value Added Tax (VAT) fees. With this policy, as long as individuals are willing and able to pay import taxes and VAT, they can import as much as they want.

"It's different from overseas conditions, in China they limit individuals to import. Even though they are already very expansive in exporting, but they can protect local products with restrictions on imports by individuals," she explained.

Nika gave an example, a one-time import limit policy of a maximum of IDR 10 million and in one year should not exceed a total of IDR 50 million. The process of making restrictions is indeed a long step because it is related to the principles of free trade in the World Trade Organization (WTO).

"But, that's one thing we can stand for. If other countries can, we can too," said Nika. 

Meanwhile, related to increasing domestic competitiveness, Nika recommends efforts to prioritize products that have a comparative advantage in the e-commerce market, for example agro and food products. Because to compete in the production of fashion, electronics, and accessories, it will be difficult to do in the short term. 

"The government must promote or build national-scale markets for agricultural products, bearing in mind that currently the e-commerce platform for them is small and scattered products such as Tanihub, Limakilo, Aruna, and others," she added.

In addition, because 90 percent of online shoppers and sellers are from millennial and post-millennial generations, that means that people over 37 years old don't shop online.

"It might also be difficult to directly invite them to shop online," Nika said.

Regarding online shopping penetration, the government must promote the Online to Offline (O2O) approach, especially for agricultural products and perishable ones. In China, Alibaba and JD set up retail outlets throughout the country that sell quality fresh agricultural products under the name Hema and 7Fresh.

"The retail stores are digitally connected to the online platform. They only need to scan the product QR code to pay, then the product will be sent in 30 minutes," Nika added. 

Building an e-Commerce Village

Indonesia needs to learn from China in accelerating the development of rural markets, reducing poverty, and providing employment opportunities. The step could be started by establishing and promoting a program similar to Taobao Village, a village linked to the Rural Taobao program from the Chinese giant e-commerce company Alibaba Group.

“There, the marketplace made the initiative, and they required the local or central government to commit to improving infrastructure. In Indonesia, the initiative should be from the government," added Nika.

The government, according to Nika, can collaborate with e-commerce platforms such as Tokopedia, Bukalapak, Shopee, and involve local governments.

"The platform can act as a facilitator to improve the abilities of villagers so they can run an online store and help market their products on the platform," she continued.

For central and local governments, they must ensure better infrastructure and ecosystems, such as increasing the reach and quality of the internet, improving infrastructure and logistics networks, and providing supporting ecosystems and policies, such as ease of business and licensing processes.

"Schemes like this (in China) have proven to be able to absorb more workers and improve the rural economy," she concluded.

Nika presented the results of her research in the Imagine Session, Developing Global Competitive Micro, Small and Medium Enterprises at IDF 2019.  Nika hoped that this study would give input for IDF 2019 which adopted the theme "Mission Possible: Seizing the Opportunities of Future Work to Drive Inclusive Growth".

"Maybe it can be taken to the Ministry of Trade, Customs and Ministry of Communication and Information (Kominfo)," she concluded.

Congratulations to Nika as winner of IDF 2019 Best Paper!