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Indonesia: e-commerce firms must have local domain

Show me some .ID, says Ministry

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Indonesia will effectively ban cross-border e-commerce and make it harder for foreign firms looking to invest in the country, by mandating that anyone wanting to sell goods online must register a local .ID domain.

The Communication and Information Ministry made the announcement as part of new rules for “electronic system operators” designed to clamp down on fraudulent web sites, according to Jakarta Globe.

The rules, likely to be implemented later this year, will force any firm wishing to do business in the country to register a local domain, meaning the local authorities can perform strict background checks and on-going monitoring, and even levy penalties or block a site completely if they find something wrong.

The plans are apparently a response to the growing number of cases of e-commerce fraud in Indonesia originating from sites registered with international domains such as .com, which over which the government has no control.

While efforts to improve trust and online security are no bad thing, the new rules will provide an extra barrier for foreign firms looking to sell into the country, as business .id registrants must be locally incorporated with a domestic postal address. There are rumours that the provisions will also mandate local data centres.

That requirement would be bothersome for foreign investors, who have noted that Indonesia is modernising rapidly, has the world’s fourth largest population and is adopting the Internet at speed.

Research from local firms Veritrans and DailySocial last August predicted that the size of the local e-commerce market would triple from £0.9bn in 2011 to $10bn by 2015.

Forrester, meanwhile, estimates that the country’s online consumers will grow from 47.3m in 2011 to 101.5m in 2017, according to Asia Pacific VP Andrew Stockwell.

He argued that the new registration rules would not necessarily provide too much of a hurdle to the likes of Amazon, which has local domains in countries like China and Japan, and may even encourage more firms like it into the country with the promise of a better regulated, safer environment.

Smaller firms, meanwhile, could get around the prescriptive rules by selling through local online marketplaces, he added.

“It’s really only keeping away the companies that they don’t want here anyway,” Stockwell told The Reg. ®

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