William Tanuwijaya on the Misperception of Foreign Investment in Tokopedia

Lately, the rumor stating that the government of Indonesia would make giant e-commerce providers, especially those owned by foreign companies or get heavily invested by foreign VCs, as their tax target has created quite a scene in Indonesian digital industry. One of providers which become the government’s target would definitely be Tokopedia, Indonesia-based marketplace that got a ravishing $100 million funding from Softbank Japan and Silicon Valley’s Sequoia Capital.

“We’re talking about giant e-commerce. Tokopedia, for instance, which got $100 million investment. Their structure lies outside Indonesia. So, who does benefit from this taxation? We have to be the host in such business,” Rudiantara, Minister of Communication and Information, told Detik.

Well, it’s not totally correct.

Tokopedia’s CEO, William Tanuwijaya, admitted that he directly contacted Rudiantara as soon as he heard about his statement. “I’ve just contacted Mr. Minister, and, sorry to say, there was a misperception. He’s currently in the process of combating DNI (Negative Investment List) in Indonesia. There was a perception that if the DNI isn’t removed, Indonesia-based e-commerce servers which get funded by foreign players must form their own vehicle structure outside Indonesia, thus reducing the potential of income tax in the future,” he clarified the Minister’s statement.

He continued by saying that tax isn’t a problem at all for Tokopedia. He convinced, “Tokopedia is completely under the law, we’ve always been a trasparent company. We always disclose any investment that we receive, including the amount as well. This has been public’s consumption, since we always dream of becoming an open company. Tokopedia also gets audited by competent auditors.”

“To keep a structure in Indonesia is really hard, a number of barriers exist, from complicated ESOP (the ownership of shares by employees) structure to being perceived as unstable by foreign investors and uncompetitive taxation compared to abroad structure; However, Tokopedia still has its structure being established by the name of PT Indonesia, without any holding company outside Indonesia,” he continued.

As for the foreign investment, Tanuwijaya perceives it as something which takes Indonesian digital scene to a higher level. The very reason why Tokopedia accepted the funding from foreign VCs is because they want to make a world-class local brand. He mentioned, “In Indonesia, each day, the apps and websites that get visited mostly are foreign-based. Users don’t choose local apps or websites.”

He emphasized that Tokopedia must upgrade its competitiveness due to the strict global competition. One of so many ways is by choosing world-class investors that support Alibaba, Google, and Apple.

“We are pretty sure that the only way to go global is by generating world-class products. Investment isn’t all about working capital, but also a transfer of know-how and the global network which we sorely need,” he concluded.