Expert Ajisatria Suleiman joins our first episode devoted to Indonesia technology policy, to explain how policy is synthesised, where current policy priorities are focused, and what we can expect going forward. Having worked with The World Bank, Kominfo and other major institutions, Aji suggests that the public sector should invest more heavily into its own innovation and digitalization in order to achieve more effective policy collaboration with the private sector. Aji also explores major topics of the day such as Digital Identity, Data Privacy and new eCommerce policy developments.
Expert Ajisatria Suleiman joins our first episode devoted to Indonesia technology policy, to explain how policy is synthesised, where current policy priorities are focused, and what we can expect going forward. Having worked with The World Bank, Kominfo and other major institutions, Aji suggests that the public sector should invest more heavily into its own innovation and digitalization in order to achieve more effective policy collaboration with the private sector. Aji also explores major topics of the day such as Digital Identity, Data Privacy and new eCommerce policy developments.
ALAN 0:12
Welcome to the 33rd episode of Season Two of the Indo Tekno podcast. Selamat datang semuanya! I'm Alan Hellawell, founder of tech consultancy Gizmo Advisors, and Venture Partner at Alpha JWC Ventures. Now, one area that we have left largely untouched across the more than 60 episodes of the Indo Tekno podcast has been Indonesian technology policy and regulation. The governments of nearly every major jurisdiction globally attempt to support, enhance and develop technology for their respective markets. In my 15 years supporting technology companies in China through IPO and onward, technology policy played a crucial role in supporting particularly the country's national champions throughout the first years of the internet age. It however more recently has clearly been used quite aggressively to rein in behaviours that it feels are anti-competitive, not in keeping with party discipline, or in some way not deemed in the national interest. The EU meanwhile has arguably the world's most highly developed laws around competition and monopoly. And here in Singapore, few days go by between various announcements of new government grant programmes, private-public sector collaborations, the building of smart nation capabilities, etc. So where is Indonesia within this broader technology policy landscape? To answer this and other questions we are pleased to invite on to today's podcast, Pak Ajisatria Suleiman, a gentleman who has dedicated nearly all of his productive years, academically and professionally, to Indonesia's technology policy. so pleased to have you on the show today, Pak Aji.
AJISATRIA SULEIMAN 1:54
Hi, Alan, it's great to be here. Thank you very much for having me.
ALAN 1:58
You're very welcome, Pak Aji. Okay. Pak Aji, first, did I read that you were valedictorian amongst your graduating classmates at University of Indonesia? Can you tell us about your days as an undergraduate?
AJISATRIA SULEIMAN 2:11
Thanks, Alan. I usually don't talk about the personal stuff. But since you asked, it seems to be quite relevant to what I've been doing so far. I did become the valedictorian at law school at the University of Indonesia. I was trained as a lawyer, and practiced corporate law for quite some time. But now I mostly focus on regulation. Since my college years, I've always been passionate about organisations and community development, and also community organising. I was the president of the student body of the Law School of University of Indonesia, and also took part in some of the student activism movement back in 2007, 2008. And I think that's the reason why I'm quite keen on developing communities and also organising people. And that led me to participate in some of Indonesia's most exciting industries, such as the tech industry. And I got to experience for example of cofounding the FinTech Association, and also join the Asia Internet Coalition and also other associations in the ICT (Information Communication Technology) world in Indonesia.
ALAN 3:17
Fantastic. Well, that more than sets the stage for what I hope to be a fruitful discussion. Going back to your days as a student, I noticed your studies then took you to Europe. Can you tell us more about that?
AJISATRIA SULEIMAN 3:29
Yeah. So back in 2009, I got a scholarship from the European Union. And the requirement to take the scholarship is to study in at least two different universities. So I decided to pick three universities in three different countries; one in Belgium, and then the Netherlands and in Germany. In the first two, I studied law and the third one in Germany, I studied economics. I studied the economic aspects of regulation. So I learned about how regulations work. What are the motivations of the regulations and regulators? Why do regulators make regulation? And what are the possible and potential alternatives to regulation in terms of the costs and also in terms of their effectiveness? So it really opened up my perspectives on how law and regulation work. So it's not just about following rules, but also understanding why certain rules exist and how to change them.
ALAN 4:26
What a fascinating concentration, but again, really explains so much of what I see on your CV subsequently. And indeed, in our pursuit of someone who could address Indonesia's technology policy, nobody, frankly, "held a candle" to your credentials. In addition to working with the World Bank on digital economy and policy, you are a researcher for the Centre of Indonesian Policy Studies, the Indonesian representative to the Asia Internet Coalition, and an expert advisor to Indonesia's Ministry of Communication Information Technology. What is your personal mission here Pak Aji?
AJISATRIA SULEIMAN 5:00
It's a very interesting question, because I don't have a technology background. But I have seen the exponential growth of the technology industry, the digital economy spaces Indonesia, I think since 2014. I think that was the first time when President Joko Widodo went to Silicon Valley and tried to understand technology. And I think also, that was the first time one of the Indonesian startups announced a very huge round of funding. And since 2014, the private sector has been playing a crucial role in developing the market of the digital economy in Indonesia, to a certain point that it requires a boost and a driving force from the government, and also its public resources in order to even expedite and accelerate the progress. What I'm trying to say is that now the role of government, the role of regulations, is playing a very, very crucial role. And I'm really passionate about making sure that the regulation and the policies are going in the right direction.
ALAN 6:01
So that leads to a very basic question that I have for you, Pak Aji. How is Indonesian technology policy developed currently?
AJISATRIA SULEIMAN 6:10
Compared to the landscape in 2015, or 2016; certainly, there is a lot of clarity in terms of the regulatory processes. And also it is easier for companies to navigate the regulatory environment. Now we already have a pathway for lending businesses. There's a much clearer pathway in payments. There is also a much clearer pathway in e-commerce. The government a couple of weeks ago has revamped the licensing processes. So I think now everything is clear, and it is a good thing. But also on the other hand, Indonesia is an administrative state that relies a lot on licensing and licensing compliance. So I think while the clarity is increasing, the compliance cost is also increasing.
ALAN 7:04
Very interesting point. Let's get back to that a little later. I want to ask you at this point, do you see most likenesses between tech policy articulation in Indonesia, with a jurisdiction like China, here in Singapore, the US, the EU or elsewhere?
AJISATRIA SULEIMAN 7:22
Well there are some resemblances and differences here and there. Indonesia is definitely very different from the US, because the way US laws and regulations work revolves around practices and litigation. So you would see a lot of cases in court involving technology companies, for example. We don't see that in Indonesia. Indonesia, as I mentioned earlier, is an administrative state. We rely so much on licensing. Over the past five or six years, there have been a lot of new licences, specifically targeting technology companies. And that is, I would say, the unique characteristic of Indonesia. In China, I think the approach is different, because they have a very strong government. They mostly focus on ensuring that the security of the government agencies is preserved. And the government has access to some of the crucial activities of the private sector and also some crucial data of the private sector. Whereas in Europe, as you mentioned earlier, the regulations on personal data protection and competition are very much advanced. So I think Indonesia is trying to copy some of the good things about Europe, about China. But the way we approach it is through licensing. And it can be a good thing or also a bad thing. It is a good thing in the sense that at least you have the procedures. You just need to follow the procedures. But also, there is little room left for flexibility in case there are some issues with the licensing process that you may want to raise objection.
ALAN 8:56
Understood. So it sounds like it's a mosaic of influences. Now, Pak Aji, what basic refinements would you propose to make the articulation of Indonesian technology policy even more successful? Who should be involved that currently is not? Or what are we not doing now that we should be doing?
AJISATRIA SULEIMAN 9:16
The private sector within the digital economy is growing. And what is lacking now is actually innovation and also digitalization of the public sector, because we do need the public sector to catch up. And the only way they can catch up is not through regulating the private sector but also to improve their own business processes. And that's why I believe that the way Indonesia can unleash its true potential is to focus less on regulation, but more on investments in the public sector. As you mentioned earlier Alan, I'm now part of the World Bank and the World Bank assessed and analysed several key areas. of digital infrastructure and public goods within the digital spaces that are necessary in order for the digital economy to thrive. For example, digital infrastructure such as identity, public data that can be used for scoring and also funding; and then also some basic frameworks of interoperability; require a direct investment of public funds into these digital goods. I think if we do have a proper digital infrastructure like we have in other countries such as India, or China, or even some European countries like Estonia, I think it will reduce the costs of digital economy and also ensure trust within digital transactions in Indonesia.
ALAN 10:47
Fantastic. So less emphasis on regulation, more on investment. That's a very interesting take on things. So Pak Aji, what is the main focus of Indonesian technology policy now, in 2021?
AJISATRIA SULEIMAN 11:02
There are a lot of new rules that were introduced back in 2020. For example, BI (Bank Indonesia) is revamping and reformatting their entire payment regime, which is good because it allows more room and flexibility for payment innovation, and payment is quite basic in terms of supporting the environment for the digital economy. So BI was doing that in 2020. And also the Ministry of Communications introduced also a major and significant reform in terms of the licensing process, and also the supervision and also data regulations for the entire digital economy; specifically for e-commerce and social media. The Ministry of Trade, also, back in 2020, issued a new landscape for e-commerce permits and approvals. So there was a lot going on back in 2020. And I think in 2021, it's now a matter of implementation and execution. Of course, it's not going to be perfect at the beginning. So now the industry players have started to raise their improvements in the system. And also they already started to ask for discussions with the government on how to improve the newly introduced regulation. So I think the 2021 focus would be making sure that these new reforms work.
ALAN 12:21
So it sounds like it was a very busy 2020. Indeed, I wanted to focus on one sleeve of policy that you referenced. Where exactly is government policy around e-commerce? We seem to have seen a number of countervailing statements and policies. For instance, one day, I see statements in support of small merchants online. Another day, I may hear talk of increasing import tariffs and other taxes on cross border e-commerce. Can you characterise where the government ultimately stands in this area?
AJISATRIA SULEIMAN 12:52
I think the first priority of the government in e-commerce is to make sure that all e-commerce players are under the supervision of the government. And that's why they introduced this new regulation back in 2019, and then implemented it in 2020. That was and has been the original plan. But recently, a couple of months ago, there was a statement from the President about empowering the local merchants, and protecting them from the foreign sellers. I think this is not something that was originally planned for the government. But since there was a directive from the President, they needed to come up with a policy plan. So there was a discussion about regulating certain products that would be banned, or restricted only to local players. There was also another approach to limit certain products that can enter Indonesia. But again, since this is not the original plan for e-commerce policy, the government is also still struggling about how to approach this. I mean, they've been inquiring with the industry players to have a conversation about it. But it is not an easy task. There was a promise that there would be a new policy in place. But everyone understands that this is not an easy task. So that's why I think everyone is still having an intensive discussion on how to formulate this in a way that does not close the market and in a way that still upholds fair competition.
ALAN 14:24
Understood. So clearly a work in progress on the e-commerce front. Now going back to something else you mentioned earlier Pak Aji, where is the conversation around personal data protection and data localization in Indonesia currently?
AJISATRIA SULEIMAN 14:40
Data localization is much more interesting because back in 2017, there was confusion and unclarity as to Indonesia's position due to different interpretations of the regulations on data localization, and it created a "limbo", or regulatory gap, for two years until 2019, when Indonesia finally allowed cross border data flow, and would not impose data localization, unless it is in certain strategic sectors, including in the financial sector. So I think it's a very good development, significant progress, especially for e-commerce and digital economy in general. Although we do understand that for the financial sectors, I think there needs to be some part of data localization, because it is considered a strategic sector. So now, I think, especially players in the financial space, they are already getting used to these rules. And so far, I think the environment is pretty set, because the rules are already quite clear. And also e-commerce can also operate the way they've been operating for years. So that's on data localization. On data privacy, this is something that is still in progress, because this work is still being discussed in the Parliament. And parliamentary discussion is never short, because it involves different parties with different interests, and also with different points of view, which is understandable. This work on data protection is important, especially because the role of the government within the digital space is increasing. And when we talk about data control, or control over citizen's data, it is the government that's actually holding a significant portion of Indonesian data. We have identity data, some financial data, some tax data. So with the increasing role of the government, there needs to be data privacy rules to ensure that the citizens' rights are protected. And hopefully, we can see this in the next coming months.
ALAN 16:44
Understood. So there does seem to be a lot of pragmatism, and in fact, accommodation in Indonesia tech regulation. And it doesn't seem to be just a series of non-negotiable, one-way edits from the government. Now Aji, what do you personally feel needs to be a new technology policy direction that the public and private sectors should focus on going forward?
AJISATRIA SULEIMAN 17:08
I think there should be roadmap, a clear roadmap that incorporates the ultimate objective of a set of regulations. It should also incorporate the non-regulatory part, which as I mentioned earlier, includes developing or investing in a specific digital infrastructure, and also in some interoperability and technical standards. And I think one of the good examples of that policy vision would be what was issued by the Central Bank of Indonesia. They issued a roadmap, a payment roadmap through 2025; which includes technical issues, legal issues, regulatory issues, licensing issues, and also human resources issues. And I think by creating this vision, we at least get to understand what the government wants. We may not completely agree with that. There's a lot of issues within the payment blueprint of the BI that I personally disagree with, but at least I get to understand what the BI wants and where they are headed. This is something that I think is still missing in some other agencies. So we keep questioning certain reasoning and justifications of the regulations. And then we often see conflicting regulatory rules, not only among agencies, but within agencies, within different departments. So I think as long as we have a clear vision of what we want to achieve, I think the industry stakeholders would be able to accept and understand and eventually follow the policy guidance.
ALAN 18:45
Understood. So it sounds as though there is indeed a plurality of views. And many, if not most, are indeed being taken into account. So that sounds quite healthy. Now, Pak Aji, would it be accurate to say that your biggest personal present day focus is on FinTech, and can you tell us about this?
AJISATRIA SULEIMAN 19:04
Well, I did help and co-founded the FinTech Association, and now it is an official Association recognised by the Financial Services Authority and also by the Central Bank. I mostly have shifted recently, but I am still following FinTech issues, and I'm still involved in some of the research and studies and assessments of FinTech.
ALAN 19:25
Well, Pak Aji, can you characterise the regulator's approach to FinTech policy, maybe as it relates to China? As you may recall, Beijing early on in the millennium seemed to allow the private sector to act first in areas such as P2P or peer-to-peer lending, and only subsequently would they scrutinise these actions, punish bad actors and do things like roll out new licensing and regulation. Today, it is much more aggressive and front-footed. Does the Indonesian regulator look like his counterpart of 10 years ago in Beijing allowing the private sector to take initiative, or the Chinese regulator of today?
AJISATRIA SULEIMAN 20:02
Since we're talking about P2P lending here, I will not discuss the payment aspect of FinTech because I just discussed it earlier. P2P lending is also quite interesting in terms of its comparison to China. To answer your question, Indonesia is much more restrictive allowing P2P lending companies to operate now as compared to three or four years ago. Because three or four years ago, it was still an infant sector. People still did not understand the magnitude of the industry and also the interests and the appetite of the industry. And suddenly it became a huge sector. So the government has been imposing more restrictions in this area. But I think the way we see P2P lending is not only P2P lending, per se, but consumer finance in general, especially in Indonesia, because the reason why P2P lending in Indonesia has become a boom, a magnet, is because the progress within the consumer lending and consumer finance sector has been quite steady over the past couple of years. Because the OJK (Otoritas Jasa Keuangan- Financial Services Authority) has not issued any new licences, or did issue but only in very small, limited numbers of licences. And also the licences for credit cards were quite limited. On the other hand, there's a lot of players that are interested and eyeing this sector. And when these areas were restricted, they eventually looked at peer-to-peer lending as an alternative. That's why this P2P lending has become a boom since 2017. And I think now OJK has realised that the issue is not in P2P lending, but consumer lending in general. So now they are trying to make sure that the rules on consumer finance, multi-finance and credit cards are in line with P2P lending. By viewing this comprehensively, it would minimise potential conflicting regulations among business sectors or business lines within consumer finance.
ALAN 22:13
I would say that the regulator must have done something right compared to China, because I don't think we have seen as dramatic a boom-to-bust, or bubble-then-burst pattern, which Chinese lenders five years ago are now infamous for. Now, Pak Aji, if I am an entrepreneur with ambitions of starting (I don't know) a new Digibank or offering other cutting edge online financial services, how much of my bandwidth do you think I will need to devote to all things licensing and regulatory? Will that "overhead" increase or decrease with time?
AJISATRIA SULEIMAN 22:49
It's a very interesting question. I think one thing for sure is that you need to invest in the compliance team, or the regulatory team, even when the landscape is uncertain. I had a lot of discussions where some of the foreign tech startups that said that they would like to invest in Indonesia, if the licensing, or the regulation is clear. If there's a clear pathway to get the necessary approval. But I always told them that you would not get a clear pathway to approval if you did not invest first, because their regulations need to have confidence that you guys are actually operating properly in Indonesia. So sometimes it becomes like a chicken-and-egg problem. And I always told them that you really need to invest in the team properly. And that's how you can get a clear path to approval. So in conclusion, I think we would see a lot more paperwork requirements in order to comply with all this licensing and regulation. And that's why you need to be prepared for that. It might increase the compliance costs. But also on the other hand, since the regulations are now much clearer, I think it would also decrease the amount of resources you need to seek regulatory clarification.
ALAN 24:08
Gotcha. So you're saying there's clearly no substitute for getting all of that "blocking-and-tackling" done upfront, so that regulatory complications don't come back to haunt us later. Now, Pak Aji, I've noticed you also seem to have taken a strong interest in digital identity. What is the state of play in that space currently?
AJISATRIA SULEIMAN 24:29
This is something that I have been focusing on over the past two years because this is something that the public, the financial sector, the public sector, desperately need. Indonesia has very strong foundational work on identity. We have some of the most complete biometric data in the world, even more complete than India for example, because we use much more advanced technology for the biometric collection. We also have identity data that are quite comprehensive that sit within the government, whether it is in the tax office or in the health and social security offices. And all of these can be leveraged for social and public service and also service delivery. So there is a great opportunity here. However, I think the way we utilise these data in order to help service delivery is not yet optimal, because we have to make sure that whatever utilisation there is, it needs to be in line with personal data protection. There needs to be checks-and-balances in order to avoid concentration of data within certain agencies within the government. But if we do have good arrangements, institutional arrangements to utilise identity data, I think we can increase financial inclusion. We can improve social inclusion and also social assistance, and also the delivery of health and educational services.
ALAN 25:58
We clearly have a follow up podcast on digital identity that we need to host with you. Now going back to an earlier comparison Pak Aji, I don't think I'm saying anything controversial by suggesting that tech regulation in China has become very unpredictable; and on the whole, much more aggressive and even punitive, particularly to the country's larger players. Could we see a similarly more aggressive policy treatment of the tech space in Indonesia in the future?
AJISATRIA SULEIMAN 26:27
Even if we do see something like that, I think the approach would be different. Because in China, the approach and stance on national security is quite strong. And the Chinese government has sufficient resources and technologies in order to protect their national interests. Whereas in Indonesia, I think if there is a crackdown on tech companies, as I mentioned, I think it would go through licensing and regulation. If there is a sentiment over a certain industry that the government perceives to be negative, then most likely we will see that area will be further regulated, and new licences will be issued. You mentioned earlier about the e-commerce sector where there have been debate and discussions about limiting the numbers of goods that can come into the country, or limiting the types of goods that can be sold in local e-commerce. And there would be some licences and approvals for that. That's quite typical for Indonesia. I know that that's still in discussion, but it just gives an example of how Indonesia typically approaches issues that are controversial.
ALAN 27:37
Understood. Now I'm going to go out on a limb and maybe I'm connecting too many dots here, Pak Aji. But I'll ask the question anyway. Do you envision yourself entering government or politics longer term?
AJISATRIA SULEIMAN 27:50
Yes. My simple answer is Yes.
ALAN 27:53
Okay, This is the first time you've answered a question monosyllabically. Any other secrets you want to reveal or ideas you have in mind? Or do we just have to wait?
AJISATRIA SULEIMAN 28:04
Entering into government and politics can be quite tricky in Indonesia, because you need to make sure that you have sufficient resources and influence in order to contribute positively to the regulatory and policy landscape. Otherwise, you will not be able to achieve what you have in mind. So I think what I'm trying to do is to make sure that I have sufficient resources that I can leverage by the time I enter into the public office.
ALAN 28:34
Pak Aji 2024! Now we at the Indo Tekno podcast were long overdue for a tutorial on Indonesian technology policy. We've clearly gained far more than we bargained for, from your sharing your expertise and insights into the topic. I really appreciate your demonstrated expertise across a number of disciplines. Thanks so much for joining us today.
AJISATRIA SULEIMAN 28:59
Thank you, Alan, for inviting me here.
ALAN 29:02
You're very welcome. We hope our listeners have enjoyed today's episode. As always, please consider sharing any feedback that you have about the Indo Tekno podcast with us. Terima kasih telah mendengarkan. Sampai jumpa lagi!