On Wednesday, Google, along with a number of Indonesian partners in both the private and government sectors, launched an initiative to bring 100,000 Indonesian small and medium businesses/enterprises online by the end of 2012.

Dubbed Bisnis Lokal Go Online, the move is spurred by the lack of adoption of the Internet by Indonesian companies despite having more than 40 million individuals logging time on the Internet. As the majority of these people spend their time on social networks, it’s up to local businesses to bring their presence online and improve awareness as well as trust to get consumers to interact with them.

While Google is the primary driver of this program, it is also being backed by three government ministries, the Indonesian Chamber of Commerce, PANDI, the Indonesian Internet domain agency, Internet providers Melsa and Bakrie Connectivity, Multiply, as well as Aptikom, the higher education association of computer science and informatics.

According to Julian Persaud, Google Southeast Asia Managing Director, who spoke at the launch, out of 17 million Indonesian SME’s, only 75 thousand have a web presence and conduct businesses over the internet. These SMEs are companies whose annual revenue range between Rp 2.5 billion to Rp 50 billion.

Daniel Tumiwa, Country Manager for Multiply, said that his company has over 60 thousand merchants ranging from individuals to large companies conducting trade every day using Multiply’s e-commerce platform. The Christmas buying period in which it applied a discount across the board apparently was very popular that transactions went through the roof. Unfortunately he declined on the details of the past year’s performance but the general mood at Multiply is very upbeat on Indonesian e-commerce.

While it seems that there is an overwhelming reluctance or ignorance by Indonesian businesses to go online, there is little reason for them to not make the leap. This is evidenced by the large number of individuals and home industries that set up shops online through Facebook pages and BlackBerry Messenger groups.

This seemingly unusual step is akin to the traditional garage sales or individuals overseas who make a living out of selling goods over eBay. Indeed, this is mirrored by those who conduct trades over at Kaskus and other outlets, earning north of tens of thousands of dollars a year.

Many of these traders are happy with what they have achieved and see no reason to go legit. A number of them who shall remain nameless say that they don’t see the benefit of actually registering their businesses with the authorities. Most cite distrust with regulatory process and the government itself as well as the uncertainties when it comes to dealing with the authorities, the specifics of which they are reluctant to elaborate.

This underground economy that they’ve created has actually contributed to a black hole in terms of economic growth indicators and surveys. Looking at this issue from the government’s and authorities’ point of view, of course this poses a problem especially in relation to tax collections, economic reports, and the like.

The challenge therefore, doesn’t seem to be in getting people to push their businesses online but getting them to go legit, to be properly registered and abide by regulatory rules.

While this e-commerce sector is still looking to plant its feet, some of the bigger names behind companies such as Multiply, Tokobagus, Tokopedia, Plasa, Disdus, Dealkeren, Doku, as well as others are working on charting an Indonesian e-commerce industry association to discover and overcome challenges facing this nascent sector.

The upcoming association aims to promote the industry as well as ensure its flexibility and freedom in operating and expanding their respective companies as well as the industry as a whole.

As per reports from Nielsen and Deloitte released near the end of 2011, the Indonesian Internet economy is poised to explode by 2015. These e-commerce players are just getting ready to face the onslaught of a far larger and more mature Internet.

A working group has been discussing over the last several weeks to find out ways to represent the industry in the face of existing and upcoming laws regarding Internet-based trades transactions and is hopeful to launch the association before the end of the February.