Facebook received permission to set up local shop in Indonesia. Now what?
Reuters reported on Wednesday that social network giant Facebook has received “an in-principal” approval from Indonesia government to set up a domestic unit here— rather than a mere representative office that Facebook already ran for years — -making it the latest Western tech firm that opened up a local business in this country of 250 million, joining the likes of Alphabet’s Google, Twitter, and Uber. Now what?
As you (and Facebook, maybe) know, Indonesia is not exactly the easiest country in the world to operate business from. In the World Bank’s latest Ease of Doing Business Index, out of 190 countries listed, Indonesia is ranked at #91, up 15 places from its shameful position last year of #106. (We are literally worse than Samoa!) World Bank noted that Indonesia recorded progress in seven key areas, including the ease to establish a business, access to electricity, registering property, acquiring finance, paying taxes, cross-border trade and establishing contracts. Despite the acclaimed progress, Indonesia still has much homework to do in terms of making it easy for international businesses to set up shop in the Southeast Asia’s biggest economy. If the country’s investment board, and Jokowi’s administration, is really serious about realising their goal to be Southeast Asia’s biggest digital economy — and, the region’s top tech investment destination — then the government needs to address some of the issues I listed below (worry not, I’ll make it brief). Addressing these concerns would not only make Facebook and its ilk operating more comfortably here, it could also inspire other tech companies to look at Indonesia as more than a mere market (*cough* Amazon *cough* Airbnb *cough* Spotify *cough*).
- Protectionism rules
Many had said that the government had too much play into the country’s booming IT sector, in which Facebook is a part of. While I agree that, in emerging market, the government’s touch is needed to regulate fledgling sector such as IT, Jakarta often micromanages the sector that could eventually hamper innovations. Indonesia is among ten countries listed in the Information Technology and Innovation Foundation’s list of the world’s worst innovation mercantilist policies of 2015 after the government implemented two protectionism laws that includes a rule that forces all foreign companies, mainly banks and technology firms, to store the data of Indonesian citizens inside Indonesia for the purpose of law enforcement and protection of the data of its citizens. Under this regulation, companies like Facebook, whose regional headquarters are in Singapore, would eventually be pushed to build own data center here or partner up with local data centre providers. ITIF argues that this could potentially hurt innovation in technology sector and shrink foreign investment. The data center localisation rule is also deemed as just another compliance cost in the eyes of foreign companies, without added business value whatsoever. Experts on the data center industry also told me that the main problem in Indonesia is that the country lack tier-4 quality data center — aka the creme de la creme of all data center, I’ve been told — because electricity here is mainly supplied by the state-owned power company and a high-end data center needs at least two different power supplies in case one failed.
Having data center on-shore allows law enforcement — with court warrant, of course — to request information on a user if they are implicated in criminal or civil cases. This is actually covered by a recently passed Indonesian law that states that local and foreign Internet companies are required to use Indonesian Internet Protocol number and to place several of their servers in data centers in Indonesia, as well as to give law enforcers a lawful interception to users data in case of crime — two terms that industry players and experts said could put users’ privacy at risk.
2. Crackdown on LGBT community
Facebook, just a head-up that the current Indonesian admin is really intolerant towards the LGBT community it’s ridiculous. Last month alone, two gays were caned in conservative Aceh province, and more than 140 men were arrested after a police raided a so-called gay sex party in one well-known gay sauna and gym in Jakarta (we all know where it is), adding to a mounting crackdown against the minority LGBT community in the past years — usually provoked by some dumb local politicians with their typically dumb comments. Anyway, this is why you (Facebook) may need to think twice before you introduce LGBT-friendly features like this cutesy Pride reaction button . Understandably, the button is not available for me (because I say on my page that I live in Indonesia, maybe?) According to Buzzfeed I can manually~ get the Pride button by liking Facebook’s pride page. I’ve liked the Page and it still doesn’t appear on my reaction buttons? ¯\_(ツ)_/¯
And trust me on this when I say that the country’s Communications ministry would ask you (Facebook) to remove it if you do roll out that cute rainbow button for Indonesian FB users. They had their panties in a bunch already over gay-related emojis and stickers on messaging apps Line and WhatsApp. I kid you not. (Funny story — my colleague was writing a story about this and asked WhatsApp what they think of this silly proposal and they replied ‘they can go back to what cave they came from we’re not removing shit’ or something along that line, shitty memory, sorry).
3. Ah yes, taxes
Brace yourself Facebook for yet another tax scrutiny from Indonesian tax agency. Now that you’ve gotten the nod to set up domestic business here, the government would apply a specific tax scheme (that they’re currently cooking) for multinational tech firms like you! Indonesia recently settled their months-long tax dispute with Google, and the search giant agreed to a different tax scheme down the road, which means now the tax agency is shifting its focus on other big tech companies such as you (FB), Twitter, and Yahoo (or should I say Altaba? I doubt tax agency even knows that the company is no longer called Yahoo, lol). To be fair, FB have the resources to fight and prolong the investigation for months until the finance ministry is tired and willing to settle for MUCH LESS than what they were aiming for, as in Google’s case, which I won’t get into today as this is a story for another day.
Welcome to Indonesia, Facebook! Enjoy your stay here! 😁
Resty is Jakarta-based freelance journalist. She is former WSJ tech reporter in Indonesia, and now she strings for SCMP. Contact her on Twitter @restyworo or mail at email@example.com