Danger looming large in Indonesia’s new e-commerce law?

By Remco Lupker, founder and president director at PT Ambient Digital Indonesia. A version of this article was first published on his blog.

The long awaited and probably feared Indonesian E-commerce law PP 82 became public recently and even though I’m no longer (directly) involved in any e-commerce businesses I thought I would take some time to read it. Mind you, this law is just the beginning and will be followed by ten government regulations which will provide more details.

My friends from DailySocial already reported on this law highlighting the part that requires any e-commerce company doing business in Indonesia to register in Indonesia as well as running their platform on a .ID domain name. Existing e-commerce companies are excused from the last clause, for now they are allowed to continue running their service on a .com or any other top level domain name.

Though I agree that the need for a .ID domain name is weird to say the least, it seems that the law poses bigger worries for new and existing e-commerce players in Indonesia. I won’t be discussing the whole law but I’ll just highlight some things that attracted my attention.

No more Facebook, iTunes, Path?

Mind you, this is not (just) an e-commerce law. This law applies to all digital platforms operating in Indonesia.

(2) Penyelenggara Sistem Elektronik untuk pelayanan publik wajib menempatkan pusat data dan pusat pemulihan bencana di wilayah Indonesia untuk kepentingan penegakan hukum, perlindungan, dan penegakan kedaulatan negara terhadap data warga negaranya.

So, before I give you the translation I will first give you the definition of an “Electronic System” in this context:

1. Electronic Systems are a series of electronic devices and procedures that serve to prepare, collect, process, analyze, store, display, publish, transmit, and/or distribute electronic information.

Thats’s pretty general right? So basically this law sets the following requirements for “Electronic System” used for public services:

(2) Operators of Electronic Systems for public services have to to put the data center and disaster recovery center in Indonesia for the purpose of law enforcement, protection, and enforcement of national sovereignty to the data of its citizens.

Now you might think that this is an e-commerce law and so doesn’t apply to Facebook. The worst that could happen is that some international platforms like Amazon and Booking.com are blocked. Well, looking at the the definition of Electronic Systems, this applies to any public digital platform.

So I’m curious how the government will enforce this. There are two options. They don’t block sites that operate from abroad which will lead to more and more companies not investing in Indonesia anymore and just operate from abroad. This is the opposite of what a government eager to see investments come to Indonesia should want. Also from regulation point of view this wouldn’t have the desired effect.