Google will expand its operations in Indonesia and plans to open a local office by 2012, government officials announced, after encouraging talks between the Indonesian vice president and Google Chairman Eric Schmidt. The reasons for the investment are obvious: Indonesia is the largest and fastest growing online market in Southeast Asia, and its ‘bright and promising’ digital start-up scene is ready to take off.
Indonesians are enthusiastic users of Twitter and other social media, and make up the world’s second largest Facebook community. Mobile phones are the dominant Internet access point, bringing online entertainment to remote corners of the world’s largest archipelago, with prepaid services charging less than 10 cents for a day of unlimited social networking and chatting. When visiting Indonesia, don’t be surprised if a police officer now asks you for the name of your Facebook account, instead of the more traditional ‘cigarette money’.
Young Indonesians in particular are very open to new ideas and are an excellent testing ground for new products and services, like the google wallet, though online shopping and marketing are still underdeveloped. Perhaps most interestingly, Google wants to expand its business by developing a working platform to connect small and medium enterprises in Indonesia with buyers from abroad.
But: there’s always a ‘but’ when it comes to investment in Indonesia. Google’s plan to expand faces an unusual obstacle: a regulation, originally proposed in 2008, that might in theory require the company to move its data centers to the country- which the US Embassy’s Charge d’Affaires in Jakarta has called ‘very strange.’ Even if only one additional data center would have to be built, Google would have to think hard about doing so, given the lack of electrical and other infrastructure and potential security and compliance issues.
Yahoo and Facebook are also keen on operating in Indonesia, but are deferring for similar reasons. BlackBerry producer Research in Motion has already cancelled production plans in the country because of the data center regulation. But instead of ensuring speedy clarification of the legal situation, the Head of Public Relations at the Communications and Information Ministry has stated that Google’s investment plans will not accelerate the process nor influence the content of the bill. This is extremely short-sighted, as Google’s estimated minimum US$100 million investment would send a positive signal to investors around the globe and create spill-over effects far beyond the country’s ICT sector.
The Ministry of Justice and Human Rights and the Ministry of Communication and Information better get their acts together quickly with some much-needed clarification – preferably with regulations that reflect the global and decentralized nature of the internet.