The rapid development of the digital world has encouraged internet data and content providers to expand their business to developing countries like Indonesia. The problem is that Indonesia is not prepared for this development. Although there are almost 100 million internet users in Indonesia, this business is not adequately regulated.
Today, internet data and content providers can run their businesses in Indonesia without having to establish a legal business entity in the country. Telecom operators, meanwhile, have to invest significant amounts developing the network infrastructure used by these ‘over the top’ (OTT) companies.
Minister of communications and informatics, Rudiantara, said that regulations are to be put in force to govern the presence of foreign OTTs in Indonesia. “They will have to be permanent legal entities in Indonesia,” said Rudiantara, Jakarta, Friday (11/3).
The government believes that consumer protection, equality before the law in tax matters, and properly handling of customer complaints are three reasons that these companies need to have a presence in Indonesia.
Under current rules, collecting taxes from foreign OTT companies, which are not registered in Indonesia, is difficult. Meanwhile, the telecom firms that provide internet services that are vital to the running of the OTT business in Indonesia, pay substantial amounts of tax to the government.
Data from the Ministry of Communications and Informatics revealed that the value of digital advertising, a major source of revenue for OTT firms in Indonesia, was more than US$ 800 million a year ago. “Two major global firms account for seventy percent of digital ads,” he added.
While Rudiantara admitted that setting up a permanent business entity in Indonesia is not easy, the government will make it easier by offering three options: setting up a business entity individually, entering into a joint venture with other companies, or partnering with a mobile operator in the country.
The new rules, which are expected to be passed early next month, aim to benefit the Indonesian people as users of OTT services. “Indonesia is not just a market; the people of Indonesia should benefit from this, too,” said Rudiantara.