Jakarta, Indonesia – Indonesia’s temporary ban on major websites including PayPal has exposed the difficult balancing act Jakarta faces as it seeks to both tighten control of the internet and become Southeast Asia’s next tech hub.
Indonesian President Joko “Jokowi” Widodo has listed digital infrastructure as a priority under his Making Indonesia 4.0 roadmap aimed at lifting his country into the ranks of the world’s top 10 economies.
But even as Widodo has pushed the digital economy, overseeing Indonesia’s rise to become Southeast Asia’s second-largest recipient of venture capital and home to 13 tech unicorns valued at more than $1bn, his administration has sought to rein in the influence of internet companies among the country’s more than 270 million people.
Those efforts have included the introduction of a licensing system that the government says is needed to enhance data protection and facilitate the removal of content that could “disturb public order” in the archipelago, where the success of startups such as GoTo has fuelled bullish predictions that the digital economy could more than double in value to $146bn by 2025.
On Saturday, PayPal, Yahoo and several gaming platforms were temporarily blocked after failing to register for the licensing system, sparking confusion and anger among users of the sites.
“In the morning, I just noticed the ministry had blocked PayPal,” Jati Andito, a 34-year-old freelance voice actor in Jakarta, told Al Jazeera.
“The market has a partnership with PayPal. They will not recommend my services if I do not use PayPal.”
On Tuesday, Indonesia’s Ministry of Communication and Information Technology restored access to Yahoo and gaming website Steam after they joined the framework past the initial deadline. The ministry, which earlier defended the system as necessary to “maintain and strengthen the governance of Indonesia’s digital space,” also temporarily lifted the bar on PayPal to give the company until Friday to register. Epic Games Store and EA’s Origin remained blocked as of Tuesday.
PayPal on Wednesday said it had registered under the system and customers could now send and receive money as usual.
“PayPal is fully committed to complying with applicable laws and regulations in the markets where we do business,” a spokesperson said.
While access to the sites was ultimately restored, the episode has raised questions about how welcoming Indonesia’s regulatory environment is for tech firms, especially those from overseas.
Bhima Yudhistira Adhinegara, director of the Jakarta-based Center of Economic and Law Studies, said the temporary bans were “very bad” news for the country’s tech scene, especially the gaming industry, which last year was valued at $1.6bn.
“There is a correlation between unclear laws and Indonesia having low attractiveness for foreign investment,” Adhinegara told Al Jazeera.
“If you block them easily, who wants to invest billions of dollars in a local game company, for example? Of course, this is a bad precedent.”
Adhinegara noted that Indonesia ranked 47th for business legislation and 38th for foreign investment in the IMD World Competitiveness Ranking 2022. Indonesia placed 44th overall out of 63 countries and territories analysed in the ranking, which is compiled by IMD Business School.
Pingkan Audrine, a researcher at the Center for Indonesian Policy Studies, said some of the obligations enshrined in the framework are cumbersome and “quite problematic”.
“There are a set of obligations that they need to comply with once they register, such as content moderation, data governance, privacy, etc,” Audrine told Al Jazeera.
Others say that the government’s efforts to increase oversight of the sector are right in principle, albeit poorly executed.
Joel Shen, Asia head of technology at global law firm Withers, said that while he broadly supported the government’s regulatory reforms, authorities had created confusion and uncertainty by backpedalling on the bans.
“In backing down from its original position, Kominfo has not only put itself in an awkward position and created this uncertainty in the market … Kominfo has called into question the reasonableness of its laws,” Shen said, referring to the ministry by its Indonesian name.
“It reinforces an impression that the foreign business and investment community have of Indonesian regulators… that Indonesian regulators are unpredictable and inconsistent in enforcing a regulation.”
Ariehta Eleison Sembiring, a representative of advocacy group Koalisi Advokasi Permenkominfo 5/2020, said the rollout of the licensing system had been sluggish, with the platform for registering companies taking more than a year to come online.
“This delay indicates that the ministry did not show good governance,” Sembiring told Al Jazeera.
“It contradicts President Joko Widodo’s vision of accelerating digitalisation for the industry.”