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Indonesia finally gives Facebook a thumbs up to establish local unit

FACEBOOK has just been given the green light to set up shop in Indonesia. As reported by Reuters, the Indonesian government has given an “in-principle approval” to the social networking giant and the details are now being processed.

This is due to a push for multinational tech companies to set up an Indonesian entity, the pressure being accelerated by the likes of Google who has been allegedly getting away with not paying the minimum taxes required.

In the case of Facebook, it currently has an office in capital city Jakarta. “I see good intention and spirit from Facebook. What we care about are taxes and responsible content,” said Thomas Lembong, who is the chairman of Indonesia’s investment coordinating board. Reuters notes that Facebook can incorporate locally by being set up as a limited liability company.

SEE ALSO: Indonesia: Facebook should open local office to take down fake news

Resty Woro Yuniar, a Jakarta-based technology journalist, weighs in on the push to have Facebook set up a local entity and the challenges that it’ll have to face.

“Brace yourself, Facebook, for yet another tax scrutiny from the Indonesian tax agency. Now that you’ve gotten the nod to set up a domestic business here, the government would apply a specific tax scheme for multinational tech firms like you,” she writes in her Medium blog, noting that since the government has just settled their tax dispute with Google, the tax agency will now focus on Facebook.

Besides tax issues, Woro Yuniar points out that another big hurdle that Facebook will have to face in Indonesia are protectionism rules. These include regulations that requires all foreign companies, especially 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”.

As many multinationals have their Asia headquarters set up in Singapore, this will eventually have to lead to a launch of an Indonesia-based data center, or a partnership with a local data storage provider.

Either way, experts in Indonesia’s IT sector believe that this will just be another layer of regulation that squeezes innovation and in the same vein, does not bring much business value.