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Facebook to Open Limited Liability Company in Indonesia

Leading American online social media and social networking service Facebook will open a permanent business entity (a foreign limited liability company, in Indonesian: Perseroan Terbatas Penanaman Modal Asing, or PT PMA) in Indonesia later this month. The move is in line with Indonesian government requests. Earlier, Facebook only operated a representative office in Jakarta.

Samuel Abrijani Pangerapan, Communications and Information Ministry Director General of Information Applications, announced Facebook’s decision to open a permanent office in Indonesia on Wednesday (02/08).

Over the past one or two years Indonesian government officials had been ventilating their displeasure with the so-called “over-the-top” (OTT) giants, a term used for networks that deliver film and TV content via Internet, as these platforms had been hesitant to set up permanent corporate establishments in Indonesia and therefore pay few taxes to the Indonesian government. Besides Facebook, it also involved Google, Yahoo, and Twitter.

Rather than opening – and booking transactions and revenue at – a permanent office in Indonesia, they preferred to continue booking earnings (that were partly derived from Indonesia) at their regional headquarters in Singapore, implying Indonesia missed out on tax revenue.

But there were more reasons cited for the importance of setting up a permanent business entity in Indonesia. One is that Facebook would be in a better position to tackle negative content and fake news (hoaxes), an issue that has become a big problem in Indonesia (and can even destabilize the country), while communication with the government would also improve.

Indonesian authorities urge social media platforms such as Facebook to combat the spread of fake news and said it would help if these platforms would set up local entities in Indonesia because it would ensure better quality services, while they would also be able to familiarize themselves with Indonesian perspectives and the local cultural context (the local context determines the degree of sensitivity of the fake news message; a fake news topic that may be harmless abroad can be a major issue in Indonesia). With a proper company in Indonesia a social media network is much quicker to respond to “negative content”, which include hoaxes and pornography, because they have a better understanding of the local culture.

Besides hoaxes, Facebook also expressed its commitment to act on reports of “illegal content” such as radicalism, terrorism and pornography. Facebook will create a special algorithm for Indonesia to deal with this matter.

Facebook will follow the new Standard Industrial Classification – in Indonesia known as KBLI – that categorizes all businesses for the purpose of economic analysis, decision-making and policy-making. Before the revision, the previous KBLI did not recognize digital businesses and therefore Facebook received a license as a management consulting company. However, it now needs to change this classification to a commercial portal or web platform.

Number of Social Media Users at Start 2017:

Platform    World
(in million)
Indonesia
(in million)
Facebook    1,788     88.0
WhatsApp    1,000     12.3
Instagram
    500     28.0
Line     220     30.0
Twitter     313     16.8

Source: Investor Daily, Indonesia Investment

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