- 07/04/2016
- Category: Commentaries
Author: Josia Paska Darmawan
The discussion over data localization in Indonesia has been brimming since the signing of Government Regulation No. 82/2012 (PP No. 82/2012) on the Implementation of Electronic Systems and Transactions. Article 17 of the regulation has especially become a huge concern for digital business. This article obliges companies and other concerned institutions to build a data center in Indonesia for the sake of national interest and sovereignty. Although the detailed guideline on this regulation has yet to be approved, companies have started to take precautions over this regulation while raising their concern over the cost of storing their data on-shore to the government.
On this basis, this article will consequently assess the potential drawbacks of data localization in Indonesia
More Economic Harms Than Goods
One aspect of this debate over data localization is the economic impact that it would bring to the community. Joe Weinman argues how data center has significant multiplier effects as services become more dependent on data. By this argument, despite the limited number of employees that it requires, the existence of a data center will result in the increase of employment opportunities in related sectors.[1] The establishment of a new data center will also require major improvements in the infrastructure, which would eventually lead to better life quality of the community and an increase in the national economy.
However, we need to remember that this economic advantage is relative. It depends on the characteristic of the country itself – whether it has the capacity to host a data center that requires a certain extent of IT infrastructure and power reliability. When the place does not have such capacity, then the cost of building a data center would be increasingly expensive and it will diminish the economic advantage. If this is the case, then it would bring more benefits to store the data elsewhere.
In the case of Indonesia, building data centers will cost a lot for the business. Data center requires a huge amount of power to run its components, especially for the cooling process. According to Data Center Knowledge, the cost allocated for cooling in a data center could reach up to 40% of the total power cost.[2] This becomes the main reason behind tech giants’ decision of building data centers in the Nordic area. The cooler climate of these countries would help the cooling process, thus lowering the operational cost. When it comes to Indonesia, its tropical climate would only increase the cost of the cooling process, which will increase the overall cost of running a data center.
In addition, building data centers in Indonesia would also require the company (along with the government) to build the supporting infrastructures that are needed. One of the most vital infrastructures will be electricity. Since the data center will require huge power, the company and the government will have to make sure that they can provide it. This leads us to two scenarios. In the first scenario, the company will take a larger part in providing said power, thus adding more burden to its budget. The second scenario would be on how the government will be the one who provides the power. But this second scenario is unlikely and will only add more burden to the government, especially that the Indonesian government still struggles to meet the power demand of its citizens.
Data localization will also harm start-ups, as they have limited funds. The expensive cost that it requires will become a huge obstacle for start-ups to develop and could hinder technology innovations.[3] Due to its substantial multiplier effect, the harm of data localization will not only be exclusive to IT-based goods and services only, but also to other sectors. A report from ECIPE suggests that economy-wide data localization will eliminate approximately 12% of Indonesia’s economic growth and 2.3% of its direct investment.[4] It shows how the cost of data localization in Indonesia prevails the benefits that it will bring.
A Threat to Individual Freedom
The Director of Information Security, Bambang Hery Tjahjono, explains that the main purpose of the regulation is to help the law enforcers in doing their job as it will be easier to access the data if it is under Indonesian jurisdiction. It is also to avoid loss of data in case they have issues with the host country in which the data center is located.[5] In addition, the text of the law also explains the purpose of this regulation, which is to protect the interest and sovereignty of Indonesia – although it is not clear to what extent.
While it seems logical that the government is trying to protect its interest, it actually also possesses threats towards private space. The storage of data within the country’s jurisdiction means that it should also abide by the law of the country. Without proper regulation on data access and data protection, some parties – including the government – could abuse the access to private information.[6] This abuse of data access could danger freedom of expression and democracy in general. Still, in regards to data abuse, the localization could also harm the right to privacy of other citizens as data from other countries will also be stored in Indonesian data centers.
Do It Right or Don’t Do It At All
With the complexity surrounding a data center, it would be wise for the government to think twice about its decision. It is not cheap to build a data center, especially in an area with insufficient infrastructure, unstable power supply, and a high-frequency of natural disasters. Based on the previous explanations, we can see how it would not only bring harm to the business but also to the government. The regulation could repulse foreign investment, especially in the digital sector. This will in turn hurt local start-ups and weaken the national economy.
But even if the government insists to implement this regulation, they need to create detailed technical guidance for it. As mentioned before, a data center has a substantial multiplier effect that it needs to be managed carefully. If the government wants to optimize the benefit of it, then they need to convince tech companies to support this regulation. Mutual collaboration between the government and digital businesses is very vital to ensure that this regulation will not hurt the national economy instead. In addition, the government should also minimize the loopholes in its regulation to avoid the abuse of data access from the incumbent or any other parties.
[1] Joe Weinman, “Why data centers have big impact on the economy,” Gigaom, October 27, 2012, <https://gigaom.com/2012/10/27/why-data-centers-have-a-big-impact-on-the-economy/>, accessed on March 30, 2016
[2]Colleen Miller, “How Big Data and Internet of Things (IoT) Impact Data Centers”, Data Center Knowledge, March 12, 2015, <http://www.datacenterknowledge.com/archives/2015/03/12/big-data-and-internet-of-things-iot-impact-data-centers/>, accessed on March 30, 2016
[3] Alexander Plaum, “The impact of forced data localisation on fundamental rights”, Access Now, June 4, 2014, <https://www.accessnow.org:443/the-impact-of-forced-data-localisation-on-fundamental-rights/>, accessed on March 30, 2016
[4] Bert Verscheld, “The Impact of Data Localisation on Indonesia’s Economy”, ECIPE Bulletin, No. 09/2014
[5] Kompas Tekno, Mengapa Indonesia Terapkan “Wajib ‘Data Center'”?, December 18, 2012, <http://tekno.kompas.com/read/2012/12/18/1737035/Mengapa.Indonesia.Terapkan.Wajib.Data.Center> accessed on March 30, 2016
[6] Alexander Plaum, “The impact of forced data localisation on fundamental rights”, Access Now, June 4, 2014, <https://www.accessnow.org:443/the-impact-of-forced-data-localisation-on-fundamental-rights/>, accessed on March 30, 2016
