About Google's Investment in Indonesia

With the revelation that Google is planning to open an office in Indonesia, a lot of the talk has been about how it would be beneficial for them to do so, but many of the arguments I see on a number of blogs, news articles and on Twitter show a misunderstanding of benefits.

Most highlighted the argument that Google as a corporation would be more accessible to Indonesians, that it would be able to do more direct interaction with Indonesia and understand the market a lot better. After all, Indonesia's 230 million people is the fifth largest in the world and with only 40-odd million internet users it's a market that can't be ignored.

Common Argument An oft mentioned fact is how prolific Indonesians are in social networking sites as if it's a major factor in establishing a local presence.

Many of those citing the number of Facebook users, Twitter activities, and blogging frequencies seem to forget that establishing a local office or striking an investment deal rely on much more than just a simple population count.

Additionally, most of the arguments put forward reflect more towards Indonesia's advantage in having Google (or any other major internet company) establishing a presence here rather than seeing it from Google's point of view.

A different angle Of course, having an office here would allow any company to get to know the market more intimately.

Additionally, despite having tens of millions of people connected to the Internet, the majority of Indonesians are still not fully aware of what it is. Most see the Internet as an alternative marketplace and a cheap way to connect with other people. Even the local term to "go online" is to "play on the internet"

As awareness of the Internet is still relatively low across the board, this is actually a good time to enter the market but not for the reasons put forward by many of the proponents of the idea.

To establish a presence right now means being able to directly identify the behavior of Indonesians online much more closely and in certain cases, influence how businesses approach and use the internet.

Stumbling blocks Unfortunately there are some issues facing any international company wishing to establish locally. Earlier today Kompas described the very problems that Google needs to consider before making an investment in Indonesia, some of which are similar to that still facing Research In Motion.

Google provides internet services and according to a bill that has been in limbo since 2008, the planned government regulation on internet and electronic services (RPP ITE 2008), any organization that provides data services must locate data centers locally.

The primary concern that is facing RIM, now that it has a local office, is whether local authorities can have direct access to the data being served to and from the servers. This brings up the issue of customer privacy and security if not properly regulated. The Canadian company still does not have a local data center for precisely that issue.

Unfortunately this law, while has been debated for several years has yet to be passed and it's not yet clear when if at all, it will pass.

There's also the regulation on online advertising that has yet to be cleared up, which, unfortunately was not elaborated further.

Gita Wiryawan, head of the investment coordination board said without going into details that Google's proposed investment is actually "very significant, even larger than what they invested Thailand, Singapore, and Malaysia."

[image from Associated Press]