MSMEs and technology start-ups are essential parts of the Indonesian economy, playing a crucial role in driving this ongoing and complex digital transformation.

According to a study by Google, Temasek and Bain & Company, Indonesian MSMEs contributed approximately 57% of the country’s GDP in 2020. The same study also found that 80% of Indonesian MSMEs are already using digital tools and technologies, such as e-commerce platforms and social media, to reach customers and do business.

As the digital economy continues to grow, data privacy and protection become more and more crucial. In response, the Indonesian government implemented two key regulations: Government Regulation (GR) 71/2019 on the Organization of Electronic Systems and Transactions and the Personal Data Protection Law (PDP).

While these regulations are great initiatives by the government to protect the company’s personal data, they also have implications for data localization, which requires electronic system operators (ESOs) to maintain and store personal data in local jurisdictions.

Currently, GR 71/2019 only requires public ESOs, or government entities or those designated by government entities, to store data at the national level. However, some unconfirmed reports suggest that future revisions could extend this requirement to the private sector. If implemented, this measure could pose challenges to many MSMEs and technology start-ups, which contribute greatly to the economy, creating jobs and solving problems for Indonesian consumers. On the other hand, the PDP law imposes restrictions on cross-border data flows.

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Beyond a holistic approach: challenges for Indonesian tech MSMEs

Although data localization policy aims to ensure data security and sovereignty, it can also create challenges for businesses that need to process and store data across borders. These regulations will require companies to store data within Indonesian borders, which could lead to increased costs, operational complexities and restrictions on cross-border data transfer. This could put significant pressure on MSMEs or early-stage start-ups, which often operate with a limited pool of resources. Furthermore, it could hamper their ability to innovate and compete globally, which could stifle the growth of Indonesia’s digital economy in the long term.

Under the EU General Data Protection Regulation, widely considered the gold standard for data protection, the right to data protection must be balanced with other fundamental rights, such as freedom of enterprise .

If data localization requirements are extended to private sector data, MSMEs and tech start-ups could be forced to forego using best-in-class technologies from foreign providers. This could hamper their ability to innovate and compete globally, directly competing with the grand vision outlined in Visi Indonesia Digital 2045, which aims to position Indonesia as a global digital leader by 2045, pulling leverage technology to drive economic growth. , social development and improve the quality of life of its citizens.

Strict data localization requirements could very well limit access to global markets in the long term by creating data silos, which could make it difficult for MSMEs to access and analyze data from different regions and technology startups. This can hamper their ability to develop products and services suitable for global markets and ultimately reduce their competitiveness compared to their international counterparts.

A blanket approach to forcing data localization on all businesses may not be the most effective solution. Given the diversity of challenges and operational scales faced by different businesses, a one-size-fits-all approach could potentially harm the interests of the economy as a whole.

A balanced approach for MSME growth

SPUN is an early-stage Indonesian immigration technology startup. We simplify the process that Indonesians and travelers with limited passport privileges face every time they travel: obtaining visas and permits to enter a country. We believe that the movement of people goes beyond leisure; If the process is made simpler, easier and more efficient, people may have better opportunities to change the course of their lives through international travel experiences, such as studying or working abroad.

Indonesians need visas to enter more than 100 countries, in stark contrast to European passport holders, who only need visas for around 20 countries. This challenge is not unique to Indonesians; many Southeast Asian countries, such as the Philippines and Vietnam, face similar problems.

With a mission to establish a strong international presence in the global immigration landscape, this leads us to ask the question: how effective are data localization measures in ensuring not only data security, but also the growth and sustainability of companies like ours?

The Coalition for Digital Prosperity Asia (DPA), which represents hundreds of digital MSMEs in the Asia-Pacific region, also believes it is essential to recognize that there is a broader ecosystem of measures and regulations across beyond the localization of data that can contribute to the development of MSMEs. and the digital economy.

Compliance with the EU General Data Protection Regulation (GDPR) or participation in the APEC Cross-Border Privacy Rules (CBPR) can be used as benchmarks to demonstrate strong privacy and data protection practices. data.

As noted in Recital 13 of the GDPR, regulators should take into account the unique needs of micro, small and medium-sized enterprises in the application of data protection. As we welcome the new presidential administration, it is crucial to reevaluate the effectiveness of these regulations and consider alternative approaches that prioritize both data protection and the growth of the digital economy.

Looking to the future

As Indonesia’s digital economy continues to grow, it is imperative to create a policy environment that supports the growth and innovation of MSMEs, technology start-ups and the broader entrepreneurial ecosystem, while ensuring the protection of personal data.

By adopting a more flexible and risk-based approach to data localization and fostering international cooperation and collaboration, Indonesia can create a stronger tailwind for its MSMEs and technology start-ups to be included and thrive in the global market with access to the best technologies. -classroom practices and innovation.

The ideas expressed in this article are those of the author and do not reflect the official position of the Jakarta Post.

Source: Digital Prosperity Asia