Indonesia requires formal registration of tech and game companies – Niko
The Ministry of Communication and Information Technology of the Republic of Indonesia (Kominfo) had issued regulation no. 5 of 2020 on Penyelenggara Sistem Elektronik Swasta (PSE) or Private Electronic System Providers. The regulation is imposed to local as well as foreign tech enterprises operating in Indonesia, which include game companies, who are (1) providing services within the territory of Indonesia, (2) doing business in Indonesia, and/or (3) whose electronic system is used and/or offered in the territory of Indonesia.
There are four main objectives of the regulation: (1) establishing a system of all PSEs operating in Indonesia; (2) maintaining Indonesia’s digital space; (3) protecting public access on digital platforms; and (4) creating a fair system between domestic and foreign PSEs, including in terms of tax collection.
According to the PSE website run by Kominfo, there are currently 8,276 private PSE that are registered, consisting of 8,069 domestic PSE and 207 foreign PSE. Some of the big names who have registered to the website are Google, YouTube, Search Engine, Playstore, Ragnarok Online, Valorant, PUBG Mobile, Mobile Legend, Roblox, and Google Maps. There are companies and games that have not yet registered to Kominfo’s database, including Opera, LinkedIn, PayPal, Amazon.com, Alibaba.com, Yahoo, Bing, Steam, Epic Games, Battle.net, Origin, Counter-Strike: Global Offensive, and Dota 2. Failure to comply will be met with the following steps: a formal warning, a monetary fine, and access termination.
How PSE Affects the Gaming Industry
The new regulation provides an opportunity to obtain information on the number of gaming company which operates in the country. In a report launched by Kominfo, there is a demand for more opportunities and jams for local game publishers to increase their experience. By tracking the gaming companies currently active in the country, the government can promote more game jams between local and foreign game companies or fund internship opportunities to major game studios. The registration requirement may also promote fairness in terms of tax issues in the gaming industry. Currently, foreign companies are yet to contribute to the country’s tax revenue compared to local gaming companies.
On the other hand, the regulation may potentially disrupt the current games market in Indonesia. In terms privacy, developers will be required to provide the government access to their users’ personal data, which may violate one’s rights to data protection. Furthermore, there is a lack of clarity in Article 14 point 3 in the PSE regulation. It states that an enterprise would be prone to lawsuits if certain contents are considered “disturbing public order”, without providing further information on what this entails. This may hinder game development projects that are already under way and ultimately affect Indonesia’s growing games industry. Global game companies could be deterred from investing and publishing games in Indonesia as the games could be banned without detailed reasons or due to fear that the companies have to compromise their users’ private data.
Indonesia is ranked as the Southeast Asia’s largest games market. According to Indonesia’s Games Market and Industry Report 2021 launched by Kominfo in collaboration with Niko Partners, Indonesia is a $1 billion video game market with more than 170 million gamers. Mobile gaming is the primary driver of growth in the country, with its revenue (US$ 755.5 million) amounting to more than twice of its PC gaming revenue (US$ 318.8 million) in 2021. Niko Partners predicts that Indonesia’s game revenue will reach US$ 968 million for mobile and US$ 426.2 million for PC in 2025. As for revenue distribution, companies that generate revenue under IDR 50 million (US$ 3,500) are mostly active only in the Indonesian market, while bigger companies are gaining up to IDR 20 billion (US$ 1.4 million) globally.
Despite its huge market, there are still relatively few local game developers in Indonesia. The local game industry only controls less than 1% of the Indonesian market, while the rest is dominated by foreign games developer. There are only 1,485 Indonesian publishers on Google Play out of all 178,278 game publishers operating in the country. The data shows that there are more than 5,258 games from Indonesian publishers on Google Play out of the 486,028 games. Some of the most downloaded games in Indonesia are coming from foreign companies, namely Free Fire (500+ million downloaded), Mobile Legends: Bang Bang (100+ million downloaded), PUBG Mobile (100+ million downloaded), Roblox (100+ million downloaded), and many more.
Despite being dominated by foreign game titles, the 2021 Indonesia’s Game Market and Industry Report shows that Indonesian gamers perceive local game titles positively, with most respondents claiming that they are willing to play local games and would want those games to be included in public life including education and other training. However, there is a low exposure of local game titles. Gamers rely mostly on recommendations from app stores and the gaming community before trying out new games. More than half of the interviewed Indonesian gaming companies stated that they aim to enter global market, instead of targeting local market. This can be seen in the case of Coral Island which has become well-known among international gaming influencers, but less than 20% of our Indonesian respondents have heard about the title.
Summary
All in all, the implementation of the PSE regulation can be seen as a positive step in terms of providing new opportunities and create fairness among all the game developers operating in Indonesia. However, the government needs to be aware that some of the regulations may cause potential harm to game developers due to a lack of clarity in some parts of the regulation. To address this, the government should consider re-examining the requirement and purpose of personal data sharing as well as its criteria for inappropriate contents.
Authors: Nahdia Laela Fijriah and Salsabila Aziziah
‘News of the Day’ content, as reported by public domain newswires.
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