About Data Center & Digital Infrastructure Law in Indonesia
Indonesia is experiencing rapid growth in digital transformation, with data centers and digital infrastructure at the core of this development. As Southeast Asia's largest economy, Indonesia aims to become a regional digital hub, supported by rising internet penetration, e-commerce, and investments in cloud computing. Data centers serve as the backbone for storing, processing, and transmitting digital data, while digital infrastructure includes networks, cables, and supportive technology enablers. With this growing ecosystem, the Indonesian government has issued several regulations to govern data storage, cybersecurity, licensing, foreign investment, and compliance, creating a complex legal landscape for businesses and investors.
Why You May Need a Lawyer
Legal issues related to data centers and digital infrastructure can be highly technical and complex. Common situations where legal assistance might be needed include:
- Negotiating land acquisition, construction, or operational permits for a data center
- Understanding and complying with local ownership, licensing, and foreign investment restrictions
- Drafting and reviewing service level agreements (SLAs), contracts, and leases
- Ensuring compliance with Indonesia's data localization, privacy, and cybersecurity laws
- Handling government audits, inspections, or administrative actions
- Managing cross-border data transfer and international security standards
- Resolving disputes with partners, clients, or regulatory bodies
- Navigating taxation, incentives, and import-export regulations for digital equipment
- Structuring corporate entities and partnerships for data center projects
Local Laws Overview
The regulatory framework governing data centers and digital infrastructure in Indonesia is influenced by several key laws and government regulations:
- Electronic Information and Transactions Law (EIT or UU ITE): Establishes the foundation for electronic systems and transactions, including data storage, electronic documents, and digital signatures.
- Government Regulation No. 71 of 2019 (GR 71/2019): Requires certain "electronic system operators," especially those providing public services, to store and process data locally in Indonesia. This regulation introduces data localization and sets requirements for data center operations.
- Personal Data Protection Law (PDP Law): Comprehensive data privacy legislation, enacted in 2022, governs the collection, processing, transfer, and protection of personal data. The PDP Law impacts how data centers handle personal information.
- Foreign Investment Regulations: Certain digital infrastructure activities may be subject to restrictions on foreign ownership, as set by the Positive Investment List and sector-specific rules.
- Telecommunications Law and Regulations: Data centers providing network or telecom-related services must comply with licensing and technical guidelines issued by the Ministry of Communication and Informatics (Kominfo).
- Environment, Building, and Zoning Laws: Data centers must adhere to local permits, building codes, energy efficiency requirements, and environmental regulations for construction and operations.
- Taxation: Special tax incentives and VAT exemptions may apply for qualifying digital infrastructure projects, but compliance with tax and customs laws is essential.
Frequently Asked Questions
What is a data center and why is it important in Indonesia?
A data center is a facility that houses servers and equipment for storing, processing, and managing data. In Indonesia, data centers are critical for supporting the country's digital economy, e-government, cloud computing, and online services.
Is data localization mandatory for all businesses in Indonesia?
Data localization is primarily mandatory for electronic system operators providing public services in Indonesia. However, private sector businesses are also encouraged to use local data centers and must comply with sectoral requirements and the PDP Law.
What are the key compliance requirements for establishing a data center?
Key requirements include obtaining the right permits and licenses from Kominfo and regional authorities, ensuring the facility meets safety and environmental standards, following data security protocols, and complying with zoning and building rules.
Can foreign investors own a data center in Indonesia?
Yes, but there may be foreign equity limitations depending on the type of data center and services provided. Investors must consult the Positive Investment List and sectoral regulations to determine allowable ownership structures.
What are the main data protection rules that data centers must follow?
Data centers must comply with the Personal Data Protection Law, ensuring personal data is processed lawfully, stored securely, and transferred in accordance with the law. Policies for consent, data subject rights, and breach notification are required.
Are cross-border data transfers allowed?
Cross-border data transfers are permitted under certain conditions, such as ensuring the recipient country provides adequate protection or obtaining approval from relevant authorities. Specific rules may apply depending on the nature of the data and the operator.
What are the potential risks of non-compliance?
Non-compliance can result in administrative sanctions, fines, license suspension or revocation, criminal penalties, and reputational harm for the company or operator involved.
What types of contracts are commonly involved in data center projects?
Common contracts include construction and engineering agreements, leases, service level agreements (SLAs), colocation and hosting contracts, maintenance agreements, and technology supply contracts.
How can a company ensure cybersecurity in its data center operations?
Companies should implement technical and organizational security measures such as firewalls, encryption, monitoring, regular security audits, and incident response plans. Compliance with Indonesian cybersecurity standards is also necessary.
Do data centers receive any government incentives in Indonesia?
Certain investments may qualify for tax incentives, customs exemptions, or other benefits, particularly if they support government priorities such as digital transformation, green energy, and local job creation. Conditions apply and legal advice is recommended to navigate the available incentives.
Additional Resources
For more information or assistance regarding data center and digital infrastructure law, the following resources and organizations can be helpful:
- Ministry of Communication and Informatics (Kominfo) - Provides regulatory updates, licensing, and compliance guidelines for digital infrastructure
- Indonesia Data Center Provider Organization (IDPRO) - Industry association offering best practices and resources for data center operators
- Indonesian Investment Coordinating Board (BKPM) - Offers guidance on foreign investment procedures and incentives
- Otoritas Jasa Keuangan (OJK) and Bank Indonesia - Relevant for data centers serving the financial sector
- Legal counsel specializing in IT, technology, and infrastructure law
Next Steps
If you are considering investing in, operating, or partnering with a data center in Indonesia, or if you face legal questions or compliance issues, the following steps are recommended:
- Assess your business model and identify applicable legal and regulatory requirements
- Consult with a qualified legal advisor who has experience in data center and digital infrastructure law
- Prepare all documentation needed for licensing, permits, and contracts
- Engage with relevant government agencies and industry associations for up-to-date guidance
- Conduct a legal compliance audit or risk assessment regularly to ensure adherence to evolving laws
- If a legal dispute or enforcement issue arises, seek immediate legal assistance to protect your rights and interests
Proper legal planning and support are crucial to successful and compliant participation in Indonesia’s growing digital infrastructure sector.
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The information provided on this page is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and relevance of the content, legal information may change over time, and interpretations of the law can vary. You should always consult with a qualified legal professional for advice specific to your situation.
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