Bank Indonesia (BI) reported the national banking loan growth only 0.12 in September compared to August, which was still grew 1.04 percent due to the pandemic - Photo by DBS Office

JAKARTA (TheInsiderStories)—Indonesia’s digital economy, is still relatively young, despite it does not change the fact the country offers a huge prospects from this.

Many studies argue that should the digital economy takes off in regional Southeast Asia, then the economy will be boosted significantly. According to the McKinsey, by speeding up the digital economy, Indonesia can earn up to US$150 billion in annual economic impact by 2025, .

The big opportunity is mostly driven by the huge country’s population of 260 million people and the giant smart-phones users of 100 million in 2017. So far, around 143.26 million people connected to the internet in 2017, according to the Association of Indonesian Internet Service Providers data.

Even Google and Temasek  notice there is a possibility that Indonesia’s internet user could reach 215 million people by 2020.

However, despite Indonesia’s digital behavior shows an increasing trend, there is an inequality in the information and communication technology (ICT) infrastructure availability, which could holdbacks the growth of Indonesia’s digital economy.

Most of the infrastructure only available sufficiently in the Java and Sumatra region. As a result, most of the internet users (58.08 percent) or equivalent to 83 million people live in the Java island. It followed by the internet users in Sumatra that reach 27.35 million people.

On the other hand, the internet users in the eastern part of Indonesia is still very low. In Maluku and Papua, the internet users only 2.5 per cent of the total users.

Based on the Ministry of Communication and Informatics data, the more severe condition seen in the border areas where only 88 districts of the total 186 districts connected to the internet. Furthermore, the internet access rate is extremely low in the remote areas that is only 451 districts of the total 1,524 districts connected to the internet.


Indonesia’s government is speeding up information & communications technology (ICT) infrastructure projects to boost the digital economy. There are at least two projects to improve ICT infrastructure for the Indonesian.

One of them is Palapa Ring project that builds national fiber-optic network. It will provide a backbone for a national information superhighway. This project is part of the universal service obligation to ensure the telecommunication and informatics access for the public.

The projects consist of the three packages namely west package, central package, and east package. The West package is ready to operate, but the central and east package reach 70 per cent and 40 per cent respectively. The two packages targeted to finish by 2019.

Furthermore, the government is also speeding up the High Throughput Satellite (HTS) project aimed to bring internet access to the remote area. This effort could boost digital economy.

The ministry offers this Rp7.78 trillion (US$563.77 million) project and expected to get investor by the end of this year. The satellite is expected to launch at the end of 2021 or at the beginning of 2022. The project is funded by a public-private partnership scheme.

This project will reach out 149,400 location that currently has no internet access. These locations are also difficult to reach by cellular phones services and fiber-optic. It includes 93,900 of schools, 47,000 of government offices, 3,900 of sectoral police and armed forces, and 3,700 of community health care.

The government prioritizes the satellite service to the eastern part of Indonesia that still underdeveloped compared to the other parts of Indonesia. The HTS project will offer an internet speed of 10-30 Mbps.

The Impact

In our view, lack of supporting infrastructure and less supportive regulars is also the cause of internet penetration and connection in Indonesia is still inferior to its neighbors in South Asian region.

Average internet connection in Indonesia around 772 kilobytes per second (kbps), Malaysia 1.7 Mbps, Thailand 3 Mbps, Vietnam 1.5 Mbps, Cambodia 1.2 Mbps and Laos 956 Kbps.

How come?

Indonesia’s Diverse Geography

Being an archipelagic country of more than 13,000 islands and spanning more than 1.9 million kilometers and a mix of hilly and heavily hilly terrain is a problem faced by network providers in networking infrastructure. At its conclusion requires a relatively greater cost than the usual territory.

High Internet Users

Is recorded 55 million people or 22.4 percent of the total population of Indonesia has been using the Internet. This number will increase and the country will become an internet users number eight in the world and number four in the Asian zone after China, India and Japan. This causes the network limited and the connection quality becomes slow.

Government Regulation Less OK

This problem actually afflicts the mobile service operators with their obligation to pay cost of operation rights to the government is too high. As a result the operator do all the ways of efficiency. This also hampers the development of technology built by mobile operators, for example, say 3G technology that has not returned investment (ROI). The investment on the next technology such as 4G/LTE is clearly not possible.

Too Many Operators

In Indonesia now there are about nine mobile operators. it is certainly not efficient because each operator will definitely get a small network spectrum because it has to share with other operators. Of course as impact the quality of network connections will slow. When considering some developed countries in the world, the government is very selective in determining and issuing new operator licenses and usually not more than five operating companies