Published daily by the Lowy Institute

Indonesia’s digital drive gets big tech backing

Jakarta has welcomed some major world figures lately, hinting at its digital ambitions. But Indonesia faces stiff competition from the rest of ASEAN.

Photo by Flickr user lau rey
Photo by Flickr user lau rey
Published 21 May 2024 

Two US technology tycoons and one British political luminary made separate visits to Jakarta in April, met Joko “Jokowi” Widodo at the presidential palace, and pitched projects that fall in line with Jokowi’s digital transformation agenda.

Indonesia’s digital economy is expected to be valued at US$125 billion by 2025, the largest share in ASEAN. 

First, Apple CEO Tim Cook met Jokowi 17 April, announcing a US$74 million investment to build an Apple Developer Academy for digital talent. Apple already has three such academies in Indonesia, in Batam island, an hour’s ferry trip south of Singapore; South Tangerang, a city to the west of Jakarta; and Surabaya, the capital of East Java province that has bustling industrial estates. Apple intends to build its fourth academy in Bali.

The idea of the Apple academies is not only to train product technicians. They are also set up to allow for the importing of finished iPhones and iPads assembled in China and Vietnam. Jokowi has called on Cook to manufacture Apple hardware in-country, making Indonesia not just a market but a link in the global supply chain. “We talked about the President’s desire to see manufacturing in the country and it’s something we will look at,” Cook said without making commitments.

The president also wants Apple to invest in the new national capital, Nusantara, under construction in the Borneo jungle. Communication and Information Technology Minister Budi Arie Setiadi said Apple is mulling investment in smart city technology for the new capital. “The details are still under discussion, including incentives for Apple if necessary,” Budi stated.

The tech tycoon also met with president-elect Prabowo Subianto, who will take the oath of office on 20 October. Cook pledged to Prabowo the bolstering of skills development, with Apple academies in Indonesia already passing out nearly 2000 graduates.

On 30 April Satya Nadella, CEO of Microsoft, got his turn to confer with Jokowi. He plans to invest US$1.7 billion over the next four years to build cloud infrastructure and artificial intelligence (AI) capacity in Indonesia. This involves the training of 840,000 AI operators. “The investment that we announce today that covers digital infrastructure, capacity, and support for developers will help Indonesia to advance in this new era,” Nadella said at a “Microsoft Build: AI Day” event. American chip giant Nvidia reportedly also plans to invest US$200 million in Solo in Central Java province to build an AI centre.

Meanwhile, another profound world figure talked with Jokowi. Tony Blair, executive chairman of the Tony Blair Institute for Global Change, came to the palace on 18 April to discuss how Indonesia can speed up digital transformation of the bureaucracy. One focus of Jokowi’s meeting with the former British prime minister was GovTech, designed to integrate various public service systems.

Indonesia faces stiff competition from its ASEAN partners. So how does the digital landscape of the broader ASEAN region look?

The Jokowi administration hopes all these big technology investments encourage digitalisation, one of the four pillars of Jokowi’s big-picture national development scheme. Jokowi has appointed Luhut Binsar Panjaitan, Coordinating Minister for Maritime Affairs and Investment, to coordinate all digital investments involving the private sector, state-owned enterprises and government agencies. Luhut has been Jokowi’s trusted jack of multiple-tasks that cross numerous sectors.

Indonesia faces stiff competition from its ASEAN partners. So how does the digital landscape of the broader ASEAN region look?

According to a 2022 report from the Singapore Institute of International Affairs, the ten member-states of ASEAN have an internet penetration rate of 75 per cent, and growing. The region gained 60 million new users of digital services in 2020 alone. Over the next ten years, ASEAN’s digital economy is expected to add as much as US$1 trillion to regional GDP.

To drive the digital economy, in 2021 ASEAN inaugurated its ASEAN Digital Masterplan 2025. It aims to make ASEAN “a leading digital community and economic bloc, powered by secure and transformative digital services, technologies and ecosystem.”

Singapore is the fifth most digitally competitive country globally, according to the IMD World Digital Competitiveness Ranking. 80 percent of the top 100 technology giants are present in the city-state. Digitalisation began in 1981 with Singapore’s National Computerisation Programme. In 2014 its Smart Nation Initiative pushed further its digital capacity, embedded into the daily lives of its people.

Thailand has the fastest fixed internet connection globally and the second fastest mobile connectivity in Southeast Asia. To provide internet access to lower-income and rural residents, the Thai government has the “Village Broadcast Internet” Scheme, providing broadband access to remote areas. Fibre cable networks were installed in more than 24,000 Thai villages. 

With its National Digital Transformation Program introduced in 2021, Vietnam intends to move the majority of government services online, with 50 per cent of the country to have a digital banking account and 70 per cent of consumer transactions done by digital means, all by 2025. Vietnam is the highest ranked ASEAN country in the creation, maintenance and scaling of computer systems and software.

Indonesia’s digital economy is expected to be valued at US$125 billion by 2025, the largest share in ASEAN. Internet penetration is over 70 per cent for the nation’s 275 million population. But Indonesia still has to extend connectivity to the smaller outer islands, where digital infrastructure is lacking. Incoming president Prabowo faces the challenge of fixing this, with the help of the big tech companies.

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