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Beyond pornography and security reasons
A polemic centering on the see-saw battle between the Communications and Information Technology Ministry and Research in Motion (RIM) which provides the BlackBerry services in Indonesia has stayed on course for a couple of weeks
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polemic centering on the see-saw battle between the Communications and Information Technology Ministry and Research in Motion (RIM) which provides the BlackBerry services in Indonesia has stayed on course for a couple of weeks.
Not only reasons of pornography and security (which are becoming trendy topics) but economic motives are also playing an important role underpinning this debate. This aspect should not be seeping out to the public at large.
Many studies have for a long time investigated the need for obtaining a certain critical mass of the penetration rate to reap benefits of telecommunication development.
An empirical study by Torero, Chowdhury and Bedi in 2006 concludes that a 1 percent increase of the telecommunications penetration rate might lead to a 0.03 percent increase in the GDP only at a penetration rate between 5-15 percent for developing countries.
Looking at the euphoria of Facebook and Twitter in Indonesia, it has generally gone unnoticed that the telecommunications sector has performed just at a sub-optimal level in comparison to those of other ASEAN countries in terms of the diffusion of gadgets.
International Telecommunication Union (ITU) estimates that Internet users accounted for only 8 percent of the population in Indonesia, far below Singapore (73 percent) and Malaysia (55 percent), as of the end of 2008. Despite the massive progress of additional subscribers of mobile broadband, the achievement of a 3.4 percent penetration rate is also smaller than Singapore (65 percent), Malaysia (9 percent) and the Philippines (7 percent).
Undoubtedly, the existence of mobile broadband functionality attached to BlackBerry browsing services is supposed to be capable of connecting the unconnected people in the wake of the digital divide.
For reasons of fostering the diffusion process of the Internet and broadband and reaching the threshold of critical mass, the diffusion of BlackBerry services, which has reached 2 million subscribers in the country, has visibly played an important role in the absence of fiber optic cable deployment in Indonesia.
Although there is obfuscation over whether BlackBerry really bridges the unconnected people rather than merely represents another multiple subscription option among existing gadget users.
Besides the problem of the digital divide, the other side has actually shown tremendous performance in the sector over the last couple of years.
The telecommunications sector, which is a part of transportation and communication, has contributed to around 6.73 percent of GDP as of 2008, from 5.91 percent in 2003.
While the growth of the Indonesian economy has averaged 6.4 percent from 2003 to 2008, the telecommunications sector has reached an annual growth rate of around 14.38 percent. Thus for most of these years, the sector has enjoyed a more rapid growth than other sectors.
Therefore, it is not a surprising fact that the ITU reported that the total telecommunication revenue from the Indonesian market was around US$5.5 billion, or the seventh-largest market in Asia as of the end of 2004.
Hence, the need for increasing the benefits from the sector not only for the investor but also for the country through job creations and access to local content makes sense.
A different perspective assessing the telecommunications sector reveals that the impact on economic growth is only visible in countries with high levels of privatization as suggested by Mariscal in 2005 for the Latin American countries and Chakraborty and Nandi in 2009 in the case of Asia.
Concerning the current issue, relaxing the regulation on RIM’s operation in Indonesia will enable the provider to offer services at an affordable price at least for the next couple of periods.
Nonetheless, given the huge digital divide in Indonesia especially in the Internet and broadband penetration rate, it is hard not to include the role of the government especially by implementing the Universal Service Obligation (USO) programs which are, funding-wise, mainly supported by the contribution of private companies in this industry.
From a fiscal standpoint, pertaining to Government Regulation No. 28/2005, the contribution of the telecommunications industry is rather specific. It has to contribute to the non-tax government revenue in terms of the USO fund, telecommunications fees and the frequency fee.
Yet, due to the fact that BlackBerry offers handsets and services at the same time unlike other operators, this aspect has become unclear in this case.
Contribution of the telecommunication industry to the non-tax government revenue has increased from only 1.09 percent in 2004 to 2.53 percent in 2008.
In spite of the greater contribution from the telecommunication sector from 5.1 TIDR in 2007 to 7.6 TIDR in 2008, the USO has surprisingly fallen from 756 BIDR in 2007 to only 693 BIDR in 2008.
In addition, given the belated start of USO initiatives in Indonesia compared to ASEAN neighbors, the impact of the program is somewhat undetectable. Thailand launched the Tambon Internet project in 2001 with the goal of providing Internet access to all 7,500 tambons (subdistricts), which was accomplished in March 2006.
Malaysia also launched the nation-wide Internet Desa program in 2000. In contrast, Internet and telephone penetration to rural areas through the Desa Pintar (smart village) and Desa Berdering (ringing village) in Indonesia only commenced in 2009.
Thus, as suggested by the Communication and Information Technology Ministry, complying with government regulations means RIM would also contribute to the government’s revenue in terms of non-tax payment, especially the USO.
The writer is a researcher at the Institute for Economic and Social Research, Economics School, University of Indonesia.
