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Jakarta Post

Nearly complete Palapa Ring key to boosting digital economy

The government’s ambitious nationwide Palapa Ring project is expected to be operational by mid-2019

Norman Harsono (The Jakarta Post)
Jakarta
Mon, January 28, 2019

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Nearly complete Palapa Ring key to boosting digital economy

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span>The government’s ambitious nationwide Palapa Ring project is expected to be operational by mid-2019. The project is intended to improve internet access in rural areas throughout Indonesia and support the country’s digital economy.

The Palapa Ring project has reached 96.3 percent completion as of this month. “Everywhere will be connected to the internet,” National Development Planning Minister Bambang Brodjonegoro said in his keynote address at the GovPay and GovNext forum at Hotel Mulia in Jakarta.

He envisioned the project’s completion would pave the way for smarter cities, new start-ups, more household entrepreneurs and, most critically, boost the overall digital economy to the targeted US$100 billion by 2025, as published in a landmark Google-Temasek report.

The multibillion-rupiah project, the construction of which is divided into west, central and east regions, remains incomplete only in the eastern region, mostly in the underdeveloped Papua province due to rough road conditions in remote mountain areas.

Meanwhile, in the western and central regions, which cover Sumatra, Kalimantan, Java, Sulawesi, the western Moluccas and lesser Sunda islands, the project was completed this month.

“After 2019, businessmen don’t have to worry about doing business in Eastern Indonesia, in Natuna or in Nusa Tenggara,” said Bambang in reference to some remote regions.

Reflecting Bambang’s optimism, Harianto Gunawan, director of e-payment service OVO, expressed optimism the project would help deepen and expand his company’s market reach in eastern Indonesia.

“We successfully operate in 303 cities now only because we ensured they had solid internet connectivity before entering,” he said.

Digital economy players such as OVO, Grab, Tokopedia and Google, which are focusing on expanding their ecosystems, stand to benefit most from the increased internet penetration facilitated by the project’s completion.

However, West Java administration expert staff member Agus Hanafi expressed skepticism over the project’s impact in Java, which already enjoys better internet infrastructure than the rest of the country.

“I don’t think it will have a huge impact in Java,” he said.

Nevertheless, he acknowledged that it was still too early to have a definitive answer, as the project was not yet operational — the government and partner developers have only laid down fiber optic cables and erected towers.

The project’s completion will also improve financial inclusivity by helping financial technology (fintech) lending firms such as Kredivo and Investree access eastern Indonesia, promising more financing opportunities for micro, small and medium enterprises.

West Kalimantan Deputy Governor Ria Norsan expects the Palapa Ring project’s completion to help boost regional financial inclusion from 65.5 percent last year to 75 percent this year through fintech.

“Our fintech vision is to make more villages financially independent,” he said.

He noted that peer-to-peer lenders disbursed a total of Rp 4.9 billion ($345,000) to 3,800 borrowers in West Kalimantan since 2016.

However, the proliferation of fintech companies raises the question of the country’s ability to regulate them given regulators such as the Finance Ministry, Bank Indonesia and the Financial Services Authority (OJK) struggle with the existing fintech landscape.

“There’s just so many users,” said OJK adviser Widyo Gunandi.

He was referring to Indonesia’s 143 million internet users at a 55 percent internet penetration rate, which may grow above 4.6 percentage points annually with the operation of the Palapa Ring project.

Widyo added that the OJK was bracing for fintech expansion by creating a Digital Financial Inclusion Index set to be released in three months.

The index will provide a map of internet accessibility and infrastructure around the country, allowing OJK to record changes following the project’s completion, and thus formulate more accurate policies.

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