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View all search resultsData flows out, value flows away: Indonesia’s digital trade paradox
Behind the rhetoric of digital cooperation, Indonesia’s new trade framework risks turning the nation into a mere supplier of raw data for global giants. To avoid a digital paradox, the country must bridge the gap between open data flows and the domestic infrastructure needed to capture its true economic value.
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Employees of a pharmaceutical store promote baby care products through live streaming on Jan. 25, 2023, at ITC Fatmawati trade center in South Jakarta. (Antara/Fitra Ashari)
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quiet but consequential shift is unfolding in Indonesia’s digital economy. Behind the rhetoric of trade facilitation and digital cooperation, the emerging Indonesia–United States digital trade framework opens the door to significantly greater cross-border data flows. While the move is framed as a necessary step to integrate Indonesia into the global digital economy, a more fundamental question remains: When data moves freely across borders, who captures the economic value it generates?
Over the past decade, Indonesia’s digital economy has expanded rapidly, driven by e-commerce, fintech, digital services and mobile connectivity. Millions of Indonesians now participate daily in digital platforms and transactions. Yet despite this growth, the country remains structurally dependent on foreign digital infrastructure.
This imbalance is reflected in Indonesia’s services trade data. Bank Indonesia statistics show that the country’s information and communication technology (ICT) services account has been in deficit for more than a decade, reaching roughly US$2–3 billion annually in recent years. This highlights a continued reliance on imported digital services, platforms and infrastructure.
Domestic mobile network operators, for example, still depend on foreign backbone providers for international connectivity platforms—such as the GPRS Roaming Exchange (GRX) and IP Exchange (IPX) systems—which support roaming, international calls and cross-border data. As a result, while Indonesia generates enormous volumes of data through platform interactions and online transactions, a significant share of the value created within this ecosystem flows abroad. In balance-of-payments terms, this appears not as domestic income, but as imports of digital services.
Against this backdrop, the digital trade provisions in the Indonesia–US agreement deserve careful attention. The framework commits Indonesia to facilitating cross-border digital transactions and allowing business data to move electronically with minimal regulatory barriers.
Key commitments include avoiding discriminatory treatment toward electronic products, maintaining a duty-free regime on electronic transmissions and refraining from requiring technology transfers or the disclosure of proprietary source code as a condition for market access.
Taken together, these provisions reduce barriers to data flows, making it easier for multinational companies to store and process Indonesian data in overseas data centers, including those in the US and other regional hubs. This marks a shift from earlier policies favoring stronger data localization.
