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INDONESIA MUST ACCELERATE DELIVERY OF DIGITAL STRATEGY TO ACHIEVE GOVERNMENT'S TOP 10 GLOBAL ECONOMY BY 2030 AMBITIONS, SAYS GSMA REPORT

08/12/2023

The new report from the GSMA, published at its Indonesia Digital Nations Summit in Jakarta, evaluates Indonesia's progress to becoming a digital nation and recommends action points to accelerate progress

6 December 2023, Jakarta: The Indonesian government has made strong steps towards becoming a leading digital nation, according to a report published today at the GSMA's Indonesia Digital Nations Summit in Jakarta. However, the country needs to adopt a whole-government approach and be more joined-up around critical policy requirements, if Indonesia is to achieve its goals of digitally transforming society and becoming a top 10 global economy by 2030.

By doing so, Indonesia stands to unlock circa $18 billion in investment from the mobile industry between 2024 and 2030, mostly on 5G networks. This, in turn, is expected to contribute $41 billion to GDP over the next six years.

As part of its key recommendations, the GSMA report, entitled Forging a resilient digital nation: Proposals for Indonesia's future , analyses Indonesia's journey to becoming a digital nation and recommends action points the government and industry must expedite to achieve this transition. Above all, the report outlines opportunities to improve and accelerate progress in each of the five pillars - Infrastructure, Innovation, Data Governance, Security and People that will help it meet its ambition to becoming one of the world's top digital nations.

Digital nations incorporate digital technologies and services into all sectors of the economy, with the aim to drive productivity and improve the livelihoods of citizens. 5G is a key component of the infrastructure required to power future digital nations, given its ability to deliver reliable network-based services and enable the emerging technology that will help to reshape the local economy and modernise industries.

Julian Gorman, Head of APAC at the GSMA, said: While Indonesia has achieved notable success in its journey to become a digital nation, transforming the country's digital ecosystem won't be possible without the necessary investment from the private sector. To unlock this, a whole-government approach is needed to ensure the right measures are in place which encourage this, including incentivising infrastructure investment, simplifying sector-specific fees, and cutting red tape.

Despite the country consisting of over 18,000 islands, Indonesia has achieved an expansive network of digital infrastructure with 96% of the population now covered by 4G networks. However, 5G mobile connectivity will be crucial to achieving new economic targets and investment will require policy imperatives to accelerate the rollout of 5G infrastructure, where it is needed the most. These recommendations include:

Ensuring sustainable investments in digital networks

The rollout of 5G is set to drive an increase in smartphone demand and data traffic. In Indonesia, shipments of 5G models grew 54% in Q3 2023 and accounted for 19% of the total. However, operators' ability to expand network capacity and coverage is often hindered by regulatory constraints, market structures and excessive tax burdens. This has created an investment gap where market conditions for private investment in telecoms networks are not favourable enough to meet ambitious national and regional digital policy targets.

Therefore, the GSMA report calls on all parts of government to work together with industry stakeholders to:

Encourage voluntary infrastructure sharing (passive and active) to reduce the cost of network rollout, particularly in difficult terrains.

Reduce red tape for obtaining the necessary permits and right-of-way (RoW) for cell-site location and fibre deployment to ease network rollout, particularly 5G densification. For example, the amendment of RoW rules in India in 2022 has been credited for the rapid rollout of 5G and fibre infrastructure in the ensuing months.

Reduce and simplify sector-specific taxes and fees (including tower taxes and tower building permission fees, and various fees imposed by municipal authorities) to ease the cost burden of network rollout and operations and ensure the financial sustainability of the mobile industry.

Provide policy incentives to encourage investment in infrastructure. In South Korea, government incentives in the form of tax credits and tax reductions for operators announced in 2020 helped unlock investment of around KRW25.7 trillion ($22 billion) in 5G networks.

Allow further consolidation in the telecoms sector to drive synergies and the scale required for expansive infrastructure rollout.

Achieving sustainable spectrum pricing

As recently warned by the GSMA, Indonesia also risks a $14 billion (IDR 216 trillion) productivity loss to its economy, unless it focused on ensuring future mobile spectrum prices are sustainable. It therefore recommends that:

Reserve prices are set conservatively below estimates of market value to enable price discovery and reduce the risk of unsold spectrum.

Government reviews the formula for calculating annual spectrum fees (BHP IPFR) and consider adjustments to the parameters to provide the right long-term incentives and avoid disproportionate increases in costs that are not aligned with evolving market conditions.

A clear spectrum roadmap is laid-out that considers not only current bands being planned but also the longer term needs for Indonesia, especially for mid-bands in the 2025-2030 timeframe. Greater certainty around the availability of spectrum and associated conditions is crucial for operators to prepare investment plans, secure financing and develop strategies for network deployment and service delivery.

The Indonesia Digital Nations Summit

The report findings were published as the GSMA hosted its Indonesia Digital Nations Summit at The Westin Jakart
LINK: https://www.gsma.com/newsroom/press-release/indonesia-must-accelerate-...
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