Indonesia’s overarching goal to expand its basic digital infrastructure first emerged in the 1990s, through the idea of the Palapa Ring project. The project aimed to provide internet access to the entirety of the 34 provinces in the archipelagic nation and was completed recently in 2019. In 2014, the percentage of households in Indonesia with internet access was just over 32 percent. All regions aside from Java had lower percentages of internet access, providing evidence of the inequality in Indonesia’s development processes. As such, one key goal of the Palapa Ring project was to supply internet access to outer areas of Indonesia as well, to mitigate this development gap.

ACI’s research uses the What-If simulation from the flagship annual competitiveness study, to explore how improvements in digital access via the Palapa Ring project affect the competitiveness of the 34 Indonesian provinces. The simulation uses the 2020 ACI Competitiveness Index, which includes hard data from 2017, and survey-based data from 2019. The research findings are then compared with internet-related indicators from 2015-2020. The results show that the provinces that have the largest scope for growth, are yet to fully reap the benefits of the Palapa Ring project.

The overall ranking and score changes presented by the competitiveness analysis displays that the Palapa Ring project has extensive benefits for Indonesia. Better internet access could increase the competitiveness of 32 provinces. Among which, 17 provinces would make notable improvements with increased rankings up to four places. The provinces with the most improvement are North Maluku, Papua, and West Sulawesi. These provinces have historically experienced slower development from nationwide plans, indicating the success of the Palapa Ring project in these areas.

However, the analysis shows that the benefits of the Palapa Ring project were largely limited to personal digital consumption, as its impact has not yet been seen in workplaces and schools. It is important for the digital initiatives to reach these areas, as they provide the foundation for the digital literacy and preparedness of future generations. As such, Indonesia requires more digital harmonization, such as increasing internet access in offices. In the face of the pandemic, this has become more urgent, as all are required to adapt to digital platforms.

Additionally, while the project has successfully connected all the provinces, there is still further need for policy implementation. Especially in village areas, the project has been under-utilized. ACI’s paper includes policy suggestions that could mitigate this issue, increase the project’s penetration rate at a village-level, and subsequently improve Indonesia’s competitiveness standing as a whole.

By Sunena GUPTA

Researchers: Clarice HANDOKO, Xuyao ZHANG