The economic recovery in Indonesia is beginning its journey with the recent introduction of changes to internet connectivity. By launching plans for 5G in Indonesia by 2023, access to the network will be available in seven cities: Serang, Jakarta, Bandung, Semarang, Yogyakarta, Surabaya, and East Kalimantan.
As is the case with many places around the world, Indonesia’s economy was hit hard during the COVID pandemic. With the new launch of 5G services, the post-pandemic recovery time looks set to speed up in the coming years.
COVID’s impact on Indonesia’s economy
Indonesia is Southeast Asia’s largest economy, but over the last year and a half, the country’s gross domestic product (GDP) fell more than projected. Because of this, the economy felt its first full-year contraction in two decades when the Asian financial crisis happened in 1998. Although the GDP ebbed and flowed throughout the year, it was only projected to see a 2% drop, which was off by a small 0.7% to the actual number. This full-year drop came off a 5% increase in 2019.
Has the pandemic really damaged Indonesia’s economy?
Both household and government spending were hit hard. Household consumption in Indonesia makes up half of the GDP, and it experienced a year-on-year fall of 3.6%. In Q4 2020, household consumption improved slightly, as compared to a 4.1% drop in Q3. . However, it was met with a 6.2% fall in investment. Government spending saw a huge decline from the previous quarter as well. Spending was up by a minor 1.8%, significantly lower than the 9.8% growth in Q3 2020. The good news is that with vaccinations ramping up, the forecasted growth is 7.8% for 2021.
The digital economy, on the other hand, has experienced growth even during the pandemic. With the introduction of 5G networks across the country, the pace of growth of the digital economy will increase with the speed of the 5G capabilities.
Emerging trends and rollout plans
Indosat Ooredoo is the leading telecommunications company in the country and, on June 3 and 4, underwent the Operation Feasibility Test (ULO) for the 1,800 MHz frequency band. After passing the test, the company was free to take steps towards positive digital changes in Indonesia. By successfully passing the ULO, Indosat Ooredoo can now make the necessary moves towards rolling out the 5G network commercially. The digital economy is growing exponentially in Indonesia, and with this achievement, the digital transformation can continue.
The initial stages of the 5G rollout will be limited to certain areas such as Jakarta, Surakarta, Central Java, Surabaya, East Java, Makassar, and South Sulawesi. However, these initial limitations will only open the door for a 5G enabled future across the entire country. By providing these areas—and eventually the rest of the country—with these digital capabilities, the digital economy in Indonesia can begin growing in a way that benefits its residents and businesses that want to provide the best possible digital experience for their customers.
Significant strides in the 5G landscape
The May launch of the first commercial 5G service by the state-owned Telkomsel will test the market. The high consumer demand in residential areas of Jakarta and South Tangerang gave the company the locale to launch the premium data service as a digital solution that is accessible and usable. The new challenges the market faces will be offset by the launch so the digital economy in Indonesia can continue to surpass expectations when it comes to digital experiences for both consumers and enterprises.
The current gap in digital technology use is a possible hindrance regarding the growth of the country’s digital economy. 5G technology is likely to help shrink the gap and help to speed up digital use and literacy via adaptive technology. The potential aspects of consumer technology that stand to gain new resilience in the region include enhanced video, high-definition music, cloud gaming and augmented and virtual reality.
When it comes to the enterprise point of view, industries that are most likely to see expedited potential because of 5G capabilities are manufacturing, utilities and media. Until the evolution of a standalone type of 5G can be implemented, Telkomsel’s 5G network will still utilise the same infrastructure left from the existing 4G network.
The challenges of the rollout, such as capital expenditure, continue to caution telecommunications companies of such grand scale rollouts of the 5G network. This initial launch will test the waters and verify the market response. Although it will take a while to reach full 5G capabilities across the country, steps are being made in the right direction.
The launch of 5G in Indonesia aims to facilitate post-pandemic recovery. With such a large digital economy, 5G may be just the thing that aids economic recovery in Indonesia.