Indonesia is an exciting growth market poised to play a significant role in Asia’s cloud ecosystem. Its population of 277 million makes it the fourth largest country in the world, with an internet penetration of 70%. Indonesia’s digital economy grew by 11% last year and is expected to exceed USD124 billion by the end of 2025. Digital transactions in the country increased from USD47 billion in 2020 to USD70 billion in 2021. Enterprises and government agencies are digitizing at a rapid pace with cloud computing revenues growing at almost 18% rate. Indonesia has a vibrant tech and start-up ecosystem with several of these companies having been ‘born in the cloud’.
These drivers have made Indonesia a big focus for hyperscale and webscale companies. The increasing needs of these cloud companies for infrastructure has transformed Indonesia’s (in particular Jakarta’s) data center industry – which has been experiencing rapid growth for the past few years.
This growth in Indonesia digital economy and data center industry creates the need for a robust and reliable internet infrastructure. However, the country is currently dependent on the central digital hub in Jakarta, making the whole country vulnerable to an outage in that primary gateway to the internet.
Current infrastructure and issues
Jakarta is the political and economic capital of the country – and a big contributor to the country’s GDP. Due to these and other historical reasons, Indonesia’s internet infrastructure has always been concentrated in Jakarta. International connectivity, including submarine cables, often land in locations surrounding Jakarta and interconnects between international and domestic networks as well as between eyeballs and content, tends to take place in central Jakarta. This means the whole country’s internet infrastructure is solely relying on Central Jakarta being totally fail-proof.
Unfortunately, Indonesia is vulnerable to natural disasters like earthquakes and flooding. In North Jakarta, rising sea levels are also a serious concern. As a result, there are plans to move the political capital of Indonesia to another city. In the same way, it would be advisable for Indonesia to develop a secondary digital infrastructure hub as a strategy for improving resilience and scalability.
Besides the risk of an internet outage, there is also a congestion issue. Currently, more than 200 million internet users in Indonesia rely on the Jakarta infrastructure for internet access and online transactions.
Lessons from the region
Indonesia is not the first country in the region to face these challenges. Japan followed a similar journey with digital infrastructure centered in Tokyo during its rapid growth phase from 2010. As the third largest GDP in the world, Japan attracted significant investment from cloud-based organizations. However, the Great Sendai or Tōhoku Earthquake and tsunami of 2011 exposed the vulnerability associated with its reliance on a single digital infrastructure hub.
Even though Japan did not lose internet access altogether, the damage to the telecom infrastructure was severe. After this incident, the country embarked on a strategy of diversifying its digital infrastructure with secondary markets. New subsea cables were routed to Osaka bypassing Tokyo, and telecom providers and ISPs began building independent new backbones in that region too. These changes and the improved resilience of the digital infrastructure in Japan contributed to the acceleration of digital growth in the country, offering a roadmap that Indonesia could also adopt.
Positioning for growth
The obvious solution for Indonesia is to have redundant internet hubs outside of central Jakarta. These hubs will need to be distributed across the country – and given Jakarta’s critical importance, there will need to be multiple hubs in the Jakarta region as well. Making this a reality will require a collaborative approach between telecom companies, ISPs, and hyperscalers. This approach will contribute to the resilience and scalability of internet access in Indonesia.
Princeton Digital Group (PDG) develops and operates data center infrastructure in several dynamic digital economies of Asia. In Indonesia, we have 6 data centers, with 3 in Jakarta and other spread across Java and Sumatra islands, which supports our strategy of being a multi-site facility that addresses the Central Jakarta limitation. Our 3rd and most recent data center in Jakarta is located in East Jakarta, right at the heart of the emerging cloud cluster of Jakarta. This foundation allows PDG to meet the demands of rapid digital growth in the region and play a part in establishing new cloud ecosystems.
A resilient and scalable digital infrastructure along with data centers that facilitate cloud ecosystems are key factors for Indonesia to maximize its digital growth.