Indonesia: Asia’s next growth engine

27 August 2013 | John Hibbard

Cover

John Hibbard

Blog Author | Hibbard Consulting; CEO


Indonesia is a country of 250 million people, making it the fourth-largest population in the world.

Indonesia is a country of 250 million people, making it the fourth-largest population in the world.

Although currently 16th in terms of world GDP rankings, the World Bank projects that Indonesia will rise to fourth by 2030, after China, India and the US.

A key ingredient in generating this economic growth will be good communications. Being an archipelagic country, with over 6,000 inhabited islands, much of the requisite connectivity will be by submarine cable. Clearly the government recognises this with the progressive implementation of the multi-phased Palapa network, which involves linking all of the significant domestic locations with a network of submarine cables.

However, the domestic network is only one part of the connectivity story. Indonesia needs enhanced international connectivity to facilitate its projected growth. Apart from the 13-year-old Sea-Me-We 3 cable south to Australia, Indonesia’s international capacity links into Singapore and Malaysia – from where it connects to the Pacific via the fault-prone South China Sea and risky Luzon Strait – or India and beyond in the west, via the narrow Straits of Malacca.

Not only will Indonesia need more capacity to support its fast-growing demand, it will also need diversity to provide the operational and political security appropriate to a country of its impending dimensions. Already underway are plans for a cable from Sulawesi to Guam, via the Mindanao Strait, to afford more diversity in the country’s methods of access to the Pacific.

Concurrent with this emergence of Indonesia as a future economic powerhouse is the growth of demand from the west of Australia, where vast mineral resources are being harvested to address the needs of China and others. It seems quite obvious that there must be a requirement for new cable capacity between Perth and Indonesia, with onward connections to Singapore. Some years ago, there was a plan for a new cable called Nava, along with A2A, and more recently Ochre and ASSC. All of these have later fallen by the wayside due to a lack of funding.

With the obvious potential demand, three more candidates have emerged to provide additional capacity on the Australia-Indonesia route. The ASC1 cable was developed by Nextgen, which is now majority owned by the Ottawa Teachers Pension Plan, but the project has since been put on hold, pending receipt of the necessary approvals following this ownership change. The APX-West cable is a SubPartners initiative, which offers spectrum as its product rather than 100G waves. APX-W has reported that Telstra has signed a memorandum of understanding for substantial capacity, but it also awaits funding finalisation. Very recently there was a surprise announcement by a company called Trident, regarding a cable which will connect Perth to the stubbed BU on the existing Matrix cable between Jakarta and Singapore. While the announcement advised substantial funding, this cable – like the other two – appears to be awaiting the necessary Indonesian permits.

Demand may be booming, but 3 cables seems like overkill. Will they all get their funding? Will there be mergers to strengthen business cases? Interestingly they are all private ventures, so does this indicate that carrier cables now face more challenges than in the recent past?

We will watch how Indonesian connectivity evolves over the coming period with great anticipation.