Indonesia's Communications and Information Minister Rudiantara says all Indonesians across the whole archipelago will be able to enjoy Internet access by 2019. Through the Palapa Ring project, one of Indonesia's priority infrastructure projects, all cities and districts in Indonesia will have fast broadband Internet through an undersea fiber-optic cable network that stretches across 13,000 kilometers as well as an onshore network of nearly 22,000 kilometers.
The Palapa Ring project, which is expected to be completed by the end of 2018, is the first government-to-business cooperation scheme within Indonesia's telecommunication sector that utilizes the so-called "availability payment method", implying the private partner is to receive payment based on the availability of the designed infrastructure at a specified performance level.
The project consists of three sections (the West, Central and East sections). In August 2016 the local consortium PT Palapa Ring Barat started construction of the west section. This consortium consists of Mora Telematika Indonesia and Ketrosden Triasmitra. Meanwhile, state-controlled financial institution Bank Mandiri agreed to a IDR 875 billion (approx. USD $65.8 million) loan for the West Palapa Ring project. This loan has an eight year term with a grace period of two years. The funds will be used to finance the construction of fiber optic networks in five cities and regencies in the Riau Islands, requiring some 1,980 kilometers of optic fiber cable.
For the central section of the Palapa Ring project PT Len Telekomunikasi Indonesia was appointed as developer. The company, tasked to build a network across 17 cities and districts, started construction in September 2016. Loans were obtained from Indonesia Infrastructure Finance (IIF), Bank Negara Indonesia (BNI), and Sarana Multi Infrastruktur (SMI).
For the eastern section PT Palapa Timur Telematika was appointed as developer that is tasked to connect 35 Indonesian cities and districts to the network. Which companies will act as creditors for this section are not known yet.
The Palapa Ring will surely boost Indonesia's promising e-commerce industry. The Indonesian government wants to see the value of the local e-commerce industry grow from USD $18.5 billion in 2015 to USD $130 billion by 2020. Rising smartphone and Internet penetration are vital to achieve this target. There are currently 132.7 million Internet users in Indonesia, while the number of smartphone users in Indonesia is estimated at 69.4 million. The Indonesian population numbers slightly over 255 million people.