People familiar to the matter claim that US multinational technology firm Google will reach a tax settlement with the Indonesian government. Authorities in Indonesia have become increasingly uncomfortable with multinational companies that generate profit from an Indonesian online audience but lack a permanent presence in Indonesia in the form of a foreign investment company. This applies to various social media platforms as well as Google that only has a representative office in Indonesia, while transactions and revenue (generated in Indonesia) are booked at Google Inc's Asia Pacific headquarters in Singapore.

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Indonesia Investments often reports about Indonesia's blossoming e-commerce industry (a lucrative sector for investors). Online retail is growing rapidly in Southeast Asia's largest economy because both Internet and smartphone penetration are rising sharply in Indonesia, while expanding per capita GDP boosts people's purchasing power. But what do Indonesia's consumers actually buy online? A new survey from Google Indonesia gives some more information.

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According to the Indonesian Internet Service Provider Association (or APJII) there are currently 132.7 million Internet users in Indonesia, or approximately 51.8 percent of the total Indonesian population. These figures, which are the result of a survey, are much higher compared to 2014 when APJII data show that there were 88 million Internet users in Indonesia. Meanwhile, APJII Chairman Jamalul Izza informed that about 70 percent of Indonesian Internet users use a mobile device to access the Internet.

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In June 2016 the "1,000 digital startup movement" was launched by Indonesia's Communication and Information Ministry in cooperation with KIBAR, the nation's technology startup ecosystem builder. This government-backed program targets to see 1,000 startups in the digital economy by the year 2020 with a combined valuation of USD $10 billion. Considering that digitalization has been a key trend around the globe (covering basically all aspects of life), Indonesian authorities want this sector to boom in Indonesia as well, which would also make the whole economy more efficient.

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According to a survey conducted by International Data Corporation (IDC), two brands controlled a combined 45 percent of the smartphone market in Indonesia in the second quarter of 2016. These two brands are Samsung (South Korea) and OPPO (China). On third position comes Asus (Taiwan), followed by the local Indonesian brand Advan and China's Lenovo. Data from IDC also show that smartphone sales in Indonesia grew 3.3 percent year-on-year (y/y) and 22 percent month-on-month (m/m) in Q2-2016. Unfortunately these data do not mention the exact sales volume.

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Google Inc. and Temasek Holdings Pte released joint research that signals Southeast Asia's digital economy (which includes e-commerce, online games, advertising and other economic activities related to the Internet) will surge to USD $200 billion by 2025. Indonesia's digital market will account for 40.5 percent - or USD $81 billion - of this total market. With an estimated USD $46 billion, Indonesia's e-commerce sector will contribute most to the total.

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The West section of Indonesia's Palapa Ring project is ready for construction according to the Indonesian Communication and Information Ministry. The majority of funds for the West Palapa Ring section - estimated to require IDR 1.28 trillion (approx. USD $97 million) in total - are ready to be disbursed. The Palapa Ring project, which consists of three sections (the West, Central and East sections), is one of Indonesia's priority infrastructure projects. It involves a huge undersea fiber-optic cable network that will offer faster broadband to the entire archipelago.

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Audit, assurance, tax & consulting services firm PricewaterhouseCoopers (PwC) estimates that the world population will number 7.4 billion by 2020. Nearly 52 percent of this population - 3.84 billion - is expected to be connected to the Internet through a smartphone or portable tablet with around half of this Internet audience expected to be able to access high-speed broadband (at least 30 Mbps). PwC added that most of these Internet users - some 92 percent - live outside the United States. Meanwhile, market research company eMarketer expects to see 4.1 billion Internet users by 2020, up from 3.21 billion in 2015.

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One of Indonesia's priority infrastructure projects in the 2016-2019 period is the Palapa Ring project. This project, involving an undersea fiber-optic cable network that stretches across 13,000 kilometers and an onshore network of nearly 22,000 kilometers, aims to provide fast broadband Internet to Indonesians in both the urban and rural areas. The project is the first government-to-business cooperation scheme within Indonesia's telecommunication sector that utilizes the so-called "availability payment method".

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Good news for smartphone manufacturers in Indonesia. Based on a survey conducted by Advan, MARS Research Specialist, and telecommunications expert Hasnul Suhaimi, the majority of Indonesian consumers replace their smartphone with a new one every two years, on average, as they want to own a newer model (with more attractive features and applications) or because they need to replace their damaged smartphone. Another - and obvious - conclusion of the survey was that Indonesian consumers want a high-quality smartphone at an affordable price.

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Local and foreign smartphone vendors are eager to assemble 4 Generation long term evolution (4G LTE) smartphones in Indonesia. No less than 26 companies (and brand owners) have established assembly plants in Southeast Asia's largest economy with a combined investment value of USD $600 million since 2015. Of these 26 companies, 14 are local players. The number of foreign smartphone manufacturers in Indonesia is expected to grow as a new government regulation comes into force per 1 January 2017.

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Indonesia's Communication and Information Ministry urges American multinational technology company Google to set up a permanent establishment in Indonesia. This way Google, which is owned by US multinational conglomerate Alphabet Inc, would need to start paying taxes to Indonesian authorities. Currently, Google only has a representative office in Indonesia, while transactions and revenue generated in Indonesia are booked at Google Inc's Asia Pacific headquarters located in Singapore.

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State-controlled Telekomunikasi Indonesia, Indonesia's largest telecommunication and network provider, plans to launch its Telkom-4 satellite in 2018 through its subsidiary TelkomMetra. The Telkom-4 satellite, which will replace the aging Telkom-1 satellite, is equipped with 49 transponders that will be capable of beaming 100 Gbps mobile broadband across Indonesia, India and Southeast Asia. The USD $200 million satellite is expected to have a life span of 15 years.

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Indonesian drivers of taxis, buses and bajaj (three-wheeled scooters) gathered on Monday (14/03) on several locations - in front of the State Palace, City Hall, and the Ministry of Communication and Information - in Central Jakarta to demonstrate against the presence of online transportation applications such as Uber Taxi, GrabCar and Go-Jek. Protestors claim that these mobile apps are operating illegally in the country (as these services are not regulated by law) and cause a decline in income for long-time established transportation services, including taxi services, bus services and the more traditional transportation services such as bajaj and ojek (motor taxi).

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The financial performance of Indonesia's listed telecommunication and network providers improved in 2015. Indonesia's three largest listed telecommunication companies Telekomunikasi Indonesia, XL Axiata and Indosat Ooredoo all recorded a better financial performance last year. However, this does not mean all three companies posted net profit. In fact, only Telekomunikasi Indonesia recorded net profit. The other two companies still posted a net loss, albeit their losses were much lower compared to one year earlier. Given that Indonesia's economic growth is expected to accelerate in 2016, these companies should be able to continue growing this year.

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During Indonesian President Joko Widodo's visit to Googleplex, Silicon Valley (California) - headquarters of Google, Facebook, Twitter and Plug and Play - he emphasized that the government of Indonesia is committed to push for the development of the digital economy, aiming to make it the largest in Southeast Asia, worth USD $130 billion by 2020 (including the emergence of 1,000 Indonesian technopreneurs). In this context, Widodo also requested the assistance of Google, Facebook and Plug and Play in the form of IT development education.

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While Indonesia is currently in the middle of expanding its 4G network, the nation remains placed among the countries that have the poorest Internet penetration rate in the world. A recent World Bank report, titled 'World Development Report 2016: Digital Dividends', zooms in on the economic and social impact that occurs when a relative large part of the population cannot be connected to the Internet or when the government fails to keep pace with the growth of technology.

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The government of Indonesia targets to see 35 million domestically-produced mobile phones (per year) starting from 2017. Meanwhile, Indonesia’s wireless network is to be upgraded to 4G speeds by the same year (a 4G network is the new necessity for those with smartphones or tablets) although currently the country’s telecommunication operators are still in the middle of building receivers to boost 3G utilization. The government hopes to see a total of USD $4.5 billion investment in the telematics sector.

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Despite sharp competition, slowing profit margins and a saturating voice and SMS services market, Indonesia’s telecommunications industry still has lucrative prospects as there is still room for growth in data services, value-added services and still relatively low smartphone penetration (as well as low Internet penetration). However, of the big three Indonesian telecommunication network and services providers - Telekomunikasi Indonesia (Telkom), XL Axiata and Indosat - only Telkom managed to post net profit over 2014.

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Today, Indonesian president-elect Joko Widodo (commonly referred to as Jokowi) and Facebook CEO Mark Zuckerberg met in Jakarta to discuss how Facebook can be utilized for the benefit of the people and how the social media network can support Indonesian micro businesses. With nearly 70 million, Indonesia contains the world’s fourth-largest Facebook community. With a total population that numbers about 250 million people, a burgeoning middle class and relatively low Internet penetration, there remains a large untapped potential.

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