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Condensing The Archipelago

Geography is an invariant component throughout the ages and very hard to change. In this aspect, Indonesia is at a huge disadvantages. This will become strategic weakness in the long term (we’re talking centuries here) unless we do something about it.

One of the ways we can overcome geography is by reducing the cost of geography itself. Geography is an impediment in moving around, whether what is being moved around is information, capital, goods, or people. If we can lower the cost, we can make Indonesia as if it is a single market (when it should really is). So how can we do that?

Currently there are four major areas of tech-enabled sectors in Indonesia. Ride-hailing, e-commerce, financial technology, and SaaS. These sectors are only possible because of availability and affordability of both internet access and smartphone because it allows for cheap movement of information (communication). Less developed is the payment infrastructure to move capital around and transportation infrastructure (logistics) to move goods around. But at this level, the payment and logistics is livable enough, although not yet optimum. Thus it is at the best interest of ride-hailing, e-commerce, fintech, and SaaS companies to solve this problem. Payment infrastructure will need a lot of regulation and collaboration between providers, while logistics will depend heavily on state funding, such as building deep sea ports and road construction.

Over the top of those infrastructures, we can create many new industries and we can achieve scale quickly like China. China has no need to expand beyond their own turf because their own huge domestic market has already enough to make the businesses very rich.

One challenge to overcome is the inequality of growth. This is not just about justice. Redistribution of growth is profitable too. Right now the biggest market tends to be Western Indonesia. Because it is more profitable to start business in Western Indonesia which have bigger population, more goods and services can be provided there, hence creating more jobs which in turn will draw even more people to work in Western Indonesia. Sending goods to Eastern Indonesia is also not economical because there is much more cargo from Western Indonesia than from Eastern Indonesia, making the round-trip journey more expensive in terms of per unit basis.This is a vicious cycle that will stunt the growth of other parts of Indonesia.

I think other parts of Indonesia should be brought together by the means of higher smartphone ownership and internet penetration combined with effective payment infrastructure and low cost logistics. Population there should be increased too, either by encouraging immigration there or encouraging families to have more kids. More people means more available labor and also bigger market.

I wonder why only Java that has high population. Is it because Java is more fertile and hence has a greater carrying capacity for bigger population? Or is it because of the lasting effect of colonial era policy that persist until today or even continued by the present policy-makers? Is is also caused by Java sucking resources from the outer Island, enabling Java to outgrow its natural carrying capacity and leaving outer islands with growth below its natural carrying capacity?

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