Indonesia: Liberalization at the Crossroad Impact on Sector Performance,Teledensity and Productivity

Unlike in developed countries, the liberalization process in Indonesia began at a time when telecommunication infrastructure was minimal and teledensity was below 2%. The main aim of liberalization and sector reform is consequently to increase teledensity. However, the results of liberalization have not yet been envisaged. A decade after the introduction of liberalization and competition, teledensity growth and sector productivity still remain low. The telecommunication sector's contribution to accelerating national economic growth in an effort to eradicate poverty, unemployment and improve national education has consequently been minimal. Given the minimal infrastructure and limited state budget available, specific strategies should be implemented focused on increasing teledensity as a priority. Mainly in the transitional period, specific initiatives will be required to anticipate "cherry picking" by new entrants and reinforce their commitment to increasing network expansion. This begs the question of whether all WTO regulations should be fully implemented immediately? Upon setting up their gateway, new entrants can immediately capitalise on subscribers developed by the incumbent operator, particularly in the metropolitan and urban areas. Consequently, although the number of new players is rising, they are not attracting new subscribers and are failing to boost to penetration levels as a result.