Is Indonesia becoming too reliant on Huawei?
China's telecommunication equipment giant Huawei has solidified its standing in Indonesia, raising concerns that Southeast Asia's largest economy is becoming increasingly reliant on a telecoms provider that is facing greater scrutiny from the West.
Indonesia has signed a flurry of agreements with Huawei in recent months, underlining the firm's eagerness to strengthen its grip on the country's US$27 billion telecoms and digital services industry.
The most notable deal was the October memorandum of understanding (MOU) with the Presidential Staff Office to train 100,000 Indonesians in technology-related fields through vocational programmes, the first agreement of its kind for the Indonesian government.
Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.
Moeldoko, one of President Joko Widodo's top aides, said during the signing ceremony that Indonesia needed at least 9 million employees in the information and communication technology (ICT) sector, "so the government cannot work alone to realise this". In August, the president said US$2 billion would be allocated to support the ICT sector in the current financial year.
"The recent MOU between Indonesia and Huawei on spearheading 5G is something that we have already anticipated as Huawei is a proactive vendor in the region. Huawei's reputation as a cutting-edge technology provider seems to have influenced Indonesia's decision," said Melinda Martinus, lead researcher in sociocultural affairs at the Asean Studies Centre at Singapore's ISEAS-Yusof Ishak Institute.
"We should not be worried about Huawei's growing presence and competitiveness in Indonesia and Southeast Asia. However, we should be concerned that Indonesia and Southeast Asia will become heavily reliant on Huawei as the only technology vendor."
Huawei first entered Southeast Asia, including Indonesia, some two decades ago when telecoms operators started to strengthen their mobile connections. It helped them develop infrastructure to support internet networks, from 2G to 4G, and analysts said these partnerships are unlikely to ebb in the 5G era despite the West's resistance to Huawei.
"Indonesia's telecommunications infrastructure, from upstream to downstream, is largely propped up by Huawei and ZTE, so if [telecoms providers] say 'no' now, they have to practically tear down their entire infrastructure and deal with the financial obligations related to their purchase of equipment," says Ardi Sutedja, chairman and founder of the Indonesia Cyber Security Forum.
Heavily relying on one company would increase the risk of data breaches, cyberattacks and hacking, analysts said.
"We must think like an investment manager here, if one put all of his eggs in one basket, he will lose it all in one go. If Indonesia only depends on Huawei, then it can risk all of the national data when one single cyberattack occurs," Martinus said.
"The Chinese government is such a supra-institution that it has the absolute power to control businesses and industries. This has raised suspicion that the Chinese government can seize Huawei's data for its national interest anytime."
Commuters look at their phones on a Jakarta Mass Rapid Transit train carriage. Photo: Bloomberg alt=Commuters look at their phones on a Jakarta Mass Rapid Transit train carriage. Photo: Bloomberg
Last month, the Shenzhen-based company signed a deal with Indosat Ooredoo, Indonesia's second largest telecoms provider, to help it develop a 5G-ready transport network based on the so-called Segment Routing IPv6, which provides better connectivity and lower latency. This was the first commercial usage of the technology in the Asia Pacific region, Indosat said on November 1.
Huawei has also signed a partnership with the country's Agency for the Assessment and Application of Technology (BPPT), which falls under the Research and Technology Ministry, to develop artificial intelligence, a cloud computing system and 5G-related technology. As part of the deal, Huawei will also help BPPT foster talent through tech-related knowledge sharing.
Greater access to Indonesia's telecoms market would reward Huawei with growth opportunities, as only about 70 per cent of Indonesia's 270 million people are now online. And by working together with the government, Huawei would also gain trust that allows it to participate in future projects.
The Widodo administration, for example, is keen on building a 5G-powered new smart-capital in east Borneo. Involvement in the US$33 billion project would be potentially lucrative for any telecoms company.
"Huawei's chance to score a telecoms contract for the new capital is quite big, since they already have made a huge contribution in Indonesia's technology development in the past years," said Heru Sutadi, executive director at Indonesia ICT Institute.
Indonesia also has an infrastructure project named Palapa Ring to build a national fibre optic network that is accessible by all corners of the archipelago.
"Huawei's equipment is largely used in Palapa Ring, so it paves the way for Huawei to work together with the government to develop the new capital, although we don't know when the construction would begin because of the pandemic and economic recession," he added.
Indonesia also holds a favourable view about Huawei as its equipment is better priced compared with that offered by its Western rivals. In the 2G and 3G era, telecoms operators used equipment made by various brands including Canada's Nortel, Motorola, and Siemens. Now, they largely use products from Huawei, ZTE, Ericsson or Nokia, Heru said.
Britain last week announced it would remove all existing equipment made by Huawei from its 5G infrastructure by 2027 due to security concerns, essentially banning it from the next-generation network development and leaving phone carriers to rely on Nokia and Ericsson. In July, British officials said US sanctions against Chinese telecoms equipment providers made it hard to verify the security of their supply chain.
The United States has for years deemed Huawei and ZTE as national security risks due to alleged intelligence the companies provided to Beijing. It has persuaded its allies, including Australia and Japan, to also shun Huawei.
Huawei and ZTE have repeatedly dismissed claims that they carried out espionage for Beijing.
A smartphone with the Huawei and 5G network logo. Photo: Reuters alt=A smartphone with the Huawei and 5G network logo. Photo: Reuters
Meanwhile, Indonesia has joined its Southeast Asian neighbours, including telecoms operators in Malaysia, the Philippines, Thailand, Cambodia, Myanmar and Laos, in forming partnerships with either Huawei or ZTE to develop their 5G networks. One exception is Vietnam, where state-owned operator Viettel decided to launch its own 5G network using equipment made by Ericsson and Nokia, as well as 5G-enabled chipsets made by Qualcomm.
Resistance is also growing in Singapore, with three of the city state's largest telecoms companies picking Ericsson and Nokia over Huawei as their main 5G equipment suppliers.
Martinus of the ISEAS-Yusof Ishak Institute said Southeast Asian states need to avoid taking sides.
"It is critical for Asean to keep its technology market open, competitive, and diversified, as Asean is committed to remaining neutral to its external partners," she said, referring to the Association of Southeast Asian Nations.
"I believe in the future there will be geopolitical tensions sparked by technology competition. Asean should anticipate the war on digital payment in years to come, for instance, as many American and Chinese providers such as Google, PayPal, Alipay and Tencent have already made inroads to Southeast Asia."
This article originally appeared on the South China Morning Post (SCMP).
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.
