Smart Cities Cooperation: Indonesia and Finland

With Indonesia pushing ahead with an ambitious smart cities program, we look at the role Finland can play in guiding the Southeast Asian nation throughout the lifespan of its transformative initiative. The article also explores the opportunities emerging for Finnish businesses.

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The Indonesian government has been wooing partners for its nationwide smart cities program – an ambitious digitization program bringing together multiple parts of the state apparatus and copious private sector partners. The President’s vision of turning Indonesia into a “smart nation” will be actualized by the country’s Smart City Master Plan, which despite being nearly a decade old, is still in its infancy. The smart city concept has been implemented in countries around the world and is touted as the solution for various urban problems, including connectivity, pollution, housing, traffic, water quality, etc.

The “Movement Toward 100 Smart Cities” initiative was launched in 2017 as a primary means to address urbanization issues. The government anticipates that 83 percent of the Indonesian population will live in cities by 2045. In 2019, the government placed 97 cities within the “smart city” program, joining Jakarta, Bandung in West Java province, and Surabaya in East Java province. The government aims to create 100 truly smart cities by 2045.

The Indonesian government is keen to bring international investors and experts on board to aid the mega project’s development. Finland, along with other nations, including the UK, sees itself as the leader in the development of smart cities. The Scandinavian nation is eager to participate and create opportunities for Finnish business.

Indonesia and Finland: What is the cooperation about?

Finland is positioning itself as one of the leading European countries in developing smart cities, leveraging its experience in developing living spaces that represent 21st-century styles. Several Finnish cities, including Helsinki, Espoo, Vantaa, Turku, Tampere, and Oulu, have been developed on sustainable and smart city principles. According to the Embassy of Finland in Indonesia, the nation is keen to share its experiences and knowledge on the topic.

Following a visit by a Finnish delegation in May, the Head of the Presidential Staff Office (KSP) Moeldoko, said that Finland is one of the cleanest and greenest nations, adding that the country also often occupies the top spot for the happiest country in the world. “Indonesia indeed needs to learn from Finland to prepare a roadmap to develop environmentally-friendly cities to expedite our efforts in achieving our carbon-neutral target by 2060,” Moeldoko added.

The collaboration between the two governments is likely to create opportunities for Finnish businesses that have expertise in domestic smart city development.

Indonesia’s new capital

Indonesia is set to move its capital from Jakarta to East Kalimantan province in 2024. The new capital will be named Nusantara and is expected to embody the idea of a smart city. It will be greener and more connected than its predecessor while providing its citizens with a better way of life. The completion of the city is also targeted by 2045. President Joko Widodo hopes to see the new capital become “a global talent magnet and an innovation hub.”

The building of the new capital provides opportunities for investors and suppliers. The project requires US$35 billion in funding, with the government funding just under half of that. The new capital will sit on an area of land approximately four times larger than Jakarta – which is slowly sinking – and its development will require significant investment in hard and soft infrastructure.

With Finnish expertise in demand, the project also represents a wealth of opportunity for Finnish businesses.

The potential of smart city development in Indonesia

Mega-projects on this scale have a low success rate. They frequently come in over budget and are rarely finished within the designated time frame. The success of Indonesia’s smart cities project will require coordination among ministries, central and regional administrations, the private sector, investors, and overseas partners. However, Indonesia’s smart cities project is somewhat of a necessity for the country as it grapples with urban population growth and economic constraints.

Indonesia intends to leverage its budding start-up ecosystem and the construction industry to aid the development of its smart cities. The Indonesian government has indicated that some US$400 billion would be required for the project, which will be invested in everything from green transport provisions to state-of-the-art internet networks. This vast sum is almost equivalent to half of the country’s gross domestic product (GDP).

However, the project has the capacity to create jobs, improve lives, enhance economic growth opportunities, and lift millions out of poverty. In 2014, Indonesia established its ‘six pillars’ of smart cities: governance, people, economy, mobility, living standards, and environment. The state aims to use technology to blend these pillars together seamlessly.

Smart governance

This pillar refers to the transition towards e-governance. Moving forward, the state will utilize mobile apps and web platforms for governance and the rollout of services to citizens. The state wishes to see AI integrated into aspects of governance including surveillance and policing.

Smart people

Indonesia sees its people as an integral part of the smart city’s transformation. The state wants to create a tech-literate population that can fully take advantage of global trends in business while enhancing general productivity.

Smart infrastructure and mobility

Infrastructure development is naturally an important part of the smart cities project. However, integrated data systems are needed to take Indonesia’s infrastructure into the 21^st century. Systems such as Adaptive Traffic Control will make transport more efficient for all. 

Smart economy

The state wishes to promote a start-up culture and create an environment whereby e-commerce platforms can thrive, further formalizing the country’s economy.

Smart living

This pillar involves enhancing citizens’ access to education, healthcare, and security. The state sees building a community of connected services as an important part of smart living.

Smart environment

This final pillar reflects the global move towards building greener living spaces and involves everything from enhancing renewable energy generation to promoting the use of clean public transport systems.

Opportunities for Finnish investors and businesses in Indonesia

Given Finland’s expertise in smart city development and the implementation of technology for sustainable living, the US$400 billion projects represent a wealth of opportunity for Finnish investors and businesses. Opportunities exist in areas including:

AI integration

The government plans to utilize the internet of things (IoT) to deliver connected solutions to the public from monitoring traffic flows to energy conservation. Finnish companies, such as LEANHEAT, provide smart building control and maintenance provided by IoT.

Connectivity

Soft technology and connectivity solutions will also represent a core feature of the smart cities program. Finnish tech giant Nokia can provide 5G solutions with almost limitless possibilities to enhance mobility and connectivity.

Maritime infrastructure

Indonesia anticipates needing more than US$6 billion to develop port infrastructure. ADMARES, another Finnish company, provides innovative floating structures to create real estate on the water. The firm is pioneering construction methods for marine environments.

Renewable energy

Indonesia needs enormous private capital to achieve its renewable energy mix of 25 percent by 2025; it currently stands at 14.7 percent. In Finland, renewable energy sources represent about 40 percent of energy end-consumption. Finland has a wealth of companies providing renewable energy solutions.

Green transport

Finland operates a green, multi-modal transport system that provides flexible services to reduce environmental and ecological damage. This will form the basis of Indonesia’s net-zero commitments. Finland has been particularly successful in promoting bicycle and bicycle sharing programs.

Further Reading

• Indonesia Ponders Issuing Five Year, Tax Free ‘Digital Nomad’ Visas
• Comparing Mexico and Indonesia as Manufacturing Hubs for US Investors
• The RCEP to Encourage Investments in Indonesia’s Downstream Industries

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