Smart Cities Opportunities in Indonesia and Lesson for Developing Countries

Indonesia is committed to achieving a carbon-neutral target by 2060 as part of its urban transformation vision through the Smart City concept.

Authors: Tuhu Nugraha and Raine Renaldi*

Indonesia is committed to achieving a carbon-neutral target by 2060 as part of its urban transformation vision through the Smart City concept. The National Long-Term Development Plan (RPJPN) for 2025-2045 emphasizes the importance of strengthening the economy and improving quality of life by developing digital infrastructure and innovative public services. Indonesia has developed 25 smart cities and aims to establish 100 smart cities to support this policy with green technology and sustainable infrastructure.

In its decarbonization efforts, according to the National Development Planning Agency (Bappenas), Indonesia requires an investment of IDR 749.6 trillion per year from 2025 to 2045. This investment will be allocated to the development of renewable energy power plants, the provision of electric transmission networks, biofuel development, and the electric vehicle ecosystem. These substantial investments support carbon emission reduction and open broad opportunities for investors and technology vendors.

Investors involved in renewable energy, eco-friendly transportation, and information technology will find a supportive business environment in Indonesia, bolstered by government incentives. Technology vendors have the opportunity to collaborate with the government and private sector in implementing solutions aligned with the Smart City initiative, which can accelerate the achievement of national goals and bring economic and technological progress to Indonesia. Focusing on these initiatives promises sustainable economic growth and improved quality of life, aligning with decarbonization goals and Smart City development.

Here are six focus areas of Indonesia’s Smart City initiative based on the blueprint from ASECH Indonesia, adopted from the Ministry of Home Affairs Indonesia:

Civil & Social

Social cohesion, cultural preservation, and tourism development are integral pillars in Indonesia’s Smart City strategy. Starting with strengthening social cohesion, the government uses digital platforms to facilitate more dynamic and inclusive social interactions, enabling active community participation in urban policy formation. This not only encourages communication among citizens but also strengthens the foundations of democracy by involving the public in decision-making.

In preserving culture and heritage, digital innovation plays a crucial role in digitizing artifacts and historical remnants, making them accessible to a broader audience. This effort maintains historical richness and strengthens national identity while ensuring that cultural knowledge and wealth remain relevant and enjoyable in the modern era.

Meanwhile, the tourism sector is enriched with immersive digital experiences, such as virtual tours and interactive apps that offer richer local narratives. This not only promotes Indonesia on the global stage but also drives economic diversification and creates new job opportunities.

Investments in digital infrastructure support all these initiatives. The development of a national broadband network and the expansion of internet access in remote areas are priorities to ensure the efficient and equitable distribution of technology. This creates significant investment opportunities in telecommunications infrastructure, benefiting investors and accelerating Indonesia’s transformation into a more connected and informed society.

Health and Wellbeing

In supporting the development of Smart Cities in Indonesia, the health, housing, and public services sectors play key roles in enhancing the quality of life for an estimated population of around 270 million people. Technologies such as telemedicine and electronic health information systems are vital, especially in densely populated urban areas, where they allow patients in remote locations to access medical consultations remotely and manage their health information more effectively and transparently. This not only expands access to quality healthcare but also opens opportunities for investors to develop health technology solutions that support effective interactions between patients and healthcare providers.

In housing, the adoption of smart home concepts integrating renewable energy technology and innovative waste management systems supports carbon emission reduction initiatives and creates sustainable living environments. In the public services sector, digitalization has transformed the way educational services are delivered through the use of digital learning tools, and transportation and population administration are integrated with smart applications to streamline the processes of birth registration and licensing. These implementations demonstrate Indonesia’s commitment to creating a responsive, inclusive, and sustainable urban ecosystem.

In the context of energy tariff regulation, Ministerial Regulation ESDM No. 26 of 2022 has established a pricing policy that supports the use of Renewable Energy (RE). With this regulation, customers using electricity based on 100% RE receive lower rates compared to conventional electricity usage, encouraging more citizens to switch to more environmentally friendly energy sources, in line with the goals of Smart City development.

Safety & Security

In the context of Smart City development in Indonesia, investing in safety and security aspects is crucial to ensure the continuity and effectiveness of smart city initiatives. First, investment in personal security technology is essential, including the procurement and installation of advanced surveillance cameras and data analytics systems that can perform automated security detection and response. This technology not only strengthens the security of citizens but also allows law enforcement to act more quickly and efficiently in emergencies.

Next, for resource security, investment is needed in technologies that can enhance the efficiency of natural resources and energy management. The implementation of smart sensors and automation systems in the water, electricity, and waste management sectors will ensure more sustainable resource use and reduce wastage, which is critical to supporting a large urban population.

Lastly, cybersecurity requires significant investment to protect data infrastructure and city information systems from cyber-attacks. This includes the procurement of security software, training of cybersecurity professionals, and the development of cybersecurity command centers that can monitor and respond to threats in real-time. These investments not only maintain the security of data and digitized essential services but also preserve public trust in the use of technology in daily life.

Given the importance of these three security aspects in Smart City infrastructure, both the government and the private sector need to collaborate in allocating sufficient funds and resources to ensure that investments in safety and security are implemented effectively and provide maximum benefits for the urban population.

Quality Environment

In the Smart City concept, the “Quality Environment” aspect plays a vital role, especially in the context of housing which includes the creation of a clean environment, resource management, and urban resilience. Building a clean environment involves using advanced technology such as waste management and wastewater treatment systems controlled by IoT sensors to monitor and regulate environmental quality in real time. This not only ensures cleanliness but also aids in environmental conservation efforts.

Furthermore, efficient resource management is key to maximizing access to vital resources like water and energy. The use of technology like smart meters integrated into smart grids allows for effective monitoring and more equitable and sustainable resource distribution. This technology facilitates more economical and efficient resource use, supporting the conservation of natural resources.

Urban resilience relates to a city’s ability to adapt and recover from disasters or disruptions. The use of technology like big data analysis and artificial intelligence (AI) in early warning systems can strengthen a city’s resilience against the negative impacts of climate change and natural disasters. This not only reduces risks but also accelerates post-disaster recovery processes.

The investment potential in digital technology to support these three aspects is substantial, offering opportunities for investors to engage in the development of solutions that support sustainable development and enhance quality of life. This approach is not only economically beneficial but also has a significant social impact, positioning Indonesia as an example of responsive and sustainable urban development for other countries.

Built Infrastructure

In Smart City development, built infrastructure or spatial planning plays a crucial role that includes utilities, mobility, as well as buildings and construction. In the utilities segment, the application of cutting-edge technology is used to optimize the distribution and use of vital resources like water, electricity, and gas. Smart energy management systems and digitally integrated utility networks allow for real-time detection of leaks or inefficiencies, contributing to resource efficiency and waste reduction.

In terms of mobility, smart cities are supported by intelligent and integrated transportation systems, which not only enhance travel convenience and efficiency but also support carbon emission reduction efforts. An example is the city of Makassar’s plan to develop electric capsule metro vehicles. This public transportation mode is planned to connect to the Sudiang Sports Complex area and will serve as a feeder for the Parepare-Makassar Railway. The small and economical design of the capsule metro, resembling a bottle column and not requiring large constructions like highways, makes it an efficient and low-cost solution.

Meanwhile, the building and construction sector is transformed through the application of green building standards and the use of sustainable materials. The development of vertical infrastructure integrating environmentally friendly technologies like green roofs, natural ventilation systems, and the use of renewable energy in building designs reduces energy consumption and enhances the health and comfort of occupants. The deep integration of utilities, mobility, and sustainable construction reflects Indonesia’s ambition to create an efficient, comfortable, and environmentally minimal-impact spatial layout, which can serve as a model for other developing countries.

Industry & Innovation

In the framework of Smart City development in Indonesia, the “Industry & Innovation” pillar plays a crucial role in supporting the education, business, and trade sectors. In the education sector, the use of digital technology such as e-learning, virtual reality (VR), and artificial intelligence (AI) has opened significant opportunities to enhance the quality and accessibility of education, allowing for more flexible and interactive learning and preparing a skilled workforce for the digital economy. Meanwhile, in the business and entrepreneurship sector, data analytics tools, cloud computing, and collaborative platforms support innovation and global competitiveness, aiding startups and small businesses in developing disruptive products and business models.

In the trade and commercial sector, digitalization through the use of blockchain and the Internet of Things (IoT) will improve supply chain efficiency, reduce transaction costs, and strengthen security and transparency in cross-border trade. Investment in digital payment systems and smart logistics opens opportunities for Indonesia to integrate more effectively into the global economy, enhancing connectivity and supporting sustainable economic growth.

Indonesia has also developed Science and Technology Areas (STAs) such as Bandung Techno Park, Serpong Science and Technopark, Solo Techno Park, and Technopark Cimahi that support technological innovation. Investments in infrastructure and technology in these areas not only support the sustainable and innovative Smart City vision but also enhance the national capacity for innovation and the creative industries, offering economically profitable investment opportunities while also making a significant social impact, and inspiring innovation across various sectors.

For other developing countries, Indonesia’s journey provides a concrete model. By tailoring initiatives to local needs and capitalizing on investment opportunities, these countries can accelerate the development of smart urban areas. Indonesia’s experience demonstrates how to maximize technology in addressing urbanization challenges while also laying the foundation for investment and economic growth.

*Raine Renaldi, President ID-Opentech Group, Chairman Indonesia Smart City Provider Alliance

Tuhu Nugraha
Tuhu Nugraha
Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)