In June 2026, Indonesia’s Deputy Minister of Communications and Digital Nezar Patria put Indonesia’s share of ASEAN’s digital economy at around 40 percent, a figure that varies with the source and definition used, yet warned that market size alone would not turn it into a global technology power. The harder challenge, he argued, is connecting infrastructure, talent, industry, and innovation into a stronger ecosystem.
For years, scale did much of the work. A huge consumer market and strategic position in Southeast Asia gave global technology companies compelling reasons to invest. That success created another question: what remains after the capital arrives? A country can host data centers, process minerals, and connect payment systems without necessarily becoming much better at designing technology, upgrading domestic firms, or negotiating the next deal.
Indonesia’s own record already reveals both possibilities. Nickel downstreaming shows how policy leverage can pull more production onshore while engineering and supplier capabilities deepen more slowly. Payments tell a different story: QRIS began as a domestic standard and has expanded through cross-border interoperability, leaving Indonesia with institutional experience that can support subsequent connections. The gap between these two trajectories points to the central argument of this article: coordination power is the ability to make each investment, connection, and partnership increase the country’s capacity to shape the next one.
Connectedness Is Not Yet Power
Stay ahead of the geopolitical week.
MD Briefing delivers expert analysis across five global fronts — the Indo-Pacific, energy, geoeconomics, European security, and the Middle East — every Monday morning. Free.
The digital economy is becoming harder to divide into neat sectors. AI depends on cloud infrastructure and data centers; data centers depend on energy; automation links AI with manufacturing; and digital identity interacts with payments and public services. Critical minerals sit underneath technologies often discussed as if they were weightless. Export controls, industrial policy, competing standards, and geopolitical rivalry are reshaping the whole system.
Economists have described some economies that remain connected across these divisions as “connector countries.” Research by Shekhar Aiyar, Franziska Ohnsorge, and Hakan Yilmazkuday shows how countries can maintain links across supply chains and partners with different geopolitical orientations. Connectedness is still only a position. A country can be deeply embedded in global networks while remaining primarily a consumer market, production site, infrastructure host, or supplier of raw inputs.
I made a similar argument earlier about Southeast Asia’s AI boom: becoming indispensable to the infrastructure of the AI economy does not automatically create proportional strategic power. Indonesia now has to make participation in one part of the digital economy strengthen capabilities elsewhere.
Strategic Assets Need Conversion Capacity
A recent Modern Diplomacy Signal Editorial on the 2026 fuel shock offers a useful analogy. As crude flows through the Strait of Hormuz recovered after months of disruption, refined fuels remained much more constrained. The episode exposed the difference between possessing a strategic input and possessing the capacity to convert it into something useful. Refining is physical while coordination is institutional, but the lesson travels: assets create potential; conversion capacity determines strategic value.
Indonesia’s nickel policy shows both the promise and the difficulty. The export ban and downstreaming strategy pulled more processing activity onshore. A World Bank Policy Research Working Paper by Hiau Looi Kee and Enze Xie finds higher domestic value added in downstream industries after the ban, alongside aggregate efficiency losses and continued heavy reliance on imported steel.
Important external dependencies remain. CSIS reports that Chinese firms control roughly 75 percent of Indonesia’s refining capacity, a figure that originates with C4ADS, and supply 80–90 percent of its refining machinery imports. Policy leverage worked in bringing processing onshore, but technology absorption and supplier upgrading developed more slowly.
Nickel therefore shows the difference between securing a stage of production and building cumulative capability. The harder task is ensuring that engineering knowledge, technology transfer, and domestic supplier capability deepen alongside industrial expansion. That is precisely the kind of gap an investment assessment should detect.
QRIS Shows What Coordination Can Look Like
Payments offer a more encouraging case. QRIS began as a domestic payment standard, and Bank Indonesia now says cross-border QRIS connectivity extends to Thailand, Malaysia, Singapore, Japan, South Korea, and China. Indonesian users can transact abroad through domestic payment applications, while visitors from partner countries can use participating applications in Indonesia.
What accumulates through this process is institutional capability: experience in standards, switching, regulatory coordination, local-currency transactions, and cross-border interoperability. Bank Indonesia made this cumulative logic explicit in September 2026, saying that experience and frameworks established through existing collaborations would provide a foundation for expanding connectivity with future partners.
In February 2026, Bank Indonesia also joined Project Nexus and committed to developing BI-FAST so it can connect to the network. Press reports of the announcement add that BI intends domestic clearing and settlement to remain inside Indonesia. If that holds, the country is learning how to connect a domestic rail outward while retaining important parts of the domestic architecture.
That is close to what coordination power should mean. It does not require owning the system on the other side of the border. It requires enough domestic capability to connect outward while making each connection improve the ability to build the next one.
What Coordination Power Means
Two existing ideas help sharpen the distinction. Muhamad Chatib Basri and Evan Laksmana describe Indonesia’s geography, resources, and diplomatic leadership as “passive assets” that need to be converted into “active capital.” The World Economic Forum’s 2026 work on technology convergence, meanwhile, argues that advantage increasingly comes from orchestrating technologies, partners, data, and processes so that each deployment strengthens the next.
Coordination power asks a different question: whether each conversion leaves the state better able to make the next one, so capability accumulates across projects, sectors, and negotiations. Nickel converted an asset into processing volume without ensuring that capability deepened at the same pace. QRIS shows more clearly how one connection can build institutional knowledge that supports the next.
Turning Projects Into Capability
Coordination power is measurable. It should appear in outcomes rather than meetings: rising local supplier participation, greater access to research and compute infrastructure, engineers moving from operating imported systems towards adapting and designing them, and regulators accumulating knowledge that improves the next negotiation. The practical test is whether an investment leaves Indonesia better able to capture value from the next one.
Data centers provide a practical test in the AI economy. If capacity expands while domestic compute access, higher-value supplier participation, advanced engineering roles, and research capability remain flat, Indonesia will have added infrastructure without adding much strategic capability.
The Institutional Challenge
Dr Siyi Liu of Cambridge’s Bennett School of Public Policy has argued that middle powers can gain influence through partnerships built around complementary strengths rather than pursuing unrealistic full-stack technological independence. Indonesia therefore needs to distinguish between dependencies that can remain external because they are diversified, replaceable, and negotiable, and capabilities that need to exist domestically because losing them would weaken bargaining power.
Digital infrastructure, energy, industrial policy, finance, research, and investment sit across different parts of government. A practical starting point would be to attach capability goals to major strategic projects. For large investments, the investment authority together with the relevant sector regulator could review not only capital expenditure and jobs but also supplier upgrading, technical skills, research access, interoperability, knowledge transfer, and realistic exit options. Government and state-owned enterprise procurement could reinforce the same logic by rewarding systems that are auditable, portable, and compatible with other infrastructure.
A simple capability scorecard could make this approach portable across sectors. It could track supplier upgrading, technical skills, research and compute access, and reusable knowledge gained by regulators. It need not cost much investment. Compared across projects over time, it would show which agreements build capability and strengthen Indonesia’s position in the next negotiation.
There are risks since poorly designed local-content rules can raise costs or deter investment; excessive centralization can slow experimentation; and public institutions may negotiate obligations they cannot monitor. Coordination, therefore, has to be selective, strongest where dependency creates strategic vulnerability or public purchasing power can build capability.
Why This Matters Beyond Indonesia
ASEAN resolved the outstanding negotiating issues in its Digital Economy Framework Agreement on 27–29 May 2026. ASEAN says successful implementation could help its digital economy reach as much as US$2 trillion by 2030. Yet the region is integrating digital economies with very different regulatory capacities, infrastructure, and external technology relationships.
Indonesia can contribute practical experience to that process. Its payment-system experience suggests how national infrastructure can be connected across jurisdictions while aiming to keep clearing and settlement at home. Press coverage of Bank Indonesia’s announcement describes its participation in Nexus as aligned with ASEAN’s Regional Payment Connectivity framework. That experience may become relevant as ASEAN faces similar coordination problems in payments, digital identity, data flows, and other shared digital infrastructure.
A fragmented digital economy does not have to split into two largely separate technology blocs. Different ecosystems can compete while retaining workable interfaces through standards, payments, data arrangements, and supply chains. Middle powers capable of keeping those interfaces functional while preserving their bargaining capacity may gain greater strategic relevance.
Indonesia’s opportunity is practical: participate in multiple systems while ensuring that important connections leave the country more capable than before.
From Market Power to Coordination Power
Indonesia has already learned how to make its market impossible to ignore. The next stage is to make that scale work strategically.
Investment should increasingly be judged by the capability that remains after the capital arrives. Partnerships should leave Indonesia with greater bargaining power for the next negotiation. Successes in AI, payments, minerals, data centers, and industrial technology should become more valuable when they reinforce one another.
Size creates options. Connectedness creates position. Coordination turns position into capability. Capability creates leverage.
Market power gets attention. Coordination power creates leverage.
