Digital Economy in

Indonesia
Prospect, Challenges, and Research Agenda

Wirawan Agahari
Leonardus Kristianto Nugraha

DIODE Workshop
Yogyakarta, 25-26 May 2017
 About this
presentation

 Data is taken from a forthcoming report

”Innovation Outlook”
 Identification of trends, projection, and agenda for
change in the field of ICT and media in Indonesia
 Some findings are highly relevant with DIODE topic
 Mainly about emerging trends and projection of the
digital economy in Indonesia
 This presentation draws on the findings from the
research
 Aims to provide understanding about digital economy
landscape in Indonesia

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 Agenda

How Emerging
Digitized is Trends in
Indonesia? Indonesia

The Impact
Looking of Digital
Forward Economy in
Indonesia

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 How Digitized is Indonesia?
Indonesia Digital Profile: An Overview

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 Digital Economy Vision of Indonesia

The biggest digital economy in ASEAN by

2020
>US$ 130 billion E-Commerce transaction in 2020

Source: MCIT (2016)

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 Indonesia is a digital country

TOTAL ACTIVE MOBILE

POPULATION INTERNET USERS CONNECTIONS

256.2 132.7 371.4

Million Million Million

SMARTPHONE ACTIVE MOBILE AVERAGE DAILY USAGE

USERS INTERNET USERS OF MOBILE INTERNET

95.87 123.3 ~4
Million Million Hours
Source: APJII (2016), We Are Social (2017)

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 What are the drivers?

Massive infrastructure Price war Social media booming

Smartphone become necessary
deployment goods
Facebook, Twitter

Chat apps that drives Introduction of Android OS Cheap and affordable

Open source, easy to develop new apps
data penetration smartphone

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However,
the infrastructure
was not yet
equally developed …

Source: opensignal.com (2017)

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… which makes
internet users
become centered
in Java island

Source: APJII (2015)

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 Some Comparison

Indonesia vs Other ASEAN Countries

Global ICT GSMA Mobile
Network Readiness
Development Index Connectivity Index
Index 2016 (Rank)
2016 (Rank) (Score)
• Singapore (1) • Singapore (20) • Singapore (80.8)
• Malaysia (31) • Malaysia (61) • Malaysia (65.4)
• Thailand (62) • Brunei (77) • Thailand (63)
• Indonesia (73) • Thailand (82) • Brunei (61.6)
• Philippines (77) • Vietnam (105) • Philippines (59.2)
• Vietnam (79) • Philippines (107) • Vietnam (54.4)
• Cambodia (109) • Indonesia (115) • Indonesia (53.9)
• Myanmar (133) • Cambodia (125) • Laos (38.4)
• Timor Leste (128) • Cambodia (37.9)
• Myanmar (140) • Myanmar (28.6)
• Laos (144)

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 Emerging Trends in Indonesia

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 The Digital Economy Hype in Indonesia
ON-DEMAND E-COMMERCE
(TRANSPORTATION) FINTECH
SERVICES

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 The Go-Jek Effect
 The first on-demand
transportation services
in Indonesia
 Established since 2010,
app launched in 2015
 “an app for every
need”, facilitate
(almost) anything on-
demand
 First official startup
unicorn in Indonesia
 One of the major
drivers of digital
economy hype in
Indonesia
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 The Go-Jek Effect
 Creating new job
market
 > 20.000 self-employed
driver
 Higher income than
conventional driver
 Facilitate mobility
 More people using “public
transport”
 Disruptive effect
 Conventional vs App-
based
 Unsupportive
regulation
 Treated as conventional
transport provider

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 FinTech
 Important enabler for the
digital economy
 Unbanked population in
Indonesia
 Only 36% of adults have a
bank account
 FinTech players are growing
rapidly
 78% in the past two years
 Mainly focus in payment sector
 Promoting financial inclusion
 Carrier billing, payment agents,
branchless banking
 Government is supporting
FinTech
 Regulation on P2P FinTech
lending in Indonesia
 Bank Indonesia FinTech Office
(BI FTO)
Source: DailySocial Indonesia Tech Startup Report 2016
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 E-Commerce
 8 million people shop online
and keeps increasing
 Driven by the increasing market
coverage and middle class
 Consumptive + Digital behavior
of Indonesians
 Still only 0.8% of total retail
sales
 China at 11%, USA at 8%
 Priority of the government!
 Targeting US$ 130 billion by
2020
 Issuing several supportive
policies
 Economic Policy Package:
Roadmap of E-Commerce

Data Source: Statista, MCIT

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 E-Commerce

 New job creation in

SMEs
 Enabling everyone to
start their own business
through internet
 Trade expansion,
reach wider audience
 Allow SMEs to sell
products & services
online
 Disruptive effect
 Omni channel by major
retailers
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 The Impact of Digital
Economy in Indonesia

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 Digital Economy promotes …

Efficiency
• ICT capital replacing labor and non-ICT capital

Innovation
• New type of economy, disruption

Inclusion
• Trade expansion, financial inclusion, jobs creation

Source: World Bank (2016)

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ICT Contributes
to GDP and 1% increase
Employment in mobile
penetration
in Indonesia

10.700 extra
$ 640 million to
formal jobs in
GDP in 2020
2020

Source: Oxford Economics (2016)

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 ICT Contributes to GDP and
Employment in Indonesia

7.2% of total GDP came from ICT sector

Largest growth in comparison to other sectors
(~10%)

Well above average national GDP growth

(~5%)

Source: Statistics Indonesia (BPS)

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 Digital Economy
and Sociopreneurship
Trends in Indonesia

 Digital start-ups are

growing rapidly in
Indonesia
 1463 start-ups in
Indonesia
 3rd highest in the
world behind USA and
India
 Most of them have a
common goal
 solving societal
problems
 giving significant
impact to the society
Data Source: startupranking.com (2017)
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 Looking Forward
Government Support, Barriers, and Future Agenda

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 Indonesia Broadband Plan 2014-2019
Economic Policy Package: Roadmap
of E-commerce
Finishing of Palapa Ring Project in

Government Eastern Indonesia

Support for expected to be done in 2019

the Digital
All capital city of regency / municipality (514)
will be connected with fiber optic

Economy 1 million domain names

in Indonesia 50 million SME’s to go digital

1000 tech start-up entrepreneurs in
2020
Digicoop smartphone: made in
Indonesia!
Source: MCIT (2016)
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 Finding qualified
Bridging the digital divide digital talents
in Indonesia Digital savvy professional

*
Poor connectivity in
rural area * across function with specific
Knowledge still hard to find
Talent war: common

*
But the government
is working on it
* practice among startups
The root of problem lies

Challenges
* in the academic sector

Adaptive Regulation
Regulation always behind

* of technology
Do not let regulation kills

* innovation
The government have
different “layers” in

* responding to digital
innovation (On-demand
transportation vs FinTech)

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 Some Research Agenda

How inclusive is digital economy in Indonesia?

 Digital economy and sociopreneurship movement
in Indonesia
 Exploring the “dark side” of digital economy: non-
user, the impacted

Policy framework for digital economy in Indonesia

 Consumer protection and data security: ensuring
trust for online transaction
 How to balance interest between various
stakeholders?

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 Thank you!
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Indonesia Sustainability Centre
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Jl. Suryopranoto No. 2, Harmoni
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