Indonesia’s digital economy will thrive as small businesses come online

Under President Joko Widodo, the Indonesian government has focused its efforts on boosting the country’s digital economy.

The discussions between various industry and government stakeholders that began two-and-a-half years ago have culminated in a digital strategy for the country, which was detailed in a paper that will serve as Indonesia’s guiding principles for its digital future To continue this trajectory, the government’s plan includes supporting eight million SMEs to be “digitally empowered” by 2020.

Small and medium enterprises (SMEs) form the backbone of this vision, said Lis Sutjiati, an expert staff member representing Indonesia’s Ministry of Communication and Information Technology onstage at Tech in Asia Jakarta 2017 this week.

According to Sutjiati, SMEs can double their turnover if they “go online.” This includes adopting software to operate more efficiently and using the internet for marketing and selling goods.

The greater goal is to reduce economic inequality, the paper states. Indonesia’s Gini coefficient – a metric that measures wealth disparity – is already in slight decline, and has been since 2015.

To continue this trajectory, the government’s plan includes supporting eight million SMEs to be “digitally empowered” by 2020.

Indonesia’s 57 million SMEs account for more than 60 percent of the country’s GDP.

This plan involves setting up workshops, Sutjiati clarified. The government’s role is to coordinate and communicate such events, whereas the training comes from industry players, she explained. Pos Indonesia, the country’s state-owned postal service, is also involved. It will retrain some of its civil servants to help SMEs manage ecommerce operations, like listing goods online and managing logistics.

Startups and farmers

According to the strategy paper, Indonesia wants to achieve other concrete numbers by 2020.

Within this timeframe, one thousand new startups are expected to grow. And in addition to SMEs, one million farmers and fishermen should gain access to digital tools that improve their livelihoods.

The paper also includes the country’s goal of reaching an ecommerce transaction volume of US$ 130 billion by 2020, says Sutjiati. This figure was developed in conjunction with consulting firm Ernst & Young a few years ago and has often been cited.

It was derived by comparing Indonesia’s current state of development with that in countries like China several years ago, explained Sutjiati, admitting that it’s not defined by measurable, consistent key performance indicators.  In her view, the environment is changing too fast and requires new sources of data that have to be taken into account along the way.

Other goals in Indonesia’s digital strategy include making IPOs more accessible to startups, even before they have reached profitability. Another is implementing laws that protect marketplace startups from liability when they work with user-generated content.

Improving internet infrastructure across the country, with fiber optic cables connecting Indonesia’s main islands by the end of 2019, and a high-throughput satellite in the air by early 2022,  are also part of the plan.and a high-throughput satellite in the air by early 2022, are also part of the plan.

“Chase us to deliver on these promises,” Sutjiati encouraged the audience at Tech in Asia Jakarta 2017.

It’s the first time Indonesia has formulated a coherent plan to boost the digital economy in a synchronized effort involving multiple ministries and departments.

Some programs are already underway and making progress, like the 1,000 startups movement initiated by startup hub Kibar. The initiative is now backed by Google, which combined its pledge to train 100,000 developers in Indonesia with this goal.

First steps to link up farmers and fishermen with digitization initiatives have been undertaken.

On the other hand, regulatory roadblocks continue to stall the development of tech startups in some areas, particularly fintech. For example, Indonesia’s central bank is holding off on issuing licenses that would allow shopping and on-demand apps, like Tokopedia and Uber, to operate mobile wallets.

Startups disrupting transportation, like Grab and Go-Jek, have had to deal with this unclear regulatory environment. Although the country’s highest court threw out parts of a restrictive regulation proposed by the Ministry of Transportation, the new version of the law still contains parts that conflict with the way they operate – such as upper and lower limits on tariffs they can charge.

It’s just a matter of time before all the initiatives put in place take effect, said Sutjiati. And the digital strategy spearheaded by her ministry doesn’t have the power to tell other ministries what to do. “We lead by example,” she said.

“We have to give credit to Rudiantara and his team, but we cannot rely on them only. We advised him to work with all the ecosystem players,” she added. “If a new administration comes in, this model will be established enough that it can stand without the pioneer.”

Indonesia is facing its next general election in 2019.


Source: Tech In Asia

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