Indonesia’s Digital Economy to Double by 2025

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A recent report from Google, Bain and Temasek predicts that Southeast Asia will have a digital economy worth $363 billion by 2025, exceeding the previous forecast of $300 billion. The majority of that growth will be attributed to Indonesia. Meanwhile, East Java has the potential to be an exciting new frontier for Indonesia’s digital economy.

SEA Regional Digital Ecomony Growth in USD

Digital growth in the region is significantly driven by industries such as e-commerce, travel, media, transport and food and beverages. Since the beginning of the COVID-19 pandemic, up to 60 million new digital consumers have entered the market.

In the first half of 2021, Southeast Asia recorded deals worth $11.5 billion for internet companies, breaking its previous record of $10 billion set in 2020. Major internet companies such as Indonesia-based GoTo (a merger between the two Indonesian unicorn giants Gojek and Tokopedia) and Malaysia based Grab are among those that are reaping the funds and are taking steps to allow early investors to profit from their investment.

The report claims that online spending in the archipelago will likely double to $146 billion by 2025. Given Indonesia’s massive population and favourable demographics, it’s no wonder it’s the region’s largest digital economy. Quoted from Bloomberg, Indonesia is on pace to become twice as big a market as Southeast Asia by 2030 after the first half of 2021 exceeded the whole-year totals of the past four years.

East Java: A digital frontier with a lot of potentials

East Java’s information and communication industry is booming. It is largely due to the Covid-19 pandemic. Thus, working and schooling are done virtually. This situation contributes to increasing data traffic among cellular and the use of virtual meeting applications such as Zoom. Apart from that, e-commerce also contributes significantly to the rapid development of the digital economy in East Java.

A look at the digital economy in East Java reveals remarkable success: The Indonesian Central Statistics Agency (BPS) and the Tourism and Creative Economy Agency (Bekraf) both report that the digital sector has grown significantly since 2016. The film, animation, and video industries have expanded by 32.45% in terms of gross added value. In the meantime, growth in the television and radio sub-sectors was 28.56 percent. The digital economy, on the other hand, continues to grow at a rate of 40% each year.

Moreover, huge support comes from the East Java Provincial government that establishes the Millenial Job Center (MJC), a networking and link and match platform for digital professionals. MJC is planned to provide a forum for digital sector industry participants to seek and find digitalisation professionals who meet their company’s needs. MJC was originally launched with the opening of Jatim IT Creative (JITC), a free-of-charge gathering area with internship programs, co-working spaces, and conference rooms. JITC comprises six community start-up groups in Industrial Products Design, Animation, Photography, Comics, Digital Marketing, and Cinematography, which were created in Surabaya and Malang.

East Java’s capital city, Surabaya, is the most prominent start-up host city, hosting 98 digital companies out of the total 281 in East Java (2019 data) — followed by Malang with 70 start-ups. These startups are mostly involved in e-commerce, online tuition payments, bitcoin investment, financial technology, drones, animation services, game development, network service providing, business contacts, travel services, health and other industries.

Surabaya and Malang are two East Java cities ranked in the top ten in the category of cities deemed competitive in Indonesia’s digital economy industry by the East Ventures Digital Competitiveness Index (EV-DCI) 2020. Surabaya was placed third with a score of 53.9, while Malang was ranked ninth with a score of 47.2. Meanwhile, DKI Jakarta, the province that hosts the nation’s capital, with a population approaching 10,500,000 and an EV-DCI score of 78.8, and is followed by Bandung, the capital of West Java, with a population approaching 2,500,000 and an EV-DCI score of 56.9.Rankings of Indonesia's Cities in Digital Economy Industry by EV-DCI

MOCCA, a start-up helped by MJC at JITC Malang since 2012, is an example of an East Java start-up that has grown quickly and into the worldwide market. This start-up specialises in international animation, working on films, digital applications and several derivative products. MOCCA has successfully collaborated on animation projects on a B2B basis with major studios in countries such as Italy, Canada, the United States (US), India, Thailand and the Philippines, among others.

The Indonesian government is optimistic about the future

To further boost the country’s digital economy, the Vice president of Indonesia, Ma’ruf Amin, encouraged all stakeholders to improve the digital economy sector.  He expects the Indonesian economy ranging from micro, small, medium to large businesses to be independent. Moreover, the Vice President added that digital independence must be a movement and shared awareness by all elements of the nation. That way, every active role of the community further strengthens efforts to build sovereignty in the midst of various challenges of digitalisation.

As digital transactions increase, he believes Indonesia is the most popular investment destination in Southeast Asia, surpassing Singapore. Therefore, global capital flows are projected to continue to come to Indonesia.

Final takeaways

The staggering growth of the Indonesian digital economy indicates that the potential of online businesses is getting bigger in the future. This growth is promising for the future of e-commerce and digital marketing as well. With more people getting on board with using technology, extending and developing your business in this industry and Indonesia seems like a no-brainer.

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