Digital economy landscape in Indonesia and its implications to development. Presented by Centre for Innovation Policy and Governance (CIPG) at the 1st Development Implications of Digital Economy (DIODE) workshop.

1. Digital Economy in
Indonesia
Prospect, Challenges, and Research Agenda
Wirawan Agahari
Leonardus Kristianto Nugraha
DIODE Workshop
Yogyakarta, 25-26 May 2017

2.  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
Researching innovation
advancing policy
improving governance
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About this
presentation

3. Researching innovation
advancing policy
improving governance
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Agenda
How
Digitized is
Indonesia?
Looking
Forward
Emerging
Trends in
Indonesia
The Impact
of Digital
Economy in
Indonesia

4. How Digitized is Indonesia?
Indonesia Digital Profile: An Overview
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Researching innovation
advancing policy
improving governance

5. The biggest digital economy in ASEAN by
2020
US$ 130 billion E-Commerce transaction in 2020
Researching innovation
advancing policy
improving governance
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Source: MCIT (2016)
Digital Economy Vision of Indonesia
>

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Researching innovation
advancing policy
improving governance
TOTAL
POPULATION
ACTIVE
INTERNET USERS
MOBILE
CONNECTIONS
AVERAGE DAILY USAGE
OF MOBILE INTERNET
256.2
Million
132.7
Million
371.4
Million
95.87
Million
SMARTPHONE
USERS
Source: APJII (2016), We Are Social (2017)
ACTIVE MOBILE
INTERNET USERS
123.3
Million
~4
Hours
Indonesia is a digital country

7. Researching innovation
advancing policy
improving governance
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What are the drivers?
Massive infrastructure
deployment
Price war
Smartphone become necessary
goods
Social media booming
Facebook, Twitter
Chat apps that drives
data penetration
Introduction of Android OS
Open source, easy to develop new apps
Cheap and affordable
smartphone

8. However,
the infrastructure
was not yet
equally developed …
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Researching innovation
advancing policy
improving governance
Source: opensignal.com (2017)

9. … which makes
internet users
become centered
in Java island
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Researching innovation
advancing policy
improving governance
Source: APJII (2015)

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

11. Emerging Trends in Indonesia
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12. The Digital Economy Hype in Indonesia
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ON-DEMAND
(TRANSPORTATION)
SERVICES
FINTECH
E-COMMERCE

13.  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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Researching innovation
advancing policy
improving governance
The Go-Jek Effect

14.  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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Researching innovation
advancing policy
improving governance
The Go-Jek Effect

15.  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)
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Researching innovation
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FinTech
Source: DailySocial Indonesia Tech Startup Report 2016

16.  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
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Researching innovation
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E-Commerce
Data Source: Statista, MCIT

17.  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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Researching innovation
advancing policy
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E-Commerce

18. The Impact of Digital
Economy in Indonesia
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19. Researching innovation
advancing policy
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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)

20. ICT Contributes
to GDP and
Employment
in Indonesia
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Source: Oxford Economics (2016)
1% increase
in mobile
penetration
$ 640 million to
GDP in 2020
10.700 extra
formal jobs in
2020

21. Researching innovation
advancing policy
improving governance
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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)

22.  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
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Researching innovation
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Digital Economy
and Sociopreneurship
Trends in Indonesia
Data Source: startupranking.com (2017)

23. Looking Forward
Government Support, Barriers, and Future Agenda
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Researching innovation
advancing policy
improving governance

24. Government
Support for
the Digital
Economy
in Indonesia
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Source: MCIT (2016)
Indonesia Broadband Plan 2014-2019
Economic Policy Package: Roadmap
of E-commerce
Finishing of Palapa Ring Project in
Eastern Indonesia
expected to be done in 2019
All capital city of regency / municipality (514)
will be connected with fiber optic
1 million domain names
50 million SME’s to go digital
1000 tech start-up entrepreneurs in
2020
Digicoop smartphone: made in
Indonesia!

25. Researching innovation
advancing policy
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Bridging the digital divide
in Indonesia
Poor connectivity in
rural area
*But the government
is working on it
*
Finding qualified
digital talents
Digital savvy professional
across function with specific
Knowledge still hard to find
*Talent war: common
practice among startups
*The root of problem lies
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)
*
Challenges

26.  Digital economy and sociopreneurship movement
in Indonesia
 Exploring the “dark side” of digital economy: non-
user, the impacted
 Consumer protection and data security: ensuring
trust for online transaction
 How to balance interest between various
stakeholders?
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Some Research Agenda
How inclusive is digital economy in Indonesia?
Policy framework for digital economy in Indonesia

27. Thank you!
CENTRE FOR INNOVATION POLICY AND GOVERNANCE
Indonesia Sustainability Centre
Komp. Harmoni Plaza Blok B-5
Jl. Suryopranoto No. 2, Harmoni
Jakarta Pusat, INDONESIA
office@cipg.or.id
twitter.com/icipg
facebook.com/ICIPG
cipg.or.id