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

2. 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
Researching innovation
advancing policy
improving governance
cipg.or.id

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

4. How Digitized is Indonesia?
Indonesia Digital Profile: An Overview
Menjelaskan konteks Indonesia, state-of-the-art Indonesia dalam hal digital conomy
Yang dijelaskan secara umum:
Digital divide masih terasa nyata di Indonesia, pembangunan infrastruktur tidak merata dan hanya terpusat di pulau Jawa
Hal ini juga diperkuat statistik dari berbagai indeks yang ada (NRI, Indeks dari ITU, ICT for Dev Index)
Di sisi lain, ada potensi besar dari perilaku digital masyarakat Indonesia. Sebagian besar masyarakat Indonesia memiliki smartphone, > 1 SIM Card, penggunaan smartphone yang sangat ekstensif, etc
Implikasinya adalah jumlah startup yang terus meningkat -> kasi data terkini
Researching innovation
advancing policy
improving governance
cipg.or.id

5. > Digital Economy Vision of Indonesia
The biggest digital economy in ASEAN by 2020
US$ 130 billion E-Commerce transaction in 2020
>
Dari statistic digital masyarakat Indonesia, dan driver2 yang ada, Indonesia melihat potensi besar untuk bisa menjadi kekuatan ekonomi digital di ASEAN
Source: MCIT (2016)
Researching innovation
advancing policy
improving governance
cipg.or.id

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

7. What are the drivers? Price war Massive infrastructure deployment
Smartphone become necessary goods
Social media booming
Facebook, Twitter
78 million people FB user, 4th
17th million twitter users
Chat apps that drives data penetration
Introduction of Android OS
Open source, easy to develop new apps
Cheap and affordable smartphone
Researching innovation
advancing policy
improving governance
cipg.or.id

8. However, the infrastructure was not yet equally developed …
Fiber Optic and BTS deployment are mainly focus on Java island
Digital divide is real
Source: opensignal.com (2017)
Researching innovation
advancing policy
improving governance
cipg.or.id

9. … which makes internet users become centered in Java island
Cari gambar yang lebih baru
Source: APJII (2015)
Researching innovation
advancing policy
improving governance
cipg.or.id

10. Indonesia vs Other ASEAN Countries
Some Comparison
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)
Researching innovation
advancing policy
improving governance
cipg.or.id

11. Emerging Trends in Indonesia
Researching innovation
advancing policy
improving governance
cipg.or.id

12. The Digital Economy Hype in Indonesia
ON-DEMAND
(TRANSPORTATION)
SERVICES
E-COMMERCE
FINTECH
The next big thing: EdTech & AgTech
Researching innovation
advancing policy
improving governance
cipg.or.id

13. 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
Researching innovation
advancing policy
improving governance
cipg.or.id

14. The Go-Jek Effect Creating new job market Facilitate mobility
> 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
Researching innovation
advancing policy
improving governance
cipg.or.id

15. 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
Researching innovation
advancing policy
improving governance
cipg.or.id

16. 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
Researching innovation
advancing policy
improving governance
cipg.or.id

17. 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
Researching innovation
advancing policy
improving governance
cipg.or.id

18. The Impact of Digital Economy in Indonesia
Researching innovation
advancing policy
improving governance
cipg.or.id

19. 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)
Researching innovation
advancing policy
improving governance
cipg.or.id

20. ICT Contributes to GDP and Employment in Indonesia
1% increase in mobile penetration
ICT Contributes to GDP and Employment in Indonesia
$ 640 million to GDP in 2020
extra formal jobs in 2020
Source: Oxford Economics (2016)
Researching innovation
advancing policy
improving governance
cipg.or.id

21. 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)
Researching innovation
advancing policy
improving governance
cipg.or.id

22. 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
ICT for public participation
Data Source: startupranking.com (2017)
Researching innovation
advancing policy
improving governance
cipg.or.id

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

24. Government Support for the Digital Economy in Indonesia
Indonesia Broadband Plan
Economic Policy Package: Roadmap of E-commerce
Finishing of Palapa Ring Project in Eastern Indonesia
expected to be done in 2019
Government Support for the Digital Economy in Indonesia
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!
Source: MCIT (2016)
Researching innovation
advancing policy
improving governance
cipg.or.id

25. Bridging the digital divide
Finding qualified
digital talents
Bridging the digital divide
in Indonesia *
Digital savvy professional
across function with specific
Knowledge still hard to find *
Poor connectivity in rural area *
Talent war: common practice among startups *
But the government is working on it
Challenges *
The root of problem lies in the academic sector
Adaptive Regulation *
Regulation always behind
of technology
The need for establishing “National Digital Economy Agency” *
Do not let regulation kills innovation
The government have
different “layers” in
responding to digital
innovation (On-demand transportation vs FinTech) *
Researching innovation
advancing policy
improving governance
cipg.or.id

26. 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
Consumer protection and data security: ensuring trust for online transaction
How to balance interest between various stakeholders?
Policy framework for digital economy in Indonesia
Researching innovation
advancing policy
improving governance
cipg.or.id