Prospects and Challenges of Digital Technology in Indonesia: A socio-economic perspective
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1 Prospects and Challenges of Digital Technology in Indonesia: A socio-economic perspective Fajar B. Hirawan Centre for Strategic and International Studies (CSIS) 11 April 2018
2 Outline Background General situation of digital technology in Indonesia Social and political perspective Economic perspective The way forward
3 Background Digitalization and disruptive technology has transformed the society in an unprecedented scale and pace. The digital technology services offer opportunity for businesses and people as an enabler of more productive society. Digital technology have changed the way people transact, connect and interact, transcending geographical boundaries, distance, and time. Technological development and innovation are driving the usage of internet-based services worldwide and increasing the demand for cheaper and faster internet and data. Due to the proliferation of mobile penetration and internet services that are becoming increasingly popular, generating tremendous benefits for consumers, small and medium business owners and content creators. Globally, many homegrown applications have also emerged to cater to specific needs in local markets such as Hike and Ola in India, Jongla in Nigeria, and Gojek, Indonesia.
4 General situation of digital technology in Indonesia (1) Employment by sector as percentage of total employment in Indonesia, (%) Source: ILO
5 General situation of digital technology in Indonesia (2) Social media users profile in Indonesia, 2016 (%) Source: Susenas
6 General situation of digital technology in Indonesia (3) Supported by the rapid growth of mobile penetration, improved telecommunication infrastructure quality and better internet literacy, Indonesia has the potential to be a digital leader in the region. However, according to the 2018 Internet Inclusiveness report, Indonesia comes in at 49th out of 86 countries studies overall, below Thailand and Vietnam. Major improvements are much needed particularly in the lack of relevancy of Indonesian content and internet or mobile content in general and low digital literacy. High level of investment with smart digital strategy from the government is a necessary condition to achieve a high-digitalization economy in Indonesia. The government s vision to make Indonesia as the largest digital economy in Southeast Asia, including the emergence of 1,000 Indonesian technopreneurs by 2020 and the launch of Industry 4.0 roadmap.
7 Social and political perspective The significant growth of information and communication technology especially internet and social media in Indonesia has brought a substantial impact towards promoting society s knowledge on various issues. Moreover, it also has given ordinary Indonesian citizens unparalleled opportunities to facilitate citizens freedom of expression and engage in public debate (Hamid, 2017). Three key issues that show the importance of digital technology from the social and political perspectives: Education. Health. Religious affairs and people s representation.
8 Education The development of digital technology enables more educators and students to invent a more interactive way in learning process. The digital technology have been found as one of the most efficient ways beyond the classroom that could provide optimal two-way communication between teacher and student. The rising of digital technology has also encouraged more opportunities for Indonesian start-ups and non-profit movements to provide innovative solution for Indonesia s education sector such as Ruangguru, Quipper, Kelase and Akademi Berbagi.
9 Health Given the unequal health services across Indonesia, digital technology can contribute to improve accessibility of health services in Indonesia. WhatsApp groups, for example, have been used by health practitioners to deliver health services and capacity building activity such as direct consultation with patients/community and discussing various policies and standard of procedures (SOP) related to health sector with other colleagues. In Kudus, Central Java, the local government is using WhatsApp for the National Health Insurance-Indonesia Health Card (JKN-KIS) registration so the people only need to send photos of their ID and Family Card (KK) via WhatsApp.
10 Religious affairs and people s representation The digital technology have been used to counter the negative impact of hoax and promoting tolerance and harmony. Religious organization and leaders use WhatsApp group to spread peaceful message and correct hoax, to support their profession to spread positive religious contents (CSIS, 2018). The digital technology provides an efficient tool for civic and engagement and aspiration process. People can directly communicate with their representatives and give their aspiration. On the other way, political elites are more engaged with its constituents with much lower cost.
11 Economic perspective Gruber et al. (2011) explored the contribution of mobile telecommunications to annual GDP growth and found a positive 0.11% growth for low income countries and 0.20% for high income countries. The World Bank (2015) has found that in low- and middle-income countries every 10 percentage point increase in broadband penetration accelerates economic growth by 1.38 percentage points more than in high-income countries and more than for other telecommunications services. McKinsey & Company estimates that a 10 percent increase in broadband household penetration delivers a boost to a country s GDP that ranges from 0.1 to 1.4%. Oxford Economics (2016) predicted that an increased mobile internet penetration will create an extra $58.1 billion in GDP and one million new job opportunities by 2020 in South East Asia. Using regional and village-level data, CSIS study (2018) found that a 10% increase in network coverage is associated with 0.92% GDRP growth. Three key issues that show the importance of digital technology from the economic perspective: Commercial and marketing Job creation and marketplace Tourism
12 Commercial and marketing According to Google Temasek report (2016), the internet economy in Indonesia is forecasted to be worth approximately USD 197 billion, or 40 percent of the total economy in Southeast Asia region by The internet has increasingly become an enabling tool for growth, productivity boost and job creation, particularly for small medium enterprises (SMEs). The increasing mobile internet penetration and internet usage, online platform has become an essential commercial instrument for businesses. A survey by idea found that Indonesian SMEs mainly use social media such as Facebook, Instagram while some use websites in Finally, social media and other online platforms can help SMEs to connect and communicate with customers, suppliers and other parts within the business chain.
13 Job creation and marketplace The digital technology introduces and promotes job marketplace applications that could connect employees with employers and also creating jobs. In Indonesia, LinkedIn connects around 8 million users and placed Greater Jakarta as the fourth most connected city in the world. The digital technology also contributes to the emergence of the online work since people could earn money from doing a job through the internet. From the CSIS desk study, we found that in Tunjungmuli, Purbalingga Regency, Central Java, a man has transformed hundreds of people in the village to be involved in online business services sector by creating a capacity building program to improve/upgrade their skills to become a customer service.
14 Tourism In line with the government focus in tourism sector, digital technology contribute significantly to achieve the government targets such as international tourist arrivals at 20 million and foreign exchange income at IDR 240 trillion in The digital technology provide platforms for Indonesia s tourism industry especially local business and SMEs to tap this opportunity. Based on the Travel and Tourism Competitiveness Index by World Tourism Organization (UNWTO), Indonesia ranks 42nd from 136 countries in 2017 with the lack of ICT readiness as it major drawback. CSIS study found around more than 700,000 users follow around top 20 Instagram accounts related to ticketing promotion and online reservation. Almost all accounts provide their contacts and information through online platform such as Whatsapp, Line, and BBM.
15 The way forward (1) Improving digital literacy among users. Better understanding on the use of digital technology would help the public in making their own judgement and selection of content, supporting better decisions regarding inappropriate content. It would also create greater economic opportunity by facilitating the use of digital technology for more productive activities. Improving telecommunication infrastructure. While greater connectivity depends on more complicated infrastructure and services development, the Government with the support of private sector might also encourage the creation of public spaces with internet connection. It can also be complemented with other initiatives that nurture new talents, skills and entrepreneurship.
16 The way forward (2) Better regulatory environment. On the regulatory issues, Indonesia needs a room to grow over the restrictive regulation especially related to digital technology, which would potentially hinder the benefit for the society. Any regulations related to digital technology must avoid high barriers to entry and uncertainty, inconsistency, lack clarity, confusion among consumers and service providers. The related stakeholders should be able to use the most efficient and most secure payment mechanism. Lastly, the development of the digital technology should be encouraged by ensuring a good investment climate and a predictable, yet appropriately flexible policy and regulatory environment that recognizes the nature of technology developments and opportunities for innovation.
17 Thank you
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