Opportunities abound as Indonesia records low digital competitiveness

The overall digital competitiveness of Indonesia remains relatively low, with a score of 27.9 out of 100, early-stage VC firm East Ventures found. (Disclosure: East Ventures is an investor in Tech in Asia.)

In its first East Ventures Digital Competitiveness Index (EV-DCI) report, the company discovered that there is a digital gap across the archipelago, as rapid growth of the digital economy only occurs in urban areas and provinces with high early tech adoption.

East Ventures, however, emphasized that this signifies a large potential for tech companies to help spur the country’s digital economy.

According to a statement, EV-DCI serves as a tool to map out the digital economic conditions in Indonesia’s 34 provinces and 24 major cities. The scores are based on input (human resources and the use and expenditure of information and communication tech), output (economics, entrepreneurship and productivity, and manpower), and supporting (infrastructure, financial inclusion, and effective and efficient governance) conditions.

The region of Java, which includes the capital city of Jakarta, recorded the highest score. Jakarta took the top spot with 79.7, followed by West Java and East Java with 55 and 49.7, respectively. According to the report, this shows the gap between Java and other regions. It also reveals the developmental inequality between cities, with Bandung (56.9) following Jakarta (76.8) at a distant second.

Photo credit: East Ventures

Data also shows that Indonesia enjoys a strong tech adoption, particularly smartphones and internet, as it scored high in ICT use. It also gained a good score in infrastructure, which means that cellular data networks have been more evenly distributed across the country.

On the other hand, human resources and entrepreneurship received the lowest scores, indicating that Indonesia still faces tech talent scarcity due to the limitations of educational institutions. The entrepreneurship score also shows that only a small number of Indonesians are opening businesses or use technology in their workplace.

Nine measuring pillars / Photo credit: East Ventures

According to Willson Cuaca, co-founder and managing partner of East Ventures, a number of local digital companies – including the likes of Gojek, Tokopedia, and Traveloka – have successfully increased economic access and productivity in major cities, especially Jakarta. The inequality revealed by the report can encourage these companies to continue expanding their reach to other parts of Indonesia and help boost the archipelago’s overall digital competitiveness.

He also said that cities with the highest EV-DCI score tend to be the best places to start a new digital business, as they are most likely to adopt to new technology early on.

“The digital economy promises inclusivity and equal economic opportunities for all Indonesians. However, Indonesia is oftentimes only assessed from the development of certain big cities like Jakarta, while there are still many cities untouched by the promise of digital economy,” Cuaca explained. “By allowing everyone to participate in the digital economy, Indonesia could convert demographic bonuses into demographic dividends, turning potential into reality.”

Established in 2009, East Ventures says it has supported more than 170 digital companies in Southeast Asia, 130 of which were built in Indonesia. Some of the local startups it has backed include Tokopedia, Traveloka, Waresix, Sociolla, IDN Media, Moka, Warung Pintar, and Fore Coffee, among others.