E-friction report shows where Indonesia needs to improve for digital inclusion

Indonesia is among the countries with the highest “e-friction”, says a BCG report. E-friction measures how difficult it is for people to access and use the internet effectively. A high score means there are many factors limiting the ease of access and usage.

Among the 65 countries – ranked in the report from “low” to “high e-friction” – Indonesia comes out in the bottom quintile. In Southeast Asia, only Vietnam does worse – while noting that Cambodia, Laos and Myanmar are not part of the study.

Unsurprisingly, the largest factor contributing to Indonesia’s high e-friction score is infrastructure. Perhaps more surprisingly, what makes Indonesia fare better than, for example, Vietnam, is a relatively advanced industry. Indonesia also does better than Vietnam in terms of access to information.

The e-friction score is made up of four components: Infrastructure, Industry, Individual, and Information. The four components comprise 55 indicators. The country-by-country drill down of the scores for each indicator is unfortunately not available online, but it was presented to representatives of Indonesia’s digital industry as well as policymakers at the digital economy roundtable in Jakarta last week. Here are some key takeaways:

Infrastructure pain points

The infrastructure-friction component, in which Indonesia scores particularly high, measures factors like broadband penetration, average mobile connection speed, and internet architecture components.

Industry pain points

In the sum of all industry component measurements, Indonesia does comparatively well, better than Vietnam, the Philippines, and even Thailand. According the report, access to loans is easy, and venture capital is available.

What jacks Indonesia’s score up in the industry component, however is “the number of days it takes to set up a business”. Here, it does much worse than its neighbors.

Clearly this score is something which legislators should worry about. Simplifying the incorporation process could lower overall e-friction and contribute to Indonesia’s digital economy.

Individual pain points

Individual e-friction measures aspects like quality of education, availability of banking services, and trust in digital transactions. What this component tries to assess is how ready the population is to access and make use of the internet.

Again, Indonesia ranks lower than other Southeast Asian countries. Contributing to the high score are Indonesia’s huge number of unbanked people, not to mention high number of people not using online financing tools, and still a high level of adult illiteracy.

Indonesians can only benefit from the internet once overall education levels increase, and they have access to, and are familiar with, bank accounts and cashless payment methods.