Indonesia’s digital economy will thrive as small businesses come online, says gov’t

Lis Sutjiati, expert staff at the Indonesian Ministry of Communication and Information Technology.

Under President Joko Widodo, the Indonesian government has focused its efforts on boosting the country’s digital economy.

The discussions between various industry and government stakeholders that began two-and-a-half years ago have culminated in a digital strategy for the country, which was detailed in a paper that will serve as Indonesia’s guiding principles for its digital future.

Small and medium enterprises (SMEs) form the backbone of this vision, said Lis Sutjiati, an expert staff member representing Indonesia’s Ministry of Communication and Information Technology onstage at Tech in Asia Jakarta 2017 this week.

According to Sutjiati, SMEs can double their turnover if they “go online.” This includes adopting software to operate more efficiently and using the internet for marketing and selling goods.

The greater goal is to reduce economic inequality, the paper states. Indonesia’s Gini coefficient – a metric that measures wealth disparity – is already in slight decline, and has been since 2015.

To continue this trajectory, the government’s plan includes supporting eight million SMEs to be “digitally empowered” by 2020.

Indonesia’s 57 million SMEs account for more than 60 percent of the country’s GDP.

This plan involves setting up workshops, Sutjiati clarified. The government’s role is to coordinate and communicate such events, whereas the training comes from industry players, she explained. Pos Indonesia, the country’s state-owned postal service, is also involved. It will retrain some of its civil servants to help SMEs manage ecommerce operations, like listing goods online and managing logistics.

Startups and farmers

According to the strategy paper, Indonesia wants to achieve other concrete numbers by 2020.

Within this timeframe, one thousand new startups are expected to grow. And in addition to SMEs, one million farmers and fishermen should gain access to digital tools that improve their livelihoods.

The paper also includes the country’s goal of reaching an ecommerce transaction volume of US$ 130 billion by 2020, says Sutjiati. This figure was developed in conjunction with consulting firm Ernst & Young a few years ago and has often been cited.

It was derived by comparing Indonesia’s current state of development with that in countries like China several years ago, explained Sutjiati, admitting that it’s not defined by measurable, consistent key performance indicators.  In her view, the environment is changing too fast and requires new sources of data that have to be taken into account along the way.

Other goals in Indonesia’s digital strategy include making IPOs more accessible to startups, even before they have reached profitability. Another is implementing laws that protect marketplace startups from liability when they work with user-generated content.