A Glimpse of Indonesia's Growing Digital Economy

Along with developments in the global arena, positive growth from year to year accompanies the journey of the digital ecosystem in Indonesia. The Association of Indonesian Internet Service Providers (APJII) stated that in the 2021-2022 period, there were more than 210 million internet users in Indonesia, compared to a decade ago where it still "only" touched 55 million users. This indicates that internet technology has reached almost the entire population of Indonesia. As a result, Internet business has experienced exponential growth.

Speaking of numbers, reports from Google, Temasek and Bain note that the country's digital economic value as measured by Gross Merchandise Value (GMV) is US$77 billion in 2022, and is projected to grow to US$130 billion in 2025. What drives the growth of our digital economy? In addition to the thriving digital startup ecosystem, the eCommerce and digital payment sectors are claimed to be the main accelerators, especially during the last pandemic which prompted people to carry out digital transformation in all aspects.

It is no exaggeration if some research notes that the value of digital payment transactions in 2022 will reach US$ 72.09 billion. As if in line with this growth, the value of digital commerce transactions in the same year was at US$ 67.31 billion, with a projection in 2027 it is expected to reach US$ 115.50 billion.

The huge potential of Indonesia's digital economy is reflected by the largest population in Southeast Asia with a demographic bonus where there are approximately 50 million middle-income residents with higher purchasing power. In addition, the Indonesian market is also crowded with micro, small and medium businesses (MSMEs), which have long been ordained to be one of the main pillars supporting the nation's economy.

This situation was then put to good use by players in the Indonesian digital startup ecosystem, who are driving support for MSMEs through digital solutions, in order to create a sustainable digital economy. Startup actors are competing to create digital solutions that can simplify and increase the efficiency and productivity of MSMEs. Thus, access to capital, supply chain, and marketing becomes easier for MSME players with digital solutions offered by startups in Indonesia.

Inevitably, the above conditions also have an equitable impact on the growth of the digital ecosystem in various regions of Indonesia. According to the 2021 E-Commerce Statistics report, there are 1.774.589 e-commerce businesses (75,15%) of the total e-commerce businesses in Indonesia (2.361.423 businesses). As of June 2021, 42.6% of e-commerce businesses are located in DKI Jakarta. Meanwhile, in addition to Java Island, the highest percentage of e-commerce businesses is in the provinces of Riau Islands (33.88%) and East Kalimantan (30.57%). This is due to the location being close to the center of the economy and the availability of adequate internet access.

Outside of the digital commerce aspect, digital equity in Indonesia is also seen as being on the right track, although of course it still faces a number of challenges, such as equal distribution of infrastructure, human resources, market access and access to capital. and so forth.

In the latest DSInnovate report regarding Indonesia's digital startup ecosystem in 2022, which was released with the Ministry of Communication and Informatics (Kemenkominfo), Minister Kemenkominfo, Johnny G. Plate said, narrowing the regional digital gap is one of the government's main commitments as one of the stakeholders in this matter.

"What I have done as a minister is to deploy Information and Communication Technology (ICT) infrastructure throughout the country through telecommunications networks and provide High Throughput Satellite with a capacity of 300 gigabits per second which will be launched into orbit next year to support Indonesia's digital needs. We have also built half a million base transceiver stations. With transportation and logistical facilities that are very limited in the archipelago, we expect the development of ICT infrastructure throughout the country to close the digital gap," he said.

In addition to the support from the regulators, the support from internet business people should also be appreciated. The proliferation of digital startups is not just a "trend", but is considered capable of making a very significant contribution, in order to accelerate digital transformation.

“These startups have the opportunity to bring new economic value in the next few decades. Especially, considering the role of digital startups that have helped various parties in bridging the digital divide and presenting solutions to problems that many people encounter. Not only that, digital startups have also helped corporations adopt new technologies to accelerate their business, such as blockchain technology, big data, Artificial Intelligence (AI), Augmented Reality (AR), Virtual Reality (VR), cloud computing, and Internet of Things (IoT)," said M. Fajrin Rasyid, Telkom's Director of Digital Business, quoted from the same source.

The role of digital startups for this nation is actually very interesting to study together. For you business people, practitioners, or observers of related industries, you can get interesting insights and descriptions regarding the horizon of the country's digital ecosystem in the latest DSInnovate report entitled “Building Indonesia's 2022 Digital Startup Ecosystem”.

In this report you can also find implementation of the People, Program, Place, Policy, and Platform aspects of the concoction Kemenkominfo for the advancement of Indonesia's digital economy. Get the report now.