Indonesia, boasting the largest population in Southeast Asia and ranking as the fourth most populous country globally, has become a magnet for companies eyeing the potential within its expanding digital landscape.

In 2009, a mere 19% of Indonesians were internet users. However, recognising the untapped possibilities early on, venture capital firm East Ventures made strategic investments in the country. Consequently, Indonesia has experienced substantial digital advancements, particularly gaining momentum during the COVID-19 pandemic.

Amidst the global pandemic challenges, Indonesia found a silver lining—witnessing an acceleration in digital adoption. The swift shift to online platforms showcased Indonesia’s adeptness in adapting to change, bringing the nation closer to widespread digital integration.

The Digital Competitiveness Index (EV-DCI) underscores Indonesia’s remarkable progress in digital adoption and competitiveness. The data reveals a staggering growth trajectory, surging from an index of 27.9 in 2020 to 38.5 in 2023, underscoring the country’s unwavering commitment to continuous development and competitiveness.

Several key factors drive this impressive growth, shaping Indonesia’s digital success in five critical areas:

Five Building Blocks for Digital Growth

ICT Infrastructure

Central to Indonesia’s digital narrative is its ICT infrastructure, crucial for driving digital expansion. In 2022, the government spearheaded various initiatives, such as constructing a Base Transceiver Station (BTS) in remote 3T areas and expanding the 5G network. This proactive program implementation yielded a notable 5% year-over-year increase in internet users. Serving as the backbone of the digital economy, however, the ICT infrastructure confronts challenges related to access and cybersecurity risks.

Despite these commendable efforts, achieving an inclusive and comprehensive digital evolution necessitates the establishment of mature and secure infrastructure throughout the nation.

Digital Government

Building upon the improvements in ICT infrastructure, Indonesia’s push towards a digital golden era in 2022 also focused on establishing an efficient, transparent digital government. Key initiatives included digitising public services, with the NLE policy implementation reaching 90.5% of its plan, and starting the National Data Center in Bekasi to centralise data integration. The implementation of the SATUSEHAT platform furthered health data integration.

However, businesses must collaborate more and the Personal Data Protection Law must be strengthened with cyber regulations. The digital government’s initiatives’ security and effectiveness depend on these phases.

Digital Business

Echoing the progress in digital government, Indonesia’s digital business landscape also saw substantial growth in 2022, propelled by initiatives like the MSMEs digitalisation program and ePayment systems. These efforts led to a 26.6% increase in digitalised MSMEs, totalling 20.76 million. This growth not only reflects the sector’s adaptability but also its crucial role in Indonesia’s economic progress.

Also, the expansion of digital business into tier 2 and 3 areas, along with the rise of new fintech unicorns like Kredivo, DANA, and Akulaku, highlights the sector’s dynamism.

Despite startup funding issues, the digital sector grew 22% from 2021 to 2022, above the national growth. To maintain momentum, business principles and stakeholder collaboration must be prioritised.

Digital Society

In terms of societal growth, 2022 was a significant moment for Indonesia in increasing digital literacy and financial inclusivity. The median digital literacy score increased 20% in smaller cities thanks to programmes like Relawan TIK. Adoption of digital payments also increased financial literacy by 12% and digital transaction values by 11%.

To continue advancing towards the digital golden era, Indonesia must focus on expanding ICT adoption and improving digital talent. Enhancing skills and access to digital technologies is crucial for inclusive and sustainable digital growth.

Sustainable Economy

Complementing these developments, ESG principles reinforced Indonesia’s digital economy sustainability in 2022. The ESG Framework for infrastructure funding and OJK’s Green Taxonomy were major initiatives. In particular, the government exceeded its renewable energy target with 12,557 MW installed capacity.

Looking ahead, the focus lies on expanding the adoption of Environmental, Social, and Governance (ESG) principles, especially within startups and non-public companies. Vital to this endeavor is the development of government policies and support from both the community and investors, serving as crucial catalysts to promote sustainable practices within the digital business landscape.

However, according to research conducted by the Tech For Good Institute, sustainability emerges as a blind spot among Digital Economical Companies, despite their genuine intentions to contribute positively. This insight underscores the imperative for a more comprehensive approach, urging these companies to align their actions with sustainable practices and integrate ESG considerations into their operations.

Taking More Steps Forward: Key Recommendations

Indonesia’s quest for equitable digital growth relies on several key recommendations:

• Equitable Ecosystem Distribution: Bridging the urban-rural digital gap is critical for national digital advancement. To provide equitable access to digital resources and opportunities, the government, the private sector, and local communities need to collaborate.
• Strengthen Business Foundations: Investing in core factors such as innovation, research and development, and access to capital is vital for sustainable progress.
• Encourage Collaboration: Cooperation between the government, companies, academia, and civil society can promote innovation, information sharing, and resource pooling, thus boosting the collective growth of Indonesia’s digital ecosystem.
• Embrace ESG for Sustainability: Environmental conservation, social responsibility, and long-term business practices are paramount. Industry-wide ESG adoption supports long-term sustainability and resistance to global issues.

The Road Ahead

As Indonesia continues on its digital journey, the combination of progress, collaborations, and sustainable development brings new chapters of success. This drive shines through in every step towards inclusion, guaranteeing an equal digital domain in which all Indonesians may participate and flourish.

As the world grows increasingly digital, Indonesia is poised for a revolution, ready to pave the way to a future marked by innovation, development, and inclusion.

This future, shaped by accessible innovation, will make it simpler for everyone, everywhere to contribute to and benefit from an expanding economic system.

The road ahead will be marked by ambition and resilience, with a goal of developing an all-inclusive digital economy. Challenges loom, but so do opportunities—ideal for a nation on the edge of a digital revolution that promises prosperity in all aspects of life.