Indonesia’s digital economy is projected to expand significantly, with its gross merchandise value (GMV) expected to grow fourfold from $82 billion (USD) in 2023 to $360 billion (USD) by 2030. This impressive growth is fuelled by the country’s substantial population, a dynamic startup ecosystem, and increasing digital adoption across society. However, the nation still faces challenges in maximising the opportunities presented by digital transformation. Many communities in peri-urban, rural, and remote areas throughout the archipelago still lack access to quality and affordable internet. Although digital transformation helps businesses improve productivity and drive economic growth, it can also potentially widen the wage gap, particularly for less skilled workers. The skills gap is particularly salient in a country where a majority of the population belongs to the informal sector.

In light of these challenges, the country’s Ministry of Information and Communication has launched the Indonesia Digital Vision for 2045. The roadmap outlines the nation’s goals and plans for a digital future. These include ensuring equitable availability and access to digital services, empowering communities to utilise digital technologies to create added value, and ensuring that digital transformation also fulfils sustainable development goals. To achieve these ambitious goals, the plan calls for greater synergies between agencies and industry, especially in the planning and implementation of future programmes and policies.

Participants:

• Ferro Ferizka, Executive Director, Pijar Foundation
• William Seitz, Senior Economist, The World Bank
• Nailul Huda, Direktur Ekonomi Digital, Center of Economic and Law Studies
• Muhammad Hafiz Noer, Head of Research, Center for Digital Society
• Ibrahim Kholilul Rohman, Senior Research Associate, Indonesia Financial Group Progress
• Clarina Andreny, Head of Public Affairs Strategy, Sustainability and Social Impact, Grab
• Ruth Simanjuntak, Head of Partnerships, Digital Districts
• Vicky Barreto, Manager of Public Policy and Advocacy, Grab
• Ming Tan, Founding Executive Director, Tech for Good Institute
• Basilio Claudio, Programme Associate, Tech for Good Institute

Key Takeaways:

1. Technology is Transforming the Nature of Work in Indonesia
A significant portion of Indonesia’s workforce is engaged in the informal sector, where workers often face vulnerabilities such as job insecurity, limited savings, and inadequate access to formal services. However, technological advancements are fundamentally reshaping the landscape of productive work in the country. These changes are fostering hybrid working arrangements and broadening the spectrum of both formal and informal employment. Digital platforms are at the forefront of this transformation, enabling individuals to supplement their income by selling goods online, becoming partner drivers, or delivering food, among other roles. The rise of the gig economy allows people to undertake jobs with varying levels of complexity and formality. Furthermore, artificial intelligence is influencing the demand for specific skills across numerous industries. As a result, many workers are navigating this evolving landscape, striving to maximise their opportunities and enhance their prospects for social advancement.

2. Indonesian Society Faces Various Challenges in Adapting to Digital Transformation
Indonesia encounters several challenges in addressing its digital and economic divides. Many individuals lack access to traditional banking services and are unaware of the opportunities offered by digital finance platforms. The nation’s archipelagic geography results in uneven deployment of digital infrastructure, particularly in remote and less urbanised communities. A significant gap in digital skills and literacy persists, impeding many people from securing jobs within the digital ecosystem. Additionally, the rise of artificial intelligence (AI) poses a threat of further job displacement. Only 27% of 15-19 year-olds in Indonesia are enrolled in general upper secondary education, and just 4% are pursuing tertiary programmes. AI-powered automation has the potential to replace many traditional forms of employment relied upon by young individuals entering the workforce.

3. Effective Data Governance and Utilisation Can Help Bridge Economic and Social Divides
Data governance, which includes frameworks for collecting, classifying, sharing, and utilising data, can play a crucial role in informing public policy. For example, data sharing between governments and digital platforms can offer a comprehensive understanding of the profiles, income streams, and prospects of gig economy workers. Governments, together with the private and public sectors, should collaborate to establish uniform standards for classifying economic and worker data, thus creating a common baseline for necessary interventions.

Data can also be harnessed to expand opportunities for SMEs, small merchants, and low-income demographics, fostering downstream development. For instance, Grab provides merchants with accessible platform tools and data including popular menu items and consumption trends. This enables merchants to make more informed decisions and enhance marketing for better customer engagement.

4. Collaboration in Policy and Capacity Building is Essential for Inclusive Growth
Collaboration among governments, the public sector, and private entities is vital for crafting regulations that protect gig workers while ensuring implementable standards for formality and compensation. Digital platforms can partner with governments to offer upskilling opportunities for small and medium enterprises (SMEs). As key players in the digital economy, these SMEs serve many underserved demographics. Robust training can help SMEs scale up and become more competitive, enhancing their resilience to economic downturns.

Governments can also utilise platforms and technology to improve social services, such as making food security programmes more effective and targeted. Furthermore, academia can work with governments to advance research on digitalisation trends and emerging technologies to enhance public programmes. For example, research institutes in Indonesia currently assist regional governments with limited resources in setting up their e-Government systems for digitising local services.