By Sylvia Febiandita, Research Assistant, Centre for Strategic and International Studies (CSIS), Indonesia
The world is currently undergoing a transformation known as the “twin transition,” where the digital and green transitions are occurring simultaneously. Indonesia, like the rest of the world, has the opportunity to benefit from this phenomenon. These two transitions are increasingly seen as interconnected, with digitalisation playing a crucial role in reducing global emissions. A report by the World Economic Forum suggests that digitalisation can reduce global emissions by up to 20%, especially in sectors with high carbon intensity. By adopting digital technologies, industries can accelerate their emission reduction efforts.
A study by the Tech for Good Institute (TFGI) explains that digital platforms can provide significant public benefits. With the momentum of the twin transition, digital platforms are well-positioned to support environmentally friendly development. In addition to their impact on the economy—disrupting sectors such as financial services, healthcare, food and beverage, transportation, and e-commerce—digital platforms can play a critical role in sustainability.
The Acceleration of Digitalisation
The COVID-19 pandemic accelerated digitalisation across Indonesia. Despite the economic shocks, digital platforms became instrumental in keeping the economy afloat. In the past five years, Indonesia’s internet penetration increased from 64.8% in 2018 to 78.19% in 2023, presenting a significant opportunity for future growth. The digital economy has shown resilience, with Indonesia’s ICT sector growing by 10.61% in 2020, while the broader economy contracted by 2.07% cumulatively. Additionally, Indonesia’s gross merchandise value (GMV) has doubled over the last five years, suggesting its potential to become a digital economy powerhouse.
As digitalisation continues to advance, it offers increasing opportunities to be harnessed for public good. Indonesia’s Long-Term National Development Plan aims for the country to become a developed nation by 2045, and digital platforms can be key drivers in achieving this goal. However, challenges such as the digital divide, inadequate infrastructure, and a shortage of digital talent still hinder progress.
Rising Opportunities for Greater Prosperity
TFGI’s seminar on “Digital Platforms and Impactful Innovations: Towards Sustainable Development in Indonesia” highlighted how digital platforms’ unique features—efficiency, scale, accessibility, and agility—can contribute to sustainable development. In Indonesia, these platforms transcend geographic limitations at lower costs and offer faster feedback loops, allowing producers to adapt to dynamic demand more efficiently. These characteristics enable digital platforms to play a crucial role in Indonesia’s twin transition.
First, digital platforms align with the government’s ambition for digital transition and the global megatrend of green development. They offer opportunities to create digital jobs, but this must be accompanied by upskilling workers in digital expertise. Compared to other ASEAN countries, Indonesia lags behind in digital talents, infrastructure, and innovation, as highlighted by the ASEAN Digital Integration Index 2021. However, there is potential for digital platforms to support MSMEs, which contribute more than 60% of Indonesia’s GDP and employ the majority of its workforce. By utilising digital platforms, MSMEs can increase productivity, expand their markets, and contribute more to the economy.
Second, the green transition presents both opportunities and challenges for leveraging digital platforms to promote public welfare. Digital platforms can influence consumer behavior by raising awareness of sustainable products and providing incentives for environmentally friendly choices. For example, platforms can offer consumers the option to select climate-friendly products or services. At the same time, platforms can provide valuable insights into why sustainability matters. However, it is important to note that Indonesia’s reliance on coal-based power for electricity poses a challenge, even though some coal plants are slated for retirement.
The Need for Public-Private Collaboration
Despite the potential benefits, challenges remain in maximising the use of digital platforms due to Indonesia’s digital landscape. The digital divide between urban and rural regions continues to hinder equal progress, particularly in remote areas. Currently, digitalisation is concentrated in large cities, primarily in Java, while other regions are left behind. Insufficient infrastructure and a limited number of workers in the ICT sector (0.7% of the total workforce) exacerbate the problem.
The government alone cannot address all these challenges. Collaboration with the private sector is essential to build and utilise digital platforms to improve public welfare. A supportive ecosystem is needed to maximise the opportunities offered by digital platforms. An example of such collaboration is the Kartu Prakerja program, which addresses Indonesia’s technical skills gap. This program has reached 17 million Indonesians, providing them with scholarships to acquire relevant skills.
To cultivate more partnerships with the private sector, Indonesia must strengthen its institutions by fostering transparency and science-driven development plans. This will attract proactive private partners and investors. Additionally, investment in more inclusive digital infrastructure is necessary to support the growing number of digital talents. Upskilling and reskilling the workforce with the latest digital skills must be a priority.
In conclusion, Indonesia has the potential to promote sustainable development and gain significant public benefits by leveraging digital platforms. However, challenges such as the digital divide and a shortage of digital talents persist. Public-private collaboration is key to bridging the gap and unlocking the full potential of digital platforms. This requires strong institutions, inclusive digital infrastructure, and a commitment to developing digital talent.
About the Writer
Sylvia Febiandita is a Research Assistant at the Economics Department of the Centre for Strategic and International Studies (CSIS), Indonesia’s oldest think tank specializing in policy research and strategic analysis in economics, politics, and international relations. Her primary research focus is on economic development and sustainability, and she has been involved in studies related to digital economy, decarbonization policy, energy subsidy, and industrial policy in Indonesia. Prior to joining CSIS, Sylvia served as an Economics Specialist for the Senior Advisor to the Minister of National Development Planning, working on social affairs and poverty reduction. She earned her bachelor’s degree in Economics with a concentration in development economics from Universitas Gadjah Mada.
The views and recommendations expressed in this article are solely of the author/s and do not necessarily reflect the views and position of the Tech for Good Institute.
