By Beltsazar Arya Krisetya, Researcher at the Department of Politics and Social Change , Centre for Strategic and International Studies
Indonesia’s digital economy is progressing steadily. The outgoing President Joko Widodo (Jokowi) claimed the country’s digital economy is expected to reach between USD 210 billion and USD 360 billion by 2030, driven by a demographic bonus with 68% of the population expected to be of productive age by that time.
Recent updates across national legislation, sectoral policies, and technical regulations aim to enhance digital trust and security, but they also introduce complexities that could potentially hinder innovation and market entry, particularly for smaller enterprises. The government’s approach, while comprehensive, raises questions about the balance between fostering a secure digital environment and maintaining the flexibility needed for a dynamic, competitive digital economy.
The impending transition to the Prabowo administration on 20 October 2024 evolves the landscape even further. The incoming government’s priorities and approach to digital economy policies may introduce further changes or refinements to the existing regulatory framework. The effectiveness of recent regulatory updates and personnel changes will likely be tested during this transition, as the new government seeks to balance continuity with its own vision for Indonesia’s digital future.
Strategic Personnel Movements
The movement of key personnel within Indonesian regulatory bodies underscores a strategic alignment with the priorities of the incoming President-elect Prabowo administration. The appointment of Thomas Djiwandono as Deputy Finance Minister II highlights a strategic move to ensure policy continuity. Previously a general treasurer in Prabowo’s Gerindra Party since 2014 and a relative of Prabowo, Mr. Thomas is tasked with aligning the 2025 State Budget (RAPBN) with both the outgoing administration’s initiatives and Prabowo’s future programmes, emphasising fiscal prudence and maintaining the budget deficit below 3% of GDP.
At the Ministry of Investment, Rosan Roeslani, a close ally of President-elect Prabowo, is appointed as the new Minister of Investment (BKPM). Mr. Rosan’s focus on attracting investments for the new capital city aligns with the incoming administration’s economic growth and infrastructure development priorities. Meanwhile, BKPM’s former head, Bahlil Lahadalia, transitioned to Minister of Energy and Mineral Resources and was elected as the Chairman of the Golkar Party, a major political force in the incoming government coalition.
The pattern continues at the Ministry of Communication and Informatics (Kominfo). Angga Raka Prabowo, a long-time loyalist and key figure in Prabowo’s inner circle, is appointed as Deputy Minister of Communication and Informatics II. Moreover the resignation of two high-ranking officials amid a cybersecurity breach led to the appointment of Hokky Situngkir, a specialist in complex systems, signalling a shift towards bolstering cybersecurity measures. Hokky was appointed as Director General of Informatics Applications (Aptika). Similarly, the appointment of a communication expert, Prabu Revolusi, for Director General of Information and Public Communications (IKP), reflects a focus on enhancing organisational communication and public engagement.
While these appointments may influence short-term policy implementation and decision-making processes, the core focus on developing a resilient digital economy, fostering innovation, and pursuing sustainable economic growth is expected to continue. The new appointees are likely to face an initial adjustment period. However, their existing connections and relevant experience suggest they will strive to adapt quickly to their roles. Nonetheless, the medium-to-long term policy implications of the Ministerial-level appointment is contingent on whether they will be in the same position once the new cabinet is announced in late October 2024.
Regulatory Updates Across National, Sectoral and Technical Levels
Concurrent with personnel changes, several policies have also been changed and introduced at national legislation, sectoral, and technical levels.
At the national legislation level, the Electronic Information and Transactions Law was revised again through Law No. 1 of 2024. Key provisions include securing electronic signatures in high-risk transactions, applying Indonesian law to international electronic contracts involving Indonesian parties, and prohibiting the distribution of misleading or harmful electronic content. These revisions could pose challenges for multinational companies, potentially necessitating a review and revision of existing contractual agreements to ensure compliance with local regulations.
Sectoral policies are also affected with the changes. Kominfo issued regulations on sanctions against non-compliant electronic service providers and game classification. Otoritas Jasa Keuangan (OJK) also introduced prudential regulations intending to enhance the regulatory framework for financial technology (FinTech) innovations. Meanwhile, Bank Indonesia (BI) updated the policy on implementing Fund Transfers and Scheduled Clearing to improve payment systems’ security, efficiency, and reliability. However, a potential weakness is the complexity and resource demand they impose on businesses. This may hinder smaller entities from compliance due to the administrative and financial burdens of adhering to detailed regulatory requirements.
Technical-level regulations are also introduced. The National Cyber and Crypto Agency (BSSN) implements infosec self-assessment for micro, small, and medium enterprises (MSMEs) and cyber incidents and crises policies, ensuring they align with national security objectives. The Ministry of Trade is establishing the trade supervision assistance team to increase the effectiveness of electronic system trading supervision. Additionally, the Ministry of Finance issued the Guidelines for Using the Program Credit Information System (SIKP), which aims to enhance the effectiveness of credit programs for MSMEs by providing a secure and comprehensive information platform. The implementation of these policies is likely to result in increased compliance requirements for businesses, particularly MSMEs, whilst potentially offering improved access to credit and enhanced protection against cyber threats.
Supporting Long-Term Vision
The regulatory updates seem to prioritise national security and consumer protection, but the increased compliance burden may inadvertently create barriers to entry and growth for some market participants. This could potentially limit the diversity and competitiveness of Indonesia’s digital economy. Ultimately, the effectiveness and broader economic impact of this approach remain to be seen. A more balanced strategy that combines robust security measures with flexibility for innovation and growth might be necessary.
Additionally, the national-level legislation also presents particular challenges in the reliance on derivative regulations (such as government and ministerial regulations) to ensure compliance and operationalise these amendments. For instance, Government Regulation No. 71 of 2019, which governs the implementation of electronic systems and transactions, still needs to be updated to align with the new EIT Law amendments, creating uncertainties for businesses and stakeholders. This gap underscores the need for timely updates to related regulations to provide clarity and ensure cohesive implementation.
Nonetheless, these multistage regulatory updates on enhancing digital trust, security, and support for MSMEs aligns with the vision outlined in the Visi Indonesia Digital (VID) 2045. The VID 2045 emphasises on creating universal access to digital literacy and STEM education across Indonesia, promoting collaboration between stakeholders, and encouraging partnerships to provide upskilling opportunities, especially for MSMEs and underserved demographics. Additionally, the White Paper on the National Strategy for Digital Economy Development 2030 provides a strategic framework for digital economic development, highlighting the need for innovation-driven growth and digital inclusivity. While these documents are not legally binding, they serve as crucial blueprints for long-term digital transformation, setting ambitious goals for Indonesia to become a global digital leader by 2045.
Converging Regional Policies and Compliance
The potential for regulatory convergence in Southeast Asia exists with Indonesia’s regulatory focus on cybersecurity, which aligns with the ASEAN Cybersecurity Cooperation Strategy. However, the divergence may occur in implementation speed and resource allocation, as countries like Singapore and Malaysia have more established cybersecurity frameworks. ITE Law revision may be a step towards harmonising digital transaction regulations, which aligns with DEFA’s emphasis on cross-border data flows and data protection. However, Indonesia’s approach to data localisation may diverge from countries like Singapore, which supports free data flow.
Indonesia’s policy movement may also support regional-level policies. For example, the focus on securing electronic transactions, as reflected in the OJK and BI regulations, can also contribute to developing interoperable digital identities, a key component of DEFA. Mutual recognition of digital identities across ASEAN can enhance trust and ease digital transactions regionally.
Subject to implementation, the regulatory focus on cybersecurity and fintech is likely to attract investments, particularly in digital infrastructure and services, supporting Indonesia’s economic growth goals. This aligns with DEFA’s aim to position Southeast Asia as an attractive investment destination. Additionally, Indonesia can empower its MSMEs to engage more effectively in regional digital markets, supporting DEFA’s inclusive growth objectives.
Finally, implementing these regulatory changes requires significant resources, which may strain smaller businesses. ASEAN could facilitate resource-sharing initiatives to support countries like Indonesia in building robust digital infrastructures. While Indonesia’s updates align with DEFA’s goals, continuous dialogue and collaboration with other ASEAN members are essential to harmonise regulations and avoid regulatory fragmentation.
About the writer:
Beltsazar Krisetya is a Researcher in the Department of Politics and Social Change at the Centre for Strategic and International Studies (CSIS) Indonesia. His expertise spans areas such as disinformation, data privacy, cybersecurity, and the broader implications of digital technologies on society and politics in Indonesia and Southeast Asia. He is currently the Principal Researcher at the Safer Internet Lab (SAIL) initiative, a collaborative research program by CSIS and Google.
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.
