The importance of accelerating Indonesia’s digital competitiveness

The importance of accelerating Indonesia’s digital competitiveness

March 4, 2022

The digital competitiveness in Indonesia has shown a development. Support is needed to further distribute the digital potential more equally across Indonesia.

According to the e-Conomy SEA 2021 by Google, Temasek, and Bain & Co., Indonesia’s digital economy is valued at US$ 70 billion Gross Merchandise Value (GMV) in 2021. This number has grown 75 per cent compared to the pre-pandemic condition in 2019. In 2025, Indonesia is projected to surge to US$ 146 billion GMV.

However, this growth faced a challenge in 2020, when the COVID-19 pandemic hit the nation as a whole. Every joint of the Indonesian economy, including the main sectors, such as tourism, MSMEs, retail, and other industries, were severely impacted. However, we can achieve the digital acceleration, as we see the high adoption of technology amongst society, and immense support from digital players. Currently, society is more aware of the marketplace, logistics, and financial technology.

The increased utilization of digital platforms, for instance. According to the data from the Ministry of Cooperatives and SMEs, there has been an increase of 10.2 million SMEs during the pandemic that utilize digital platforms. Meanwhile, a Redseer report states, Indonesian online buyers have grown from 75 million people pre-pandemic, to 85 million people during the pandemic.

The digital sector also plays a vital role in bridging the cross-institutional collaborations between the government, private sector, and the society, that ultimately paved our way towards the digital  ecosystem in overcoming the challenges throughout the pandemic.

One of the collaborative efforts was Indonesia PASTI BISA Safeguards Oxygen. This collaboration was initiated by East Ventures, alongside other investors and donors, in raising more than US$ 1 million to distribute 1,450 oxygen concentrators. With the assistance of three of its portfolio companies, Waresix, Bonza, and Advotics, East Ventures circulated these oxygen concentrators to hospitals in need.

Optimism about the future

We need to be optimistic about the future of Indonesia’s digital industry. The East Ventures Digital Competitiveness Index (EV-DCI) 2021 showed a promising prospect for the digital industry. The report reveals that the distribution of digital competitiveness experienced an increase from 27.9 in 2020 to 32.1 in 2021.

Additionally, the expenditure for information and communication technology (ICT) pillar has also increased. The index recorded an increase of 6.3 points. This data indicates that the Indonesian population of all provinces has further utilized digital services and transacted frequently. 

The report also finds that the human resources, economy, entrepreneurship and productivity, finance, regulation and capacity of the regional government pillars have seen an increase of 3-5 points. Meanwhile, the manpower pillar has increased by 0.8 points.

East Ventures found that infrastructure development was the main factor that boosted the equal distribution in provinces. This pillar recorded the highest increase of 7.5 points to 54.3 in 2021. The indicators used to determine this were the ratio of villages with 3G and 4G connectivity, ratio of households with phone connectivity, and the level of electricity disruption. 

From EV-DCI 2021, we also found that DKI Jakarta led the digital competitiveness with an EV-DCI score of 77.6. Meanwhile, the second and third positions went to West Java and East Java with the scores 57.1 and 48.0 respectively.

Moreover, Bali and Riau Islands were provinces with the highest growth of EV-DCI score. Bali jumped to the 4th rank with the score 47.7, from the 7th rank with the score 40.6. Whilst Riau Islands rose to the 7th rank with the score 43.0 from 35.9.

Both provinces showed that the internet penetration rate in supporting jobs or businesses has increased. Meanwhile, the upsurge of Bali’s score was supported by the digital infrastructure factor within the province.

Equal distribution of Digital Competitiveness

The EV-DCI was an initiative by East Ventures to optimize the equal distribution of digital economy and competitiveness in all provinces in Indonesia. The index aims to support a sustainable economic growth that positively impacts the social, environment, and society’s governance.

Since 2020, East Ventures has launched the EV-DCI report to map the digital competitiveness in 34 provinces in Indonesia. This report acts as a guide to related stakeholders, be it from the central and regional government, investors, and even business players to understand and implement various innovations that positively impacts the digital distribution in Indonesia.

The EV-DCI is measured by several aspects, through nine pillars: Human Resources (HR), Use of Information and Communication Technology (ICT), Expenditure for ICT, Economy, Entrepreneurship and Productivity, Manpower, Infrastructure, Finance, as well as Regulation and Capacity of the Regional Government.

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Original article published on Harian Kompas, on Wednesday, 23 February 2022, page 16.