Encouraging sustainable digitalization: Arsjad Rasjid, Head of KADIN (Indonesian Chambers of Commerce and Industry)

In 2021, the value of Indonesia’s digital economy has reached US$ 63 billion and continues to grow and is expected to reach US$ 360 billion in 2030. How to encourage sustainable digitalization so that Indonesia still has high attractiveness?

There are several aspects that can encourage sustainable digitization in Indonesia. First, infrastructure: Equitable infrastructure to provide high-speed broadband access to remote areas. Indonesia has the potential for up to 74,000 villages that can be reached by digital services, especially fintech. In addition, there will be 204.7 million people connected to the internet in 2022 with 370.1 million people owning a smartphone. Take advantage of the high penetration of smartphones in Indonesia to empower the people’s economy which can be triggered by the connectivity and speed that digitalization brings.

Until 2022, digital infrastructure currently serves 93,900 schools, 47,900 local government offices, 3,900 security facilities, 3,700 health service facilities and 600 other facility points. To accelerate the distribution of digital infrastructure, collaboration with the private sector is required. Kominfo data states that 4G BTS is only available in 9,113 location points in the 3T area. The target is that in 2024 4G BTS will reach all 3T areas in Indonesia, namely in 62 districts.

Second, capability. Startup business incubator programs to ensure that this startup business can survive and receive guidance to continue to grow. The importance of expert guidance or assistance/mentorship from established companies to test the resilience of the startup business model that has mushroomed lately. Digital skills training program: To increase the capability and skills capacity of the workforce in Indonesia, moreover Indonesia must be able to take advantage of the huge demographic bonus so that our workforce can help accelerate digitization and not be fixated on jobs that only require manual labor which will later be eroded by the automation process.

Third, regulations. Easier regulation and support for accelerated digitization such as the passage of the Personal Data Protection Act (October 17, 2022) which guarantees the security of users’ personal data uploaded to the database of electronic system operators. Regulations that spur competition and rivalry to foster new innovations in the market. Regulations that promote ease of investment and licensing for the digital sector.

What strategic steps need to be taken to maintain the investment and business climate in helping business actors remain conducive in the midst of a protracted global crisis?

Business actors must be able to adapt amidst this uncertainty. And you have to be keen to see opportunities, one of which is to innovate and enter the digital ecosystem.By entering the digital world, for example, businesses can streamline operational costs such as moving physical stores to online stores, exploring new markets with multimedia promotions and utilizing industry 4.0 technology to help efficiency.

The investment climate also needs to be maintained by providing investment facilities that provide added value to the community. Such as infrastructure projects, industrial downstreaming, and the development of connectivity in Indonesia which involves local entrepreneurs and micro, small and medium enterprises.

The government has taken the correct steps by issuing the Omnibus law/ UU CK to facilitate the investment climate and oversee investment until it is realized. Because in fact there are many investments that want to enter Indonesia, but in the process a government escort is needed so that these investments can be realized without being manipulated/complicated by certain parties.

The emergence of 2,300 startups in mid-2022 is considered to have bright prospects and will support digital economic growth going forward. What is the role of KADIN as an industrial forum in increasing digital economy competition in Indonesia?

KADIN has launched several initiatives: Wirausaha WIKI – as a digital information center about training and partnerships, partner search, connecting MSMEs with IoT technology provider companies as well as a discussion platform for MSMEs. KADIN Tech Hub Platform – a digital platform that brings together companies that have problems with ecosystems that can provide the development of integrated solutions to problems faced related to digitalization with the spirit of a collaborative economy.

KADIN International Trading House – a digital platform that connects requests and offers between Indonesia and other countries, also provides assistance services for MSMEs to export products as an effort to integrate MSMEs in the digital ecosystem and global value chains.

What strategic steps need to be taken to maintain the investment and business climate in helping business actors remain conducive in the midst of a protracted global crisis?

Business actors must be able to adapt amidst this uncertainty. And you have to be keen to see opportunities, one of which is to innovate and enter the digital ecosystem. By entering the digital world, for example, businesses can streamline operational costs such as moving physical stores to online stores, exploring new markets with multimedia promotions and utilizing industry 4.0 technology to help efficiency.

The investment climate also needs to be maintained by providing investment facilities that provide added value to the community. Such as infrastructure projects, industrial downstreaming, and also the development of connectivity in Indonesia which involves local entrepreneurs and micro, small and medium enterprises.

The government has taken the right steps by issuing the Omnibus law/ UU CK to facilitate the investment climate and oversee investment until it is realized. ○ Because in fact there are many investments that want to enter Indonesia, but in the process a government escort is needed so that these investments can be realized without being manipulated/complicated by certain parties.

Regarding startup IPO strategy, do you think the step of going public is important for startups that meet the requirements? What impact will this have on the digital sector in the long run?

The most important thing is to ensure startups are able to run a sustainable business, ensure that the business model that is implemented is proven and can indeed support their lives. We often see startups adopting a ‘growth at all costs’ strategy where it is important to improve user metrics and enterprise valuation for the next round of funding.

Go public is a way to attract funding, but not the only way to attract funding. Why go public if the company is not healthy. Because going public has a responsibility to the community if the funds received are managed properly and correctly. Startups need to prioritize aspects of sustainability in their business, strengthen the company’s fundamentals so that when a crisis occurs they can be more resilient.

In the midst of rapidly developing digitalization, digital and physical infrastructure is still uneven in Indonesia. How to encourage investment towards equal distribution of digital economic potential?

The need for government partnerships and business entities or public private partnerships in encouraging investment in digital supporting infrastructure. The guarantee scheme that the infrastructure that has been built will be used commercially will provide a sense of security to investors that The government can issue pro-regulations and policies to attract investment in digital infrastructure and also increase the level of ease of doing business in Indonesia. The government from the bottom line needs to carry out a pick-up strategy, by actually offering digital infrastructure projects directly to investors.

KADIN as the government’s strategic partner is ready to facilitate this initiative. We will assist the government in encouraging Public Private Partnership (PPP) projects for national and foreign private companies to participate in equitable digital infrastructure development.

What are your views on the challenges that remain in fulfilling digital skills and enhancing digital safety for digital ecosystems?

Digital skills: the lack of vocational education in the field of digitization, the national education curriculum needs to be changed to be forward-looking, not prioritizing memory skills but more on problem solving. Everyone needs access to learn new skills even though they have left school. Knowledge must be democratized, so learning doesn’t have to be in school.

Moreover, Indonesia has a large demographic bonus, where the productive age population will exceed the unproductive, and this figure will reach its peak in 2030, so there is an urgency to provide digitization skills for students in Indonesia so that there is no skill mismatch which results in increased unemployment.

Digital Security: There has been progress regarding digital safety, especially with the recently passed Personal Data Protection law. Translating the PDP Law will be a challenge, because the phrase is very general, besides that the government must also be able to move adaptively in making laws and regulations due to the rapid development of the digital world.

What kinds of synergies and collaborations are needed between stakeholders and policy makers to optimize the digital economy to be adaptive and resilient to disruption?

Public-private partnerships. Cooperation between government and private. The government needs to issue policies that can “follow” technological developments and also issue regulations that support investment in the digital sector. Communication needs to be built frequently to accommodate the needs of the private sector, because industry is a center for innovation and development, with a more adaptive public sector that can balance and support the development of the digital economy.

With government support, the private sector can move more freely and innovate to mobilize/create new technologies in the digital economy that contribute to Indonesia’s economic resilience.

The inclusive digital economic growth agenda is also marked by alignment with the SDGs through the application of the ESG, how is it implemented in the digital economy industry and what are the challenges faced?

Digital economy industries such as the financial technology sector have the potential to empower many people and parties. For example, more than 70% of people in Indonesia do not have access to banking, with many digital wallet services and online loans that can benefit the community, especially MSMEs, to get loans and buy ‘big ticket items’ that are useful for empowerment and their businesses.

Credit or funding/financing from banks, fintech, finance companies/LKM that contribute to supporting Micro, Small and Medium Enterprises (MSMEs) as well as financing for the empowerment of women and the poor. This is an effort to push forward SDGs goals in particular one (no poverty), five (Gender Equality), and eight (decent work and economic growth).

With the rise of unregulated fintech news, of course there are challenges in the aspect of supervision to ensure that all platforms present in Indonesia comply with existing laws and regulations. The importance of the role of inter-agency collaboration to be able to continue to follow up on illegal fintech platforms in Indonesia so that fintech products can receive a positive response from the public and increase their user.

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