East Ventures – Digital Competitiveness Index (EV-DCI) improvement
Bridging the digital gap
The increase in the EV-DCI score (median) in 2023 to 38.5 indicates that Indonesia’s digital competitiveness is improving in most provinces.
Digitalization is ‘maturing’
Digital acceleration has occurred in most regions due to the development of technological infrastructure, which resulted in an increase in internet penetration to 77% and the adoption of digital applications in society.
Opportunities to seize
Tier-2 and 3 regions are full of untapped market potential, where synergy and collaborations between stakeholders can open new business opportunities.
Getting closer towards Indonesia’s digital golden era
In the EV-DCI 2022 report, we have highlighted the concept of building blocks or frameworks to assist stakeholders in building toward Indonesia’s digital golden era.
Looking at the development of Indonesia’s digital economy in 2022, stakeholders must continue and accelerate the growth of building blocks to make it stronger.
In 2022, the government has carried out various initiatives such as building a Base Transceiver Station (BTS) in the 3T area and expanding the 5G network. The program implementation resulted in an increase in internet users by 5% YoY.
Through digitizing public services, the implementation of the National Logistics Ecosystem (NLE) policy has reached 90.5% of the initial plan. However, this must be accompanied by cooperation between stakeholders in 2023.
Several government and digital business initiatives impacted increasing digital transactions, including MSMEs digitalization, increasing efficiency and business performance through technology, and others. This resulted in a 22% increase in Indonesia’s digital economy from 2021-2022, an achievement that needs to be appreciated amidst global economic uncertainty.
Indonesian people are becoming more ‘digitally literate’. This is evidenced by the increase in EV-DCI digital literacy by 20% YoY. However, ICT adoption needs to be increased, along with the quantity and quality of digital talent.
The Information and Communication (ICT) sector continues its role as the backbone of the digital economy. This growth is driven by an increase in public digital consumption and ICT investment by business players.
However, the ICT sector is still dominated by the same obstacles: inequitable infrastructure, an inadequate amount of digital talent, and weak cyber security in Indonesia.
With the end of the pandemic in Indonesia, people were able to regain the experience of direct offline shopping. However, as people’s economic capacity and digital literacy grow, online shopping will still continue.
E-commerce players need to enhance their relevance through innovation that adapts to changes in consumer behavior, execute business diversification and expansion.
The transaction value of the logistics sector in Indonesia is growing from IDR 882 trillion in 2019 and is projected to reach IDR 1,090 trillion in 2023. Logistics players can develop technology adoption strategies, diversify their business through collaboration, and expand ESG implementation.
Reducing logistics costs is one of the government’s priorities this year, as high logistics costs contribute to rising inflation in Indonesia as an archipelago state.
Now, the growth of the productive-age population that earns an income is expected to drive fintech transaction value in Indonesia. However, financial literacy remains one of the biggest challenges in fintech adoption.
Fintech’s growth drivers are also the surge in the use of e-commerce during and after the pandemic. Online shopping and digital payments have become daily habits, so fintech is predicted to maintain its positive growth.
The Indonesian people have experienced the success of technological development in the health sector, which supported daily activities, from SATUSEHAT application to telehealth services. However, this sector is still facing the next big challenge this year, equal access in all parts of Indonesia.
Healthtech players can take advantage of digital transformation opportunities provided by the Government of Indonesia through collaboration, business efficiency, and increased value added for consumers.
The education sector is expected to grow at an annual rate of 8% until 2027, with edtech faster than conventional education.
The Development of edtech aims to address issues in the education sector. However, there are challenges for edtech to develop a sustainable business model. Edtech players can target educational institutions as clients or target more specific market segments.
Indonesia tourism is showing a significant recovery after the pandemic. Moving forward, there is an opportunity to increase Indonesia’s tourism revenue.
Currently, there are strategic initiatives supporting the growth of the tourism industry, such as increasing the infrastructure budget, the use of technology to support efforts to leverage Indonesia’s tourism potential.
The risk of climate change impacts presents urgent opportunities for innovators to provide solutions through a technological approach.
Although many parties have not yet widely adopted climate tech, the government’s support as a regulator and the growing trend of sustainable investment among investors have opened opportunities for climate tech business players to continue to grow.
Climate tech can assist the government in achieving its 32% Greenhouse Gas emission reduction target in Indonesia.