Digital Economy in Indonesia Prospect Challenges and Research

Digital Economy in Indonesia Prospect, Challenges, and Research Agenda Wirawan Agahari Leonardus Kristianto Nugraha DIODE Workshop Yogyakarta, 25 -26 May 2017

About this presentation § Data is taken from a forthcoming report ”Innovation Outlook” § Identification of trends, projection, and agenda for change in the field of ICT and media in Indonesia § Some findings are highly relevant with DIODE topic § Mainly about emerging trends and projection of the digital economy in Indonesia § This presentation draws on the findings from the research § Aims to provide understanding about digital economy landscape in Indonesia Researching innovation advancing policy improving governance cipg. or. id 3

Agenda How Digitized is Indonesia? Emerging Trends in Indonesia Looking Forward The Impact of Digital Economy in Indonesia Researching innovation advancing policy improving governance cipg. or. id 4

How Digitized is Indonesia? Indonesia Digital Profile: An Overview Researching innovation advancing policy improving governance cipg. or. id 5

Digital Economy Vision of Indonesia The biggest digital economy in ASEAN by 2020 >US$ 130 billion E-Commerce transaction in 2020 Source: MCIT (2016) Researching innovation advancing policy improving governance cipg. or. id 6

Indonesia is a digital country TOTAL POPULATION 256. 2 Million SMARTPHONE USERS 95. 87 Million ACTIVE INTERNET USERS MOBILE CONNECTIONS 132. 7 371. 4 ACTIVE MOBILE INTERNET USERS AVERAGE DAILY USAGE OF MOBILE INTERNET Million 123. 3 Million ~4 Hours Source: APJII (2016), We Are Social (2017) Researching innovation advancing policy improving governance cipg. or. id 7

What are the drivers? Massive infrastructure deployment Chat apps that drives data penetration Researching innovation advancing policy improving governance Price war Smartphone become necessary goods Introduction of Android OS Open source, easy to develop new apps cipg. or. id Social media booming Facebook, Twitter Cheap and affordable smartphone 8

However, the infrastructure was not yet equally developed … Source: opensignal. com (2017) Researching innovation advancing policy improving governance cipg. or. id 9

… which makes internet users become centered in Java island Source: APJII (2015) Researching innovation advancing policy improving governance cipg. or. id 10

Some Comparison Indonesia vs Other ASEAN Countries Network Readiness Index 2016 (Rank) • Singapore (1) • Malaysia (31) • Thailand (62) • Indonesia (73) • Philippines (77) • Vietnam (79) • Cambodia (109) • Myanmar (133) Researching innovation advancing policy improving governance Global ICT Development Index 2016 (Rank) • Singapore (20) • Malaysia (61) • Brunei (77) • Thailand (82) • Vietnam (105) • Philippines (107) • Indonesia (115) • Cambodia (125) • Timor Leste (128) • Myanmar (140) • Laos (144) cipg. or. id GSMA Mobile Connectivity Index (Score) • Singapore (80. 8) • Malaysia (65. 4) • Thailand (63) • Brunei (61. 6) • Philippines (59. 2) • Vietnam (54. 4) • Indonesia (53. 9) • Laos (38. 4) • Cambodia (37. 9) • Myanmar (28. 6) 11

Emerging Trends in Indonesia Researching innovation advancing policy improving governance cipg. or. id 12

The Digital Economy Hype in Indonesia ON-DEMAND (TRANSPORTATION) SERVICES Researching innovation advancing policy improving governance FINTECH cipg. or. id E-COMMERCE 13

The Go-Jek Effect § The first on-demand transportation services in Indonesia § Established since 2010, app launched in 2015 § “an app for every need”, facilitate (almost) anything ondemand § First official startup unicorn in Indonesia § One of the major drivers of digital economy hype in Indonesia Researching innovation advancing policy improving governance cipg. or. id

The Go-Jek Effect § Creating new job market § > 20. 000 self-employed driver § Higher income than conventional driver § Facilitate mobility § More people using “public transport” § Disruptive effect § Conventional vs Appbased § Unsupportive regulation § Treated as conventional transport provider Researching innovation advancing policy improving governance cipg. or. id

Fin. Tech § Important enabler for the digital economy § Unbanked population in Indonesia § Only 36% of adults have a bank account § Fin. Tech players are growing rapidly § 78% in the past two years § Mainly focus in payment sector § Promoting financial inclusion § Carrier billing, payment agents, branchless banking § Government is supporting Fin. Tech § Regulation on P 2 P Fin. Tech lending in Indonesia § Bank Indonesia Fin. Tech Office (BI FTO) Researching innovation advancing policy improving governance Source: Daily. Social Indonesia Tech Startup Report 2016 cipg. or. id 16

E-Commerce § 8 million people shop online and keeps increasing § Driven by the increasing market coverage and middle class § Consumptive + Digital behavior of Indonesians § Still only 0. 8% of total retail sales § China at 11%, USA at 8% § Priority of the government! § Targeting US$ 130 billion by 2020 § Issuing several supportive policies § Economic Policy Package: Roadmap of E-Commerce Data Source: Statista, MCIT Researching innovation advancing policy improving governance cipg. or. id 17

E-Commerce § New job creation in SMEs § Enabling everyone to start their own business through internet § Trade expansion, reach wider audience § Allow SMEs to sell products & services online § Disruptive effect § Omni channel by major retailers Researching innovation advancing policy improving governance cipg. or. id 18

The Impact of Digital Economy in Indonesia Researching innovation advancing policy improving governance cipg. or. id 19

Digital Economy promotes … Efficiency • ICT capital replacing labor and non-ICT capital Innovation • New type of economy, disruption Inclusion • Trade expansion, financial inclusion, jobs creation Source: World Bank (2016) Researching innovation advancing policy improving governance cipg. or. id 20

ICT Contributes to GDP and Employment in Indonesia 1% increase in mobile penetration 10. 700 extra formal jobs in 2020 $ 640 million to GDP in 2020 Source: Oxford Economics (2016) Researching innovation advancing policy improving governance cipg. or. id 21

ICT Contributes to GDP and Employment in Indonesia 7. 2% of total GDP came from ICT sector Largest growth in comparison to other sectors (~10%) Well above average national GDP growth (~5%) Source: Statistics Indonesia (BPS) Researching innovation advancing policy improving governance cipg. or. id 22

Digital Economy and Sociopreneurship Trends in Indonesia § Digital start-ups are growing rapidly in Indonesia § 1463 start-ups in Indonesia § 3 rd highest in the world behind USA and India § Most of them have a common goal § solving societal problems § giving significant impact to the society Data Source: startupranking. com (2017) Researching innovation advancing policy improving governance cipg. or. id 23

Looking Forward Government Support, Barriers, and Future Agenda Researching innovation advancing policy improving governance cipg. or. id 24

Indonesia Broadband Plan 2014 -2019 Government Support for the Digital Economy in Indonesia Economic Policy Package: Roadmap of E-commerce Finishing of Palapa Ring Project in Eastern Indonesia expected to be done in 2019 All capital city of regency / municipality (514) will be connected with fiber optic 1 million domain names 50 million SME’s to go digital 1000 tech start-up entrepreneurs in 2020 Digicoop smartphone: made in Indonesia! Source: MCIT (2016) Researching innovation advancing policy improving governance cipg. or. id 25

Finding qualified digital talents Bridging the digital divide in Indonesia * * * Poor connectivity in rural area But the government is working on it Digital savvy professional across function with specific Knowledge still hard to find Talent war: common practice among startups The root of problem lies in the academic sector Challenges Adaptive Regulation * * * Researching innovation advancing policy improving governance Regulation always behind of technology Do not let regulation kills innovation The government have different “layers” in responding to digital innovation (On-demand transportation vs Fin. Tech) cipg. or. id 26

Some Research Agenda How inclusive is digital economy in Indonesia? § Digital economy and sociopreneurship movement in Indonesia § Exploring the “dark side” of digital economy: nonuser, the impacted Policy framework for digital economy in Indonesia § Consumer protection and data security: ensuring trust for online transaction § How to balance interest between various stakeholders? Researching innovation advancing policy improving governance cipg. or. id 27

Thank you! CENTRE FOR INNOVATION POLICY AND GOVERNANCE Indonesia Sustainability Centre Komp. Harmoni Plaza Blok B-5 Jl. Suryopranoto No. 2, Harmoni Jakarta Pusat, INDONESIA office@cipg. or. id twitter. com/icipg facebook. com/ICIPG cipg. or. id