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Indonesia’s Digital Economy Makes Huge Gains

Investment in the Indonesian digital economy has increased significantly. The country secured a US$ 3 billion investment deal value in the first quarter of 2022, the second largest value after Singapore. With the sector’s favourable performance, its valuation is predicted to quadruple to USD 130 billion in 2025 and reach USD 220-USD 360 billion in 2030.

Indonesia has become a prominent player in the ASEAN digital economy, accounting for almost 40% of the overall value of ASEAN digital economy transactions. According to a recent study in 2022, Indonesia’s digital economy reached US$77 billion last year, a 22% increase from 2021. This success is further reinforced by the fact that Indonesia has a majority of the productive age population, more than 2,400 start-up enterprises, and is rated sixth in the world with the most significant number of start-ups, as well as an internet penetration rate of 76.8%.

“In the short term, the government help build awareness of the use of domestic products, strengthens and broadens access to KUR as a primary driver for MSMEs, governs inflation to maintain people’s purchasing power, and improves the domestic market,” said Airlangga Hartarto, the Coordinating Minister for the Economy, during a virtual keynote speech in Central Jakarta.

The national economy is demonstrating its robustness and recovering more swiftly due to more robust domestic economic fundamentals, such as consumption, investment, and exports. Furthermore, it is supported by the significant potential of digital economic growth in the last two years, one of which is motivated by people’s increasingly contactless behaviour, namely a greater reliance on e-commerce and on-demand businesses such as ride-hailing, online food delivery and online logistics.

During the 2023 ASEAN Chairmanship, the government will continue to improve the tourism sector through Special Economic Zones (KEK), develop downstream natural resource-based industries, diversify export markets, and promote the Digital Economy Framework Agreement.

In the long run, the government is dedicated to expediting the national economic recovery and improving resilience through enhancing competitiveness, investment, human resource (HR) productivity, and employment through the execution of the Job Creation Law and digital transformation.

Through synergy and collaboration between the national ride-hailing company and the government, particularly in the food and transportation sub-sectors, it will realise potential worth US$39 billion in 2025, expanding at 20% on average (CAGR 2022-2025).

To expand digital payment in the region, Indonesia’s Central Bank (Bank Indonesia/BI) collaborated with five ASEAN countries and the Philippines, Malaysia, Indonesia, Singapore and Thailand to facilitate cross-border payment using QR. The five ASEAN countries agreed on Regional Payment Digital Connectivity during a series of events during the G20 Bali Summit. The agreement will increase the availability of the Indonesian Standard Quick Response Code (QRIS) across five ASEAN countries.

The Ministry of Communication and Informatics welcomed the conversation. According to Usman Kansong, Director General of Information and Public Communication at the Ministry of Communication and Information (Kemkominfo), the ministry supports initiatives to integrate payment systems via QRIS ASEAN. The central banks of the five nations have met several times to discuss the implementation of cross-border payment system connectivity in the region.

Indonesia’s Ministry of Trade has updated internet trading legislation in response to the country’s more widespread development of online trading firms. The purpose of upgrading the Permendag is to boost MSME product competitiveness while eliminating unethical trading activities in the e-commerce market. Unfair competition tactics undermine the MSME structure and disrupt the trade structure of Indonesia.

Minister Zulkifli Hasan emphasised the importance of maintaining and optimising domestic online trade in the updated Regulation of the Minister of Trade (Permendag) Number 50 of 2020 regarding Provisions for Business Licensing, Advertising, Guidance, and Supervision of Business Actors in Trading Through Electronic Systems. Various public comments and proposals have proven critical to enhancing the act, such as social media commerce laws, cross-border transactions, and a ban on selling commodities on marketplaces.

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