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Indonesia Encouraging E-commerce and Digitalisation to Boost National Economy

Indonesia is keen to maintain domestic consumption and encourages national economic growth by boosting its digital economy. Household consumption is the primary driver of Indonesia’s economic growth. Therefore, the role of the trade sector in the economy is to keep consumption increasing and keep a trade balance surplus.

Consequently, the role of the Ministry of Trade is to stabilise prices, strengthen the domestic market and increase exports to ensure that the wheels of production continue. As part of its strategy, it organised a National Online Shopping Day (Harbolnas) to promote e-commerce usage and increase the trade of domestic products.

“We hope this programme can benefit e-commerce businesses, especially to increase micro and small businesses. I hope Harbolnas can continue to increase domestic consumption, especially domestically made products,” Minister of Trade Zulkifli Hasan Zulkifli stated.

Harbolnas’s implementation from 2018 to 2021 resulted in a significant increase in transaction volume. Harbolnas recorded transactions totalling IDR 18.1 trillion (US$ 1.16 billion) in 2021, a 56% increase over the previous year. Bima Laga, General Chair of the Indonesian E-Commerce Association (idEA), estimates that the total transaction value will reach IDR 20 trillion (US$ 1.28 billion) this year. Consumption of local products at the Harbolnas event is also increasing. Harbolnas 2021 achieved IDR 8.5 trillion (US$ 543.7 million)in local product consumption, a nearly 40% increase over the previous year.

The Indonesian government is accelerating digital transformation in the e-commerce sector since it has become a means for Southeast Asian MSMEs to survive the pandemic and digital financial services are emerging as critical enablers.

“Traders who have been onboarding are currently feeling the impact of digitalisation. More than 90% of online traders will continue to use digital technology in payment, marketing, and other trade support matters. One of the Ministry of Trade policies is to improve the quality of the e-commerce ecosystem as part of the structural transformation of trade,” said Deputy Minister of Trade Jerry on a separate occasion.

As a result, the Trade Ministry has developed some action plans to help realise this vision. The first step is to digitise people’s markets and empower small micro enterprises (UMK). Second, the establishment of e-commerce facilitators. Third, e-commerce regulations must be structured and strengthened – using the internet to promote MSME products via the Portal Indonesia website.

According to Jerry, Deputy Minister of Trade, the government must collaborate to determine development policy directions, increase growth, and create a conducive e-commerce ecosystem as a cross-sectoral activity.

The ministry also encourages collaboration of various parties to overcome several e-commerce issues regarding lack of regulations, coaching, cyber security issues, logistics, payments, and strengthening the competence of workers, businesses, and local products.

The government is making all the effort to boost more significant contributions from the digital economy sector. However, currently, e-commerce’s contribution to Indonesia’s overall economy is still relatively small. With a total GDP of IDR 980 trillion in 2021, Indonesia’s digital economy only contributed 5.7%.

Despite this, its expansion is rapid. The gross merchandise value (GMV) of Indonesia’s digital economy is expected to increase more than fivefold by 2030, reaching IDR 24 thousand trillion. As a result, the digital economy’s contribution to total GDP rises by 18%, or approximately IDR 4,531 trillion. As a result, Indonesia’s digital economy will have twice the GMV value of the rest of Southeast Asia.

Bank Indonesia noted that significant e-commerce growth reflected Indonesia’s digital economic growth from the trade side. During the first half of 2022, e-commerce transactions increased by 22.1% to IDR 227.8 trillion years on year, and volume increased by 39.9% to 1.74 million transactions.

E-commerce business-to-business (B2B) and business-to-consumer (B2C) market locations are expected to contribute the most value to Indonesia’s digital economy ecosystem in 2030, amounting to IDR 1,908 trillion, or 34%.

Furthermore, Indonesia’s internet users also improve the digital economy’s potential. Approximately 202.6 million Indonesians have internet access and can become e-commerce users. Moreover, the Covid-19 pandemic has created momentum to accelerate digital trade transformation in Indonesia.

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