September 28, 2023

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Indonesia moves up in digital competitiveness index

In their latest Digital Competitiveness Index, an Indonesia-based early-stage venture capital firm stated that Indonesia is “entering a new chapter” for its digital economy. Bali and Riau Islands have climbed up the digital competitiveness index as the provinces with the most promising digital ecosystem in Indonesia for the tech industry to grow in, according to its recent report.

Bali has moved up to the fourth position, up to three positions from last year’s result, while Riau Islands moved up to seventh from tenth, just below Jogjakarta which has been widely known as a centre of tech talents in Indonesia. Bali, with its capital city Denpasar, is also reported to have the second-best digital infrastructure in the country after DKI Jakarta. This assessment was concluded from the number of villages in the province that have received 3G and 4G networks.

As for Riau Islands, the proximity of its largest city Batam to Singapore have turned this province into a destination of digital investment. As reported by OpenGov Asia, there were also several collaborations between Indonesia and Singapore in the form of projects such as Nongsa Digital Park.

The report details that digital competitiveness between provinces in Indonesia tends to be dominated by provinces in the Java island followed by Sumatra and Borneo. Provinces in the Eastern part of the country tend to score the lowest. This pattern remains consistent in both 2020 and 2021.

The venture capital firm explained that there are six factors that they considered in deciding a province’s digital competitiveness: Human resource, ICT use, ICT spending, entrepreneurship and productivity, labour, infrastructure, funding, regulations, and government capacity. Bali and Riau Islands received top scores particularly in the human resource as well as entrepreneurship and productivity factors.

In general, the report says that the country’s digital competitiveness index increased from 27.9 in 2020 to 32 in 2021. This indicated a more even distribution of opportunities in provinces across the country, particular between top- and middle-tier provinces.

The report also highlighted changes in the national digital economy as affected by the COVID-19 pandemic. A statistical survey agency in Indonesia revealed in August 2020 that the national aggregate number of internet users in the country increased 6% within just three months –from 48.4% in 2019 to 54.4% in 2020. There was also an increase of users accessing the internet from home from 95% to 96% followed by a decrease from users accessing from office and school. This change was certainly related to the lockdown measures implemented in some parts of the country.

Commenting on the urgent need for digital transformation in a post-pandemic era, Coordinating Minister of Economic Affairs Airlangga Hartanto stated in the report that the government will put greater focus on developing talents through various training programmes. Another factor that is just as crucial is access and connectivity, represented by the installation of fibre optic cable across Indonesia, and the country’s effort to get corporations to set up their data centre in the country.

Minister also said they already have full geospatial data that they must integrate with the data centre at the development planning agency. In the past years, the Government had been encouraging cloud data centres to move to Indonesia. Also, they are currently in talks with the Singapore government about setting up a data centre in Batam, West Java, and one more province. In the future, the government will also be working on a 5G prototype in the country.


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