January 16, 2021

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Indonesia optimistic about targets with enhanced digital economy

Indonesia is anticipating a rosy economic outlook this year on the back of reformed strategies and policies in digitalisation. Minister of Industry Agus Gumiwang Kartasasmita expressed optimism in his recent statement that the country will record economic growth of 5.5% in 2021, thanks to its digital economy development programme and other policy reforms set in place to mitigate the impact of the COVID-19 pandemic. 

 The Minister added: “With various combinations of policies and opportunities that we take advantage of optimally, it is hoped that the Indonesian economy can grow around or in the 4.5% to 5.5% range in 2021.” 

The growth rate projected by the government this year is in line with earlier projections made by economic institutions. Estimates made by the Asian Development Bank for global economic growth was pegged at 5.3% while the International Monetary Fund sees the world economy growing by 5.2%. The World Bank, however, sees that economic growth will be at 4.4%. 

The Indonesian government has been at the fore of improving its digital landscape. Aside from infrastructure development, the country’s digital economy is at the priority list of the government in creating a shared economy and in boosting consumption. Several tech startups have been put up and internet connectivity in the country is forecast to drive the internet economy to be worth more than $100 billion by 2025. The growing young middle-class is likewise expected to be more adaptive to technology and entrepreneurship. 

In a recent report by OpenGov Asia, the Indonesian government announced that there are now several tech giants that are expressing interest to invest in the economy, due to an improved digital economy framework and business climate in the country. The government has been scaling up efforts to transform its digital economy as it seeks to fast-track economic recovery due to impacts brought by the pandemic.  

Aside from building on existing digital transformation initiatives, the Minister stated that to reach its economic target, the government will focus on the continued implementation of the Job Creation Law and the adoption of the National Economic Recovery (NER) programme. 

The NER is an economic stimulus programme issued by the government in the first half of 2020. It helps buffer economic setbacks caused by the pandemic through the introduction of tax breaks, capital injection for state-owned enterprises, subsidies for Micro, Small and Medium Enterprises (MSMEs) and financial assistance to households. 

To further bolster economic recovery, the Indonesian government will continue to provide assistance to MSMEs. It is also lining up a new array of investments for 2021. The Minister noted: “[T]he government will compile a list of investment priorities and form an investment management institution or LPI.” 

The government is likewise banking on other key areas that can leverage economic growth. These include the food security programme, industrial estate development and other labour-centred policies. 

The Minister added that the government’s optimism is due to its extensive portfolio of recovery strategies that it has formulated to soften the blow of major economic setbacks. One of these strategies is maintaining an open collaboration with key players in various sectors. He explained: “[S]ynergising with all stakeholders is an absolute must so that national economic growth will revive more quickly in 2021.” 

On top of this, the Minister emphasised that the economy has sufficient capital for the implementation of new and existing policies that can further accelerate economic recovery this year.  

To explain further, the Minister of Industry said that in the manufacturing sector alone, there was a steady expansion recorded driven by industrial differentiation. This, he said, shows continued optimism in the business sector.