Indonesia’s digital economy is primed to become the largest in Southeast Asia, according to a new study, as its market value triples to US$ 100 billion by 2025 from US$ 27 billion in 2018.
As reported, this growth will be promising more jobs and consumer choices for a rising tech-savvy generation.
The annual study is conducted by American tech giant Google and the Singaporean holding company, Temasek.
Called the “e-Conomy Southeast Asia” study, it highlights that the growth will be caused by four digital services.
These are e-commerce, with 53% contribution; online travel with 25%; ride-hailing services with 14%; and online media with 8%.
These sectors have grown big and they will continue to do so in the coming years.
Since the study did not include the emerging digital businesses like those related to finance, health and education, the growth might be slightly higher than predicted.
The American company’s Head of Strategy and Insights explained that the lack of data on these businesses meant the study was unable to make reliable predictions.
The increase in digital services available, specifically in e-commerce, diversifies the product and service choices for Indonesia’s 150 million smartphone users.
This number is the largest in the region, particularly for users located in more remote areas.
Advertisements launched by Indonesia’s e-commerce platforms, Tokopedia and Bukalapak, highlight their expansive logistics networks, able to bring everything to even the remotest home.
The report says that the digital economy will also increase employment opportunities as the average Southeast Asian internet-based company will increase staff by 10% each year.
The study’s findings can be supported by a 2018 McKinsey report as it estimates that the digital economy could produce 3.7 million new jobs in Indonesia by 2025.
Aside from employment, the report also describes that the growth of transportation-facilitated digital services may triple “partner” jobs to 12 million region-wide in 2025, from 4 million in 2018.
Even though Indonesia’s digital economy grows to the estimated US$ 100 billion in 2025, it will only contribute 4% to the US$ 2.5 trillion government-target in gross domestic product in the same year.
Nevertheless, the Singaporean company’s Portfolio Strategy and Risk Group Joint Head said that he was confident Southeast Asia could “narrow the gap very rapidly” over the years to come.
Everything in the ecosystem is slowly beginning to come together and that is going to make all the difference.
These factors in the ecosystem that limit digital economic growth, according to 2017’s e-Conomy report, are funding, internet connection, consumer trust, digital talent, logistics and payment methods.
Indonesia had made significant progress with the first three factors, thanks to rising investor confidence, government infrastructure programs and effective marketing campaigns.
However, room for improvement remains for the availability of digital talent, logistics and payment methods.
The government, for its part, promised to continue its infrastructure programs and to focus next year’s development policy on building human resources.
Regarding payment, the internet-based companies need to either partner or consolidate with other companies to increase the integration of payment services in an otherwise heavily fragmented payment landscape.
