The Dutch Indonesian Student Association (PPI Belanda) held the IDEAS 2021 SUMMIT. The main session in this event discussed the topic “Equality of Digital Elevation: Making it Possible,” attended by Sandiaga Uno, Minister of Tourism and Creative Economy of the Republic of Indonesia, along with Alvin Cahyadi, VP of Investment AC Ventures, and Thomas Aquinas Dewaranu, Researcher at Center for Indonesian Policy Studies (CIPS).
Here are our key takeaways from the session:
The penetration rate of internet users in Indonesia continues to experience significant growth. In 2018, the figure reached 50%, but data released by HootSuite titled Digital 2021 shows that internet user penetration in Indonesia reached 73.7% at the beginning of this year. This number increased 15.5% or 27 million people compared to the same period from the previous year.
“In terms of index, we may not be among the highest in the world, but this is an improvement,” said Alvin Cahyadi.
The challenges of digital transformation are three main factors; the internet, logistics infrastructure, and capital.
1. Internet aspect
From the internet aspect, the government has pursued several programs to expand telecommunications services, such as the BAKTI Telecommunications program to provide equitable telecommunications services to remote areas in Indonesia.
According to Sandiaga Uno, it is necessary to fulfill the need for digital infrastructure to facilitate digital transformation, especially for MSMEs.
“MSMEs are the backbone of our economy, which contributes more than 61% of GDP. So, let’s look at the target of US$ 124 billion for the e-commerce market in Indonesia, which currently only supplies 10%. Digital transformation can change the situation so that by 2025, at least 35% of the US$ 124 billion will be filled by MSME players, work products, services, and the talents from our nation,” said Sandi.
2. Logistics infrastructure
The second challenge that is quite formidable is the logistics infrastructure, considering that Indonesia consists of many islands. Even if internet connections are spread evenly in Indonesia and the digital economy is open, MSMEs in remote areas can’t send their products to consumers if the logistics conditions are not adequate.
However, several development initiatives, such as the Trans-Java toll road, are an excellent signal to optimize the movement of goods on the island of Java.
Regarding capital, Alvin sees that the current investment climate in Indonesia is increasingly attractive.
“In the last two years, I have met a lot of big investors from other countries, VCs from America, Europe, China with assets under management that may reach billions of dollars and have been actively investing in Indonesia,” said Alvin.
Even during the pandemic, VCs are still actively investing in Indonesia. The next question is, which sector is the most attractive?
According to Alvin, VCs pay attention to market readiness and everything related to MSMEs.
“We focus on sectors that can help democratize the economy, education, financial aspects, logistics access, and how we can provide equal opportunities for SMEs in small areas to be able to improve their standard of living through technology,” explained Alvin.
Therefore, in the last 6-12 months, the list of investments made by VCs on average leads to companies that help provide solutions for MSMEs.
Alvin advised startup founders to focus on creating solutions that can bridge the needs of the MSME sector, especially in tier 2 and 3 areas.
Pentahelix & Sandbox approach
Equality of digital elevation, according to Sandi, has to win: win: win. This is about the public-private partnership; Pentahelix involves the central and local governments, educational institutions, communities, business world, and media that must work together.
“We can’t do this alone. The government may take the lead, but at a certain point, it’s the ecosystem that will drive us,” said Sandi.
On the other hand, Thomas highlighted that problems in the field are often related to regulations or policies that do not support inclusiveness.
Let’s look at the Regulation of the Minister of Trade (Permendag) Republic of Indonesia No. 50/2020 concerning the e-commerce sector, which requires merchants in e-commerce to have several permits. In the light of Thomas, this hinders inclusiveness and must be addressed immediately.
From Sandi’s perspective, the best approach is Sandbox. “We have to use the Sandbox approach, as President Joko Widodo mentioned. Sandbox concept explains that the business world’s development must be monitored and ensured that it is not rash. Don’t let us be left behind because we make the rules or regulations with a non-progressive way of thinking.”