Nusa Dua, Bali. The central bank has turned to gathering real-time data from social media, online portals, internet search data and satellite images to help it better shape its policies.
However, while it is essential for Bank Indonesia to determine the right policies, collecting accurate information in a short time poses challenges as the country's population of 260 million people is dispersed across more than 17,000 islands.
The central bank currently relies on official data from its own surveys or data compiled by the Central Statistics Agency (BPS). Some data sets, such as employment statistics, can lag by as much as six months.
"If we rely only on the published data from the statistics agency, it will depend too much on the time [the surveys are taken] … With big data, we can predict consumer behavior in any sector to estimate economic growth," Bank Indonesia Deputy Governor Erwin Rijanto said at a press conference in Jakarta on Thursday (27/07).
According to Yati Kuniarti, Bank Indonesia's head of statistics, the central bank can now create a daily job vacancy index by using data collected from online job portals, as well as a property market indicator from online property advertisements. The central bank previously only surveyed the latter every three months.
"These data sets will be the leading indicators to show in real time whether Indonesia's economic activities increase or stagnate," Yati told reporters.
The increasing number of Indonesians using the internet and social media has made it easier to collect this data. A survey by the Indonesian Internet Service Providers Association (APJII) showed that the number of internet users in the country increased by almost 600 percent since 2008 to 143 million last year.
The total value of online transactions meanwhile increased to Rp 27 trillion ($1.9 billion) last year from Rp 17.8 trillion a year earlier, despite Indonesia's 51 percent internet penetration rat, which still lags behind neighboring countries such as Thailand (67 percent) and Malaysia (71 percent).
This generates huge amounts of data points that show consumer behavior patterns and labor participation rates, essential for creating effective central bank policies.
Bank Indonesia has cut its benchmark rate by a total 200 basis points in 2016 and 2017, but this did little to boost lending and economic growth. Household consumption growth has also remained flat at 5 percent over the past few years.
The central bank now has even less room to maneuver after it had to hike its rate by 100 basis points to stem a weakening rupiah and reduce capital outflows amid global uncertainties.
Mohammad Faisal, an economist at the Jakarta-based Center of Reform on Economics Indonesia, said big data will provide the central bank with firsthand information to help it shape its policies more accurately.
"If the central bank knows which regions don't respond well to government policies, it can find a solution more easily and make more accurate decisions," Faisal told the Jakarta Globe.
Big data is used by almost a third of central banks across the world, including Japan, China, India, Singapore, Thailand, Britain and the United States, according to the Bank for International Settlements, often described as "the central bank's bank."
Collection and Access to Data
Still, Yati said extracting the right information from the abundance of available data is not easy. To ensure accuracy, the data has to be cleaned by separating real news from the misinformation proliferating on online news sites. This consumes almost 80 percent of the time. The extracted data is then analyzed by the central bank's data scientists to produce research that may help to back up the bank's policies.
"Aggregate data is less useful in gaining information because if we want to know certain consumer behavior, we need to know the details, such as with e-commerce platforms for example, where we need to look at every transaction to determine who the buyers are and in what sectors," Yati said.
Bank Indonesia has so far signed disclosure agreements with Indonesia's four largest e-commerce players, six property companies and two automotive companies, to provide it with such granular information.
Collecting data remains one of the central bank's greatest challenges, as permission to access information belonging to corporations and online portals is still limited.
Indonesian online ride-hailing firm Go-Jek for example, is still reluctant to share the personal data of its users over privacy concerns.
"Go-Jek will not grant access to the personal data of customers or partner drivers unless there is evidence of criminal activity, such as money laundering," Go-Jek chief executive Nadiem Makarim told the Jakarta Globe on Friday.
The Ministry of Communication and Information Technology has drafted a law on the protection of personal data, which regulates specific details such as religion, health, sexuality, financial information and criminal records.