Ulf Ewaldsson, senior vice president and head of business area digital services at Ericsson, said the Indonesian economy is 'just waiting for more innovation and entrepreneurship.' (JG Photo/Sheany)

Infrastructure, Education and Software Development Key to Growth of Indonesia's Digital Economy


NOVEMBER 27, 2017

Jakarta. Indonesia must focus on infrastructure and education to accommodate rapid growth in information and communication technologies, while also encouraging local entrepreneurs to engage in software development, an Ericsson executive told the Jakarta Globe on Monday (27/11).

Ulf Ewaldsson, senior vice president and head of business area digital services at Ericsson, said the Indonesian economy is "just waiting for more innovation and entrepreneurship."

He said Indonesia has all the ingredients for continued growth in the digital economy, with the combination of the government's infrastructure investment strategy, positive attitudes among telecommunication operators, and young and active entrepreneurship.

In a 2016 report titled "Unlocking Indonesia's Digital Opportunity," worldwide management consulting firm McKinsey predicted that the digital economy can contribute around $150 billion to Indonesia's national economy by 2025.

The digital revolution and its impact on the global economy are driven by mobile internet, cloud technology, the Internet of Things (IoT), and big data and advanced analytics, according to the same report. These technologies are "intertwined and complementary," and have seen increased adoption in Indonesia.

The deployment of fifth-generation mobile networks, or 5G, – poised for 2020 at the earliest – is expected to support and benefit IoT innovation. Ericsson predicts that the technology could contribute at least $6 billion in 5G enabled revenues for operators in Indonesia.

"We think somewhere around that level of opportunity – just in Indonesia – on new businesses that can grow on the 5G platform," Ewaldsson said during an exclusive interview in Jakarta.

However, before the arrival of 5G, Indonesia will experience more 4G development as it moves to increase connectivity and smartphone use, which are fundamental aspects for the establishment of IoT.

While Indonesia has experienced notable growth in e-commerce with the success of various startups, especially in retail goods and low-cost services, the country's industrial sector has seen less growth, especially in terms of applications that support farmers, despite agriculture being one of the key sectors of the economy.

Ewaldsson told the Jakarta Globe he is surprised that Indonesia has seen less growth in applications for trading of farm goods, which he has seen in other markets.

"What is moving slower is the industrial sector. I hope with the support of government, and modernization of the industrial sector, it will pick up faster than it has. I think this is necessary to keep the economy growing at the pace it is growing now," he said.

He added that Indonesia's industrial sector needs to be more technology-friendly, and encouraged cooperation between technical universities and the industry, along with the government, to integrate efforts for speedy development.

Indonesia is working on implementing Sweden's triple helix model – cooperation between the government, the private sector and universities – which has been integral to the country's successes in innovation. The prestigious Bandung Institute of Technology (ITB) is already trialing this system.

"Everything here is so separate. Ideally, a lot of the research going on in corporations today can be done by the ITB, then transferred to industries," Ewaldsson said. "That's how it works in Sweden and in many European countries."

In contrast, research conducted at Indonesian universities are less often transferred to industries.

Ewaldsson said Indonesia should also promote more software development by local talents and entrepreneurs, especially as a safer way to build value and grow the economy.

"It's more sustainable to focus on software development than to become the backyard of a polluting industry," he said.

The strong urbanization trend in Indonesia, with seven in every 10 Indonesians projected to live in cities by 2025, also means that the Indonesian economy will have to focus on providing adequate employment for the new city dwellers.

"I think the most important thing is to keep people employed in Indonesia [...] and therefore we need a lot more companies. The private sector here has to grow, a lot. To do so, ICT [information and communications technology], as we know from other countries, is one of the keys to provide a foundation for launching new companies," Ewaldsson said.

He said it is important to focus on ensuring that there are enough platforms for ICT, rather than solely on productivity.

"[Here], the government has a role to play, it needs to invest in order to make sure this happens," Ewaldsson said, while noting the importance of a faster-moving and technology-friendly government.

Correction: The earlier version of this article stated that Ericsson predicts 5G could contribute at least $6 billion to the Indonesian economy. The company clarified that $6 billion is the 5G enabled revenue for operators.