A woman uses online app to shop at a digital trading platform in Jakarta on August 18, 2021. (Ruht Semiono)
Will Digital Innovation Unleash New Growth?
BY :ILYAS BHAT
SEPTEMBER 10, 2021
Indonesia is the fastest growing e-commerce market in ASEAN, a vibrant young economy and the world’s fourth most populous country. Now the country aims to become the 4th largest economy by 2045.
Although statistically Indonesia has been a rather stable economy in ASEAN with a consistent 4 to 5 percent annual GDP growth, however, some of the economists believe it might not be enough to achieve this target.
For Indonesian economy to reach above US$12,000 threshold to become a high income economy, we must achieve annual growth rates between 6 percent and 7 percent consistently over multiple years.
Can technology and digital innovation unleash new growth and productivity cycle?
Globally, growth has been on a downward trajectory since the past 40 years. Our traditional growth models are failing. For Indonesia to escape middle income trap we need ground up transformation to kickstart new growth cycles by using 4th generation technological innovations to infuse more productivity.
We need more and more progressive digital disruption, encourage and nurture entrepreneurship and innovation to kickstart our new growth engines. You will be surprised what technological innovation with great entrepreneurs can achieve.
Using technology alone can produce large multiplication of resources, without destroying the planet. For all entrepreneurs out there, from manufacturing to real estate to construction to food production, from financial services to energy, they are all open for disruption and dematerialization.
However, we need to remember a growing digital economy does not by default imply an inclusive one. Issues challenge the efforts to align digital innovation to achieve inclusivity.
Despite all the advances Indonesia has made in the recent past on digital technology and the fact that it has the highest number of unicorns in ASEAN, the country is still at an early dawn of what we call Globalization 4.0. Today, the contribution of digital economy to Indonesia’s GDP is currently at 2.9 percent, which is still trivial.
Digital technology will be impacting every walk of life and every vertical industry across the globe. The internet will increasingly become the most fundamental and vital infrastructures around the world.
Artificial intelligence, virtual reality, 5G, big data, advanced robotics and cloud and quantum computing will become the basic building blocks of Globalization 4.0. Transportation, education and many more industries will become fully digital.
While it sounds promising, some may say that the future is already here yet it is unevenly distributed. Inclusive growth is rapidly becoming a mere smoke screen, used for political and marketing gimmick thus becoming “conceptually fuzzy” and having “a limited evidence base” rather compounding existing inequalities.
While creating lower cost, east of use, efficient ways for creating products and services, hundreds of thousands would lose jobs because of technology disruption. While the opportunities for disruption will be huge, those left behind will feel it acutely.
It would be a bigger mistake to let the risks associated with digital innovation obscure its potential to make our world a better place.
The question is how well or how little we are as a nation prepared to harness the next digital revolution.
I hope we will all agree that globalization since years ago in essence has raised our standard of living. But one can argue that it benefited 1 percent of the population tremendously while leaving the 99 percent behind, creating a greater economic divide.
Whether technology and digital innovation can become an equalizer -- creating a levelling field for those who have been left behind -- is a rather pressing question. Whether our economy will do good and well at the same time, I will leave it as an open question.
We don’t honestly know whether 30 years from now AI and other technologies would have replaced more jobs then created new ones. But what we do from now till then is important. For the next decade, the biggest and single most important challenge for our government will be skill enhancement and reskilling Indonesia’s workforce.
The government will have to lead from the front not just relying on protectionist policies, red-tapes or curbing global competition or have less disruption but reforming the government to accommodate more dynamism.
As the trickle-down economics is failing globally, a shift is needed from economic model based on “growing now and distributing later” to strengthening and boosting digital connectivity to ensure digital economy works for all and connects the unconnected.
The government must take early measures to prevent the de-coupling of digital economy and that of real economy to avoid “K-shaped” growth model.
I believe the future of Indonesia’s inclusive growth is digital. To achieve that, a multi-stakeholder dialog andaction is needed in which the government, public and private sector and academia, all come together and form a collaborative front to ensure that all Indonesians, especially the most vulnerable, can access various digital technologies and services and realize the economic benefits.
We cannot forget our MSMEs -- the backbone of our economy -- while the government is focusing on digitalization of the micro sector, we at madeinindonesia.com are focused on commercialization and internationalization of our SMEs.
At Madeinindonesia.com, our commitment is based on our philosophy “To make Indonesia known for quality products in the global markets” -- a larger than life vision at the core of everything we do.
The core foundational principle behind the inception of this Indonesia’s first business-to-business digital trading platform comes from a dire need to democratize and simplify Indonesian exports in an inclusive manner with a strong societal value, which is acting as a catalyst in pushing SME exports.
This tech platform also aims to leverage the power of technology and e-commerce, as a levelling field for Indonesian SME to go global. It acts as one-stop digital platform, an ecommerce enabler and export accelerator, connecting our businesses with millions of international buyers across 150 countries around the world.
Every foreign company wants to sell in Indonesia, which is perceived as a strong consumptive market. But on the other hand, exporting from Indonesia remains as complex, inefficient and primitive, largely dominated by few big corporations at the top.
Export contributions of Indonesian SMEs have been on a downwards trajectory from the past decade, from over 18 percent in 2005, now down to 13 percent. If the trend continues it will be very hard for our SMEs to survive this century.
While in the same period, China created more SMEs than total number of SMEs in EU and US combined, now contributing over 68 percent of China’s exports.
The Indonesian government runs dozens of programs through various ministries and institutions under SME empowerment agenda, almost all working in silo-driven approach. Some of the programs may look very promising, but penetration of these programs at the grass root level is still questionable.
We, as a small Indonesian start-up company, are building Indonesia’s largest platform to centralize all available support and put a collaborative front to represent whatever best Indonesian SME have to offer for the global markets, digitalizing Indonesian supply chain end to end and connecting Indonesian companies beyond borders. A bold vision to internationalize over 1 million Indonesian SMEs by the end of this decade.
We at Madeinindonesia.com are doing our part, using digital innovation to boost inclusive growth and if that translates to a small percentage of Indonesia’s GDP, we will consider our job well done.
The writer is founder and CEO of Madeinindonesia.com, a tech startup for export solutions.
The views expressed in the article are those of the author.