The Indonesian technology industry in the international market.
Source: Apple Inc.
Indonesia is one of the countries that became the fourth largest population in the world. According to the World Bank (2020), In 2019, 62% of Indonesian adults in urban regions had access to the internet, compared to 36% in rural areas, compared to 20% and 6% in 2011. The rapid growth of technology development in Indonesia brought a brighter horizon for Indonesia to prepare the advanced future generation of technology in Indonesia.
In addition, ADB (2021) mentioned that by 2040, Indonesia’s technology adoption might add USD 2.8 trillion to Indonesia’s economy. This potential growth would accelerate Indonesia’s gross domestic product (GDP) growth by 0.55% points each year over the next two decades. Therefore, Indonesia’s technology development might become a propitious prospect to invest in the next upcoming years.
What are the opportunities that this industry offers? Read this article to know more!
The Overview of Technology Development in Indonesia
Indonesia has become the largest user of Information Technology (IT) in Southeast Asia. The internet in Indonesia contributed to 2.5% of the national GDP in 2016 and the country will gain 125 million internet users by 2025. Indonesia has 112% mobile penetration with a total of 266 million mobile subscribers and is the world’s 4th largest mobile market. The user penetration in e-commerce is also estimated to increase from 11.8% in 2018 to achieve 15.7% in 2022. As a result of the technology development in Indonesia, the proportion of Indonesian adults with access to the internet has increased from 13% in 2011 to 51% in 2019.
Indonesians who are connected to the internet are among the most engaged populations in the world, seen from the spending of their online activities in an average of six hours a day. A large segment of the digital society in the country is ready to intensify its digital interactions with the government. Digitally engaged Indonesians are now experiencing the advantage of technologies that reshape their lives.
To leverage digital technologies for greater involvement, the government emphasizes three policy priorities. The first is improving the clarity of regulations about the sharing of telecom infrastructure to boost digital connectivity and universalize access to high-quality internet. The second priority is to ensure that the digital economy works for all, which can be supported by better logistics and greater investment in relevant skills for the digital era. The third priority is to improve the quality of citizen and state interactions, using digital technologies to provide better public services and build trust in the digital world.
The Covid-19 Impact on The Technology Development in Indonesia
The COVID-19 pandemic has caused society and government to engage with technology such as using online meeting platforms for learning and working purposes, intensification of public services through the website and mobile apps, and other activities. The pandemic has also forced the government to address inequality gaps, especially in technology. The COVID-19 has become one of the reasons to hasten the digital transformation process so that the government can issue swift and proper policies to respond to various issues. Data integration is considered an important thing to do because currently, the data owned by various government institutions has yet to be synchronized. The Covid-19 mass vaccination policy and social aid distribution during the pandemic, for example, crucially need data integration.
As an impact of the social distancing and social restriction policy, e-commerce companies in Indonesia are reporting higher volumes of online sales. Consumers in the country have been increasingly turning to online channels to make purchases as the COVID-19 case count has risen. According to the iPrice report on Indonesian online shopping behavior during the pandemic, consumers are buying more health care and work-from-home products, sports equipment, and groceries.
Indonesia’s Technology Development and Its Current Trends
While Indonesia is proven to be one of the fastest-growing digital economies in South East Asia, the government still needs to ensure that all Indonesians could have easy accessibility to various digital technologies and services to realize the benefits. With the ongoing pandemic, there was an accelerated amount of internet-enabled services, which boosted the growth of the digital economy.
Application development has become a big player in the economy throughout Indonesia in the past 5 years. An InMobi analysis depicts that Indonesia is one of the suitable places for developing apps, which is supported by the fact that Indonesia has one of the fastest-growing app markets in the world. One of the benchmarks for technological development in Indonesia is the launch of Go-Jek. This app was able to replace a traditional industry and establish a new technological age, which helped pave a way for the government to openly accept technological change.
Aside from developments of technology in the transportation sector, there are other sectors like E-Commerce, Finance, Health, and education that seem to leave traditional ways and implement technology to day-to-day operations. From the E-commerce sector, Indonesia has the biggest e-commerce market in ASEAN with total sales of USD 20.9 billion in 2019. While in the finance sector, digital payments are now more commonly used by citizens. Healthcare services now could be easily accessed from a tap in your device, because healthcare firms decided to open online consultations, pharmaceutical delivery, and e-appointment, leaving inconvenient traditional ways behind. Lastly, from education itself, implementations like online class platforms and school management systems make learning mobile to students, especially during the pandemic.
Several technology trends are currently developing rapidly in Indonesia and the world. One of them is blockchain technology. This technology is predicted to show continuous growth due to the increased demand for online financial products. Secondly, Customer Learning Experience seems to also have a positive trend in Indonesia. This technology allows businesses to create courseware, training programs, documentation, to deliver complete digital learning experiences which feature integrating videos, webchats, and augmented reality. Last but not least, implementations of Artificial Intelligence will replace one-tenth of today’s screen-based apps, in which 10% of Indonesian enterprises will use conversational speech tech for customer engagement.
The Future Prospects of Technology Development in Indonesia
To date, the technology industries in Indonesia keep constantly developing based on what Indonesia needs. The massive development of information technology, urbanization, and consumerism in urban societies would be the contributing factors to the technology development in Indonesia. The latest projection in 2020 showed that Indonesia’s national e-market would reach USD 130 million or equivalent to IDR 151.4 trillion in upcoming years and is currently in the third position behind China and India in Asia. The promising sector to invest in the technology industry in Indonesia would involve the e-commerce, financial technology (fintech), and telecommunication sectors, considering the 5G internet is recently trending in Indonesia these past two years.
According to JakartaPost (2021), the telecommunication sector would become a promising sector since the 5G internet transformation in Indonesia created a better way of communication between the enterprises and the consumers in Indonesia. The fare of 5G internet in Indonesia is still relative to its neighboring countries and adapting the lessons learned from the early generation of 5G internet worldwide. The telecommunication sector framework would also become a challenging ground to distribute evenly all over Indonesia, especially in freeing the spectrum and opening a 5G roadmap in Indonesia.
In another sector, the financial technology (fintech) sector in Indonesia would also become a fruitful prospect of technology development in Indonesia. The recorded investment to Indonesian fintech companies in 2017 has reached USD 421 million or more than IDR 5.85 trillion. Since Indonesia consists of thousands of islands, it created a bigger opportunity for the technology development in Indonesia to provide accessible digital banking or a fintech platform to ease the access of financial services all over Indonesia.
Read more about Foreign Digital Banking in Indonesia here
The prospect of e-commerce in Indonesia is also not less interesting to invest in. Currently, Indonesia’s e-commerce continues to drive demand for better logistic spaces. However, this attracted the local companies as well as the foreign companies to take more advantages as the first-mover to enter the Indonesian market.
Enter The Indonesian Technology Market with BRIGHT Indonesia
The rapid growth of Indonesia’s technology industry development created a lot of opportunities for understanding many sectors in the Indonesian market. The technology development would bring Indonesia to embrace the future challenges in economic growth, and enable a brighter future for the Indonesian technology market. To enter the Indonesian market, you need the right local partner to assist you.
BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.
BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:
- Provide an assistance for you in expanding and developing your business by identification of potential partners
- Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison.
- Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
- Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.
For more information, email firstname.lastname@example.org.
*This article is written by Galih Akmal Latif, Debora Septenia, and Aurellea Dashaliva