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Indonesia voted. What’s the incoming government’s biggest digital economy homework?

Written by Khamila Mulia Published on   4 mins read

Everyone wants more unicorns. But the country also needs better broadband, consumer protection, and more incentives to foster the domestic market.

Indonesia held general elections on Wednesday.  Everyone gets the day off to cast their vote. Turnout is usually very high with over 70% of the adult population joining in. The day is fondly called the ‘festival of democracy’ by locals.

While the final results are not yet in, quick counts show incumbent president Joko Widodo in a comfortable lead over challenger Prabowo.

Whoever will be confirmed as the next president will have to prove their ability to foster the country’s digital economy. Both sides have highlighted this intention in their development agendas.

As far as local and foreign investment in the technology sector is concerned, things will remain stable, analysts predict, no matter who takes the highest office. But nonetheless, there are many things the incoming government can improve.

KrASIA spoke to industry players about the issues that they think need to be resolved.

Joshua Agusta, the VP of investment at MDI Ventures, believes that improving internet infrastructure by accelerating the Palapa ring project — a large-scale broadband infrastructure upgrade that’s been in the works for decades — is crucial.

As data is dubbed as “the new oil”, internet accessibility has transformed from being a luxury or peripheral need into something essential for the national economy and its growth. Access to fundamental needs such as knowledge, credit, and capital is in direct correlation with internet and smartphone penetration. Hence, accelerating the Palapa ring project to improve access to the internet is something the government needs to prioritize.

The government also needs to pay further attention to local investors, according to Agusta. As an investor, he found that there are many difficulties and hurdles when setting up local VC firms. “From obtaining the license to facing a high capital gains tax, the regulation is quite complicated for local investors,” he said.

What has happened is that most VC firms are setting up their funds abroad and reducing the probability for the nation to capture the value out of our home-grown startup. Capital gain incentives and easier licensing processes are crucial in order to entice bigger and more sizable new local funds in Indonesia.

Ruly Achdiat, software architect at Tibco and co-founder of the KawalPemilu movement, echoes Agusta’s belief:

Many young Indonesians have brilliant ideas, which can be seen from a high number of digital startups that emerged in the past few years. I think the government through its bank institutions must be able to provide solutions to make it easier for new startups to get funding so they can grow faster and enrich the ecosystem.

Achdiat also believes that e-government and data integration will play important roles in digital economy acceleration.

E-Government is needed as it can provide efficient public services, increasing transparency, simplifying access to official information, and so on. The bureaucratic process in Indonesia is slow and it has not been able to adapt to technological advances. The government needs to build a master data management system for each citizen. We need the single source of truth where our database is centralized or at least integrated, from national ID, passport, tax number, and so on. If we have improved e-government, I believe it will accelerate the digital economy.

Achdiat hopes that the elected government will do something to improve the e-commerce logistics sector:

Most players in logistics are private companies. A state-owned company like Pos Indonesia should do better to enable Indonesians, especially those who live in rural areas, to enjoy more convenient services.

Regarding e-commerce, Heri Sutadi, executive director of the Indonesian ICT Institute, has a different priority. He hopes that the government can be more serious about empowering small and medium enterprises through online platforms.

Entering the digital era, I am afraid we’re losing our vision. The digital economy should provide the greatest benefit for Indonesian people. Unfortunately, the products in e-commerce platforms are currently dominated by imported products. We have to reverse this situation as people will have greater benefits if local products dominate the market.

Sutadi also wishes that the government will review regulations related to the tech sector.

The major homework for the government is to immediately create a regulation related to personal data protection because this is very crucial. Data protection law is currently being studied in the representative council and I hope it can be completed soon. I think we can use the general data protection regulation in Europe as reference and adjust it to meet our national interests. The regulation protects individual’s personal data such as name, address, and IP addresses, to sensitive data such as genetic data and biometric data. This way, our data is protected from the risk of misuse and exploitation. Most developed countries have made a lot of effort to ensure the protection of personal data, including by localizing data servers in the country, so we must catch up quickly.

In addition, Sutadi argues that the ‘freedom of speech’ article should be separated from the IT Law.

I think the government should revise the IT Law, because its content mostly revolves around freedom of expression issues like fake news or the spreading of hate speech. Although important, this issue isn’t directly related to IT. The IT Law should focus on the rules that drive the digital economy only.

Representing entrepreneurs, Stanislaus Tandelilin, the co-founder and CEO of fintech platform Modal Rakyat, sees that the government hasn’t done much in supporting local startups. “While I do understand there are several programs from the government such as 1,000 startups and NextICorn, there is almost no other support given for us other than education and matchmaking,” he said.

Tandelilin compares this situation to Singapore, where the government is consistently providing grants for SMEs and startups:

Not only funds, the Singapore government also provides access to their city database to help local startups grow their portfolio. I hope the Indonesian government can be more aggressive and more hands-on to help promising local startups here.

Editor: Nadine Freischlad


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