Tech companies are fundamentally reshaping Indonesia’s economic outlook

Rapid digitalization has major ramifications for Southeast Asia’s largest economy.

Photo by Appai on Unsplash. Photo by Appai on Unsplash.

According to a recent study, Indonesia’s digital economy is expected to nearly double in value from IDR 814 trillion last year to IDR 1.447 quadrillion (USD 101 billion) by 2024. In comparison to the other rising digital economies in Southeast Asia—such as Thailand, Vietnam, and the Philippines—Indonesia is racing ahead because it has a robust tech scene and plenty of capital to boot; that it’s the largest economy in the region helps too. In a time when technology defines some aspects of our daily lives, how does Indonesia’s ballooning digital economy influence the country’s economic outlook?

Joint research by the Institute for Development of Economics and Finance (INDEF) and research foundation Laboratorium Data Persada indicates that the digital economy generates added value to several sectors, including manufacturing, trade and transportation, as well as communications.

Indonesia’ GDP growth is at a healthy 5.2%, and 171 million Indonesians are online (that’s 64.8% of the population). The economy’s digitalization is expected to reduce unemployment, which currently stands at 5.2% and is expected to drop to 4.9% by the end of the quarter. Tech startups, in particular, are creating new opportunities for personnel with the right skills. Unicorns like Traveloka, Tokopedia, and Bukalapak, as well as the ever-expanding decacorn Go-Jek, are constantly seeking new, innovative workers. In some parts of the country, there is also an increasing reliance on the blue-collar workforce, such as drivers and domestic helpers.

The rapid rise of the digital economy has seen other tangible improvements to Indonesia’s population as well. The gig economy provides new channels of income and employment for traditional low wage earners, and access to education materials and other information gives Indonesians of all backgrounds the chance to improve their skills or augment their existing curriculum. Education and vocational training hasn’t been entirely equalized, but phone-based platforms are making nudges in a constructive direction.

Other public services such as healthcare have also been impacted positively, with telemedicine and AI-enabled medical devices that identify symptoms or improve patient care, reducing human error and lowering costs through web and mobile tools. Looking at Jakarta specifically, health applications such as Halodoc allow for convenient, instant medical services, in some cases giving patients the space to recuperate at home instead of weaving through the city to seek treatment and fill prescriptions. At many hospitals, once a patient has received their medicine, they can head back home and have their refills delivered via Halodoc at no additional charge. The company also has a “tanya dokter” feature that allows you to connect with their database of over 1,000 specialists who can issue diagnoses through a telemedicine connection for certain conditions.

Photo by Sharon McCutcheon on Unsplash.

That being said, there is persistent trepidation that the gig economy’s entrenchment could relegate those who rely on it for income to a new form of underclass, serving the wealthy elite for a pittance, rather than providing an avenue out of lower economic brackets.

Considering the spillover effect on the other sectors, “the manufacturing sector has benefited the most,” says INDEF research director Berly Martawardaya. With the digital economy expected to create IDR 100 trillion (USD 71 million) in value for the manufacturing industry by 2024, the government is working to ensure there is stable internet access nationwide as soon as possible to spur growth in the digital economy. Public officials are also working with entrepreneurs to develop digital skills and financial access in rural areas, among other things.

Felicia Tanuwijaya—founder of millennial-focused clothing brand Krom Collective, which has manufacturing plants in Indonesia—claims that 40% of her online sales come from small cities around indonesia, while the rest are for orders from the capital Jakarta. Buyers typically place orders through Instagram and WhatsApp, though the company also makes sales through the e-commerce platform Tokopedia. “A lot of the factory workers in Yogyakarta did not have smartphones when we started manufacturing a few years ago,” Tanuwijaya said. “And now with the rapid digitalization, I am able to send and receive media on the production process, and they are able to see how the products we manufacture are being sold online.” This lets her work remotely in Jakarta, minimizing time spent on the road, giving her more space to focus on building her business.

Businesses like Krom Collective as well as larger tech companies of all streaks demand workers with advanced skill sets and an understanding of IoT implementations in everyday situations. Even those on the business side are required to master “growth hacking,” which requires out-of-the-box thinking. On the ground, rapid digitalization means Indonesia’s workers will need to adopt new skills to remain competitive—and keep Indonesia ahead of the game in the region.