Indonesia holds perfect momentum to bridge the digital divide to foster transformation

The Government of Indonesia now has in its hands the perfect momentum to bridge the so-called digital divide and foster digital transformation, following the confirmation of a long-awaited consumer data protection law and an important agreement between businesses in G20 countries.

The B20 Indonesia Summit, which was part of the G20 series of meetings that concluded in mid-November 2022, resulted in a communique that highlights three priorities that can help countries to find novel solutions to solve the specific global economic challenges they face, especially after the pandemic-induced economic meltdown. The priorities are boosting an innovative global economy, forging an inclusive and sustainable future, and embracing a collaborative recovery and growth.

Technology and digital transformation play an important role in achieving the goals as reflected in the B20 policy recommendations.

The first key message of the communique is to promote innovation to unlock equitable post-crisis growth, in which equitable innovation and technology are at centre stage. Among other recommendations, the B20 called on G20 governments to advance digitalisation in a deliberate manner to bridge the digital divide through prioritising connectivity infrastructure in underserved areas, promoting adoption of digital infrastructure, and digitising government services while maintaining national security.

Indonesia is among the first countries to recognise the power of digital transformation, and Indonesia’s digital economy will remain a key driver of inclusive growth in the coming years. Increasing digital inclusion and access to digital employment and education opportunities are essential for the country and the economy, which was hit by the COVID-19 pandemic. The pandemic showed how technology can help people, businesses, and the government to survive and recover. However, it also puts the digital divide in the spotlight, as an unequal infrastructure development across the archipelago hampers access to technology and digitalisation in some parts of the country. Furthermore, the digital transformation push also allows new challenges to emerge, such as cybersecurity and businesses’ readiness in adapting to new technologies.

As a response to the pandemic, business leaders have activated contingency plans in order to keep their people safe and healthy while keeping their businesses running. There is a greater emphasis on the digitisation of business activities, with a goal of moving towards more contactless operations. PwC’s 2023 CEO Survey Report also reveals that 56% of CEOs in Indonesia believe their companies will not be economically viable in the next decade if they continue on their current path, and 76% of CEOs have invested in automating processes and systems (technology and reinvention-oriented). We are of the view that organisations, going forward, must be ready to build business models that do not necessarily have a precedent, and to imagine customer and employee experiences in ways that have not been seen before and still optimise efficiency. A comprehensive digital business model will be critical in driving the change.

Furthermore, we must ensure that the digital economy works for everyone by supporting and investing in essential digital economy enablers, as well as unlocking citizens’ capacities to grab opportunities that are created. Some essential components of that plan include interventions to advance financial inclusion, foster trust to encourage wider uptake of digital payment systems, improve logistics, and scale up investment in digital skills, as well as a broader set of capabilities to survive in the digital economy.

On the consumer side, Indonesians still face a wide digital gap. The percentage of adults with internet access in the country has jumped fourfold from 13 percent in 2011 to around 62 percent in 2021, according to the World Bank, making the country one of the fastest growing digital economies in Southeast Asia. However, that also means 38 percent of adult Indonesians still do not have internet access.

Nonetheless based on East Ventures Digital Competitiveness Index 2021, there is now a more even distribution of digital competitiveness between the country’s 34 provinces. The creation of digital infrastructure and a thorough digital ecosystem are crucial measures for the governments and digital actors if they want to speed up the digital transformation of society and capitalise on this momentum.  Other critical factors that need to be continually enhanced include digital literacy and security.

Digital literacy does not have to be limited to technical and practical capabilities, but should also focus on basic skills, especially for the younger generation. The development of individuals’ technical digital skills must be done through continuous education involving multi-stakeholder cooperation. This is to increase their propension to use digital products and services and ability to navigate cyberspace safely and mindfully.

Digital security has become more important now amid rampant cyberattacks on individuals, businesses as well as government institutions. The attacks cause disruptions in essential government services, such as financial systems, healthcare, energy, and water supply. They can and will compromise national security and personal data.

There are several tools that can be used by stakeholders to enhance cybersecurity, including blockchain. Blockchain has evolved into one of the most failsafe systems for dealing in the digital network space, despite not being indestructible. PwC’s Time for Trust report finds that Blockchain technology has the potential to boost global gross domestic product (GDP) by US$1.76 trillion over the next decade.

On the other hand, the Government of Indonesia and the parliament also made significant progress by concluding the deliberations of the Personal Data Protection (PDP) Law. The law regulates data categorisation, data owners’ rights, data managers’ obligations, and the authority of a protection agency that the government will form. The law gives a two-year period for data managers in the country to adjust and prepare themselves to better manage and protect their customers’ information. It is expected to better protect consumers’ data after a series of information leakages that compromised millions of customers’ and citizens’ data.

Amid the looming risks and wide digital divide, there are a couple of recommendations from the B20 Digitalisation Task Force to solve the issues, such as ensuring companies have a digital-ready mindset through access to digital platforms. This includes micro, small, and medium enterprises (MSMEs) as they are the key engine of job creation and economic activity.

Furthermore, the government and companies need to promote risk and evidence-based interoperable and technology-neutral cybersecurity standards and best practices that support companies’ efforts to protect their networks. The measure could be done by defining cybersecurity protocols, promoting enhancement of cybersecurity practice, and education of private users and companies.

We believe Indonesia’s digital economy promises equity and inclusive development going forward as digital tools widen access to healthcare, education, and employment. A synergy between the government’s policy and businesses’ ability to adapt and adjust will play an important role in ensuring a sustainable digital transformation in the country.