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Skills gap, inadequate rules hamper digital economy
Indonesia’s digital economy has enormous potential not only as reflected in the high rate of its adoption in the country but also by its potential market value, which is estimated to reach more than US$100 billion in next five years
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Indonesia’s digital economy has enormous potential not only as reflected in the high rate of its adoption in the country but also by its potential market value, which is estimated to reach more than US$100 billion in next five years.
However, the skill gap, inadequate regulations and a lack of internet access outside of urban centers have hindered the growth of the digital economy, researchers have said.
Institute for Development of Economics and Finance (Indef) economist Berly Martawardaya said that the country needed to build its soft infrastructure including the enhancement of digital literacy and skillset of human resources to meet the expectations.
“Digital literacy and skill sets must be improved for consumers and producers alike,” Berly told The Jakarta Post on Friday, last week. He said that retailers should, for example, acquire the necessary skills such as improving their photography and videography skills to boost sales on online platforms.
A joint study conducted by Indef and nonprofit research foundation Laboratorium Data Persada projected that the market value of the country’s digital economy would almost double to Rp 1.45 quadrillion ($101 billion) by 2024 from Rp 814 trillion in 2018, signifying the rapid growth of the digital industry.
The lack of human resources in the digital economy occurred because its growth was too fast for educational institutions to prepare the required skills to meet labor market needs, Indonesia E-Commerce Association (idEA) chairman Ignatius Untung said.
“Many start-up companies complained that they find it hard to recruit employees. Other than that, the high wages of employees in technology companies serves as evidence of the lack of labor supply compared to high demand,” said Ignatius on Tuesday.
In addition to the government, the private sector has also been involved in promoting digital literacy in the country. Several technology giants have, for example, introduced digital training programs to address literacy and skill set gaps in Southeast Asia’s largest economy.
American technology giants such as Google, Facebook, Apple, Amazon Web Services (AWS) and China’s Alibaba and Huawei have been working alongside the government and local communities to scale up their digital training programs.
In a 2019 study published by United Kingdom-based research firm Merchant Machine, Indonesia topped the e-commerce ranking last year with growth of 78 percent while a 2018 study by American consulting firm McKinsey & Company projected that the online commerce market would reach between $55 billion to $65 billion by 2022. As both studies painted a hopeful picture of the sectors, researchers have called for stronger government policies to realize the projections.
Another Indef researcher, Andry Satrio Nugroho, pointed out the regulation weaknesses in several sectors such as e-commerce, manufacturing and financial technology.
“In e-commerce, we need to look for the proper tax design so that businesspeople would not have a burden as well as to keep the playing field level,” Andry told the Post, adding that the government had not yet designed an Internet of Things (IoT) roadmap for the manufacturing sector.
Other than that, financial technology (fintech) has yet to gain government support because of the lack of commitment to protect the data of customers.
“Public trust toward fintech companies has already decreased because they opened their data to dubious business players,” said Andry, adding that fintech companies are important to expedite financial inclusion.
Meanwhile, Laboratorium Data Persada researcher Bastian Zaini said the regulatory environment must be improved to create a level playing field.
“The much-needed regulations are the ones that could create an environment in which the digital economy does not only favor the rich but also provide opportunities for the poor.”
Bastian also called on the government to provide high-quality internet access in the eastern part of Indonesia as an Indef and Laboratorium Data Persada study pointed out 36.3 percent of Indonesians could access the internet in 2018, a significant improvement from 13.8 percent five years before.
Meanwhile, the Office of the Coordinating Economic Minister’s expert staff on economic relations, Mira Tayyiba, said the government had taken a number of measures to boost the digital economy through education programs and the construction of a broadband network nationwide under the Palapa Ring.
“The government is working together with businesspeople such as marketplaces in upgrading local products through educational programs […] Insya Allah [God willing] the Palapa Ring project will be completed this year,” Mira said.
Ignatius said the government had 1,000 start-up programs to help boost the digital economy, but he called for government assistance to boost the businesses’ survival rate. (awa)
