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Jakarta Post

Digitally mature SMEs could add $164b to GDP: Cisco, IDC

  • Eisya A. Eloksari

    The Jakarta Post

Jakarta   /   Fri, September 11, 2020   /   11:09 am
Digitally mature SMEs could add $164b to GDP: Cisco, IDC Online shopping illustration (Shutterstock/Ivan Kruk)

Indonesian small and medium enterprises (SMEs) could contribute an additional US$164 billion to the country’s gross domestic product (GDP) in 2024 if they become more digitally mature, according to a recent study.

The 2020 Asia Pacific Small Medium Business Digital Maturity Study by technology company Cisco and International Data Corporation (IDC) shows that digitally mature SMEs can enjoy up to 16 percent increase in revenue and a 14 percent increase in productivity, allowing for a greater contribution to the national economy.

“Digitizing SMEs is important, as it is the driving force of our economy. SMEs are also one of the sectors hardest hit by the pandemic,” said Cisco Indonesia managing director Marina Kacaribu in a press briefing on Wednesday.

She went on to say that most of Indonesia’s SMEs were still in the early stage of digital transformation, marked by the absence of a digitalization roadmap and lack of digital talent.

The study showed that 31 percent of SMEs in the Asia-Pacific region are still in the first stage of the digitalization process, called the digital indifferent stage. Meanwhile, 53 percent are in the observer stage, 13 percent in the digital challenger stage, and only 3 percent are in the digital native stage.

Indonesia’s economy relies heavily on small businesses, which account for more than 60 percent of the GDP and employ a majority of the labor force.

Cooperatives and Small and Medium Enterprises Minister Teten Masduki previously stated that the government aimed to have 10 million micro, small and medium enterprises (MSMEs) to go digital by the end of the year to help them ease the financial burden of the pandemic.

Teten at the time said that only around 8 million MSMEs had an online selling platform, either through e-commerce or social media. That number represents around 13 percent of all of the MSMEs in the country.

The COVID-19 pandemic has driven the majority of SMEs in APAC, at 69 percent, to accelerate the digitalization process, including by investing more in technology, the study finds. For Indonesia, that means businesses are investing more in cloud technology and upgrading security measures.

Marina said that 82 percent of Indonesia’s SMEs were digitalizing processes to create new products and services, up from 41 percent last year. Reasons for the digitalization include a need to keep up with the competition and catering to customer demand.

She added that, as companies progressed to the next stage, they would invest more in technology, hire more tech-savvy workers and adopt more automation in their business processes.

“The potential for Indonesia to go beyond the first stage is tremendous. The most important thing to do for SMEs is to plan and prioritize the digital solutions they need and invest accordingly,” Marina said.

Read also: Indonesian businesses ramp up cybersecurity budget amid rampant attacks

The study also suggests that accelerating the digitalization process could add $1.3 trillion to the region’s GDP in 2024.

“The pandemic brings an opportunity for SMEs to accelerate their digital transformation, as the process will not only help them solve problems but also sustain their growth in the long run,” said Cisco ASEAN small business and commercial director Raz Mohamad.