In the second quarter of last year, Indonesia's gross domestic product (GDP) growth was recorded at 7.1 percent year-on-year (yoy) and is expected to keep growing at 5 percent yoy in the fourth quarter this year. The digital economy contributed around 9 percent or Rp 1.003 quadrillion (US$70 billion) to Indonesia's GDP. It is foreseen to grow more than 350 percent or about Rp 4.531 quadrillion to Indonesia's GDP in 2030.

We witnessed how the digital economy has an essential role in Indonesia's overall economic recovery, especially during the hard times where some critical government programs such as the preemployment card and microcredit program (KUR) have been greatly helped by digitalization.

The digital economy could be the primary driver of post-pandemic economic growth if stakeholders, either the government, investors or companies, join hands in continuing to build the country's digital foundations stronger and broader. The digital economy will also become one of Indonesia's Group of 20 presidency priorities in 2022. The government, through the Communications and Information Ministry, has developed three priority issues in the Digital Economy Working Group: equitable digital access, digital literacy and cross-border flow of data traffic.

Building more robust and broader digital foundations needs to be translated by digital inclusion, that is ensuring fair digital competitiveness in all provinces and tapering the disparity between the highest and the lowest level provinces. Shaping and identifying the key success and addressing challenges of the digital competitiveness of each region is vital to growing a more sustainable economy

The East Ventures-Digital Competitiveness Index (EV-DCI) measures the digital performance of all 34 provinces and cities in Indonesia. Since its inception in 2020, EV-DCI showed a steady rising score from 27.9 in 2020, 32.1 in 2021 and 35.2 in 2022. The disparity between provinces is further at its lowest level – 48.3 percent falling from 61.9 percent in 2020. Both figures indicate better inclusion across all regions across Indonesia.   

The median score is obtained by rating the 50 indicators. Those indicators are classified under three broad heads: input, output and support. Between input (human resources, information and communication usage and expenditure) and output (economy, entrepreneurship and productivity and human resources), 80 percent of the weightage is split evenly. A final 20 percent weightage is assigned to support, which includes the infrastructure, finance, regulation and capacity of the regional government in the strategy and execution of digitization initiatives to spur regional economic growth.

Based on the EV-DCI 2022, Jakarta and West Java remain in the top two spots. Yogyakarta, East Kalimantan and West Sumatera jumped to third, seven and ninth positions, respectively.

Yogyakarta and East Kalimantan have seen an increase in the digital talents pillar. Yogyakarta also recorded an improvement in the entrepreneurship and productivity pillars. Meanwhile, West Sumatra experienced an increase in information and communication technology (ICT) infrastructure and information technology utilization.

Aside from the top 10, Bengkulu, West Papua and West Sumatra successfully made the fastest score growth, with a change of 7.8, 6.7 and 5.4, respectively, from their 2021 score. It indicates that these provinces have more rapid digital acceleration and increased pursuing digital equity.

There are five key building blocks to ensuring the sustainability of Indonesia's digital economy and pushing the country forward into its digital golden era. ICT infrastructure is the main foundation in driving digital performance nationally. Approximately 7,904 locations in the frontier, outermost and underdeveloped (3T) areas have received 4G networks through base transceiver station construction. West Papua, for instance, experienced a 126 percent increase in the number of villages receiving 4G signals, much greater than other provinces.

Moreover, based on the EV-DCI 2022 survey, almost 80 percent of Indonesian companies have made investments in ICT and digital transformation (especially for legacy corporates) a high priority. In addition, digital knowledge and skills also become important criteria for employee recruitment.

Regional governments could initiate collaborative efforts with ICT providers to accelerate the region's ICT development. Engaging in bilateral or multilateral partnerships can also support access to funding and knowledge transfer in ICT infrastructure projects.

As a policymaker, the government plays an important role in the acceleration of digital transformation. This year, regional governments' regulations and capacity increased significantly to 54.6 from the score of 35.5 last year, signaling that digital transformation is also increasingly becoming a top priority, not only in the private sector but also in the government.

The digitalization of government services has proven to increase productivity, efficiency and transparency. The survey found that most digital companies view government regulations as the primary driver of digital payment adoption. For start-ups, support from government policies is a vital aspect of post-pandemic business development. Thus, the regulator should be agile in introducing and reforming regulations and policies that concern activities related to the digital economy to provide digital inclusion and further accelerate economic growth.

However, the rise of ICT infrastructure and regulation support from regional governments is not enough if the digital society pillar is not formed well. Having digital skills is very important to compete in today's job market. About 95.8 percent of digital companies see digital ability as crucial in selecting prospective employees.

Therefore, as a significant part of structural employment transformation, upskilling digital talents is urgently needed to support the development of Indonesia's digital economy. The development revolves around improving capabilities to use and develop digital technologies. Moreover, multistakeholder partnerships are encouraged to nurture future talents through enhancing the education curriculum while also upskilling the current workforce.

Another building block is the digital business sector, which consists of six digital sectors – e-commerce, logistics, healthtech, edutech, tourism and fintech. These sectors have successfully leveraged digital technology to improve the performance of businesses by improving efficiency and agility. We can focus on enhancing digital technology adoption in various sectors and explore the untapped market for potential growth.

Last but not least, stakeholders need to accelerate the implementation of environmental, social and governance (ESG) principles into their strategies and executions. All stakeholders need to reassess their value chain to identify environmental, societal and community risks in order to achieve sustainability in moving toward Indonesia’s digital golden era.

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The writer is an operating partner of East Ventures.