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Powering Regional Expansion for Indonesian SMEs
Across 2022 and 2023, Indonesia has stood proudly at the very center of the international community. T
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By Firnando Buenayre Sirait, CEO of HARA and member of Digital Prosperity for Asia
Across 2022 and 2023, Indonesia has stood proudly at the very center of the international community. The eyes of the world have turned to us, and Indonesia has risen to the occasion, heading two very successful consecutive years as G20 President in 2022, and ASEAN Chair in 2023.
With the spotlight firmly planted on Indonesia, now is the time for us to leverage this attention to promote our small and medium businesses, and help them expand and compete regionally and internationally, to grow our exports in goods and services. As it stands today, countries across this region, including Indonesia, have only captured an estimated 30% of the US$2 trillion value of the Asia-Pacific’s digital economy.
Research shows that countries were missing out on massive economic gains and could not realize the remaining 70% because they were not doing enough to help more domestic micro small and medium enterprises digitalize, expand regionally, and invest in other growth areas wherever possible.
I am the CEO of HARA, an Agritech company based in Jakarta. Alongside this, I represent the Coalition for Digital Prosperity for Asia (DPA), an alliance of digital companies from across the Asia-Pacific which aims to democratize access to digital technology and empower digital companies to expand their presences across the region.
Embracing Trade Opportunities through Collaboration
HARA provides access for smallholder farmers to access finance, insurance, farm inputs, and market opportunities. This is done through an agent-based implementation model by which HARA uses innovative incentive models to grow a community that now reaches over 30,000 farmers and has disbursed US$1.5m in loans to date.
HARA is a small business with a growing footprint and a need for processing capabilities to enable the use of our blockchain-based traceability automation and supply chain monitoring processes, which help farmers ensure compliance with environmental standards, prevent deforestation, and promote sustainable sourcing. HARA needs these capabilities to thrive and survive in a constantly changing environment.
HARA and many of our SME peers from many countries enthusiastically embrace the opportunities presented by the global trade environment, for instance tapping into new markets by actively collaborating with their governments to ensure compliance and respect local norms. This approach is an integral part of our strategy to build trust and establish a strong presence in new regions.
We also innovatively navigate the competitive landscape by leveraging digital technologies and forming strategic alliances, including adopting advanced analytics to understand market trends, using blockchain technology to enhance supply chain transparency, and collaborating with local partners to gain insights and establish a foothold in new markets. These practices embody the collaborative spirit that is inherent in SMEs and pivotal to their success.
SMEs, which form the backbone of Asia’s economy by accounting for over 90% of its businesses, possess a unique agility and capacity for innovation. This makes them well-suited to capitalize on these emerging opportunities. By focusing on collaborative efforts, embracing technological advancements, and adapting to market dynamics, SMEs like HARA can effectively expand their global reach. Even with limited profit margins, this strategic approach enables us to thrive, demonstrating that embracing opportunities through adaptability and partnership is key to success in the dynamic landscape of international trade.
The DPA launched our Indonesia chapter earlier this year, and a core part of our mission has involved working with governments across the region, including in India, Singapore, and Vietnam, to promote the right conditions for digital companies to grow to their full potential by hindering anticompetitive practices and promoting regional digital trade.
HARA is a proud member of the DPA alongside other digital businesses in ASEAN, and we want to help set the agenda for digital trade and business across the region to ensure that the underdogs are not left out of the future-building conversation as we represent the majority across the region.
Enabling Growth through Digitalization
A key and fundamental way governments across the region like Indonesia can help to realize economic growth is by promoting SME digitalization. More and more Indonesian SMEs are looking to ASEAN and the wider region to expand, and digital technologies invariably play a big role in making this possible.
Both digital-native companies and legacy firms growing into their new roles as digital companies are embracing new technologies at a rapid pace—whether that’s by jumping onto e-commerce platforms or upgrading their business processes with cloud-based digital tools such as new payment options for customers, or even artificial intelligence.
To ensure that companies can remain competitive and innovative as they rapidly digitalize, policies can be put in place to support Indonesian SMEs in accessing the best technologies available on the market to gain a competitive advantage. Such policies could include adopting risk-based approaches to regulation that target misuse of technology, instead of imposing general bans on use or restrictive usage principles.
Furthermore, the success of SME digitalization in Indonesia also heavily depends on the digital literacy and skills of the Indonesian workforce. To effectively utilize digital tools and technologies like cloud services and AI/ML, there must be a concerted effort in enhancing digital literacy and providing specialized training programs.
This could involve collaborations between the government, educational institutions, and private sector to develop training initiatives tailored to the needs of SMEs. By investing in human capital, SMEs can more effectively integrate digital solutions into their operations, fostering innovation and competitiveness in both domestic and international markets.
DEFA and the Digital Trade Angle
Alongside enabling policies on digitalization, the Indonesian Government can also play a role in helping Indonesian SMEs through its policies on digital trade. An especially exciting development of late has been the work ASEAN has begun in moving towards a consolidated Digital Economy Framework Agreement (DEFA), which will tie Indonesia and its neighbors even more closely together as a digitally integrated economic bloc.
In seeking to move DEFA forward, ASEAN member states should consider developing high standard digital trade rules that makes doing business across borders simpler and cheaper through facilitating cross-border data flows and discouraging data localization, while at the same time protecting countries’ data sovereignty and enhancing data security and privacy protection policies.
The DEFA could also drive agreement on international standards and practices that will further promote interoperability and trust for digital companies across ASEAN. This includes standardizing formats, protocols, and procedures for digital transactions, which simplifies processes for businesses operating in multiple jurisdictions. This will ensure that ASEAN companies can seamlessly innovate using emerging technologies including Artificial Intelligence (AI) and ensure that high levels of cybersecurity are uniformly adopted.
The accelerated start of the DEFA negotiations this year under Indonesia’s ASEAN chairmanship this year is a testament to Indonesian leadership in the region and its strong ambition to be a digital hub for ASEAN and the Asia-Pacific. We hope Indonesia will use its leading position to unlock cross-border data flows and reduce regulatory friction within ASEAN, to enable Indonesian digital SMEs and start-ups to accelerate their growth into the region.
Partnerships towards Progress
From its priority agenda items during the G20 to its leading role in accelerating discussion of the DEFA, Indonesia has demonstrated strong support for the active contribution of digital SMEs to the digital economy.
The DPA believe that SMEs are ready to participate as allies, friends, and partners to governments and enable APAC’s full economic potential. As such, HARA and the DPA stand ready to engage with the Indonesian Government on how best Indonesia can approach the further evolution of its approaches to digitalization and digital trade, with a view to benefiting Indonesian digital SMEs and startups.
Firnando Buenayre Sirait is the CEO of HARA. He brings his expertise into the agriculture sector by focusing on granular data acquisition from the upstream to support farmers in having equal access to opportunities especially in financial inclusion. In HARA, Firnando explores traceability use case(s) capitalizing blockchain to ensure trust, transparency, and security among stakeholders.
The Coalition for Digital Prosperity for Asia (DPA) consists of a growing group of innovative Asian digital companies promoting the democratization of digital technologies across all sectors. As the first pan-Asia Pacific (APAC) focused alliance built by home-grown companies, DPA aims to support national governments and policymakers in APAC to grow their digital economies and reap the benefit of digital technologies.
