Digital Economy in Indonesia to Reach USD 130 billion in 2020

Digital economy in Indonesia will be able to reach USD 130 billion, if the country can tackle seven main challenges in e-commerce industry

May 2019, by

The Ministry of Communications and Informatics stated that digital economy in Indonesia will be able to reach USD 130 billion, if the country can tackle seven main challenges in e-commerce industry. According to Lis Sutjiati, Special Staff for Project Management Office and Digital Economy, these challenges include funding, internet speed, tax, as well as protection of personal data.

The ministry stated that the internet speed in Indonesia is still considered as slow. The ministry also puts concerns to customer protection and cyber security in e-commerce activities in the country. In addition to that, logistics cost in Indonesia is among the most expensive. Limited digital talent in Indonesia is also seen as one of the biggest challenges for e-commerce development. Besides, Sutjiati also stated that tax on e-commerce companies can potentially hinder the growth of these companies.

Jakarta E-commerce Report

To address these key challenges, the government needs to do collaboration across 18 ministries. Since the challenges are not only related technology and information. All ministries, together with relevant stakeholders in digital economy, have formulated solutions in dealing with these issues. Through engagement with all key players in the e-commerce system in Indonesia, the government managed to draw up proposed solutions, stated in Presidential Regulation Number 74 of 2017 on Roadmap E-commerce 2017-2019.

E-commerce Market in The Capital

Though there are potentials, Jakarta, the capital of Indonesia  also has several barriers. In line with the statement from the ministry, our latest report, “Top E-Commerce Cities in Asia” analyzed that infrastructure-wise, Jakarta has a bit of a challenge especially with the low penetration of credit card and digital banking. Furthermore, our research shows that Jakarta's ecosystem, competitiveness, and customer behavior ranked 6th among the 12 countries. Other things worth nothing include weak pool of human resource to cater to the industry and lack of government support. 

Jakarta, a home to more than 30 million people, is considered as one of the busiest cities Furthermore, beyond its physical development, the city's e-commerce landscape is surely not to be overlooked. According to our report, Jakarta is among the top e-commerce cities in the region, along with other cities, including Bangkok, Shanghai, Seoul, and many more. Based on our study, its large emerging middle class population, retail market size, and daily internet usage, with 30% of its population are millennials, the biggest customers of e-commerce, are what factors that bring the city's attractiveness in the industry.

Jakarta has 72% internet penetration rate, 29% digital banking penetration rate, along with retail market value that is worth USD ±130 billion. This is further sustained by the average hours for internet usage in Jakarta, recorded around 9 hours which is more than half of their time awake. On top of that, some of the top e-commerce companies in Indonesia often get a large portion of financing, coming from large international venture capital and private equity funds that bring significant experience in e-commerce from their portfolio of investment. Global investors' focus on Jakarta has also been helpful in accelerating the e-commerce market growth. 

Moreover, growth of e-commerce in Jakarta is partially spurred by changing consumer behavior in the way they interact with the traditional brick-and-mortar stores. Consumers today tend to check promotions or prices online prior to buying anything offline - and this proves to be another possible touchpoint for e-commerce sites, providing its role as additional benchmarking platform. 

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