The Digital Komodo Dragon: How Indonesia can capture the digital trade opportunity at home and abroad
With Indonesia’s government’s aim for the country to become Southeast Asia’s largest digital economy by 2020, digital trade will be crucial not only as a way to increase and diversify the country’s export base but also for helping local businesses leverage digital technologies across every sector of the economy. The value that digital trade creates for the domestic economy today is estimated at IDR 125 trillion, but can grow by more than 18 times to reach IDR 2,305 trillion by 2030. Some of the largest beneficiaries are expected to come from the traditional sectors, such as agriculture and infrastructure.
Besides creating value from abroad through digital exports, digital trade also supports large productivity improvements in Indonesia’s domestic sectors. Yet, traditional economic measures struggle to adequately capture both the value of digital trade to exports and Indonesia’s domestic economy. However, appreciating the value of digital trade is crucial when formulating trade and economic policy.
This report assesses (a) the current and future value of the digital trade opportunity for Indonesia’s exports and the domestic economy; (b) perceived concerns relating to digital trade abroad and how these could be addressed without unduly impeding digital trade flows; (c) priority areas Indonesia could focus on in order to fully harness the benefits while managing the potential risks of digital trade.
The research by AlphaBeta was commissioned by the Hinrich Foundation and launched in Jakarta together with the Indonesian E-Commerce Association (iDEA) and the Centre for Strategic and International Studies (CSIS).