BKPM helps accelerate the wave of digital economy in Indonesia

The Indonesia Investment Coordinating Board (BKPM) is seeking to accelerate the growth of Indonesia’s highly promising digital economy, which might be the future of the country’s economy amid depleting oil and gas resources, by encouraging more investors to invest in the sector.

The Indonesia Investment Coordinating Board (BKPM) is seeking to accelerate the growth of Indonesia’s highly promising digital economy, which might be the future of the country’s economy amid depleting oil and gas resources, by encouraging more investors to invest in the sector.  According to data from the BKPM, currently Indonesia has four startups with assets exceeding US$1 billion: online ride-hailing app Go-Jek, travel services provider Traveloka as well as online retailers Bukalapak and Tokopedia.  Startups with more than $1 billion in assets are commonly referred to as unicorns, using the mythical animal as a metaphor for these startups’ success in solving consumers’ problems while creating various economic multiplier effects along the way.  The BKPM data also recorded that the Indonesian digital economy had been growing impressively within the last five years, with $3 billion foreign direct investment realized in the sector during the period. Due to the amount of investment poured in to the sector, the BKPM has ranked digital economy at the top of Indonesia’s most promising investment sources.  One way in which the BKPM strives to help the digital economy in Indonesia to move faster is by encouraging the sector to remain minimally regulated by the government, as it currently is, because minimum regulation could help spur innovations in the sector.  The BKPM, meanwhile, attributed the success of our local digital economy to the high chunk of young digital natives entering their productive ages, plus the country’s growing middle-class with their enhanced access to resources and assets to start their own businesses.      Read more about: New online single submission system (OSS) for Businesses: What is it, and how does it work?   Europe, for instance, has only produced four unicorns so far. Indonesia is advantageous in this sector owing to the fact that it is one of the four most populous countries — China is on top of the list followed by India and the United States. The three countries’ digital economies are also thriving thanks to their big populations.  Keeping this in mind, the Chairman of BKPM Thomas Lembong voiced his concerns about Indonesia’s complicated bureaucracy, with its excessive and rigid procedures, which he saw as a serious hindrance to the effort of the country’s digital economy players, especially those working in the services sector, to adopt more sophisticated innovations to enhance their businesses.  He added that it was essential for Indonesia to move faster to adopt these new innovations, as the digital economy in Indonesia was evolving rapidly and would transform our world impressively in the next 15 to 20 years.  Furthermore, Thomas also warned that Indonesia should not be sluggish in adopting new innovations supporting business operations; otherwise the country would be left behind in the global economy.  He mentioned the health services sector as an example.  “Let’s take telemedicine as an example. Perhaps 10 to 15 years later we would have a gadget which allows individuals to independently monitor their own health by conducting independent heart rate and blood pressure examinations, before uploading them to an application for doctors to analyze. That could make health examinations affordable, while solving health problems faster along the way,” he said recently.  If Indonesia cannot adopt these new innovations rapidly due to bureaucracy, he explained, then Indonesians might prefer to install applications developed by other countries instead. Worse, the country’s infamous red tape could also hinder its adoption of innovations in other sectors related to public welfare, such as transportation, energy and urban planning, he added.  “It is inevitable that digital transformation will affect all aspects of our lives [including public services] to make them better,” Thomas said.  Thomas said that the BKPM strove to maintain the simplicity of investment permit issuance procedures in the digital economy sector while enhancing its services to investors who would like to invest in the sector to lay fertile ground for technologically savvy Indonesian youngsters and middle-class members to take their digital entrepreneurship higher.  He added that the BKPM’s strategy of cutting red tape — known as the greatest hindrance to investment in Indonesia — to support the digital economy was much better to help local players expand their operations internationally to embrace global competition than taking protectionist measures. Due to the digital economy’s seamless nature, protectionist approaches would not do much to help local players at all, he explained.  Instead of being afraid of global competition, Indonesians should embrace it as motivation to further boost their business qualities instead, he explained, adding, “Local players should endeavor to sharpen their competitive advantages to go global, or at least go regional.” Go-Jek, for instance, has expanded its operations to other Southeast Asian countries. So far it has been officially operating in Vietnam, while Philippines and Singapore have shown positive responses to the brand’s expansion plan to their countries. Currently, the brand is attempting to expand to Malaysia as well, despite facing some difficulties in their attempt to penetrate into the country’s market.  He added that the Indonesian digital economy could in fact thrive thanks to minimum protectionist measures on the government’s part. He continued by saying that the highly protected conventional sectors did not show the same rate of growth as the digital economy in Indonesia exactly because of these protectionist regulations, which might hinder local players from exchanging expertise and knowledge with their international counterparts.  According to Thomas, that protectionist measures hinder the economy this way has also been seen in other countries. He also encouraged Indonesian policymakers to learn from how other countries regulated their digital economy sector.  “We should regulate the digital economy for sure, like in terms of how much tax they have to pay. It would be much easier for us to just model policies which have been proven effective in other countries,” he said, concluding the interview.  

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