For the first time East Ventures, a Jakarta based venture capital investment company, who are major seed investors across Indonesia and Southeast Asia, has released a Digital Competitiveness Index (EV-DCI) 2020 Report for Indonesia. The report is a comprehensive analysis of the digital economic growth of the archipelago’s 34 provinces, and 24 big cities.
The EV-DCI’s primary finding is that there is huge digital disparity across the country. This occurs in terms of both where a majority of the digital innovation is geographically concentrated, and what areas of Indonesia’s digitalisation are thriving or underserved. It is not the first time Indonesia’s ‘digital divide’ has come to light, but as digital growth shows no signs of slowing, this report acts as an urgent call to level the digital playing field in the country.
What unique insights does the EV-DCI report provide about the current digital climate in Indonesia? What can we learn from it, and how could it impact the country’s economic and digital future?
What does the EV-DCI report tell us?
The insights from the 179-page report have the potential to alter digital development across Indonesia.
The EV-DCI is a comprehensive index built on nine pillars, or areas, that affect digital development. The nine pillars are split into three major sub-categories: Input, including human resource and ICT usage; Output, such as entrepreneurship and human resources; and Support, such as digital infrastructure and finance.
Each of the archipelago’s provinces, and then major cities, are given an overall score out of 100 based on their strength in each pillar. Although Indonesia is ASEAN’s premier digital destination, in an aggregate calculation the country scored a relatively low 27.9.
Breaking this calculation down reveals the digital disparity across the country. DKI Jakarta scored 79.7, with the five other highest-scoring provinces also being on the island of Java. Unsurprisingly, given its tourist and travel tech scene, Bali was the highest scorer outside of Java, at 40.6. A majority of provinces scored in the 20s, however, with Papua being the lowest scorer at 17.7. The statistics clearly demonstrate that the digital divide occurs between Java and non-Java provinces.
The report also throws light on Indonesia’s digital strengths and weaknesses. Ownership and infrastructure are high scorers, with a majority of the population owning smartphones and having internet access. But there are people issues, with the lowest scores occurring predominantly in entrepreneurship and human resource. This indicates a looming tech talent shortage and calls for a need for greater investment and emphasis in training a skilled workforce.
Bridging the digital gap
However, not all is lost, as the EV-DCI demonstrates, information is power. By pinpointing and quantifying the issues in terms of area (pillars) and location, it illustrates how to start closing the gap on the digital inequalities across Indonesia.
There is a need for Indonesia’s five Unicorn startups, to start expanding their services effectively across the archipelago. Although these unicorns—which includes digital payment service OVO, ride-hailing app Go-Jek, booking platform Traveloka, and eCommerce platforms Tokopedia and Bukalapak—in addition to other major digital platforms, have bolstered Indonesia’s economy and digital status, they have also cost the country in other ways.
Bricks and mortar shops have closed due to eCommerce; fintech is disrupting banks; taxi companies are going out of service thanks to ride-hailing. As investments and skilled individuals concentrate in tech hotspots, it causes certain regions to flourish, such as we see across Java, and others to buckle under the disruption, leaving them further behind digitally and economically.
Rapid digitalisation across Indonesia, and indeed globally, also disrupts the workforce. The necessary skill set for labourers is changing, as they must be tech literate. But as we saw in the low scoring area of human resource, there is not enough education and retraining occurring at the pace needed to keep up with demand.
The EV-DCI report comes at a significant time, as the report details that Indonesia’s digital economy is set to more than triple in the next five years, growing from $40 billion USD in 2019 to $133 billion USD in 2025. East Ventures also has a vested interest as a significant investor in Indonesian startups, including Traveloka and Tokopedia. It is fair to say that, in this anticipated period of rapid economic growth for Indonesia, East Ventures has a responsibility to help bridge the digital, and therefore economic, divide.
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They are stepping up and embracing this challenge through their emphasis on the need for a culture of digital inclusivity and economic growth across the entirety of Indonesia. This is a crucial point made both throughout the EV-DCI report and by East Venture’s co-founder Willson Cuaca. Given these revelations, it will be interesting to see what next year’s EV-DCI reveals about the archipelago’s digital future.