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Indonesia on track to realize digital transformation

Indonesia on track to realize digital transformation
Both public and private sectors in Indonesia have invested in digital technologies in order to grow their competitiveness. As the government tries to turn the nation into ASEAN’s digital hub, e-commerce and data centers in Indonesia are poised to advance in the next few years.

Indonesia has embarked on a journey to be Southeast Asia’s digital hub next year, as the government announced recently its plan to overhaul the country’s e-commerce and personal data protection regulatory frameworks.
“The utilization of digital technology will not remain limited to certain sectors but (affect the country’s) development as a whole,” said Rudy Salahuddin, an official from the Office of the Coordinating Economic Minister in Indonesia, according to The Jakarta Post.
His view is in line with that of a report recently published by the Hinrich Foundation. The report, titled “The Digital Komodo Dragon: How Indonesia Can Capture Digital Trade Opportunity at Home and Abroad,” is a joint collaboration between AlphaBeta, the Hinrich Foundation and the Centre for Strategic and International Studies.
According to the report, digital trade contributes IDR 125 trillion (US$9.3 billion) of economic benefits to Indonesia today, in the form of improved worker productivity, lowered costs and creating new revenue sources.
However, digital trade is equivalent to just 0.9 percent of Indonesia’s GDP. The percentage pales in comparison with neighboring ASEAN economies like Malaysia, the digital trade of which is equivalent to 2 percent of the country’s GDP.
The difference suggests that digital technologies still have much potential to impact the economy in Indonesia. Digital trade could grow by more than 18-fold by 2030 in Indonesia, reaching IDR 2,305 trillion (US$172 billion). And it will account for 9 percent of the country’s projected GDP.

Private sector's effort

The private sector appears to have its own digital vision as well while companies carry out their digital transformation (DX), according to an IDC report. “Indonesia has been aggressive in economic development, including in digital innovation and initiatives across the region.”
“Based on our latest research, there are 80% of enterprises today that have considered DX as a core strategy while the rest have recognized its importance to create one in the future,” says the report.
In terms of the fields of digital focus, analytics and cloud are perceived as the core, while emerging technologies like artificial intelligence, machine learning and internet of things (IoT) are key exploratory capabilities that will be enhanced by enterprises, says IDC.

Data center is key

As more companies in Indonesia embark on their DX journey, demand for hosting infrastructure servers will increase. “The demand for cloud services have increased across all verticals with the adoption of solutions such as AI, IoT and big data,” says Meily Lisdiyanti, Market Analyst of IT Services IDC Indonesia.
As these technologies are gathering big chunks of data in real time, it will require an infrastructure that is more agile and cost efficient,” Lisdiyanti explained.
Alibaba from China appears to have sensed some business opportunities. Last month Alibaba Cloud launched a second data center in Indonesia.
“Datacenters are now the new business jewels for all enterprises as well as governments as they must rely on them to deliver business value much greater than their costs. It is the backbone that supports the growth of large, SME and startup businesses,” said Sreenath Kandarpah, Head of Services IDC ASEAN.
The emergence of Alibaba Cloud is likely to create competition “which will only cause the local players to raise their game,” Kandarpah added.
“To stay competitive in the market, local service providers should re-evaluate their approach towards enterprises by creating an attractive pricing and add-on services as well as be committed to help the country to achieve its digitalization efforts and boost the national digital economy,” Kandarpah added.

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