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Indonesia’s Readiness for Digital Economy

 4 min read / 

According to MD World Digital Competitiveness Rankings, Indonesia is ranked the 59th out of 63 countries concerning readiness in adopting and exploring digital technologies leading to a change in how governments, businesses and in general, society, operates.

However, Apple Inc. of Cupertino, California is currently developing an innovation center based in Green Office Park in Bumi Serpong Damai (BSD) and will start operating in October 2017. Facebook and Google have also launched their local units on a smaller scale.

Without proper readiness for the digital era, Indonesia is at risk of losing its global and regional competitiveness and overall wellbeing since the changes will eventually transform systems of production, management, and governance. Where does Indonesia stand in this constellation? What does Silicon Valley giants’ presence in the country mean?

The Ranking’s Variables

The IMD World Competitiveness Center, which is a research group at IMB Business School in Switzerland published The 2017 IMD World Digital Competitiveness Rankings, examined 63 countries for their readiness in adopting and exploring digital technologies leading to a transformation in government practices, business models, and society in general.

The digital competitiveness ranking is based on 50 criteria, one-third of which are new data, based on 6250 respondents measuring variables such as corruption, environmental concerns and quality of life. Those 50 indicators are grouped in nine sub-factors that in turn are classified into three factors.

The first factor is knowledge, which reflects the capacity for the country to understand and learn new technologies through cultivating talents, progressive training and education, and focusing on science. The second factor measures the technology environment of the economy, which is the competence to develop new digital innovations. Such factor heavily relies on the regulatory framework, capital, and technological framework.

The third factor reflects the readiness of the country’s economy for the coming developments. This factor includes adaptive attitudes, business agility, and IT integration.

This Year’s Winners

The top ten winners are Singapore, Sweden, USA, Finland, Denmark, Netherlands, Hong Kong, Switzerland, Canada, and Norway. Three countries with the strongest supportive regulation are Singapore, Sweden, and Finland. Singapore is merely one-hour flight away from Jakarta, the capital of Indonesia.

The best adaptive attitudes are found in USA, Finland, and Denmark. Moreover, countries with the most comprehensive IT integration are Singapore, Sweden, and Finland. Cyprus and Saudi Arabia received their first ranks this year with 53rd and 36th places

Indonesia Ranked the 59th

Ranked 60th is Ukraine, 61st Mongolia, 62nd Peru and 63th Venezuela. These countries are considered not yet ready for global digital competitiveness and lagging far behind due to various nagging social and political issues, as well as poor governance and unstable economy.

Indonesia ranked the 59th is actually an irony. Why? Because Indonesia is a G20 country with a massive population of 258 million (ranked the 4th in the world) and strategically located in Southeast Asia. It’s only natural that a country of this magnitude (literally and figuratively) requires a strong digital readiness.

Silicon Valley Giants’ Presence

Apple Inc’s presence in Indonesia might as well be the new milestone much needed to boost this country’s confidence in its long pathway to digital readiness. This Cupertino company will invest IDR1.1trn ($82.3m) in an R&D centre in South Tangerang, close to capital Jakarta.

The decision to invest in Indonesia stemmed from Apple’s inability to sell iPhone 6 devices due to the Indonesian government’s requirement to include local content and the establishment of R&D centres. Apple finally complied with this regulation by agreeing to build the centre and pouring $44m into various R&D projects in the country until 2018. 

It’s expected that this innovation centre to be similar to those in Silicon Valley. Apple will be joining forces with Bina Nusantara (BINUS) University as this university is IT oriented. The goal of this centre is supporting the performance of Apple’s gadgets and other products, including the development of new apps.

Facebook and Google have also started local offices in Jakarta. However, their data centres serving Southeast Asia are located in Singapore. Google’s data centres came online in December 2013, after acquiring 2.45 hectares of land in Jurong West, and Facebook’s data centres started operating in 2014.

Conclusion

Nonetheless, homework for the government of Indonesia is still plentiful, such as providing a solid legal infrastructure that would encourage business and R&D, a stable political climate, and an overall inviting business environment for local and foreign investors. To compete with Singapore as the leading digital readiness in the region, Indonesia also needs to handle human resources well, by providing sufficient digital training and collectively taking education seriously.

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