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Digital economy expected to become new growth engine

Jakarta Globe - April 7, 2022

Herman, Jakarta – The digital economy could potentially become the new engine of growth due to the massive spread of digital technologies that transforms many aspects of people's way of life, Chief Economic Minister Airlangga Hartarto said on Thursday.

A notable example of fundamental changes in business practices brought by digitization is that it allows faster and more efficient financial transactions, resulting in a more rapid money circulation than ever before, he said.

"The government is encouraging the use of new sources of growth to support this economic transformation. Accelerating the digital economy becomes our main strategy to transform the economy and speed up the post-Covid-19 economic recovery," Airlangga said in a webinar hosted by Investor Magazine, a sister publication of the Jakarta Globe.

Indonesia is making progresses in financial inclusion, with 55.7 percent of adults in rural areas possessing a bank account, he said without going into details.

The government introduced several policies to boost the number of people with an account, including a decision to channel pandemic-related financial assistance through bank accounts only.

But a lot more need to be done to ensure that Indonesia is a major player in the global digitization.

"Indonesia needs 9 million digital talents by 2030 to contribute Rp 4,434 trillion to our GDP or 16 percent of the estimated GDP in 2030," Airlangga said.

According to an estimate, Indonesia has 202 million internet users who contributed $70 billion to the country's digital economy last year.

Arsjad Rasjid, the chairman of the Indonesian Chamber of Commerce and Industry, said last month the value of the country's digital economy is expected to reach $146 billion by 2025.

Indonesia has over 2,300 tech startups including 12 with the Unicorn status – a startup valued at over $1 billion.

Home-grown financial technology startup Julo told the webinar that it has channeled more than Rp 5 trillion in credits to approximately 1 million Indonesian customers since the company was founded in 2016.

Co-founder Julo Adrianus Hitijahubessy said the company's services can be accessed in all 34 provinces, offering small-scale loans of up to Rp 20 million per transaction.

"Credit disbursement quadrupled during the pandemic era in 2020-21," Julo said.

The app also offers digital payment platform to help customers pay utilities and health insurance and buy internet package, he said.

"Julo is a technology company because everything we do is based on technology, including our risk mitigation system to evaluate the credit risk of any borrower," he said.

Source: https://jakartaglobe.id/tech/digital-economy-expected-to-become-new-growth-engin