Indonesia must invest billions in infocomm tech: Report

Go-Jek motorcycle taxi drivers travel past an entrance to a Jakarta Mass Rapid Transit station. A.T. Kearney analysts have called for the Indonesian government to boost innovation with more funding and exit options for startups.
APRIL 02, 2019 - 12:03 PM

INDONESIA needs a national digital transformation plan, consulting firm A.T. Kearney has said, calling for more investment in technology and infrastructure.

While schemes such as “Making Indonesia 4.0” and an e-commerce road map are already under way, “the government’s digital initiatives are split across a number of different national road maps, and as such, lack a clear overall focus”, a recent report argued.

Indonesia “should also urgently set up a national digital taskforce to co-ordinate national policymaking and promote broad consumer adoption”, with buy-in from both the public and the private sector, the report added.

The Indonesian government must invest between 275 trillion rupiah (S$26.2 billion) and 300 trillion rupiah a year in infocommunications technology, such as cyber security, automation and analytics, according to analysts Hari Venkataramani, Vanda Chau, Sridhar Narasimhan, Damian Manuel, and Shirley Dhewayani Santoso, who wrote the report.

A.T. Kearney noted that Indonesia’s digital infrastructure investments has made up about 1.3 per cent of gross domestic product (GDP) - lagging behind South-east Asian peers like Thailand (2.4 per cent), Malaysia (4.5 per cent) and Singapore (6.6 per cent) - and recommended raising this spending share to to 2.5 per cent over the next five years.

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Key suggestions included offering more funding and exit options to nurture innovation, such as a national venture capital (VC) fund or a multi-tier market system for higher-risk startups, which A.T. Kearney said “could enable more liquidity and greater investments in the space”.

Meanwhile, annual digital investments in state-owned enterprises must triple in the next five years, with notable potential in the manufacturing, logistics, agriculture, and services sectors.

“State-owned enterprises can potentially play a valuable role in helping Indonesia embrace a digital future,” said the report’s authors. “They can help to improve consumer education and trust, educate and upskill the workforce, and build the local innovation ecosystem.”