Indonesia must invest billions in infocomm tech: Report

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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.

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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.

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.”