- 22/03/2016
- Category: Commentaries
Digital technology has become a salient issue in the President Joko “Jokowi” Widodo era. The President’s visit to Silicon Valley was canceled last year on account of worsening haze in Indonesia, but he was able to follow through with the planned visit last month. Jokowi has shown a strong desire to develop digital solutions and the creative industry. He wants people nationwide to have access to the internet. It is certainly a strategic way of thinking and could realize vast opportunities, but it should be followed up with a prudent, comprehensive and sustainable digital policy to overcome our many weaknesses.
In the next five to 15 years, e-commerce opportunities will be created through the rapid development of secondary cities, the demographic bonus and the middle-income revolution and widespread information and communications technology (ICT) usage and advancement. A link between these three factors will result in a “niche”, which is the use of ICT by productive middle-income people in secondary cities. This niche bears great digital economic potential, which should be considered not only by the central government but also local governments, the private sector, academicians and people in general. Decision makers do not realize that the future of economic development will be centered in secondary cities.
A secondary city itself is defined as an urban settlement with a population of at least 200,000 that is not the largest city in the country. In the late 1970s, the development of secondary cities emerged as a solution to reduce the urbanization influx to primary cities. Moreover, the Organization for Economic Cooperation and Development (OECD) also noted that 43 percent of the economic growth of its member countries from 1995 to 2007 was driven by secondary cities. McKinsey (2014) reported that at least 90 million people were predicted to migrate to Southeast Asia’s cities by 2030. There are approximately 215 secondary cities with 200,000-2 million inhabitants, or 91.5 percent of the total number of cities in the region. Remarkably, they will account for 29 percent of ASEAN’s gross domestic product (GDP) and are expected to post faster growth compared to the larger cities through 2030.
The demographic bonus and middle-income revolution have become central issues in the past several years. In fact, around two-thirds of the population will be of “working age” (15 to 64) and the dependency ratio will have decreased to 46 percent in 2030, the lowest level in the last 100 years (Office of the Coordinating Economic Minister, 2014). Accenture (2012) reported that 87 percent of Indonesia’s households were forecast to be in the US$5,000-$30,000 disposable income band by 2020.
Last but not least, massive ICT advancement is also key. Manuel Castells (1996) said that the impact of digital technologies was comparable to that of the Industrial Revolution. ICT, like that revolution, will play a key role in enhancing economic growth. Disruptive technologies, a term to depict innovative technology related to mobile internet, big data, cloud technology and so on, are expected to contribute 4 to 12 percent to ASEAN’s GDP in 2030 (McKinsey, 2014). The fact that Indonesia has 72.7 million active internet users, 308.2 million mobile connections and is home to among the most active social media users in the world needs to be considered in ICT usage. ICT development has contributed to more effective public service delivery and good governance in general. The development of secondary cities in line with the “smart city” concept — with its elements of effectiveness, consideration for the environment and innovation — is a smart move.
Thus, the use of ICT by middle-income people in secondary cities will significantly drive economic growth in the next five to 15 years. Unfortunately, Indonesia will still face serious challenges. Sadly, none of the secondary cities have been ranked among the most livable cities in any indexes and despite the potential of its youths, the country ranks in 108th position in the Human Development Index, with Palestine, Tunisia, Georgia and Iran ranking above it. Further, based on a Nielsen survey (2011), Indonesians are mostly unproductive online. The Networked Readiness Index (2014) ranked Indonesia in 64th place for technology readiness.
The Microsoft Smart Secondary City Project found four main challenges in the development of ICT in Indonesia, as follows: low awareness in the government of the importance of ICT usage; lack of funds for ICT development and infrastructure; inexistence of an ICT development master plan, resulting in poor management; and lack of awareness among people with regard to ICT solutions.
A big gap between opportunity and government strategy is the main problem. Without a specific, comprehensive strategy to take advantage of this great opportunity, Indonesia will certainly lose it. Therefore, the country must pay more attention to this niche. Academicians should also conduct more research in this field so that they are able to support government and business needs. And finally, business practitioners might gain advantages by considering this niche as a great prospective market in the near future.
Article published on The Jakarta Post, on March 19th 2016. See more at < http://www.thejakartapost.com/news/2016/03/19/digitalized-indonesia-big-opportunity-greatchallenge.html>
