Digitalisation in Indonesia

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published on May 23, 2018

 

Interview with Markus Schlüter

 

    

If the topic of digitalisation in Germany is written on the agenda, it can be expected that you will not just get a plain definition for the term. The repeatedly mentioned keywords are “disruptive technologies”, “innovative business models” or “autonomization”, which in turn is often summarized under the term “Industry 4.0”. But today we want to talk about Indonesia. Please give us a brief insight into what is meant by the term digitalisation in Indonesia. 

Generally speaking, in Indonesia digitalisation tends to be perceived as a transformation of conventional business models into internet based models for the provision of goods and services (e-commerce). Digitalisation actually does not replace the conventional way of doing business, it rather accompanies and complements the traditional methods.

 

As to the public sector, the Government has introduced electronic tax filing. However, manual submission and face-to-face communication still account for a substantial share in this public service segment. The same applies to the BKPM (Investment Coordinating Board), as approval procedures may to some extent be affected through a web portal, but direct communication still dominates the interaction with authorities.

 

In the private sector, the most obvious transformation is to be observed with online trading or e-commerce, in particular used with the business-to-consumer sector as well as with person-to-person business. Furthermore, mobile based personal transport recently proved to be an increasing trend, such as Go-Jek (motorcycle transport and delivery), Grab and Uber (share riding). Electronic airline tickets also already coexist with conventional tickets.

 

On the other hand, electronic payment procedures (e-money) are only yet implemented to a rather modest extent. Being part of the Fintech implementation in Indonesia, electronic payment is still limited to some of the country´s major cities. In this context it has to be noted that so far there is no uniform nationwide Internet access across the archipelago of Indonesia, and the regulatory framework with regard to electronic payment procedures is still in a development stage.

    

Digitalisation is a cross-industry and cross-company topic. How do you assess the current situation in Indonesia - Has society already internalized the topic, do companies understand the change or is it more likely to try and endure the topic? Which sectors are already on the road to success, which are lagging behind, maybe even traditionally  

In our view, there are large differences to be observed as to the acceptance and implementation of digitalisation across Indonesia´s huge archipelago. Due to the unevenness of communication infrastructures and Internet access, some areas – particularly the major cities of the island of Java – are significantly further advanced than more remote regions. Given the fact that 60 percent of the Indonesian population is concentrated on the island of Java, we may state that the digitalisation of market places has definitely hit the road to success, already steadily coexisting with the traditional national retail business. The same may be expected for mobile and Internet based personal transport and share riding platforms. Money transfer platforms (business-to-business and person-to-person) have also been increasingly adopted by major banks recently.

  

Can you give us an example from Indonesia on how German (or other foreign) entrepreneurs deal with digitalisation locally? How can companies be supported by external consultants and experts in the transformation, where do you see more on-site consulting needs?

As German business activities in Indonesia mainly concentrate on operating beyond retail business due to local investment restrictions, digitalisation is still only rather modestly visible in international business life. Rocket Internet GmbH, a German start-up company has been operating in Indonesia through its former ownership by Lazada Group, but has given up its investment in Indonesia to China's Alibaba. The majority of foreign entrepreneurs focusing on digitalisation are strategic investors in e-commerce retail business. For instance, Tokopedia, one of the dominant players in the field of online market places, recently received some quite substantial investments from foreign investors.

    

Where do you see the best chances for German and European companies to position themselves in the market with disruptive business models in Indonesia?

As German/European companies traditionally have a stronghold in the provision of high-end machinery for manufacturing processes, we see a good chance to tap into the markets of production automation and related information systems such as ERP in Indonesia. Another promising field of activities is the supply of specialist know-how alongside the entire digital transformation process.

 

What points must be given special attention in the transformation in Indonesia (for example: cybersecurity, data protection, change management, cloud computing, ERP systems, (tax) compliance systems, digital payroll, value change, blockchain technologies, etc.)? Do you see local cultural, social or economic advantages that speak in favor of an easier transformation?

We are convinced that every single point in the list given above is equally substantial and requires undivided attention, as Indonesia is still at the beginning of its transformation process. An additional point worth mentioning to our mind is, that from a demographic perspective, Indonesia´s society offers a large percentage of young people (so called generation X and millennials) who according to social experts are very open-minded with regard to the digital era and keen to participate – as consumers and as potential specialist work force for new business models and technologies alike.
  

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