Indonesia’s Digital Economy Poised to Reach $133 Billion by 2025
Wed, January 22, 2020

Indonesia’s Digital Economy Poised to Reach $133 Billion by 2025

Indonesia is likewise on track to reach $21 billion this year / Photo by bloomua via 123rf

 

The digital economy of Indonesia is “well on track” to reach $133 billion by 2025 and more likely to dominate Southeast Asia. This is according to a study conducted by Singaporean holding company Temasek, tech giant Google, and management consulting company Bain & Company.

 

The internet economy of Indonesia

The study predicts that from $40 worth of internet economy in 2019, it will grow to $133 billion by 2025, thanks to the growing adoption of digital payment options and e-commerce expansion in rural areas and smaller cities. 

The group’s study, titled “e-Conomy SEA 2019: Swipe Up and to The Right, Southeast Asia's $100 Billion Internet Economy,” details that two-thirds of Indonesia’s digital economy is based on e-commerce and it will be worth $82 billion in total by 2025. The country is likewise on track to reach $21 billion this year, equivalent to 52 percent of its current $40 billion internet economy.

Included in the digital economy is the online travel industry, which is forecasted to reach $25 billion in 2025 from its current $10 billion worth. There is also the online media that will reach $9 billion from the current $4 billion. The report also mentioned the ride-hailing sector that is expected to grow from $6 billion this year to $18 billion in 2025. 

 

How local e-commerce firms are expanding their reach

Google Indonesia’s managing director Randy Jusuf commented via the Jakarta Globe, a daily online English language newspaper in Indonesia, that local e-commerce firms are starting to expand their services and audience reach by selling groceries and wholesale products. Currently, there is a total of 152 million internet users in Indonesia. Jusuf said that opportunities continue to get bigger and e-commerce to move forward. Companies in the country are not just thinking about growth but also of new business models and monetization.

The report also shows that even the non-metropolitan cities are offering opportunities for e-commerce companies, considering that people living in these places only spend a fifth of their earnings on electronic commercial transactions compared to those living in larger cities. Jusuf believed that if e-commerce logistics can improve in non-metropolitan cities, then it also means that the whole industry can grow faster.

The report also notes that people living in the region of Greater Jakarta spend as much as $555 per person yearly in online transactions. Most of these are media subscriptions, ride-hailing service, travel, and e-commerce. On the other hand, the spending figure for non-metro areas is only $103. 

 

Greater Jakarta spend as much as $555 per person yearly in online transactions / Photo by Kongsak Phuangsub via 123rf

 

Southeast Asia’s internet economy

In the compound annual growth rate provided by the Google, Temasek, and Bain & Company joint report, six countries were compared. In 2015, Indonesia’s internet economy was valued at $8 billion, Malaysia at $5 billion, the Philippines at $2 billion, Singapore at $7 billion, Thailand at $6 billion, and Vietnam at $3 billion. This year, Indonesia remains on top with an internet economy market value of $40 billion, Malaysia $11 billion, Philippines $7 billion, Singapore $12 billion, Thailand $16 billion, and Vietnam $12 billion.

By 2025, the study projects Indonesia’s market value to be at $133 billion, Malaysia $26 billion, Philippines $25 billion, Singapore $27 billion, Thailand $50 billion, and Vietnam $43 billion.

Temasek’s investment group joint head Rohit Sipahimalani said that in spite of the worldwide headwinds, Indonesia continues to receive “a lot of funding.” The figures have not even included some investments that the country is receiving.

 

The four “unicorns” of Indonesia

In the business world, a unicorn means a tech startup that has reached a market value of $1 billion based on its public or private investment. In a separate report published by the Jakarta Post, mentioned was the four new unicorns of Indonesia. These are the e-wallet service OVO, online marketplaces Tokopedia and Bukalapak, ride-hailing service provider Gojek, and lifestyle and travel service provider Traveloka. 

Aside from these four unicorns, there are also over 70 aspiring unicorns scattered in South Asia and they include Indonesia’s online marketplace Akulaku and health app Halodoc.

Indonesian E-Commerce Association (idEA) chairman Ignatius Untung commented that the skills gap and lack of infrastructure are two factors that can hamper the growth of their digital economy. But Temasek’s Sipahimalani believed that there is a lot of potential in the digital economy of the country because the younger population will serve as the key factor in such growth.

 

Digital economy: statistics 

The Bureau of Economic Analysis of the US Department of Commerce previously published digital economy statistics that cover the period from 1997 to 2017. The total digital economy (GDP) includes the following in billions of chained dollars:

 

 

-Digital-enabling infrastructure

2011: 896.7

2012: 928.5

2013: 970.0

2014: 993.4

2015: 1,089.3

2016: 1,158.6

-Hardware

2011: 129.5

2012: 133.2

2013: 137.8

2014: 132.9

2015: 156.0

2016: 172.7

-Software

2011: 197.2

2012: 205.7

2013: 209.8

2014: 224.8

2015: 245.9

2016: 260.0

-Telecommunications

2011: 301.9

2012: 301.5

2013: 324.2

2014: 315.8

2015: 339.5

2016: 357.2 

-Support services

2011: 268.7

2012: 288.3

2013: 298.3

2014: 317.9

2015: 347.4

2016: 369.5

-E-commerce and digital media

2011: 85.2

2012: 89.6

2013: 110.4

2014: 118.8

2015: 131.9

2016: 143.3

 

 

-Digital goods

2011: 155.2

2012: 155.7

2013: 160.5

2014: 154.4

2015: 176.1

2016: 188.2

-Digital services

2011: 831.9

2012: 871.9

2013: 919.7

2014: 955.9

2015: 1,043.9

2016: 1,112.7