Indonesia shares similar characteristics with China and India as Asian countries that have more people between the ages of 15 and 64 than young children and the elderly.
Analysts call this surplus of people of productive working age a “demographic bonus”, which can contribute to the rise of China, India and Indonesia as leading economies.
The young populations of these countries are entering a shifting jobs landscape propelled by innovation in digital technology. China and India are moving to prepare their populations to take advantage of the digital era.
But Indonesia has a lot of catching up to do to provide its people with skills including digital literacy, to be able to find employment in a world where the ability to use the internet via digital mediums, such as personal computers, smartphones, tablets and others, will be a necessary skill.
Changing jobs landscape
Before there was the internet, around 30 years ago, more than half of Indonesia’s population (54.7% in 1985) worked the land as farmers.
By 2016 only 34% were still working in the agriculture industry. Some 44.8% work in the services sector and 19.7% in manufacturing.
Data from Indonesia’s Statistics Agency show more than half of Indonesian workers (51.5%) are underqualified or lack the right skills to do the job. This occupational mismatch is often associated with low levels of education. Some 40% of workers’ skills and employment are well matched. And 8.5% are overqualified for their occupations.
The data show Indonesia is facing a skills shortage. One of the skills Indonesians lack is digital literacy.
What China and India are doing
China provides us with a good example of how to take advantage of an internet-enabled digital economy. It accounted for 30.6% of China’s GDP in 2016.
Even though China restricted its citizens’ internet access, by blocking certain websites and applications since 1997 (“the great firewall of China”), it has, on the other hand, driven the development of its native platforms such as WeChat, Weibo, QQ, Renren, Alibaba, JD.com and many others.
With its restrictions, China has reoriented internet adoption and online behaviours by maximising its market potential within the country.
For example, WeChat has grown rapidly since 2011 to rival Facebook and become the nation’s most-used social media app. It has radically changed the Chinese lifestyle and way of doing business. WeChat will potentially overtake Facebook in the future.
It offers features such as instant messaging, commerce and mobile payment services. It makes a virtual workplace possible by offering components that enable and improve important business functions such as task co-ordination. It provides a convenient virtual wallet that can be used for almost every transaction, from paying utility bills to a coffee.
The Chinese diaspora has spread the use of WeChat worldwide. This is an example of China using its demographic bonus to create opportunities and a competitive environment that allow its citizens to redefine the global economic balance of power.
Meanwhile, India made a serious move to combat digital illiteracy by establishing the National Digital Literacy Mission (NDLM) in August 2014.
With the objective of “making one person in every family digitally literate by 2020”, India has pledged to provide 147 million people in rural India with the necessary skill to use the technology.
This can be seen as a positive move towards a more digital-savvy India that recognises the need of digital literacy for development.
What about Indonesia?
Indonesia currently focuses on traditional infrastructure development, such as roads, ports and a subway system, to improve physical connectivity and mobility. But the government should not lose sight of the importance of providing the population with the infrastructure to access information and technology.
A survey by the Association of Indonesian Internet Providers (APJII) pointed out that people living in the urban areas in Java, Sumatra and Bali enjoy internet access, whereas the rest of Indonesia is still struggling to connect.
According to Akamai, as of March 2017, the internet penetration rate in Indonesia is 50.4%. This is lower than neighbouring countries such as Australia (85.9%), Singapore (81.2%), Malaysia (67.7%), Philippines (52%), Vietnam (52.1%), and Thailand (60%).
The average speed of internet connection in Indonesia (7.2 Mbps) is also slower compared to Singapore (20.3 Mbps), Thailand (16.0 Mbps), Vietnam (9.5 Mbps) and Malaysia (8.9 Mbps).
Despite high smartphone sales (55.4 million users in 2015 with 4.5 million smartphones sold annually), Indonesia remains “a marketplace” rather than a rising power in the global competition. Indonesia is the third-largest smartphone market in the Asia-Pacific rgion, after India and China.
Indonesians can use social media such as Facebook and WhatsApp, but they do not have fast and reliable internet access to browse and research online, let alone create business opportunities.
Research by Edwin Jurriens and Ross Tapsell recommends that the Indonesian government start paying attention to the digital divide if Indonesia is serious about its objective to combat inequality.
Start with simple but necessary steps
Indonesia needs to develop policies with clear objectives to spur internet adoption and digital literacy.
If President Jokowi is serious about creating “1000 technopreneurs by 2020”, the government should start by:
- working with the private sector to provide internet access and telecommunication services for rural areas
- training citizens to use digital technology via formal and informal education programs nationwide
- promoting and providing incentives to develop native online platforms.
This could involve, for example, holding hackathons to solve the real issues that Indonesians face daily, such as traffic jams, floods, finding markets for local products, access to health services and referral, options for different service providers, a channel to provide feedback to improve services, etc.
Instead of leaping towards the objective of creating “technopreneurs”, Indonesia could begin with a simple objective to start a nationwide movement to combat digital illiteracy, a hidden inequality that persists in Indonesia.
Indonesia should also provide an environment where tech startups can thrive, through tax rebates and investments, to really benefit the Indonesian economy.
For example, Gojek, one of the most successful local startups, was founded and is led by Nadine Makarim, an Indonesian. However, it could only succeed after receiving backing and investment from Warburg Pincus, KKR and Farallon Capital – all American-based equity firms.
We may celebrate Gojek as a successful Indonesian example of a startup that has helped to solve local issues by allowing access to convenient services. But, if we fail to understand who are “the real owners” of the business, Indonesia will only be “a marketplace”, not an emerging economy.