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Digital innovation in Indonesia: inequalities between the east and the west

Indonesia is witnessing digital technology innovation in the growth of online on-demand transportation services such as (Go-Jek and Grab), e-commerce businesses such as online shops (Tokopedia and Bukalapak), and ticketing services (Traveloka and

But a large proportion of Indonesia’s society, especially people living in the eastern part of Indonesia, could not fully enjoy these innovations. The eastern part of Indonesia enjoys less access to information and communication technology (ICT) than the country’s western regions.

Even if some infrastructure for communication technology is available, low levels of knowledge and skills to utilise information technology hinder many people from enjoying the benefits of technology.

Hence, our research calls the government to bridge this digital divide by involving academics, civil society and businesses.

Raising new inequality

People in the western region benefit more from digital innovation than people in the eastern parts of Indonesia.

Recent data from Indonesia’s Central Statistics Agency show that people in the western part of Indonesia have higher access to technology and have better skills to utilise it compared to people in the eastern part of the country.

Four provinces on Java island scored high in ICT Development Index, while five provinces in the eastern part of Indonesia were at the bottom five.

The majority of Base Transceiver Station (BTS) still centres in Java and Sumatra. Four out of five internet users in Indonesia live in those two islands. Only about 42-48% of people in rural communities have access to smart phones and the internet, compared to 71-72% of people in urban cities.

Not only that, only 21% of people in poor areas have access to the internet. Meanwhile, the figure reached 93% in rich regions.

In addition, many Indonesians still do not have sufficient technical skills in using technology. From 143.26 million internet users in Indonesia, 89% use the internet for instant messaging and 87% for social media in 2017. This indicated that Indonesian citizens have yet to fully utilise the Internet in a productive way.

Opening up new opportunities and cutting the bureaucracy

It is undeniable that the development of digital innovation in Indonesia has spurred efficiency in daily life. For instance, Go-Jek and other e-commerce platforms help create a more efficient interaction between consumers and service providers.

A financial platform, Amartha, helps women in rural areas with limited access to the banking system to get loans for their businesses.

Public reporting tool LAPOR! facilitates communication between the government and civil society. It also promotes public’s participation to create a more transparent and accountable administration.

Overall, digital innovation has led to better quality of life. But digital innovation is also a two-edged sword. It may bring positive impacts in creating a more inclusive society. But it can also widen social inequalities.

The rise of tech-base companies is changing the current employment landscape. While they create more jobs, they also require people to have advanced technological skills to be able to do the work.

Agenda for change

As solutions, we emphasise the importance of improving basic infrastructure coverage such as electricity and mobile network as well as improving people’s ability to use technology in rural areas through various digital literacy activities.

Infrastructure projects have become the current government’s main priority. The Palapa Ring project, which will install 11,000 kilometers of fiber-optic cable across the archipelago, is an example.

Meanwhile, civil society must be involved in various initiatives to improve digital capacity in rural communities. We believe local governments must adopt similar programs and initiatives.

We propose three agendas to maximise the potential of digital innovation in Indonesia.

Comprehensive regulatory framework

Currently, Indonesia still lacks adequate regulations on digital innovations. Existing regulations mostly focus on e-commerce and industry 4.0. In addition, Indonesia also does not have a clear regulation related to data protection. Indonesia lags behind other ASEAN countries such as Malaysia and Singapore. in this area.

The government can translate this vision into a comprehensive set of regulations, ranging from digital infrastructure, digital knowledge and talent, and incentives for business actors.

Multi-stakeholder approach

The government should involve all relevant actors from academics, business players to civil society in policy-making. This is to ensure that everyone is on the same page about the country’s vision on digital economy and willing to engage in collective action make it happen.

Indonesia’s digital economy vision needs to be aligned with the roles of the Ministry of Research, Technology and Higher Education as well as the education sector to ensure an adequate supply of talent working in the digital industry.

Clear control mechanisms

The government must take the lead in supporting digital innovation in Indonesia. Various institution overlap in implementing policies related to digital economy in Indonesia due to lack of coordination.

Indonesia is far behind than other ASEAN countries, like Thailand and Malaysia, which have established specific institutions for digital innovation that focus on overseeing the implementation of digital economy in those countries.

Looking at the global trends, it is only a matter of time before digital innovations impact almost all aspects of life in Indonesia. We must ensure that these innovations contribute to inclusive development and not widen inequalities in the country.

This article was originally published in Indonesian

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