The digital economy set to become a new engine of growth

Jakarta. The digital economy could potentially become the new engine of growth due to the massive diffusion of digital technologies that are transforming many aspects of people’s way of life, Chief Economy Minister Airlangga Hartarto said on Thursday.

A notable example of the fundamental changes in business practices brought about by digitalization is that it enables faster and more efficient financial transactions, causing money to flow faster than ever before, he said.

“The government encourages the use of new sources of growth to support this economic transformation. Accelerating the digital economy becomes our main strategy to transform the economy and accelerate post-Covid-19 economic recovery,” Airlangga said in a webinar hosted by Investor Magazine, a sister publication of the Jakarta Globe.

Indonesia is making progress in financial inclusion, with 55.7% of adults in rural areas having a bank account, he said without going into details.

The government has introduced several policies to increase the number of people with accounts, including a decision to channel pandemic-related financial aid through bank accounts only.

But there is still a long way to go for Indonesia to be a major player in global digitalization.

“Indonesia needs 9 million digital talents by 2030 to contribute 4,434 trillion rupees to our GDP, or 16% of the estimated GDP in 2030,” Airlangga said.

According to one estimate, Indonesia has 202 million internet users who contributed $70 billion to the country’s digital economy last year.

Arsjad Rasjid, president of the Indonesian Chamber of Commerce and Industry, said last month that the value of the country’s digital economy is expected to reach $146 billion by 2025.

Indonesia has more than 2,300 tech startups, including 12 with Unicorn status, a startup valued at over $1 billion.

Local fintech start-up Julo told the webinar that it has funneled more than 5 trillion rupees in credits to around 1 million Indonesian customers since the company was established in 2016.

Co-founder Julo Adrianus Hitijahubessy said the company’s services are accessible in all 34 provinces, offering small-scale loans of up to Rs 20 million per transaction.

“Credit disbursement quadrupled during the pandemic era in 2020-21,” Julo said.

The app also offers a digital payment platform to help customers pay for utilities and health insurance and purchase an internet plan, he said.

“Julo is a technology company because everything we do is based on technology, including our risk mitigation system to assess the credit risk of any borrower,” he said.

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