Indonesia has embarked on a journey to become Southeast Asia’s digital hub next year, as the government announced recently its plan to overhaul the country’s data protection and e-commerce regulatory frameworks. Both public and private sectors in Indonesia have invested in digital technologies in order to grow their competitiveness with e-commerce and data centers in Indonesia poised for dynamic growth in the three to five years.
Rudy Salahuddin, an official from the Office of the Coordinating Economic Minister in Indonesia, recently said that, “The utilization of digital technology will not remain limited to certain sectors but (affect the country’s) development as a whole.”
Recently the Hinrich Foundation issued a report, “The Digital Komodo Dragon: How Indonesia Can Capture Digital Trade Opportunity at Home and Abroad,” which estimated that digital trade contributes $9.3 billion USD to Indonesia today. However, while digital trade is growing, its still less than 1% of Indonesia’s GDP. The percentage pales in comparison with neighboring ASEAN economies like Malaysia, where digital trade is equivalent to 2% of the country’s GDP.
The difference in GDP from digital trade figures between Indonesia and Malaysia reinforces the fact that digital technologies have the potential to impact the economy in Indonesia. According to economists, Indonesia’s digital trade could grow by 1800% by 2030 in Indonesia and reach $172 billion USD per year and would account for 9% of the country’s projected GDP.
Another report, by IDC, highlights the fact that Indonesia’s private sector has its own vision related to digital trade and is actively working on it. According to IDC, “Indonesia has been aggressive in economic development, including in digital innovation and initiatives across the region. Based on our latest research, 80% of enterprises today have considered digital trade as a core strategy while the remaining 20% recognize its importance to the future.”
Data analytics and cloud computing are perceived as core subjects in Indonesia’s digital transformation, while emerging technologies including artificial intelligence, machine learning and the internet of things (IoT) are key capabilities that will be enhanced by enterprises in the future.
Another component of Indonesia’s digital transformation that has been recognized by the government and private enterprises is that Indonesia will have an increasing demand for servers and hosting capacity. Meily Lisdiyanti, Market Analyst at IDC Indonesia noted, “The demand for cloud services have increased across all verticals with the adoption of solutions such as AI, IoT and big data. As these technologies are gathering big chunks of data in real time, it will require an infrastructure that is more agile and cost efficient.”
Echoing this sentiment, Sreenath Kandarpah, Head of Services IDC ASEAN said, “Datacenters are now the new business jewels for all enterprises as well as governments as they must rely on them to deliver business value much greater than their costs. It is the backbone that supports the growth of large, SME and startup businesses.”
Alibaba Group from China appears to have realized Indonesia’s server and hosting business opportunities as the company recently launched its second data center in Indonesia.
Sreenath Kandarpah, Head of Services IDC ASEAN reviewed Indonesia’s hosting and server environment and said that the emergence of Alibaba Cloud will create competition that, will cause the local players to raise their game. To stay competitive in the market, local service providers should re-evaluate their approach towards enterprises by creating an attractive pricing and add-on services as well as be committed to help the country to achieve its digitalization efforts and boost the national digital economy.”