PhD Researcher @ TU Delft. Former researcher @ Centre for Innovation Policy and Governance (CIPG). Keen interest in digital platform, data-driven business model, digital development and public sector innovation.
In today’s digital era, data have become a valuable resource for digital enterprise to innovate and stay competitive in the market. This also applies to developing countries, where start-ups offer new digital products and services and transform everyday lives. One way to realize data-driven innovations is by sharing data among parties and even competitors to generate new insights and improve the quality of products or services.
In this context, data marketplaces are emerging, which are described as platforms that bring multiple parties together to exchange data with each other. Data marketplaces could play a key role in enabling data-driven innovations for digital enterprises in developing countries since they face a significantly different challenges in terms of resources and capabilities than digital enterprises in developed countries. More importantly, data marketplaces might generate value for digital enterprises in developing countries, because new insights can be generated by analyzing data from multiple sources.
Various initiatives and pilots on data marketplaces are available (e.g. OpenDataSoft, Azure Data Market, Data Market Austria). However, they often struggle and fail to survive. This is mainly due to lack of trust, fear of losing competitive advantage when sharing data, or the risk of violating strict privacy regulations (e.g. GDPR). To tackle these challenges, in the Safe-DEED project (Safe Data-Enabled Economic Development) we focus on developing new privacy-preserving technologies to enable firms to expose data via data marketplaces without giving access to actual data. We are also conducting multi-actor business model research in order to bring those technologies to the market in a sustainable way so that digital enterprises can generate value from such a platform.
How is this relevant to the digital economy and development? There are several possible use cases within the digital economy and development context. For instance, SMEs could benefit from accessing data and information provided by other SMEs in data marketplaces to support market research, so that they can formulate a better strategy to reach their target market. Digital enterprises providing on-demand transportation services could also expose their data via data marketplaces, and support the government in developing traffic policies without revealing sensitive information. Furthermore, a peer-to-peer lending platform focusing on providing loans in rural areas can also expose data to conventional banks via data marketplaces to get a better picture of unbanked population in a country so that they can collaborate in achieving financial inclusion.
Of course, there are several challenges in realizing data marketplaces that are safe and secure, such as convincing the first couple of firms to join the data marketplace platform, the impact of such an innovation on trust, ethics, security, and finding a sustainable business model for the data marketplace itself. Hopefully, answers to these challenges will be available by the end of this project.
Indonesia aims to become the biggest digital economy nation in ASEAN by aiming to reach 130 million US$ of e-commerce transaction in 2020. This may sound ambitious, but the fact that a majority of Indonesians are digitally oriented makes the government strongly believe that the target can be achieved. The latest data from Asosiasi Penyedia Jasa Internet Indonesia (APJII) and We Are Social revealed that there are 143,26 million internet users in Indonesia in 2017, and a majority of them use mobile devices to access the internet. Moreover, the total number of mobile connection has exceeded the Indonesian populations, with each citizen have approximately 2 to 3 SIM cards.
What are the underlying factors that drive this enormous growth? I would argue that there are at least four factors:
Technological advancement particularly in the telecommunication sector. Initially, we can only use a mobile phone for voice call and SMS. These days, both services are not popular anymore as people prefer to use instant messaging and Voice over Internet Protocol (VoIP). This also applies for the handset that we use today, as it becomes smarter and capable of doing a wide range of tasks compared to a classical feature phone.
Increase coverage of a mobile network. There is a fierce competition among operators to become the best in the country through massive infrastructure deployment. As a result, more and more people now have an access to the internet.
Price of ICT is getting cheaper. There is a price war between each operator by lowering the price of internet services in order to maximize network utilization. Also, we can easily find a high-quality smartphone with an affordable price. As a result, telecommunication is not a luxury good anymore.
Social media and instant messaging as “killer apps”. The introduction of Blackberry Messenger (BBM), Facebook and Twitter in Indonesia played a key role in boosting data penetration in the country.
Despite the growing trends of digital in Indonesia, we still face a significant challenge in narrowing the digital divide. Around 77 per cent of internet users are centred in Java and Sumatra, and less than half of citizens in eastern part of the country do not have access to the internet. As a result, Indonesia still lags behind our neighbour countries like Thailand and Malaysia when it comes to global indexes such as Networked Readiness Index (NRI) or GSMA Mobile Connectivity Index.
The digital divide in Indonesia (Source: Open Signal)
The development impact of the digital economy
The aforementioned infrastructure challenges apparently do not hamper the promising growth of the digital economy in Indonesia. At the time of writing, Indonesia has nearly 2,000 start-ups and only behind USA, India, UK and Canada. Interestingly, the majority of those start-ups are led by “millennials” that are passionate to create social impact by harnessing the power of digital technologies. This can be seen from how Nadiem Makarim is successfully growing Go-Jek to empower not only “ojek” drivers but also SMEs and consumers. Go-Pay, mobile wallet system developed by Go-Jek, even contributes in promoting financial inclusion in Indonesia. Another example is evident from how William Tanuwijaya initiates Tokopedia as a platform to enables everyone in starting their own business for free. Both Go-Jek and Tokopedia, together with Traveloka and Bukalapak, are known as start-up unicorn in Indonesia.
So, how does the digital economy contribute to economic growth?
Admittedly, the contribution of the ICT sector to GDP in Indonesia is still not significant with only 7.2 per cent. However, the GDP growth from this sector is the highest compared to other sectors with 10 per cent of GDP growth. In fact, this number is much higher than average GDP growth of Indonesia that only reached 5 per cent.
In other report published by Oxford Economics (2016) revealed that by 2020 every one per cent increase in mobile penetration can contribute in creating additional 640 million US$ to Indonesia’s GDP as well as opening up 10,700 additional job opportunities. Hence, it is no surprise that the government has put significant attention to the digital economy sector.
Speaking of the digital economy, there are at least three emerging trends that are currently happening: on-demand services, financial technology, and e-commerce.
On-demand services. It is impossible to talk about this sector without mentioning Go-Jek, one of the most influential tech start-up in Indonesia. They not only managed to revolutionalize “ojek”, but they also successfully influence behavioural change in our society. Essentially, they facilitate almost everything on-demand, from logistics, food delivery, car wash, and even beauty services. They are now in the process of preparing their own streaming service, which could cement Go-Jek’s position in providing anything that Indonesians need.
Financial technology. There is a clear challenge in bringing financial services to everyone in Indonesia. Only about one in three adults in Indonesia have access to financial services. In this regard, Financial Technology (Fintech) played an important role not only as an enabler for the digital economy but also promoting financial inclusion through technology. This is evident particularly within the case of a peer-to-peer lending platform that enables small business to get access to financial capital. Another example is how the mobile payment serves as a mean to promote a cashless society in Indonesia.
E-commerce. More than 8 million Indonesians loved to shop online, and the numbers are expected to increase in the near future. This is driven by both consumptive and online behaviour of Indonesians as well as the increasing market reach thanks to social media and technology. As a result, many stores are now trying to sell their products through both online and offline channel. People can now buy almost anything easily through their smartphone without having to go to the actual stores, and we can receive our products within hours with the help of instant courier. In the future, we can expect further innovation such as an unmanned store that will transform the way we shop.
Conclusion
Indonesia has a great potential to become the biggest digital economy nation in ASEAN, even in the world. But, achieving this target requires various stakeholders involved to overcome the following challenges:
Narrowing the digital divide. Infrastructure is an important enabler in maximizing the benefit of the digital economy, so the government must ensure that everyone can have an equal access to technology. Palapa Ring project is a great starting point, and the quality of our infrastructure will surely get better by the time the project is finished in 2019. But the infrastructure deployment cannot stop there and should focus on providing access to rural areas in Indonesia.
Digital talent. There is still a mismatch between the supply of university graduates and the demand from tech start-up. This leads to talent war, in which many start-ups have to compete in securing high-quality talents that are lacking in the market. Hence, a collaboration between industry and academia is important to ensure the production of high-quality digital talent that meets the needs of the digital industry.
Regulations. It is no secret that regulations are always behind technological advancement, as can we see from the case of Go-Jek and Grab. What we need is a guiding principle in designing regulations for those emerging technology. It should be designed in such a way that it will not hamper creativity and innovation in tackling societal challenges. Several cybersecurity issues should be taken into account, particularly about consumer protection of personal data.
Development Implications of Digital Economies (DIODE) Strategic Research Network 