Digital Economy in Indonesia: Regional Preview and Necessary Policy Response

Abstraksi

Digital Economy become one of the main keys to accelerates the structural transformation of Indonesia’s economy. This digital disruption on the economy has a potential to provide opportunities in expanding the market for local micro, small and medium enterprises (MSMEs) while creating the new job chains that may help the government in lowering unemployment and poverty rates as well as boosting the local economy. To reap benefit from the digital economic opportunity, the government has developing a regulatory framework of National Roadmap for E-commerce (through Presidential Regulation No. 74/2017) and continuously strive to attract the investment in scaling up local tech-startups and digital business as well as tourism sector development. However, without proper comprehension about the spatial distribution of current digital economic activity, we will be difficult to formulate policies that can mitigate the risk of import, link and match with local economic potential, and support quality growth, which not only rapid but also equal across the region. This paper aims to explore the spatial distribution characteristic of digital economic activity, especially e-commerce. There are four objectives in order to accomplish the goals above. First, explores which e-commerce types that most involves MSMEs, and which platform that most accessible to the remote region. Second, mapping the spatial distribution of e-commerce activities and explores the spatial attributes that highly correlates to the e-commerce sectors. Third, explore how the regional typology can indicate the e-commerce development phase. Last, formulate necessary policy response in optimising digital opportunities to develop local talent and markets. The methods used are the combination of big data analysis and conventional analysis such as literature review, locational quotient (LQ) analysis, specialisation index, correlation analysis and descriptive statistics. Most of the data sources retrieved from Google Trends Analytics, Bukalapak web site, and Central Statistic Bureau. The results are shows that the e-commerce with consumer-to-consumer (C2C) business model has the largest involvement of MSMEs with total more than 2.3 million sellers compared to business-to-consumer (B2C) type that only contains 21.000 sellers. Within the C2C category, Bukalapak is leading with 1.3 million sellers slightly higher than Tokopedia with 1 million sellers. From the google trends analytics, Bukalapak is also more popular in remote and outermost area such as North Maluku, East Nusa Tenggara, North Kalimantan, Papua and Bengkulu comparing to Tokopedia that popular in Maluku, West Papua, North Sulawesi, Southeast Sulawesi, West Kalimantan; and OLX where mainly popular in Western part of Indonesia. From the spatial distribution, using product’s volume as a proxy variable of e-commerce activity intensity, we found that most of the activities concentrated in Java Island or Metropolitan Region outside Java such as Batam, Medan, Denpasar and Palembang. This concentration correlates strongly with gross regional domestic product/GRDP (R=0.74) and population density (R=0.56), and weak positive correlation to human development index (R=0.19), construction expensiveness index (R=0.02), also weak negative correlation to area (R=-0.06), If we breakdown by sectors, electronic and fashion for children are two categories that most correlated with GRDP (R=0.93) and Population (R=0.63); Moreover, Bicycle (R=0.61), men’s fashion, women’s fashion (R=0.58), hobbies and collections (R=0.57), are four categories that have medium correlation with Population Density. However, the Ticket and Voucher category has the weakest correlation to all variables measured. By comparing specialisation index to product’s volume, we found that the 82.95% region with high intensity categorised as less specialised and 79.82% the region with low intensity tends to be more specialised. Metropolises and large cities have high volume and low specialisation characteristic; This means digital platform has largely used in almost all categories, reversely counties in relatively remote areas such as East Seram, South Buton, and Mappi use the observed digital platform respectively to sell goods in Electronic, Computer, and Motorcycle categories. However, Batam, Semarang and Surakarta categorised as the region with high volume and high specialisation. Batam and Surakarta with women’s fashion (LQ = 6,18 and 4,17), and Semarang with handphone (LQ = 13.35). This pattern can reflect the developmental phase of digital utilisation in local economic activities, whether it has affects all products categories or only in several limited categories. These findings will be useful in classifying the region based on current condition and exploring what policies tailored to the needs of each region. For instances, if there is any mismatch between local economic potential and observed digital economic potential, there are indicates the interception from either foreign or domestic imported goods. For low specialisation, low-intensity region, the strategies are increasing local production capacities through creating small-medium industry clusters and vocational education that supports related sector development. For high specialisation, low-intensity region, the strategies are extending digitalisation for product marketing in other categories through the improvement of ICT, e-commerce workshops and facilitation. For the high-intensity region, either high or low specialisation, the data and research centres will be needed to capture opportunity in exporting products while mitigating trade imbalances through the monitoring of imported goods that channelled by digital platforms. In conclusion, the future national roadmap of e-commerce should not only address how we are optimising digital opportunities in boosting national economic growth but also providing a grand design on where and how similar opportunities able to leverage local economic activity so that accomplishing the quality growth will not be impossible.