Strategic Investment Policies for Digital Transformation: The Case of Indonesia

ABSTRACT

Consumption and production of digital goods and services have increased in Indonesia for the past ten years. A fast-growing e-commerce sector and an increase in digital payments supported the strong growth of the digital economy. Although Internet and digital transactions emerged in the late 1980s, the regulatory framework governing digital activities was only introduced in 2008 with the enactment of the Law on Electronic Information and Transactions. The government of Indonesia has relaxed foreign capital restrictions and provided fiscal incentives for digital businesses. Indonesia has also made commitments related to digital business in recent trade agreements in terms of the mutual recognition of consumer protection and cross-border data transfer. To encourage the use of ICT in public service, Indonesia introduced the 100 Smart City programme and has begun the implementation of electronic-based public service and operation (e-government). The government accelerated digital transformation during the COVID-19 pandemic by increasing the budget allocations for ICT in 2020 and 2021. To further accelerate digital transformation, the government needs to focus on digital literacy, nationwide integrated infrastructure, regulatory and institutional mechanisms and the innovation ecosystem.