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Indonesia is moving forward with digital innovation

Indonesia is poised for a big leap forward in digital innovation. On a recent trip to that country, I met with government officials, industry leaders, and academics, and found a country brimming with meaningful progress. With 250 million people, that nation is the fourth largest in the world. Around one-third of its people have fixed line Internet access. Fifty seven million individuals own smart phones and the country has an estimated 69 million Facebook users.

Walking around the streets of Jakarta, Depok, and Bandung, you can see lots of people taking “selfies” and posting them online. Young people, in particular, love mobile devices and use them for communications, entertainment, and service delivery. Both cellphones and smartphones are ubiquitous in the major cities.

All of this has led Indonesian leaders to seek new ways of doing business. An Open Government Initiative is emphasizing transparency, participation, and innovation. The government has released a national broadband plan that seeks to make the Internet more accessible. Bandung has launched an ambitious “Smart Cities” project that addresses issues of transportation, garbage collection, energy sustainability, and service delivery. Universities have expanded their educational offerings in science, engineering, and technology.

Mobile applications have become a big part of Indonesia’s economic story. A recent InMobi analysis showed that Indonesia is one of the top places for developing apps. In addition, the report found that Indonesia has one of the fastest growing app markets in the world.

Future policy challenges

Of course, there remain many challenges. People wishing to launch new companies complain of bureaucratic obstacles and lengthy delays in registering firms and getting tax identification numbers. Similar to other places, demand for wireless is out-stripping available spectrum. LTE technology is not fully deployed, making it difficult to reach high speeds. Many are concerned that proposals for a luxury tax on smartphones and local content requirements in manufacturing will slow down technology adoption rates.

In this situation, all eyes are on government leaders seeking to build an innovation-based economy. According to a recent McKinsey report, Indonesia ranks 85th of 144 countries in digital infrastructure, 77th in Internet bandwidth, and 61st in having a skilled workforce. Right now, Indonesia devotes only 0.8 percent of Gross Domestic Product to research and development, well below regional leaders such as Japan (3.5 percent), South Korea (3.4 percent), and China (1.6 percent).

Time Mobility Study of public attitudes in Indonesia found that 74 percent believe invention is important to society and 64 percent think that invention drives economic growth. Yet 31 percent see the lack of government protections for inventors as the biggest barrier to innovation. Making sure inventors receive the economic benefits of their creations is a major requirement for encouraging new ideas.

Policy proposals for increasing digital innovation

There are several keys to Indonesia continuing to make progress on digital innovation. The country needs to boost its investments in higher education and research and development. It has to continue to build a skilled workforce that can compete in the 21st century economy. It needs to upgrade its digital and mobile infrastructure. The country must protect intellectual property rights so inventors are encouraged to develop new products and services. Finally, Indonesia should remove bureaucratic barriers to the startup economy so people can launch new businesses and bring new products to the marketplace.

With smart and sensible policies that encourage innovation, Indonesia is ready to become a real leader in digital technology. It just needs to get its policy, legal, and regulatory regime right so that its hard-working entrepreneurs can take off.

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