High Hopes for Digital Economy

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  • TEMPO.CO, JakartaTechnology accelerates the pace of change in financial services. Progressive measures are needed to ensure that Indonesia can optimize the potential of the digital economy sector.

    THE initial public offering of the Ant Technology Group should serve to spur on Bank Indonesia, the Financial Services Authority, and the government to hasten the acceleration of the digital ecosystem in this nation. Those stakeholders need to adapt more quickly in line with the rapid development of the technology so that the huge potential of Indonesian digital economy is not frittered away.

    The move by the Ant Group Corporation on the Hong Kong and Shanghai Stock Exchange this Thursday, November 5, is historic. It is estimated that the financial technology company affiliated with Chinese e-commerce giant Alibaba Group Holding Limited will raise US$34.5 billion, or around Rp508 trillion, breaking the record for the world's largest initial public offering. The achievements of the Ant Group show how the digital economy, including financial technology, will continue to grow in the future.

    The digital economy is now exploding around the world. Technology companies in many nations are flocking to enter a range of Internet-based service sectors from trade, transportation and tourism to medical and financial services. This business is the new gold and now contributes 15.5 percent of world gross domestic product.

    The same explosion is taking place in this country. Digital technology companies have expanded to every aspect of people's lives, from transportation and tourism to education and health. Research by Google and Temasek in 2019 estimated that the digital economy in Indonesia was already worth US$40 billion, with an average growth of 49 percent every year since 2015. Indonesia is predicted to be a new force in the global digital economy with turnover increasing threefold in the next five years.

    The problem is that this prediction will only be realized if a number of conditions are met. At present, Indonesia's biggest assets are limited to the size of its population and the large and steadily increasing number of Internet users. A number of other aspects needed to optimize the potential of the digital economy are still far from ready.

    Just look at the efforts to integrate the digital payment system that are still in abeyance. Regulations to support the growth of the financial technology industry are also very weak. There is still no blueprint for the education of human resources to tackle the lack of understanding of information technology. Meanwhile Bank Indonesia, the Financial Services Authority, and the government are too passive. They only rush to produce strategies and policies when problems arise. This means that Indonesia continues to be left behind other countries.

    The policy from Bank Indonesia in January to implement the Quick Response Indonesia Standard is one example of a measure that was right but too late. The implementation of the QRIS did not happen by the initial 2018 deadline despite the fact that there had long been calls to integrate a number of QR code payment systems managed separately by each payment systems service provider.

    In the future, Bank Indonesia must be more progressive. After successfully rolling out the National Payment Gateway, with QRIS as a part of it, Bank Indonesia should move more quickly. The central bank should immediately introduce a central bank digital currency like those of the central banks of China and Japan. The implementation of that policy will not only make the management of payment systems and monetary policy by the central bank more efficient, but it will also make the financial system more accessible to the people unable to use banking services. Financial inclusion will be the most important contribution of the digital economy to improve the welfare of the Indonesian people.

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