Bridging the Gap

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”Maybe you are searching among the branches, for what only appears in the roots.” (Rumi)

The journey of digital transformation in Indonesia is faced with challenges of geographic, economic and social inequality. In fact, the digitalization program in Indonesia is part of efforts towards inclusive and sustainable economic and social development. Digitalization is also a major prerequisite for a knowledge-based economy.

In the global digital ecosystem, Indonesia's current position is more focused on being a consumer rather than an active producer of its own digital products.

In reality, as the country with the largest digital economy in Southeast Asia, Indonesia has great potential to increase its role from just a consumer market to a producer of innovation and technology.

Also read: Digital Society Transformation

Digital divide

The challenge of realizing digital transformation is overcoming the digital divide (digital divide). From the supply side, the availability of digital technology infrastructure is key (Kumaret al, 2023).

Meanwhile, from the demand side, the state plays a role in closing the digital gap through fundamental improvements, especially in terms of income gaps.

These two major currents play a significant role in closing other gaps, such as economic inequality, access to education, and healthcare services. This also includes improving the efficiency and transparency of government service processes (OECD, 2001).

The role of digital transformation to support development has become increasingly critical, especially during and after the Covid-19 pandemic. This is in line with studies which state that the adoption of digital and technological innovation by micro, small and medium enterprises (MSMEs) can improve business sustainability, financial literacy, marketing strategies and operational efficiency in Indonesia (Affandi et al , 2023).

The acceleration of digitalization in payment systems and various other initiatives, such as the use of QRIS, BI Fast, and credit cards, reflect the regulator's efforts to utilize digital technology for sectoral growth and efficiency.

The implementation of e-Government and the National Electronic Government System (SPBE), as well as the establishment of the National Data Center (PDN), is also one of the efforts to realize a clean, effective, transparent, and accountable government governance.

Nevertheless, digital transformation can still be encouraged to strengthen Indonesia's position as a major player in the global digital economy.

Digital foundation

In the process, the development of digital foundations (digital building blocks) that can be used modularly, both by the government and the private sector to enable digital transformation in society at large, has become very significant.

Indonesia can learn important lessons from India through implementing the India Stack (Alonsoet al, 2023). This infrastructure is a shared digital building blocks supported by open standards or specifications that are interoperable.

In technical terms, this digital infrastructure is a network, system, or platform that allows programmatic and secure access to data through application programmatic interfaces (API).

This infrastructure consists of three layers. First, the unique and single identity of each entity. Second, an integrated payment system. And, third, a data exchange system that allows online, paperless, cashless access, and maintains privacy to various public and private services.

Strengthening human capacity is crucial so that Indonesia's demographic bonus can be utilized.

This infrastructure minimizes overlapping efforts of digitalization between institutions and cost inflation. In addition, it also improves the efficiency of digital infrastructure maintenance and provides optimal impact.

This is due to the uniform digital infrastructure development carried out on a single digital system. As a result, it can encourage innovation, inclusion, and healthy competition at the national scale.

Indonesia can learn lessons regarding the importance of the state's role in supporting digital transformation to strengthen an inclusive and sustainable economy.

As an illustration, India Stack has succeeded in increasing efficiency in the fiscal, education, health and financial sectors, as well as supporting community empowerment.

India Stack is an initiative that combines an individual's digital single identity (Aadhaar) with various programs, such as eSign, a single tax identity (GSTN), registration systems, and a single identity for MSMEs (Udyam).

This system is also connected to the education system platform (DHIKSA) which provides various needs of students, teachers and school administration for free. This includes providing textbooks that link QR codes to relevant digital content, online courses, assessments, quizzes and chatbots. Overall, this improves the quality of public education.

Meanwhile, the payment system platform (UPI), Aadhaar payment system and payment bridge, centralized billing payment system is connected to digital document storage (DigiLocker) and account aggregator which allows access by consent (consented) and sharing of digital financial information between financial institutions in a secure and reliable manner. This supports inclusive financing.

The digital infrastructure was successful in reducing government budget leaks, increasing tax absorption, promoting inclusive learning, financing micro, small, and medium enterprises, as well as streamlining the distribution of Covid-19 vaccines.

This implementation serves as an example of how technology can be used to improve the quality of governance, accountability, and efficiency, as well as provide data protection for the community. Not to mention, the control over personal data.

Strengthening human capacity is crucial so that Indonesia's demographic bonus can be utilized.

Building inclusivity

Inclusivity, empowerment, and sustainability are the three important pillars in Indonesia's digital transformation to bridge economic and social gaps. Of course, building inclusive and sustainable digital infrastructure is the key to supporting Indonesia's Digital Vision 2045.

The digital building blocks initiative can be adapted to increase financial inclusion, expand access to health and education, and increase economic efficiency.

The development of information and communications technology infrastructure that includes a national broadband network, an integrated and reliable national data center, and cloud computing services is a very important foundation.

Equally important is the development of human resources in Indonesia through increasing digital expertise, mastery of science, technology, engineering, and mathematics (STEM), as well as instilling a culture of learning and research. Strengthening human capacity is crucial in order to utilize Indonesia's demographic bonus.

Also read: Inevitable Digitalization

An integrated approach involving collaboration between the public and private sectors in planning and implementing digitalization strategies, as well as adopting comprehensive and participatory strategies, will enable Indonesia to leverage digital transformation as a means to achieve inclusive and sustainable development.

Yoga Affandi, Head of Bank Indonesia Institute