Digital Economy

An ultra-micro business owner (UMi) receives payment by Gopay at the launch of the ultra-micro finance digital ecosystem in Jakarta, Nov. 12, 2018. In order to facilitate the monitoring of loans and to reduce the use of cash, the government has cooperated with institutions engaged in digital payments such as T-cash, T-money, Gopay, and Bukalapak to channel assistance to UMi.

The terms unicorn, sky toll and Industry 4.0 came to the fore during the presidential debates recently. What exactly is their context in our economy, given the revolutionary change in the global economy.

The 2008 major crisis was an important milestone in the industrial revolution. First, almost all developed countries experienced a cycle of the economic decline due to the crisis and it was believed that it could only be resolved through technological innovation.

They have entered a phase where labor is no longer able to boost productivity. Second, people tend to no longer trust formal institutions, especially the financial sector. The orientation of innovation leads to a more informal pattern of relations, without intermediaries, or avoiding the intermediary function.

Artificial intelligence research began in the 1950s, but its rapid development has only taken place in the last 10 years. Starting in 2011, the development of artificial intelligence has been quite dynamic, involving many aspects, such as big data, machine learning and deep learning. Sophia, one of the smartest robots at the moment, was first introduced to the public in 2016 by Hanson Robotics, a Hong Kong-based company.

In September 2008, a paper about bitcoin was published by someone claiming to be named Satoshi Nakamoto. Bitcoin is still being debated and there is no global consensus on its use. However, the technology used by bitcoin, namely blockchain, has been recognized as a revolutionary discovery that is considered equivalent to the invention of computers. You can imagine, the blockchain will change the landscape of all fields, not only the financial sector.

In 2015, the largest US financial center, Wall Street, announced that it had adopted a blockchain. Many institutions, both government and private, are competing to adopt this recording technology.

KOMPAS/ALIF ICHWAN

Customers try the LinkAja mobile money application in Jakarta, on Feb. 25. Telkomsel\'s electronic financial service, TCASH officially changed to LinkAja on Feb. 22. LinkAja is a digital money service synergy of various state-owned enterprises (BUMN). LinkAja combines Telkomsel\'s TCASH product, Yap! owned by BNI, e-Cash owned by Bank Mandiri and T-Bank BRI. This merger is expected to enable BUMNs to compete with OVO and Go-Pay and can optimally serve Telkomsel customers.

Implications

Many people think the implication of this revolutionary change is remote. That\'s where the problem lies. Various inventions are indeed still in the incubation phase and have not yet entered the commercialization phase, but their progresses has been faster than expected. Therefore, preparations to face them must be accelerated.

Industry 4.0 is a meeting of physical, digital and biological intelligence that produce innovations that have never existed before. Supporting technology such as cloud storage, internet for all and superfast computer processors have created an ecosystem that allows acceleration of discovery in almost anything that is almost limitless.

Recently, Japan pioneered initiatives to use technology to improve the quality of human life and society, which is known as the Society 5.0 concept. Technological advances are directed at improving the health sector, the environment, energy and the welfare of society at large. In universal language, technology must be able to improve the ability to achieve the Sustainable Development Goals (SDG).

In 2014, Prime Minister Shinzo Abe launched a robot as the main pillar of Japan\'s growth strategy with the slogan "Make Japan Great Again". A budget of US$22 billion has been allocated until 2020, complete with a blueprint for the development of the robots for five years and the establishment of an institution responsible for the implementation of the program.

How about us? The potential of the digital sector in Indonesia is large, but it needs more systematic efforts to adopt the technology to increase the productivity of the domestic economy. McKinsey & Co in a report published in August 2018 estimated that the market of the digital networks in Indonesia will grow eightfold to between $55 billion and $65 billion by 2022 from $8 billion in 2017.

Average individual expenditure will increase from $260 a year in 2017 to $620 in 2022. This situation is similar to China\'s experience in 2010-2015. Meanwhile, Frost & Sullivan in a 2018 report estimated that the market share of nonintermediary loans (peer to peer lending) will reach $150 million by 2021, while the e-commerce market is expected to reach $130 billion by 2020.

This report also cites the government\'s target to digitalize eight million small and medium enterprises (SMEs) until 2020, which is expected to help increase the value of SMEs to $10 billion.

Frost & Sullivan estimates that the pay TV market will increase from $758 million in 2017 to $4.9 billion in 2022, while the insurance market is expected to increase from $3.1 million to $138 million in the same period.

KOMPAS/PRIYOMBODO

A salted fish trader receives payment using e-money at Mayestik Market, South Jakarta, on Oct. 18, 2018. Besides the cash payments, traders in the market receive payments in electronic money such as E-money and T-cash. According to the traders few consumers utilize the cashless payment systems. 8

Application-based education and health services are projected to increase eight and 11 times in the next five years. Meanwhile, according to Bank Indonesia data, electronic money transactions sharply increased from Rp 1.97 trillion in 2012 to Rp 47.2 trillion in 2017.

The market share of the digital sector in Indonesia is very promising. The January report of Hootsuite and We Are Social indicates that 56 percent of the population are internet users, while cellphone penetration reaches 133 percent of the population.

Compared to the previous year, there was a 13 percent increase in internet usage and 15 percent in the use of social media. The time spent accessing the internet every day is 8 hours 36 minutes.

Of course we are not satisfied to become only a market because digital technology can function in two ways. First, increase the productivity of each sector, including micro and small businesses and the

informal sector. Second, it enables business to integrate into the chain of production with higher added value. Technology can create an ecosystem as a whole. In this phase there are two urgent things to do. First, there should be a comprehensive mapping of digital-based economic potential and the establishment of its institution so that it will not only be handled partially. There are signs of the lack of coordination but it should not be allowed to slow its progress.

Second, human resources should be improved through cooperation between government, business, and the private sector as well as through vocational education and certification.

It is expected that there will be more unicorns, startups with valuations of more than $1 billion, from Indonesia, not just limited to existing four, namely GoJek (S$9.5 billion), Tokopedia (S$7 billion), Traveloka ($4.1 billion) and Bukalapak ($1 billion).

On the one hand, the adoption of technology will kill job opportunities. However, with good planning, it will also be able to create new jobs with open access. The Palapa Ring project which is planned to be completed this year must function as a sky toll. The synchronization of the regulatory and institutional frameworks to synergize digital-based sectors is becoming more urgent now.

A. PRASETYANTOKO, Lecturer at Atma Jaya Catholic University Jakarta.