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Sun, 19 Jan 2025 06:43 | News | Editorial INTI
Jakarta, INTI – The digital economy is emerging as a central driver of global growth, and Indonesia, with its immense potential, is positioning itself as a key player in this transformative era. With the digital economy projected to contribute 9% to Indonesia's Gross Domestic Product (GDP) by 2024, the nation is poised to leverage technology as a cornerstone of its economic progress.
This ambitious vision, however, is not without its challenges. It demands strong collaboration between the government, private sector, academia, and civil society to accelerate digital transformation and harness its full potential.
Harnessing the Power of the Digital Economy for National Growth
Indonesia’s digital economy has shown remarkable growth over the past few years. By 2024, it is expected to contribute 9% to GDP, but projections indicate even more significant growth in the future. According to Minister of Coordinating Economic Affairs Airlangga Hartarto, the digital economy’s contribution could increase to 11.1%-13.4% by 2030 and soar to an impressive 15.5%-19.8% by 2045.
This upward trajectory aligns with the country’s broader vision of Indonesia Emas 2045 (Golden Indonesia 2045), which envisions Indonesia as a developed nation with a competitive, inclusive, and sustainable economy.
A recent report by Google, Temasek, and Bain & Company underscores the rapid expansion of Indonesia’s digital economy, which reached a valuation of USD 77 billion in 2023, up from USD 70 billion in 2022. The primary drivers of this growth include the booming e-commerce sector, advancements in fintech, and increased adoption of digital services.
Innovation as a Catalyst for Progress
A key driver of this growth is innovation. Indonesia has made strides in improving its innovation capabilities, climbing to the 54th position in the 2024 Global Innovation Index (GII), a seven-place improvement from 2023.
While this progress is encouraging, Minister Airlangga emphasizes the need for further acceleration. “Innovation isn’t just about creating new technologies; it’s about building a supportive ecosystem that includes policy frameworks, investments, and a skilled workforce,” he said.
The focus on innovation is not just a national priority but a global necessity, especially as emerging technologies like Artificial Intelligence (AI) and semiconductors become essential for economic and technological leadership.
The Pivotal Role of AI and Semiconductors
Artificial Intelligence is reshaping industries worldwide and is expected to contribute a staggering USD 15.7 trillion to the global economy by 2030, according to PwC. In Southeast Asia, AI’s impact on GDP is projected to reach USD 1 trillion, with Indonesia contributing up to 40%, or USD 366 billion.
However, the success of AI hinges on semiconductors, the foundational technology powering modern computing systems. A McKinsey report projects that global demand for semiconductors will hit USD 1 trillion by 2030, driven by data centers (33%), wireless communication (26%), and automotive industries (14%).
Despite its growing demand, Indonesia remains heavily reliant on semiconductor imports, which are forecasted to reach USD 22.31 billion by 2045. This dependency underscores the urgency of developing a robust local semiconductor industry.
Strategic Initiatives to Strengthen Indonesia’s Digital Ecosystem
To address this dependency, the Indonesian government is crafting a comprehensive roadmap to build a sustainable semiconductor ecosystem. This roadmap involves collaboration with key stakeholders, including the private sector, research institutions, and global partners.
The government has also initiated partnerships with renowned international universities such as Arizona State University and Purdue University to enhance research and development (R&D) capabilities. These collaborations include scholarships for semiconductor design, internships with leading tech companies, and funding for research projects.
In addition, the government has launched programs to upskill the workforce in areas like data analytics, cloud computing, and cybersecurity. These efforts aim to bridge the talent gap in digital skills and foster a new generation of tech-savvy professionals.
Boosting Local Production and Addressing Talent Shortages
Indonesia is also ramping up local production to meet rising demand. By 2030, the government targets the production of 600,000 electric vehicles (EVs) annually. Furthermore, domestic production of smartphones and tablets reached 40.2 million units in 2022, showcasing the potential of the local electronics industry.
However, one of the most pressing challenges is the limited availability of skilled human resources in the semiconductor and AI sectors. Currently, the country faces a significant talent gap in fields requiring specialized expertise, such as integrated circuit (IC) design.
Minister Airlangga highlighted the importance of leveraging Indonesia’s natural resources and digital economy to strengthen its position in the global supply chain. “Indonesia must use its natural resources as leverage while showcasing the quality of our human resources to support the back-end operations of this ecosystem,” he said.
AI and Semiconductors: The Twin Engines of Future Growth
AI and semiconductors are intrinsically linked and represent the twin engines driving the future of technology. As Minister Airlangga aptly noted, “There can be no AI without semiconductors, and there can be no modern semiconductors without AI. These two elements move hand in hand, shaping the trajectory of technological advancement.”
The government’s vision extends beyond meeting domestic needs. It aims to position Indonesia as a major contributor to the global semiconductor supply chain while fostering innovation in AI to address global challenges.
The Path Forward: Collaboration and Commitment
Realizing this ambitious vision requires a collective effort from all stakeholders. The government, industry leaders, and academia must work together to create an environment conducive to innovation, investment, and talent development.
Indonesia’s journey toward becoming a digital powerhouse is filled with opportunities and challenges. With the right strategies and a strong commitment to collaboration, the country is well-positioned to lead in the digital age.
As the digital economy and AI continue to reshape the world, Indonesia’s proactive approach to embracing these technologies offers a roadmap for other developing nations. By prioritizing innovation, sustainability, and inclusivity, Indonesia is not only building a stronger economy but also paving the way for a brighter, more connected future.
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