Digital skills: A US$312 billion GDP opportunity for Indonesia in 2030 (insights from forthcoming research)

Indonesia is Southeast Asia’s largest and fastest growing digital economy. However, the long-term potential of the digital economy in Indonesia is far greater than seen today. For example, it has been found that the economic value of digital trade (one significant component of the digital economy) could grow more than 18-fold by 2030. Critical to unlocking further value in Indonesia’s digital economy is a digitally skilled workforce. A past AlphaBeta survey of investors, MNCs and digital startups in 11 Asian economies including Indonesia found that developing “digital talent” was the single most important lever for a country to advance its digital economy. This makes it essential for policymakers to understand the size of the economic contribution of digitally skilled workers in Indonesia – and the necessary steps to realize it. However, while there is a range of literature on the productivity benefits of digital technologies in Indonesia, no studies to date have attempted to quantify the contribution of digitally skilled workers in both tech and non-tech sectors to its economy.

Defined by UNESCO as “a range of abilities that allow individuals to use digital devices, communications applications and networks to access and manage information”, digital skills are important for workers across all sectors of the Indonesian economy. These include workers in traditional sectors such as manufacturing and construction – particularly as companies in these sectors seek to adopt new technologies and improve their productivity.

To address this knowledge gap, AlphaBeta is currently conducting research (supported by Google) to examine the value of digital skills for Indonesia’s economy and to identify ways in which government, the private sector, and civil society can come together to capture this opportunity. The initial findings of this research suggest that improving Indonesia’s digital skills base has the potential to deliver an estimated annual GDP impact of Rp 4,411 trillion (US$312 billion) in 2030, which is projected to account for about 16% of the country’s forecast GDP.

Further findings of this initial research include:

– Today, digital skills in Indonesia account for Rp 908 trillion (US$64 billion) in terms of annual GDP contribution, which is equivalent to 6% of Indonesia’s GDP. Almost three quarters of this value is being derived from non-tech sectors such as manufacturing. Given that small and medium-sized businesses (SMBs) contribute to over 60 percent of the country’s GDP, such businesses are likely to account for a substantial proportion of this value.

– If Indonesia could accelerate its development of digitally skilled workers through a multi-stakeholder approach involving government, industry, and civil society, digitally skilled workers could bring about an estimated Rp 4,411 trillion (US$312 billion) GDP benefit in 2030 – as compared to Rp 1,965 trillion (US$139 billion) projected based on the current pace of skilling.

This valuation of digital skills is based on an estimate of the GDP contributions from three groups of workers: a) workers in the technology sector (e.g., AI developers working for digital companies or start-ups); b) digital workers in non-technology sectors (e.g., Building Information Modelling engineers in the construction industry); and c) non-digital workers in non-technology sectors who require digital skills to perform their jobs (e.g., factory workers in the manufacturing industry who require some level of IT proficiency to operate machinery).

The final report will be released in the second half of 2020.

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