Indonesia's Low Internet Penetration Rate Curbs Economic Growth
While Indonesia is currently in the middle of expanding its 4G network, the nation remains placed among the countries that have the poorest Internet penetration rate in the world. A recent World Bank report, titled 'World Development Report 2016: Digital Dividends', zooms in on the economic and social impact that occurs when a relative large part of the population cannot be connected to the Internet or when the government fails to keep pace with the growth of technology.
Each day the world's Internet users watch an average of 8.8 billion YouTube videos, share 186 million photos on Instagram, make 152 million Skype calls, purchase 36 million products through Amazon, send 207 billion emails, post 803 million Tweets, and make 4.2 billion searches on Google.
Although digital technologies have spread rapidly across the globe, the World Bank says digital dividends have lagged behind for part of the global population. The Washington-based financial institution defines digital dividends as "the broader development benefits from using these technologies". For example, the business community can use digital technologies to expand their business, people can use these technologies to find jobs and the government can use it to enhance services. In other words, digital technologies support financial inclusion, job creation, and overall economic growth.
However, the fruits of these dividends are unevenly distributed. One of the key solutions in order to let all people enjoy the benefit of digital technologies is to enhance Internet connectivity. But the World Bank also states that well developed Internet access alone is not enough. "Countries also need to work on the 'analog complements' by strengthening regulations that ensure competition among businesses, by adapting workers’ skills to the demands of the new economy, and by ensuring that institutions are accountable.
In essence, two factors are the cause that digital dividends cannot be enjoyed by part of the world population. Firstly, almost 60 percent of the world population still lacks Internet access, hence cannot participate in the digital economy in a meaningful way. Secondly, some of the perceived benefits of digital technologies are offset by emerging risks.
The first factor should be combated by governments by encouraging (affordable) access to the Internet (and other digital technologies) for its citizens, while creating conducive regulations for the Internet and mobile operators.
After India and China, Indonesia has the highest amount of people who are not connected to the Internet. The World Bank report stated that the Indonesian government is on the right track to address these aforementioned issues. For example, the Indonesian government is currently finalizing an e-commerce road-map that aims to improve and develop the country’s e-commerce industry. Previously, the Indonesian government said it may allow foreign investors to own a 100 percent stake in Indonesian e-commerce companies in this road-map.
According to the Association of Internet Service Providers in Indonesia (APJII), Indonesia had around 88.1 million Internet users in 2014, up 22 percent (y/y) from 71.9 million in the preceding year. Given that the total population of Indonesia numbers more than 250 million individuals, Indonesia's Internet penetration ratio stood at around 35 percent in 2014. This low rate implies there is still ample room for growth in the online business industry.
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