How COVID-19 is accelerating Indonesia’s digital transformation
As the coronavirus pandemic forces millions of Indonesians online – for work, school and social activities – there is a clear and urgent need for improved ICT capacity, through infrastructure, skills and regulation.
As of 17 May 2020, 17,514 COVID-19 cases have been confirmed in Indonesia. Confirmed cases have been reported throughout the archipelago, with local transmission occurring mainly on the island of Java, especially in the Greater Jakarta, Greater Bandung, Semarang, Solo and Greater Surabaya areas.
The government has already implemented countermeasures like many other affected countries, including social distancing, mask wearing and work-from-home policies. Large-scale social restrictions (PSBB) have been applied in many regions with high numbers of COVID-19 cases and deaths. This restriction has meant schools and office closures, and restrictions to religious, social and cultural activities. In doing so it has migrated all of these spheres to online.
Three sectors that have significantly been impacted are retailers, education and health services. In this paper, we look at how organisations are shifting to online delivery and how this is accelerating Indonesia’s push towards a digital economy faster than originally planned. To capitalise on this, Indonesia needs to focus on three areas:
- strengthening its digital ecosystems by upgrading its information and communications technology (ICT) infrastructure
- upskilling its ICT and digital skills workforce, and
- strengthening its ICT-related policies.
Economic impact of COVID-19
According to the Ministry of Manpower, since the COVID-19 outbreak began, more than 2 million Indonesian workers have lost their jobs, certainly leading to increased poverty as more people find themselves unable to meet basic needs. The SMERU Research Institute estimates the poverty rate will increase from 9.2 per cent in September 2019 to 9.7 per cent by the end of 2020, pushing roughly 1.3 million people into poverty. In the worst-case projection, the poverty rate will increase to 12.4 percent, meaning that 8.5 million additional people become impoverished.
With growing unemployment and poverty, Indonesia faces risks of political and social instability. Hence, it needs to assist the new poor – in addition to the existing poor.
This must be done by providing social protection programs as well as support for businesses to survive and reduce unemployment. Table 1 categorises the government’s economic stimulus measures in response to COVID-19 in four main parts (KPMG, 2020).
In order to support businesses, workers and families battered by the economic disruption, on 31 March the government announced an economic stimulus package worth IDR 405.1 trillion (~AUD 40.5 billion). With this additional spending, Indonesia’s budget deficit is estimated to reach 5.07 per cent of its gross domestic product (GDP), though the current ceiling is at 3 percent. Relaxation of this deficit ceiling will only apply for three fiscal years, from 2020 to 2022.The Kantar market research agency suggests that constant changes in attitudes and behaviour is steadily leading to a ‘new normal’. More consumers are staying home more than ever before, forcing businesses to adapt to a new ‘stay-at-home’ economy. Sectors that require travel and mobility, such as airlines and tourism, are being hit hard while businesses related to health and hygiene, online education, e-commerce are booming.
A Mobile Marketing Association (MMA) report shows that 70 per cent of consumers have tried at least one new digital service during the pandemic.
Telehealth platforms have also reported skyrocketing demand and use of their apps. This phenomenon is a positive sign of the greater uptake of digital business and, more specifically, digital services – something that the Indonesian government has been pushing in the last couple of years.
E-commerce and digital business during COVID-19
As consumers practice social distancing, e-commerce companies in Indonesia are reporting higher volumes of online sales. Indeed, consumers have been increasingly turning to online channels to make purchases as the COVID-19 case count has risen (Oxford Business Group, 2020).
According to the iPrice report on Indonesian online shopping behaviour during the pandemic, people are buying more health care and work-from-home products, sports equipment and groceries. Hand sanitiser sales skyrocketed more than 5,000 per cent, while other health care products also saw sales increases of over 1,000 per cent.
Health care aside, students and remote workers are increasingly looking for webcams (up 1,572 per cent); interest in bicycles grew by 1,036 per cent; while Nintendo video game console sales rose 156 per cent. Less surprising is the growth of online grocery shopping, as supermarkets reduce operating hours and limit purchases of staple goods, such as rice, sugar, oil and instant noodles.Sales of boxes of Indomie noodles, for example, have increased by 159 per cent (Devita, 2020).
E-commerce marketplace Bukalapak reported growth of more than 10 per cent in new users in March 2020 (Annur, 2020), with its grocery selection having expanded by even more. According to the company’s president, Fajrin Rasyid, the spike in transactions along with growth in new users has been caused by the shifts in the SME business model and consumption behaviour. Another online market, Blibli, has also recorded high demand for video games, cooking appliances and exercise equipment as Indonesians adjust to spending more time at home (Oxford Business Group, 2020).
The need for products which, for the time being, can only be fulfilled effectively through online shopping is accelerating consumers’ uptake of e-commerce.
In fact, consumers who have never purchased online are now embracing the digital marketplaces to acquire essential products.
While the demand for online shopping is increasing, consumers seem to have low awareness of cyber security issues, such as scams and unethical business practices. For example, Tokopedia has blocked thousands of merchants for listing health care products and other basic necessities during the pandemic at inflated prices. Tokopedia has also banned merchants from selling COVID-19-related products using unproven claims, and eliminated service fees and reduced shipping costs for health care products and staple goods to help distribute these essential products faster (Jakarta Post, 2020).
Schools and education services
Around 1.5 billion students, or approximately 91.3 per cent of those enrolled in study worldwide, have been unable to attend their schools, universities and other education providers due to the pandemic (UNESCO, 2020). This includes around 45 million students in Indonesia, representing roughly 3 percent of the affected global student population (Statistics Indonesia, 2020; cited in Azzahra, 2020). Schools under partial lockdown in Indonesia have attempted to transform the online learning process and emulate the classroom experience through videoconferencing. This provides opportunities for education technology (EdTech) to play an important role in providing online educational tools to meet the demand for quality and accessible education during the pandemic.
Technology (particularly the internet, laptops and smartphones) is now widely used to support remote learning. Telkomsel, one of the largest mobile telecommunication providers in Indonesia, has recorded an increase in broadband traffic of 16 per cent during the pandemic, fuelled by the growth in users of online learning applications such as Ruangguru, campus e-learning sites, and Google Classroom (Azzahra, 2020; Olavia, 2020). Ruangguru was growing steadily even before the outbreak, but once schools in Indonesia began closing, visits to its website quickly jumped from 7.5 million to over 11 million per month (Lauria, 2020). Various other initiatives are also underway to ensure continued school activities despite the absence of face-to-face learning.
The Ministry of Education and Culture (MoEC) has partnered with seven Indonesian EdTech providers to grant free access to online learning during the pandemic.
The ministry developed an online learning service now available on its website and as a Google Play app called Rumah Belajar (learning house). The providers are: Google Suite Education, Ruangguru, Zenius, Kelas Pintar, Microsoft Teams, Quipper and Sekolahmu. Table 2 summarises the EdTech learning materials and programs that can be accessed through Rumah Belajar (compiled by Kompas.com).
There are, however, challenges to implementing digital learning across Indonesia. Some students without reliable access to the internet and/or technology, especially those living on remote islands and in hinterlands, struggle to participate in online learning. The effort to spread internet access along with the relevant hardware and content solutions represents an important step toward the uptake of technology for teaching and learning. According to the Omidyar Network (2019), connectivity remains slow in Indonesia, averaging only 13.79 Mbps (9.82 Mbps for mobile phone). Australia, as a comparison, was recently reported to have the fourth slowest internet in the OECD with an average speed of 41.78 Mbps.
While waiting for improvements in the ICT network, EdTech companies need to adjust to the limitations in order to extend the scalability of their products, such as by creating offline modes and recorded learning tutorials or videos.
The COVID-19 pandemic has provided a catalyst for many learners to start participating in online classes and education, which could potentially address the learning inequity across the archipelago, long term.
Health services and telehealth
Data from the World Bank shows there are only four doctors for every 10,000 Indonesians. This limited number of practitioners is compounded by heavy inner-city traffic and limited access to healthcare for those in need even before the COVID-19 pandemic.
The development of sufficient infrastructure and information facilities for Indonesia’s health care has been slowed by the problem of distance. The advancement of ICT can certainly help to deal with this problem.
One way forward is telehealth (Nugraha and Aknuranda, 2017). Through telehealth, tech companies are able to provide easy access to cost-effective and high-quality medical services through smartphones or computers. Although the capacity of telehealth services is limited to basic consultations, they are expected to improve health conditions in under-serviced areas (Iwamoto, 2018).
As coronavirus cases surge in Indonesia, doctors are working double time to treat patients both in hospitals and online through telehealth apps. This approach is quickly becoming part of the national health care system and includes providing free home consultations to those in need (Potkin and Widianto, 2020).
Telehealth services are being integrated with the government’s COVID-19 Task Force. Tech company Data Enzim has been contracted to integrate a long list of telehealth services into a digital call center called Sociomile (Marchelin, 2020). The initial services to be included are: Halodoc, Alodokter, GrabHealth, Gojek, SehatQ, Link and Link Sehat, Dokter Sehat, Klikdokter, MauDok, Mau Periksa, Ripple10, YesDok, Perawatku, Prosehat, Klinik GO, Docquity, lykra, Qlue, Jovee, Lifepack and Eureka AI.
If a patient’s condition worsens, doctors will alert the Task Force and a health care worker will visit the patient for an on-scene examination to confirm whether they have COVID-19. The health care worker will then decide whether the patient has to be transferred to the government’s hospital or an isolation facility or to simply self-isolate at home under the supervision of medical doctors via telehealth apps (Marchelin, 2020).
The Task Force, telehealth companies and doctors have agreed to share aggregate patient data to aid efforts to slow the spread of the virus, and they are discussing what other information can be shared (Potkin and Widianto, 2020).
As consumers have been forced to adapt to a new way of receiving medical treatment virtually, telehealth platforms Halodoc and Alodokter have reported skyrocketing use of their apps and demand for their services.
Alodokter recorded 61 million web visits and had more than 33 million active users in March 2020. The app has also been downloaded more than 5.5 million times, and the number of patient–doctor interactions increased to more than 750,000 in the same month, representing a roughly-50 per cent jump in traffic. Meanwhile, Halodoc, which has 12 million monthly users, has launched a service that enables users to make appointments for COVID-19 rapid tests or real-time polymerase chain reaction (PCR) tests at 20 hospitals in the Greater Jakarta area and Karawang municipality in West Java (Oktavianti, 2020).
What’s missing – areas for added focus
COVID-19 has forced Indonesians to transform workplaces and essential services, such as health and education institutions, in order to continue operating. Companies that are able to utilise technology effectively and rethink their business models by integrating digital tools will have advantages over their competition (Marr, 2020). The pandemic has inadvertently led to an increased level of ICT updating in Indonesia. The increased ICT adoption will have positive impacts on the digital environment, which is crucial to the digital economy. However, three major challenges must be prioritised and addressed if the country wishes to reap these benefits and continue the growth of its digital economy.
First, ICT infrastructure and bandwidth must be upgraded.
While data costs are low, the quality of transmission is not equitable. There is a lack of a uniform high-speed internet connection and a digital access divide between rural and urban areas and between Java and other islands (Hadi, 2018; Chan et al., 2019). As the need for digital service delivery increases, consumers’ confidence in such delivery needs to be maintained. Having stable, high-quality and fast internet access is one of the most important priorities for the digital economy.
Second, digital literacy and skills must be improved.
While ICT education is part of the school curriculum and there are informal blogs dedicated to common uses of ICT (Rahmah, 2015), general awareness and knowledge of digital skills and literacy, such as cyber security, remain low (Chan et.al. 2019). The same is true with regard to the rights of digital consumers (Aprilianti, 2020).
Finally, regulations and policies relevant to the digital economy are crucial.
While e-commerce has been in existence for a few years, robust regulation for ICT implementation is lacking in Indonesia (such as protection of personal data). The significant growth forecast for Indonesia’s digital economy is not exclusively for unicorns and e-commerce start-ups but also includes sole traders and SMEs such as fishermen looking to sell globally. In times of pandemic or crisis, national digital policies and robust cyber security systems that align with international best practices and standards are crucial for the speed of economic recovery.
For many business owners in Indonesia, the COVID-19 pandemic is a crisis unlike any other they have known. Unsurprisingly, companies that digitally transformed their businesses before the pandemic are adapting to the crisis better than their competitors that did not. Their business models and working processes have allowed them to accelerate the changes that were already in progress. Businesses without an online presence, such as traditional markets and retailers, have struggled. Meanwhile, tech companies that provide software-based services, such as online education providers, e-commerce and telehealth companies, have experienced significant increases in traffic and income.
Business owners should seize the opportunity to establish digital business models, strategies and collaboration agreements for the future.
Through this crisis, we have seen that it is very risky for societies to ignore technological advancements in the face of evolving business models and general lifestyle trends. As the main policymaker, the government needs to provide the necessary digital infrastructures and robust digital policies to accelerate the digital transformation of Indonesia after the pandemic is over.