Indonesia’s digital economy has soared over the past five years, but the government’s restrictions on investment and innovation could stifle growth, experts have warned.
The country’s digital economy is projected to triple to US$100 billion by 2025, however Indonesia remains the fourth most restrictive country for digital trade out of 64 countries surveyed by the European Centre for International Political Economy (ECIPE).
Indonesia’s level of restrictiveness is topped only by China, Russia and India according the ECIPE Digital Restrictiveness Index.
“This biggest [factor that creates] economic impact is productivity, so the economies that stand to receive the biggest boost from relaxing regulations are these most restrictive countries,” said ECIPE director Hosuk Lee-Makiyama in a discussion in Jakarta recently.
In its 2018 report, the ECIPE highlighted two policies that curb the growth potential of Indonesia’s digital economy: the restriction on foreign ownership in e-commerce businesses – which contribute 45 percent of the digital economy – and the requirement for companies to build data centers in Indonesia.