Indonesia has been navigating the pandemic for more than two years. Forecasted to be one of the world’s largest economies by 2045, Indonesia was initially expected to succeed in maintaining the stability of its economic growth at around 5 percent (YoY). However, that stability only lasted from 2015 until 2019. The COVID-19 pandemic has dealt a devastating blow to Indonesia’s economy, causing it to contract by -2.07 percent (YoY) in 2020. Although Indonesia’s economic growth rebounded into positive territory (3.69 percent) in 2021, having learned the lessons from its previous crisis, Indonesia should always be prepared to anticipate unforeseen storms. The economic contraction caused by the limitations on people’s economic activities in the form of large-scale social restrictions and the enactment of community activity restrictions had spurred a shift or change in people’s behaviours—from previously being accustomed to offline (physical or in-person) activities to activities that are conducted online. This transformation has generated new, well-performing economic sectors amidst the pandemic, such as the information and communication sector, which had registered double-digit growth (above 10 percent) compared to other economic sectors that contracted during the pandemic period. This shows opportunities for several economic sectors amidst a pandemic and a demonstrated resilience in industries related to the digital economy during times of crisis.

An interesting finding of the study also revealed that the growth of the internet economy in Southeast Asia was driven by e-commerce and food delivery.

A report by Google, Temasek, and Bain & Company (2021) stated that Southeast Asia has entered the digital decade, and it is estimated that the internet economy in the region can reach US $1 trillion in value by 2030. An interesting finding of the study also revealed that the growth of the internet economy in Southeast Asia was driven by e-commerce and food delivery. Gross Merchandise Value (GMV) from e-commerce is forecasted to reach US $234 billion in 2025. In the context of Indonesia, Indonesia’s digital economy’s potential is predicted to reach US $146 billion in 2025 and is projected to rise eightfold in 2030. This trend clearly needs to be supported by a robust digital payment system and the acceleration of digital banking to optimise the digital economy's potential in Indonesia. The digital economy and finance development in Indonesia has prompted policymakers, particularly Bank Indonesia and the Coordinating Ministry for Economic Affairs, to emphasise the importance of building synergy among stakeholders to accelerate national economic recovery, especially in the post-pandemic period. The discussion around the governance of the digital economy and finance is also necessary and urgent to optimise digital trade and payment so that Indonesia's payment system expansion and digital banking acceleration can be realised.

Identifying Stakeholders in the Ecosystem

A classic problem often faced by an institution or government body in implementing its policies is miscoordination or the absence of synergy and collaboration in achieving the desired outcome. Therefore, in developing the digital economy and finance, every stakeholder is expected to be able to exchange information and communicate regarding work plans and policies that will be carried out. The Government, Bank Indonesia, industry, business/industry associations, consumers, and NGOs or non-governmental organisations are among the stakeholders in the digital economy and finance sector that should be identified. Identifying every stakeholder is crucial to map their role and contribution to Indonesia's digital economy and finance ecosystem.

The private sector, which includes firms, start-ups, and e-commerce, is the most vital stakeholder in shaping the digital economy ecosystem, as it is the initiator and executor of the digital economic system.

As the public stakeholder, the government plays a role in influencing and operating the digital economy and finance through regulation, policy, and government spending. Bank Indonesia, in this regard, also holds an essential part, particularly concerning the implementation of the digital payment system. Consequently, the private sector, which includes firms, start-ups, and e-commerce, is the most vital stakeholder in shaping the digital economy ecosystem, as it is the initiator and executor of the digital economic system. Accordingly, merchants who are derivatives of the private sector act as the seller of goods or services—they have businesses, both physical and online stores, which cooperate with banks or other payment system service providers in executing payment transactions. Additionally, business associations that show partiality towards the digital economy industry can support the running of businesses by becoming hubs or connectors between consumers, firms, and business partners on an ongoing basis. NGOs, both local and international, also play a role in the digital economy ecosystem. They typically encourage the empowerment of local communities through policy advocacy and strengthening the capacity of local communities. No less important are investors, who are the parties that provide capital to firms and start-ups.

Governing Digital Economy and finance

Massive growth in the digital economy and finance sector in Indonesia cannot be left alone without good governance. Such governance should at least encompass several issues, such as consumer personal data protection, cybersecurity, oversight and legal regulation, and industrial policies within the digital financial economy sector. However, developments in this sector are also underpinned by the level of trust and transparency from all stakeholders as well as the policies and regulations implemented, especially related to data. In the regulatory order related to the protection of personal data, regulations that can provide general direction and explanation regarding data protection and governance are required. However, since the regulations tend to be spread across different government layers and institutions, specifically in the case of payment systems.

Business associations that show partiality towards the digital economy industry can support the running of businesses by becoming hubs or connectors between consumers, firms, and business partners on an ongoing basis.

Changes in the payment system industry in the digital era, along with the various challenges faced particularly on digital economy governance, have been responded to by Bank Indonesia through the Indonesian Payment System Blueprint 2025. The blueprint’s realisation includes a realignment of the payment system industry’s structure and forming a payment system implementation ecosystem that can adapt to the digital economy and finance developments. The enactment of Government Regulation (GR) No. 71/2019 on Implementation of Electronic Systems and Transactions and GR No. 80/2019 on Trading through Electronic System needs to be harmonised with Bank Indonesia Regulation (Peraturan Bank Indonesia (PBI)) No. 22/23/PBI/2020 on Payment System, PBI No. 23/6/PBI/2021 on Payment Service Providers, and PBI No. 23/7/PBI/2021 on Payment System Infrastructure Operators). This initiative could at least minimise the complexity of regulatory frameworks, which is a trademark of the sector that seems to be dealing with dynamic changes/trends, including the digital economy and finance. Digital economy and finance will continue to play a significant role in the Indonesian economy. Its contribution to Gross Domestic Product (GDP) and employment are estimated to continue to rise. It also can encourage small and medium-sized enterprises (SMEs) to recover from the pandemic slump or even grow and upgrade. However, these estimates or predictions must be accompanied by consistent recovery efforts from all stakeholders. Even more massive digital infrastructure development throughout all regions in Indonesia, accompanied by the spirit of equitable development, must continue to be made a national development priority. Additionally, digital literacy and skills, along with regulatory tools or regulations that can encourage innovation, should be a priority for the Government so that the potential of the digital economy in Indonesia can be appropriately utilised.

• International Affairs
• Economics and Finance
• The Pacific, East and Southeast Asia
• digital
• digital banking
• Economy
• Finance
• GDP
• Indonesia
• infrastructure

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