Indonesia’s economy recovered quite quickly towards its long-term growth path, so that by the second quarter of 2022 growth had reached 5.44%. However, according to the Rector of Universitas Indonesia (UI), Prof. Ari Kuncoro, S.E., M.A., Ph.D., not all sectors experienced the same growth. Mobility and technology-based sectors were the ones that managed to grow above average. These sectors include transportation, accommodation, food and beverages, trade, manufacturing, and information and communications (infocomm).
Prof. Ari’s statement was delivered at the Investor Daily Summit forum held on October 11-12, 2022, at the Jakarta Convention Center. On that occasion, Prof. Ari reviewed the topic “Economic Recovery: Digital and Non-Digital Business Synergy”. According to Prof. Ari, digital businesses in the infocomm sector play an important role in the resilience of Indonesia’s economic growth. However, it is not solely the digital sector that is represented by infocomm. Other sectors such as transportation have also risen, as the middle class, which has been confined for a long time due to the pandemic, tries to find relaxation by visiting tourism spots.
“During the pandemic, they used digital media to shop. But after that, they use digital media to learn about places to visit. This is where there is synergy between the mobility-based sector and the infocomm sector. This is exciting because synergy can start anywhere. Whether a business starts its business through digital channels and then offline, or vice versa, a business starts production in one area and then advertises through digital channels,” said Prof. Ari.
One of Indonesia’s advantages is that the country’s middle class makes up approximately 21% of the population. The International Monetary Fund (IMF) assesses that the probability of Indonesia being hit by a recession is only 3%. One of the reasons is because of the middle class. The existence of digital businesses and the desire of the middle class to return to mobility caused the growth engine to run even though the world geopolitical situation (Russia and Ukraine clashes) was still uncertain.
In addition, Indonesia also has domestic purchasing power reserves. The existence of toll roads across Java and Sumatra built before the pandemic has made the demand and production sides more integrated. Industries can be located almost anywhere with access to toll roads, including Micro, Small and Medium Enterprises (MSMEs). After the pandemic, people who want to relax by traveling to tourist areas can take advantage of toll roads. MSMEs can also sell their products to cities by utilizing digital platforms and physical channels. This is what is then able to revive the economy in the region.
This phenomenon of synergy between digital and non-digital can be utilized by entrepreneurs and local governments to create the concept of agglomeration. Products that are not yet well-known are put into a package with well-known tourist destinations. People who use digital media to learn what they want to visit will find objects in the vicinity of well-known objects, so that they can be combined into a travel package.
“For example, when someone searches for Borobudur, they will get recommendations for other destinations in Magelang. This is a concept referred to as agglomeration. If the new destination becomes more famous, the attraction can do branding so that it becomes a destination in its own right which can certainly be used by other attractions that are not so famous to be included in the same package. This is the so-called flying geese theory. One goose takes the lead, then eventually the others will follow,” Prof. Ari said.
Another example would be fabric crafts. In one area in Central Java, businesses that were originally online can develop into offline and businesses that can be visited offline if consumers have not had time to visit the location, they can utilize online media. This synergy explains why digital business is highly relevant to Indonesia’s economic recovery by 2022. Especially when you consider that Indonesia’s economic growth rate has *reached* 5.44%.
“That is something high, especially if we look at other countries, including the Organization for Economic Co-operation and Development (OECD), even the United States, other industrialized countries are still experiencing low growth and high inflation. This is one of the advantages of Indonesia. There is purchasing power, there is a middle class, there is digital technology, and there is a willingness to visit to increase mobility to production areas and tourist areas, so that business can also be done non-digitally,” said Prof. Ari closed his presentation.
The Investor Daily Summit Forum was officially opened by President Joko Widodo and attended by the Ministers of the Onward Indonesia Cabinet, Chairman and CEO of B-Universe, as well as all levels of management, leaders of companies, BUMN, private and cooperatives. In his remarks, Jokowi said that in the midst of fundamental changes in the global economy, Indonesia must remain optimistic, cautious, and vigilant. Indonesia’s economic growth in the second quarter was among the best in the world, at 5.44%. Indonesia’s monetary is still in a manageable position. This is due to the synergy between the central bank (BI) and the Ministry of Finance, which go hand in hand, get along well, and do not overlap. Good communication between the two makes fiscal and monetary work together.
