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Micro and Small Businesses in Indonesia’s Digital Economy

Published on February 12, 2019

The digital economy has afforded Indonesia’s MSMEs unprecedented opportunities for inclusive growth within local, regional, and even global value chains. E-commerce, social media, the sharing economy, and cloud-based analytics are all contributing to an MSME technological leapfrog. This report explores how MSMEs in Indonesia can leverage technology to better access the digital economy and grow their businesses.

MSMEs need improved access to all manner of digital literacy resources, including basic business education, industry specific training and human capital development, funding, and, better online access.
A common theme that has emerged is the power of collaborative networks operating in digital ecosystems. In these scenarios, MSMEs can benefit from open-sourced solutions, with key stakeholders contributing to the successful dynamics of entrepreneurial ecosystems.
The biggest challenges in Indonesia’s regulatory and legal frameworks involves a lack of information about relevant regulations (for compliance purposes) as well as the lack of harmonization and coordination between government agencies.

The digital platform economy is enabling the development of human capital by connecting small enterprises to the digital global commons. This means access to new markets and resources such as cloud-based tools, e-commerce platforms, and mobile apps that can facilitate economic and social activities. Through an analysis of eight case studies of Indonesian MSMEs, this report assesses the positive impact that technology can play to develop and promote human capital through training programs and partnerships to maximize the economic participation of MSMEs in local, regional, and global value chains.

Conducted by Alex Capri, Senior Fellow at the Lee Kuan Yew School of Public Policy National University of Singapore Business School, this research report is one of three published for the APEC-Canada Growing Business Partnership around the theme of human capital, with a focus on the Indonesia  and other APEC economies. 

“The technology revolution offers great promise for Indonesian MSMEs. But this remains a work in progress, and policy-makers will have to follow a rigorous roadmap to achieve success.”