East Ventures Digital Competitiveness Index 2020: Uncovering The Opportunities of Indonesia's Digital Economy and Bridging the Archipelago Digital Divide
JAKARTA, Indonesia, Feb. 4, 2020 /PRNewswire/ -- East Ventures, the pioneer of Indonesia's early-stage venture capital scene, released East Ventures - Digital Competitiveness Index (EV-DCI) 2020, a comprehensive report of digital economy development in 34 provinces and 24 big cities across Indonesia.
The report outlined a picture of a digital divide in Indonesia, one of the fastest-growing digital economies in the world. The disparities between the rapidly developed digital ecosystem in Indonesia's urban area and the regions beyond it shows that Indonesia's digital journey has just begun.
East Ventures Digital Competitiveness Index (EV-DCI), a measurement that factors in 9 aspects relating to digital development, shows that the majority of Indonesian is ready to adopt digital services due to high smartphone ownership and internet access. Yet, EV-DCI's score for human resources and entrepreneurship is still low. Meaning, only a small number of Indonesians are utilizing technology to open businesses or improve productivity.
The digital divide also shows that the fast-growing internet-based companies that operate in the Indonesian market (six of those are unicorns), serves only a fraction of Indonesia's economy. By scaling up and extending their services across the archipelago, those companies have an immense opportunity to grow their business exponentially.
Some key highlights of the report:
Centralizes on Java
The provinces on the island of Java records the highest EV-DCI score in comparison to all other provinces. This evidently shows the gap between Java and other Indonesian regions. Furthermore, the EV-DCI score for cities highlights a developmental inequality seen by the huge gap between the city that ranked first, Jakarta, and the city that ranked second, Bandung.
The financial industry is one of the most affected by digitalization in Indonesia. In areas with a high EV-DCI score, banks close their branch offices at a faster rate. EV-DCI score is also correlated with a high disbursement of credit by fintech lenders and the number of branchless banking financial agents.
Talent Pool Shortage
The growth of the digital economy creates a more competitive talent market which produces a pool of skilled workforce. Though areas with high digital competitiveness tend to absorb more of these professionals and skilled workers.
Several jobs such as administrative work, machine operators, and laborers are expected to be impacted the most by digitalization. Evidently, the number of these workers in the ICT, finance, and transportation industries has been facing the sharpest decline.
Digital competitiveness in areas prepared to be the 'New Bali' such as Labuan Bajo, Lake Toba, Raja Ampat, Borobudur Temple, Mount Bromo, and Morotai must be improved in providing access to information, comfort, and attractiveness for foreign tourists.
Willson Cuaca, Co-founder and Managing Partner of East Ventures explained, "The digital economy promises inclusivity and equal economic opportunities for all Indonesians. However, Indonesia is often times only assessed from the development of certain big cities like Jakarta, while there are still many cities untouched by the promise of the digital economy. By allowing everyone to participate in the digital economy, Indonesia could convert demographic bonuses into demographic dividends; turning potential into reality."
The full report can be downloaded at east.vc/DCI
About East Ventures
East Ventures is the first early-stage investor in Indonesia and stands amongst the most consistently top-performing venture capitals globally with a constantly high IRR. Established since 2009, the firm has supported more than 170 digitally-enabled companies in Southeast Asia, with 130 companies founded in and operating in Indonesia.
East Ventures has worked alongside entrepreneurs to build Indonesia's digital ecosystem from the ground up since day 1. Spotting opportunities early, the firm is the first venture capital to support Indonesia's two homegrown unicorns: Tokopedia and Traveloka. The firm has since then invested in other industry themes, including supporting infrastructure to e-commerce such as Waresix (logistics), Xendit (payment), Kudo (offline to online), Shopback (e-commerce enabler), vertical commerce such as Sociolla (new retail beauty), media such as IDN Media (millennial and gen-z audience), Tech in Asia (tech audience), and Katadata (business and economy audience), SME support such as Mekari (accounting, tax, payroll), Moka (POS), CoHive (coworking), new retail such as Warung Pintar (FMCG) and Fore Coffee (on-demand coffee chains), and digital transformation such as Advotics (supply chain analytics) and Nodeflux (computer vision and AI).
Over the past decade, the firm has grown its Southeast Asian assets reaching US$1.2 bn under management for both the early-stage and growth funds. The firm has delivered more than 20 exits, including Kudo's acquisition by Grab, Loket's acquisition by Gojek, Bridestory's acquisition by Tokopedia, and multiple exits to both local and regional business groups. It has also attracted a total of US$4 bn in follow-on funding that fostered the growth of Indonesia's digital economy today.