Indonesia's Digital Economy

Indonesia is undergoing a profound digital transformation, driven by a national ambition to become a leading digital economy by 2045. Indonesia's digital economy is experiencing robust and rapid growth, projected to exceed $US 146 billion by 2025. This transformation is not merely technological — it is a structural shift in how the government delivers services, how businesses operate, and how citizens engage with the state and economy.

This expansion is primarily driven by a young, tech-savvy population, increasing internet penetration, and the swift adoption of digital services across various sectors. The ecommerce sector, in particular, has witnessed exponential growth, fuelled by the convenience and accessibility offered by online platforms. Ride-hailing and food delivery services have also become integral to daily life, transforming urban mobility and consumption patterns.

The fintech sector is rapidly evolving, offering innovative solutions for payments, lending, and investments, thereby increasing financial inclusion. This digital transformation has not only created new economic opportunities but also fostered a vibrant startup ecosystem, attracting significant domestic and international investment.

At the heart of this effort is a coordinated strategy involving multiple ministries, with the Ministry of National Development Planning (Bappenas) playing a pivotal role. Indonesia’s digital transformation is anchored in several key planning documents: Digital Industry Development Roadmap: This roadmap outlines the country’s strategy to support inclusive and sustainable economic transformation through digitalization. When releasing the report, Bappenas projected that the digital economy would reach Rp 4,800–5,400 trillion (NZ$ 505-568 billion) by 2030. Medium-Term National Development Plan (RPJMN) 2025–2029: This plan integrates emerging technologies such as artificial intelligence (AI) and blockchain into national development strategies. It also emphasizes smart cities, green digital innovation, and digital public services as key pillars of Indonesia’s long-term vision.

Significant challenges exist to bridge the digital divide in Indonesia

Indonesia has successfully transitioned to extensive 4G LTE coverage, with around 80- 90% internet penetration, primarily through mobile. While 5G is in its nascent stages, it's expected to expand significantly by 2027. Fixed broadband, predominantly fibre-optic led by IndiHome, is also growing, though its household penetration remains relatively low.

Despite the impressive growth, Indonesia's digital economy faces several significant challenges that could impede its sustained development. One of the primary concerns is the persistent digital divide, particularly between urban and rural areas. While internet penetration is high in cities, many remote regions still lack adequate access to reliable and affordable internet infrastructure. This disparity limits the reach and benefits of the digital economy, excluding a substantial portion of the population from participating in online activities.

Another critical challenge is the shortage of skilled digital talent. The rapid pace of digital transformation has outstripped the supply of professionals with expertise in areas such as cybersecurity, data analytics, and artificial intelligence. This talent gap can hinder innovation and the efficient operation of digital businesses.

Cybersecurity threats also pose a significant risk, with an increasing number of cyberattacks targeting businesses and individuals. These threats can erode trust in digital platforms and lead to substantial financial losses. Furthermore, the regulatory framework is still evolving, struggling to keep pace with the rapid advancements in the digital space. Ambiguities and inconsistencies in regulations can create uncertainty for businesses and investors, potentially stifling growth.

Addressing these multifaceted challenges is crucial for ensuring the inclusive and sustainable development of Indonesia's digital economy. The government is also maintaining (and possibly increasing) its controversial 35% domestic content requirement in the ICT sector. This requirement has frustrated tech companies some international tech companies, while the Indonesian think tank, the Centre of Strategic and International Studies, noted the requirement “frequently falls short of its intended purpose of fostering the growth of local industry. ”

DEN of Innovation plots Indonesia’s Digital future

President Prabowo Subianto has mandated the National Economic Council (DEN) to collaborate with national ministries to advance Indonesia’s digital transformation. In addressing these challenges Indonesia’s digital strategy places strong emphasis on inclusive growth, particularly for micro, small, and medium enterprises (MSMEs). Through programs like Strive Indonesia, the government aims to support 300,000 small businesses in adopting digital tools and platforms.

This reflects a broader commitment to ensuring that MSMEs can participate in and benefit from the expanding digital economy. The government is undertaking a range of actions it hopes will ensure a safe and competitive digital environment. This includes strengthening cybersecurity frameworks, enhancing data governance, and reducing the ICT trade deficit. These efforts are complemented by investments in digital talent development, research and innovation, and regulatory reform.

A key part of this digital transformation strategy is the use of Digital Public Infrastructure (DPI) approach, integrating digital identification, authentication protocols, and data exchange. DPI ensures that services like social protection, civic registration, and health services are accessible, transparent, and responsive to people’s needs. To address this, a current focus for DEN is the Digital Nusantara Initiative, which was launched in July 2025 in partnership with the United Nations Development Programme (UNDP). T

his initiative aims to unify Indonesia’s fragmented digital systems into a single, interoperable, secure, and scalable digital infrastructure:“This initiative is about improving public service delivery through integration, efficiency, and providing tangible results for our people, ” said Luhut Binsar Pandjaitan, Chairperson of DEN. The DEN is working to finalize the Social Protection unified system, which is hoped will transform Indonesia’s social protection efforts. There is a keen interest in New Zealand’s automated welfare application ‘SmartStart’ , which is used for integrating birth registration, healthcare and parental support.

This report was produced by the NZ Ministry of Foreign Affairs & Trade, and published here under Creative Commons provisions.