Deloitte Report: SMEs Powering Indonesia’s success has been saved
Deloitte Report: SMEs Powering Indonesia’s success
Higher SME digital engagement could lift Indonesian economic growth by 2% a year
Jakarta, 20 August 2015 - A new report by Deloitte Access Economics commissioned by Google, reveals that boosting digital engagement among Indonesia’s small and medium sized enterprises (SMEs) could increase the country’s annual economic growth by 2%.
Such a jump would have Indonesia on track to becoming a middle-income country by 2025.
The SMEs Powering Indonesia’s success: The Connected Archipelago’s Growth Engine report, was launched by Minister for Communications and Information Technology, Mr Rudiantara, at an SME event in Jakarta today.
The key findings of the report are that greater use of digital technologies such as social media, broadband and e-commerce can deliver significant benefits for SMEs, including:
- Up to 80% higher growth in revenue
- Being one-and-a-half times more likely to increase employment
- Being 17 times more likely to be innovative.
According to Deloitte Access Economics, if the revenue growth uplift is applied to the average-sized small business (IDR1.4bn revenue p.a.), an SME that doesn’t have an online presence could grow its revenue by as much as IDR140m a year if it acquired advanced online capabilities.
Despite these benefits, three quarters of Indonesia’s SMEs are missing out on most of the benefits of digital technologies:
- Around one third (36%) are offline
- Another third (37%) have only basic online capabilities such as a computer or broadband access
- Only a minority (18%) have what the report defines as intermediate engagement (use of websites and social media) or advanced engagement with e-commerce capabilities (9%).
The report is based on a review of existing literature, economic analysis, a new survey of over 400 business owners and managers across Indonesia, targeted consultations with business leaders and government officials, and an analysis of publicly available data from across the ASEAN region.
The report also finds that digitally engaged SMEs are also more competitive internationally – an important consideration with the creation of the ASEAN Economic Community. SMEs with basic online capabilities derived 6% more of their revenue from international customers than offline SMEs.
“The report’s case studies, such as Islamic fashion e-commerce business HijUp and Holycow Steakhouse, show that Indonesia can produce successful innovative businesses, and they are the future of Indonesia’s economy,” said Managing Director of PT Deloitte Konsultan Indonesia, Ms. Claudia Lauw.
The report also outlines key directions for government policy to support digital local SMEs, including:
- Increasing broadband access. Existing internet access in Indonesia remains relatively expensive and slow. Increasing broadband access and the quality of service will encourage digital technology adoption by SMEs and improve performance of existing technologies
- Helping all SMEs to be digital businesses. Many government agencies provide SME support programs, including those targeted at increasing SME digital engagement. But they are often overlapping and limited in scale
- Expanding e-payments. Improving trust in e-commerce payment platforms, increasing bankability of Indonesian consumers and businesses and expanding alternative payment systems will increase the volume of digital transactions
- Expanding access to finance. Digital SMEs need a mix of domestic and international sources of finance which are currently barriers that reduce their potential for growth
- Expanding e-government services. Government services delivered through online platforms are more cost effective and efficient. More online government services would build consumer confidence in online activities and services over time.
Speaking at the report’s launch, research co-author and Deloitte Access Economics partner John O’Mahony said: “Indonesian businesses accelerating their adoption of digital will not only drive growth and profitability.
“It will help achieve important national objectives for higher employment, improved living standards and greater international competitiveness. Digital needs to be an important agenda item for the Indonesian Government.”
To read the full report please visit: google.co.id/bisnisgoonline
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