Indonesian’s SMEs could potentially contribute an additional US$164 billion to the country’s GDP in 2024 if they are able to become more digitally mature, stated a recent study.
According to the 2020 Asia Pacific Small Medium Business Digital Maturity Study by technology company Cisco and International Data Corporation (IDC), digitally mature SMEs have the potential to enjoy up to a 16 percent increase in revenue and a 14 percent increase in productivity, allowing for greater contribution to Indonesia’s national economy.
“Digitalising SMEs is important, as it is the driving force of our economy. SMEs are also one of the sectors hardest hit by the pandemic,” said Cisco Indonesia managing director Marina Kacaribu in a recent press briefing.
She added that most of Indonesia’s SMEs were still in the early stage of digital transformation, marked by the absence of a digitalisation roadmap and lack of digital talent.
The study showed that approximately 31 percent of SMEs in the APAC region are still in the early stages of the digitalisation process. This stage is often referred to as the digital indifferent stage. In the mean time, 53 percent are in the observer stage, 13 percent in the digital challenger stage, and only 3 percent are in the digital native stage.
Indonesia’s economy is heavily reliant on SMEs, who account for more than 60 percent of the nation’s GDP and employ the vast majority of the workforce.
Cooperatives and Small and Medium Enterprises Minister Teten Masduki previously stated that the government aimed to have 10 million SMEs go digital by the end of the year to help them ease the financial burden caused by the economic devastation of the COVID-19 pandemic.
At the time, the minister had said that only about 8 million SMEs had an online selling platform, either through e-commerce or social media. Those numbers represent only about 13 percent of all SMEs in the country.
The COVID-19 pandemic has driven the majority of SMEs in APAC, at 69 percent, to accelerate the digitalisation process, including by investing more in technology, the study finds. For Indonesia, that means businesses are investing more in cloud technology and upgrading security measures.
Marina had said that up to 82 percent of Indonesia’s SMEs were in the process of the digitalisation process in order to create new products and services, up from 41 percent last year. The main reasons for the digitalisation was a need to keep up with the ever-growing competition and changing customer expectations.
As more companies progress through the stages of digital transformation, it is more than likely that they would invest more in technology, hire more tech-savvy workers and adopt more automation in their business processes, she added.
“The potential for Indonesia to go beyond the first stage is tremendous. The most important thing to do for SMEs is to plan and prioritise the digital solutions they need and invest accordingly,” Marina said.
The study also suggests that accelerating the digitalisation process could add US$1.3 trillion to the region’s GDP in 2024.
“The pandemic brings an opportunity for SMEs to accelerate their digital transformation, as the process will not only help them solve problems but also sustain their growth in the long run,” said Cisco ASEAN small business and commercial director Raz Mohamad.