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Indonesia's digital economy: Digital trade and cross-border data flows in a post-COVID world

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By Dora Heng


According to the latest World Bank Global Economic Prospects, Indonesia is facing 0% GDP growth this year—a 5.1% drop from January forecasts. This would be Indonesia's poorest economic performance since the 1998 Asian Financial crisis, as the country sees muted economic activity from partial lockdown measures and supply chain shocks impact Indonesia's commodity exports.


But amidst the economy slowdown, e-commerce firms remain bright spots in the digital economy as consumers practice social distancing at home. Indonesia's digital economy has been valued at US$40 billion, according to the e-Conomy SEA 2019 report by Google, Temasek and Bain & Company—making it the largest e-commerce market in Asia.


As reported by We Are Social, there were 175.4 million internet users in Indonesia in January 2020, representing 64% of the population and a 17% increase from 2019. As for e-commerce penetration, 168.3 million users purchased consumer goods online in 2019.


Digital trade, e-Commerce and implications for cross-border data flows


Cross-border data flows—the movement and transfer of information between servers across country borders—are integral in facilitating trade in the digital economy. Data is multifaceted and can range from information streams between the manufacturers in charge of global supply chains, to financial data and transactions for online purchases. These data flows allow e-commerce vendors to keep track of customers'  orders and product supplies both domestically and abroad. With data as the fuel, emerging technologies such as artificial intelligence (AI), machine learning analytics and cloud computing can further build upon online marketplaces and shape the evolution of new business models.


Free flow of data across borders reduces friction and constraints due to distance, while increasing the efficiency of the economy. As the COVID-19 crisis has illuminated, cross-border flows of certain types of health data are vital for global collaboration on epidemiology and scientific research. This information allowed public health officials to model the spread of COVID-19 and coordinate global supply chains of personal protective equipment (PPE) to fight the coronavirus. In a global pandemic that has closed borders, free flow of data between countries has let markets remain connected and maintained trade.


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