Increased economic opportunity in regional Indonesia has been an unintended side effect of pandemic-era lockdowns in the country, according to Arisudono Soerono, CEO of Danareksa, an Indonesian multisectoral state-owned-enterprise holding group.
Speaking to ANZ Chief Economist Richard Yetsenga as part of the Blue Lens on Mic podcast series from his office in Jakarta, Soerono said as more Indonesians worked from home during the pandemic, regional areas benefitted from the increased economic participation of people who would otherwise commute to the capital.
“You don’t have to be in Jakarta anymore,” he said. “The regions, the secondary cities, they've seen a lot more economic activity.
“The pandemic has actually distributed economic activity better across Indonesia.”
Yetsenga said it was clear the health impact of COVID-19 in Indonesia had been worse than the economic one, particularly in the second wave and beyond – a development seen in many economies around the globe.
“This hasn't been a crisis of economies or businesses,” he said. “For the most part [around the world], it's been a crisis of health and inequality.”
You can listen to an edited version of the conversation below.
Soerono expressed confidence in Indonesia’s economic outlook, but noted the structure of the economy could be overreliant on imports.
“To grow our economy we [currently] need to import a lot of raw materials required for manufacturing,” he said.
“This reliance on imports [means] when we grow the economy, imports grow - and that has an impact on the current account [balance].”
This can lead to higher inflation and rates, according to Soerono - ultimately impacting growth.
“I think the inherent structural weakness we see is something that has to be addressed,” he said. “We need to be able to reduce our imports.
“We need to be able to step up in the value chain. I think that's the key for us to be able to realise our potential economic growth.”
Soerono said Indonesia recognises this, and is taking steps to diversify the economy - including by investing in the county’s technology sector.
“China and Singapore tend to take the limelight in terms of the revolution in technology in Asia,” he said. “But one thing Indonesia has as our strength is the [domestic] market.
“That's a big market for us to capitalise on. And I think the government realises that, so there are policies is to accelerate start-ups, deregulate and to take advantage of the technological revolution.”
The emergence of the digital economy is just one of the marked shifts seen in Indonesian businesses through the pandemic, Soerono said.
“The digital economy in Indonesia grew by about 50 per cent in 2021, to become about $US70 billion in size,” he said.
“That's a massive growth, driven mostly by growth in e-commerce, which also grew by about 63 per cent to become about $US50 billion in size.”
More broadly, Soerono said the pandemic had forced companies in Indonesia - as in most of the world - to rethink how they approach efficiency.
“We’ve also seen a lot of effort to maintain customers, and provide better services to [existing] customers, as opposed to acquiring new customers,” he said.
“The innovation, the new services, the new ideas to provide better services to existing customers has been quite evident in the past couple of years.”
Listen to the podcast above to find out more.
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