Indonesia Digital Economy

Last published date: 2025-11-17

Indonesia’s digital economy is one of the fastest-growing in Southeast Asia, driven by a young, mobile-first population, increasing internet penetration, and strong government support. The Government of Indonesia has elevated the digital economy to a national priority under a series of ambitious strategies, including the “Making Indonesia 4.0” roadmap and the “Digital Indonesia Roadmap 2021–2024.” These initiatives aim to establish Indonesia as a global digital powerhouse by 2030. Indonesia’s digital economy will create new jobs and extensive business opportunities, accelerate the transformation of economic sectors, and open the doors to financial inclusion.

Indonesian Government created The National Strategy for Digital Economy Development of 2023 – 2030 which is a national policy covering the focused and strategic areas that will empower economic development. This white paper is a guideline for ministries, agencies, sub-national governments, and other relevant stakeholders to conduct the digital economy program and activities. Major government programs such as the “100 Smart Cities” initiative and the “National Strategy for Artificial Intelligence (2020–2045)” further underscore Indonesia’s focus on enabling technologies and digital infrastructure.

The Ministry of Communication and Digital Affairs (Komdigi) leads this transformation, supporting 5G development, AI policy, data center construction, and the expansion of digital public services. The country’s digital economy is projected to exceed $130 billion by 2025, driven largely by e-commerce and fintech, according to a joint study by Google, Temasek, and Bain & Company. As of early 2024, internet penetration has reached 79.5% with over 221 million internet users, supported by improved mobile broadband and expanding digital literacy.

Indonesia’s vibrant digital ecosystem includes global tech players like Amazon, Google, Microsoft, Meta, and Apple, alongside major regional firms such as GoTo (the merged Gojek-Tokopedia entity), Shopee, and Lazada. These firms are increasingly investing in digital banking, logistics, and cloud services. With strong consumer demand and deepening public-private partnerships, Indonesia’s digital transformation is rapidly extending into key verticals like EdTech, HealthTech, AgriTech, and government services.

Despite these gains, market participants face a range of regulatory and operational challenges. These include evolving data privacy rules, data localization mandates, uneven enforcement of intellectual property rights, and complex subnational regulatory landscapes. The theme of the Indonesian Digital Economy Strategy is “IDigital: Taking Indonesia Forward by way of Inclusive Digital Aspiration.” IDigital is expected to speed up digital economic growth and contribute to the value of the digital economy, which can rise ninefold or around 20% to the GDP by 2045.

Market Challenges

Regulatory environment

Navigating Indonesia’s regulatory landscape presents several challenges for businesses operating in the digital sector. The regulatory framework is still evolving, and frequent changes can create uncertainty for foreign and domestic companies alike.

Indonesia’s digital policy environment is highly dynamic. The 2022 Personal Data Protection (PDP) Law establishes strict rules for the collection, processing, and transfer of personal data, with full implementation scheduled for October 2024. Foreign firms must also comply with regulations limiting cross-border data flows and requiring local storage of sensitive information, particularly in financial and public service sectors. These data localization measures increase costs and complicate global cloud strategies.

Emerging AI regulations are in flux. While comprehensive legislation is still under development, Komdigi’s Circular No. 9 of 2023 and the Financial Services Authority (OJK)’s AI Guidelines are current reference points. Businesses are advised to monitor evolving ethical standards and requirements for transparency in algorithmic decision-making. Currently Komdigi is developing AI roadmap, and it is targeted to be completed by 2025.

Indonesia’s decentralized governance also creates inconsistencies across regions, with local regulations sometimes diverging from national frameworks. This can result in operational uncertainty, especially in the technology, e-commerce, and fintech sectors.

Foreign digital service providers must also navigate sector-specific restrictions, including domestic content requirements, VAT obligations on cross-border digital transactions, and burdensome certification procedures for software and hardware.

Indonesia needs to improve the four pillars of ICT regulations: Regulatory Authority, Regulatory Mandate, Regulatory Regime, and Competition Framework. Indonesia needs to enhance policy and regulation clarification, applying agile and collaborative model, and applying best practices for a good governance. Policies and regulations in Indonesia should also actively reduce disparities in various aspects of digital economic development. It includes expanding financial inclusion, improving access to education and skills development, providing better access to public services, and offering greater support for startup ecosystems that can create employment opportunities.

Digital Trade Barriers

Indonesia’s most significant digital trade barriers include stringent data localization rules, restrictions on internet service platforms, and local certification requirements for digital products. Foreign digital service providers must charge and report 11% VAT on transactions in Indonesia and provide proof of compliance. As of early 2024, more than 160 international firms are listed as digital taxpayers in Indonesia.

Government restrictions on certain internet services, such as content moderation, licensing requirements for over-the-top (OTT) platforms, and preferential treatment for domestic platforms, can disadvantage foreign firms. Indonesia’s enforcement of content regulation under the Electronic Information and Transactions (ITE) Law also presents reputational and operational risks for digital companies operating in Indonesia.

Digital Trade Opportunities

Indonesia’s push toward a digitally enabled economy offers significant commercial opportunities across a range of sectors. Some advanced innovations have the potential to shape the future and bring significant impacts to Indonesia economic sectors such as: Next-level automation, Applied Artificial Intelligence (AI), Next-gen connectivity, Genetic engineering, and Quantum computing.

Cross-Sector Enabling Technologies

Demand is growing for advanced communications and networking systems, including 5G infrastructure, ORAN (Open Radio Access Network), and sub-sea cable networks. These technologies are critical for expanding access and capacity in Indonesia’s archipelagic geography.

Advanced computing—including high-performance computing (HPC), edge computing, and cloud services—is gaining traction across finance, healthcare, and government. Leading cloud providers like AWS, Google Cloud, and Microsoft Azure have launched or committed to Indonesian data centers, capitalizing on growing demand for secure and scalable cloud infrastructure.

Sensing and signature technologies, human-machine interfaces, and AI solutions are being deployed across defense, agriculture, and manufacturing sectors. AI applications are also expanding in fintech, retail analytics, and public service delivery. Opportunities exist for U.S. firms offering cutting-edge AI tools, cybersecurity systems, and smart city solutions.

Specific Industry Sub-sectors

Fintech remains a top investment destination. Following the passage of the Financial Sector Development and Strengthening Law (UU P2SK), Indonesia’s fintech ecosystem—including digital wallets, P2P lending, and Insurtech—continues to mature. In 2023, digital payments increased by 10%, with a projected 15% growth rate through 2025.

Cybersecurity is another critical need. As the threat landscape evolves, Indonesian firms require modern solutions for data protection, endpoint security, and cyber-resilience. The National Cyber and Crypto Agency (BSSN) leads regulation and enforcement, but private sector capacity remains limited, creating room for foreign entrants.

IoT and smart city applications—particularly in transportation, waste management, and energy—are integral to Indonesia’s urbanization goals. U.S. firms with expertise in IoT, GIS, and public infrastructure technologies can benefit from this focus.

Quantum technologies, while still in the early stages, are attracting attention for secure communications and cryptography. Opportunities may exist for collaborative research or pilot projects with local academic and government institutions.

The software and digital services sector, including enterprise software, SaaS, and mobile platforms, remains a key area of opportunity. Demand is especially high for customer relationship management tools, cloud services, and e-government platforms.

Digital Economy-Related Trade Events

Key events offer opportunities to engage the Indonesian market and showcase technologies:

Indonesia Digital Innovation Conference & Expo – A premier venue to meet government and business leaders in digital innovation. DTI-CX
Smart City Expo Indonesia – Focused on IoT, infrastructure, and public services. IISMEX
Fintech Festival Indonesia – The top event for fintech entrepreneurs, banks, and regulators. IndonesiaFintechSummit
Cybersecurity Indonesia – Highlights developments in national and private sector cyber defense. NCSC
Indonesia ICT Expo – An industry-wide showcase of ICT infrastructure, hardware, and solutions. INTI