Managing Indonesia’s Digital Transformation

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Illustration (Photo: digianalysys)

A lot of work has to be done for the country before it can compete shoulder-to-shoulder with other countries in the digital era

The very first industrial revolution sparked in the 18th century, bringing dramatic changes on the mechanisms of goods and services productions, including through the invention of sewing machines, steam engine, cement, and light. As technology advances, so does the manufacturing industry. Today, the world is riding into the fourth industrial revolution, in which manufacturing industry is integrated into a digital and online system. This era is often called Industry 4.0.

Industry 4.0 has transformed the industrial production, restructuring the whole process into a centralized and digitalized system, yet with a decentralized process of production. This cuts down the cost, and in turn, is much more efficient. This direction, however, fundamentally requires heavily on the development of software and hardware, as it heads towards an era of automation.

Salkin et. al on his book “Industry 4.0: Managing the Digital Transformation” defined Industry 4.0 as an integration process between production facilities, supply chain, and a services system that would add the value of goods and services. To reach this transformation, a country will have to boast three components.

First, a horizontal integration to added value and vertical integration to manufacturing network is essential. This means that there is a need to develop a technology that has the ability to evaluate the value and the quality of goods and services provided.

A common example is when a customer orders an Ojek through online applications. The system automatically will find available drives through a set of algorithmic computation based on the distance between the consumer and the driver. Next, it will determine the rate that has to be paid by the consumer, based on the distance of travel. Then on the end of the ride, the consumer will be able to determine the level of quality of the services. All these processes, from start to end, uses a computerized system.

This system will also be very useful if used in the health service sector, especially in cases that need quick responses. Digitally integrated machines and technology will clearly ease and speed up responses as well as minimize risks.

Second is adequate technology. Sufficient capabilities of technology, including the developments of software and hardware as well as a reliable internet network that can reach every consumer at any given time and place, are definitely needed.

The third is the abilities of the human resources itself. This means trained and well-prepared human resources that are capable to adapt along with the advancement of technology.

Challenges for Industries in Indonesia

Yet the government, industrial sectors, service providers, and the consumers have a lot of work to be done.

The government has to be able to provide a conducive environment for industries to thrive. An example is that the government, through its state-owned electrical service enterprise otherwise known as PLN, must be able to guarantee a reliable and accessible network that can reach every region. This will be essential especially for industries which are growing in relatively low-cost production regions.

A revamp in the telecommunication network and internet access speeds are also needed. In 2017, Indonesia ranked only 75th out of all countries in terms of internet speed. The champion in this sector is Singapore, followed South Korea. In 2020, South Korea has already planned to implement 5G technology for internet access, whilst 143 million population of internet users in Indonesia has yet been able to enjoy a reliable 4G network.

Even in some regions, such as in Raja Ampat, Maluku, Papua, and a few regions in South Sulawesi, access to telecommunication network has yet been at their disposal. This limits the spread and the access people have to information.

Despite this, the paramount issue lies in the capabilities of human resources. And this can only be developed through a conducive environment which allows technological advancements to thrive, and translated from research facilities to the industrial sectors. One method to encourage this is to allocate more research and development funds to potential research facilities as well as to establish collaboration with universities. This will provide the government with clear and measurable development of technology in a bid to grow the industrial sector in Indonesia.

It has to be reiterated too, that the country needs to give much more credit to the works of its own nationals. Many Indonesians feel that their works are more appreciated abroad than at home, which in turn led to patents being settled in other countries, such as in Malaysia.

If all are not anticipated from the beginning, then one should not hope for the country to compete shoulder-to-shoulder with other nations, which in 2030 will enter a digital ecosystem, where all will be digitally integrated.

By Asmiati Malik

The writer is a Doctoral Researcher on Political Economy at the University of Birmingham