Indonesian Readiness for Digital Economy: Case of Trade in Services in ASEAN
Iwan Hermawan
Research Center, Secretary General and Expertise Body of Indonesian House of Representative
Abstract
Indonesian digital economy is projected to become the largest in Southeast Asia, promising more jobs, and more consumer choices for an emerging tech-savvy generation. One of efforts to realize that path, Indonesia has signed the 10th Package of ASEAN Framework Agreement on Services (AFAS). The commitment increases to trade in services cooperation for approximately 15 sub-sectors. However, the Indonesian readiness is highlighted by many parties, such as lack of human resources skill, poor infrastructure condition, and affordability uneven. So it is worrying that it would become a boomerang for national economic growth. The purpose of this study is to analyze Indonesian readiness for digital economy through trade in service in the ASEAN market. This study employs a quantitative approach with Gravity Model. The secondary data in the form of panel data period year 2014-2016 (annual) and includes ASEAN-6 countries. The variable digital economy readiness is a main explanatory variable interest and represented by networked readiness index. While the data sources come from Comtrade, IMF, World Bank, World Economic Forum, and Indonesian Ministry of Trade. The analytical method uses Poisson Pseudo Maximum Likelihood (PPML) and it is resolved with software of Stata 13. Based on the interim results indicate that the level of Indonesian readiness for digital economy; includes infrastructure, affordability, and skills of human resources; would effect positively the flow of trade in services in the ASEAN market. Therefore, it is important for the Government of Indonesia to ensure that there are prerequisites that must be prepared in grabbing benefits of the momentum of the digitalization era.
Keywords: Trade, Service, Digitalization, Gravity Model
Topic: Trade policies strategic Responses