OPTIMIZING INDONESIA'S DIGITALLY-ENABLED SERVICES FOR ECONOMIC GROWTH AND IMPROVED TRADE BALANCE

Danny Hermawan, Cicilia A. Harun, Ade Dwi Aryani, Dwi Cahyo Ardianto, Eskanto Adi Nugroho, Andi Widianto and Najibullah Ulul Albab
Additional contact information
Danny Hermawan: Bank Indonesia
Cicilia A. Harun: Bank Indonesia
Ade Dwi Aryani: Bank Indonesia
Dwi Cahyo Ardianto: Bank Indonesia
Eskanto Adi Nugroho: Bank Indonesia
Andi Widianto: Bank Indonesia
Najibullah Ulul Albab: Bank Indonesia

No WP/03/2025, Working Papers from Bank Indonesia

Abstract: This study examines how digital trade in services (DTS) can promote economic growth and improve Indonesia's digital trade balance. Over the past two decades, digital transformation has reshaped global trade, but developing economies such as Indonesia face a dual reality of opportunities and infrastructure constraints. Despite sectoral growth, Indonesia recorded a USD 18.4 billion deficit in DTS in 2024, driven primarily by imports of telecommunications, professional services, and digital content. This trade imbalance underscores the need to optimize Indonesia's digital services exports and reduce dependence on foreign digital products. Using a mixedmethods approach that combines cross-country panel GMM and time-series GMM for Indonesia, the study finds that regulations, digital talent, and digital infrastructure are critical to accelerating economic growth and enhancing the competitiveness of digital service exports. However, strict regulations can hinder exports, particularly in developing countries that face challenges in regulatory and infrastructure capacity. In Indonesia, while improved regulations can support economic growth and reduce the DTS deficit, further development of digital talent and infrastructure is essential to driving growth. The study recommends focusing on developing digital talent, strengthening regulations, and expanding digital infrastructure. These efforts will reduce the DTS deficit and position Indonesia as a competitive player in the global digital economy.

Keywords: Digitally-enabled services; Digital services exports; Digital trade balance; Economic growth; GMM (search for similar items in EconPapers)
JEL-codes: C36 F10 F14 O40 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025
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