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Optimizing Indonesia'S Digitally-Enabled Services For Economic Growth And Improved Trade Balance

Author

Listed:
  • 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)

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.

Suggested Citation

  • Danny Hermawan & Cicilia A. Harun & Ade Dwi Aryani & Dwi Cahyo Ardianto & Eskanto Adi Nugroho & Andi Widianto & Najibullah Ulul Albab, 2025. "Optimizing Indonesia'S Digitally-Enabled Services For Economic Growth And Improved Trade Balance," Working Papers WP/03/2025, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp032025
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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