THE ECONOMIC AND SOCIAL BENEFITS OF

MOBILE INTERNET TECHNOLOGY IN INDONESIA

Oliver Salmon

October 2016

INTRODUCTION

WHY IS MOBILE SUCH A TRANSFORMATIVE

FORCE?
Allowing people
Increased
flexibility for
workers

to access a deep
web of
information

Enabling small
businesses to
reach a wider
customer base

Applications for
mobile internet
Improving labour
market matching

A source of
education via
distance learning

A social
connector of
people

INTRODUCTION

RESEARCH BACKGROUND
Over the past six months Oxford Economics has been engaged in an extensive
research project to quantify the economic benefits of mobile internet technology. A
multi-stage modelling programme has enabled us to estimate:
1. The historic contribution of mobile internet to GDP and jobs from 2010-2015;
2. The projected forecast contribution of mobile internet to GDP and jobs from
2015-2020; and
3. How this activity has and will continue to boost government revenues and
thus could support investments in social infrastructure.
The geographic focus of our analysis was ASEAN but here we drill down on our
results for Indonesia.

INTRODUCTION

OUR RESEARCH SHOWS THAT SUCH GROWTH

CREATES BENEFITS THROUGH TWO CHANNELS
Productivity: mobile internet technology supports efficiency gains for
businesses. Higher productivity is vital to supporting long-term growth
and prosperity.

Participation: mobile internet enables more people to seek work in the

formal economy. Through this channel mobile helps to create more jobs
in the long-run.
These benefits create widespread benefits throughout the economy
they extend well beyond the digital sector. They support SMEs, major
corporates and public sector institutions alike across all sectors of the
economy.

INTRODUCTION

MOBILE INTERNET GROWTH IN SOUTHEAST ASIA IN

GLOBAL CONTEXT
Active subscriptions per 100 inhabitants

120

Australasia
100

N.America
W.Europe

80

60

E.Europe
N.E.Asia
World
S.E.Asia

40

Mobile internet
penetration in SEA
remains slightly
below the global
average.
However, the gap has
narrowed significantly
since 2012, a trend
we expect to continue
going forward.

20
Sub-Saharan Africa
S.Asia
0
2010

2011

2012

2013

2014

Source: Oxford Economics/ITU

INTRODUCTION

RECENT PROGRESS IN INDONESIA HAS BEEN

SLUGGISH

Active subscriptions per 100 inhabitants

50
45
40
35
30
25

Indonesia

20
15

South East Asia

10
5
0
2010

2011

Source: Oxford Economics/ITU

2012

2013

2014

2015

The past five years in

Indonesia have been
characterised by fairly
sluggish progress in
regional context.
Despite this, mobile
internet penetration
has more than
doubled between
2010-2015, with
growth picking up
strongly since 2013.

ECONOMIC AND SOCIAL VALUE 2010-2015

MOBILE INTERNET HAS ALREADY SUPPORTED A

SUBSTANTIAL ECONOMIC IMPACT
Jobs, 000s

US$ mns, 2015 prices

12,000

300

10,000

250

8,000

200

6,000

10,900

150
260

4,000

100

2,000

50

0
GDP (Left-hand axis)

Jobs (Right-hand axis)

The growth of mobile

internet over the past
five years has
already yielded
considerable gains.
GDP boosted to the
tune of $10.9 billion
and an extra 260,000
jobs spread across
the economy.

Source: Oxford Economics

ECONOMIC AND SOCIAL VALUE 2010-2015

MOBILE BOOM HAS BEEN A VITAL SOURCE OF

GROWTH
Contribution to GDP
growth*, 2010-2015

The mobile internet

boom is estimated
to have boosted
GDP by $10.9
billion over the past
five years.

Manufacturing

Distribution
Construction
Agriculture
Public Services
Information and Communications
Transport
Business Services

Equivalent to 4.6%
of recorded GDP
growth during this
period.

Financial Services
Mobile Internet

10.9

Hotels & Accommodation

Extraction
Other Services
Utilities
0
Source: Oxford Economics

10

20

30

40

50

60

70

US$ billions, 2015 prices

*The contribution of mobile internet refers to how it is estimated to have boosted the
economys supply side capacity whereas sectoral figures show their demand-side
contribution to GDP growth.

ECONOMIC AND SOCIAL VALUE 2010-2015

ALL THIS ACTIVITY HAS BEEN AN IMPORTANT

SUPPORT FOR THE PUBLIC FINANCES
Extra jobs and higher productivity
have both provided an important
boost to the public finances.
The extra wages and profits
supported by the growth of mobile
internet technology have increased
revenues, sufficient to support:
The construction of over 1,358
km of new two-lane highway
Routine immunisation
programmes for 17 years
Primary school education for
over 232,000 children
9

ECONOMIC AND SOCIAL VALUE 2010-2015

BOOST TO GDP OF 1.3% IN 2015

Thailand

Overall boost to
output worth 1.3%
of 2015 GDP.

Malaysia
Singapore
SE Asia

Lags behind the

ASEAN average
reflecting the
relatively sluggish
progress in mobile
internet growth.

Vietnam
Philippines
Indonesia

1.3%

Myanmar
Cambodia
Brunei
Lao PDR
0%

1%

2%

3%

4%

Share of 2015 GDP

Source: Oxford Economics

10

POTENTIAL FUTURE GAINS, 2015-2020

GOING FORWARD WE EXPECT INDONESIA TO

MOVE AHEAD OF THE REGIONAL CURVE
Active subscriptions per 100 inhabitants

100
90
80
70
60

50
40
30

Indonesia

20
South East Asia

10
0
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Subscription rate in
Indonesia forecast to
rise to around 90%
by 2020.
Baseline forecast
sees Indonesia
gradually move
above regional
average.

2020

Source: Oxford Economics/ITU

11

POTENTIAL FUTURE GAINS, 2015-2020

MOBILES FORECAST CONTRIBUTION IS

IMPRESSIVE WHEN BENCHMARKED SECTORALLY
Mobile expected to
remain an important
source of economic
growth.

Forecast contribution to GDP

growth*, 2015-2020
Manufacturing
Distribution
Construction
Agriculture
Public Services
Mobile Internet

30.1

Sixth in the projected

sectoral rankings,
higher than many
mainstream
industries.

Transport
Information and Communications
Business Services
Financial Services
Extraction
Hotels & Accommodation
Other Services
Utilities
0
Source: Oxford Economics

20

40

60

80

US$ billions, 2015 prices

*The contribution of mobile internet refers to how it is estimated to have boosted the
economys supply side capacity whereas sectoral figures show their demand-side
contribution to GDP growth.

100

$30.1 billion
equivalent to 5.2% of
forecast growth up to
2020.
12

POTENTIAL FUTURE GAINS, 2015-2020

THE MOBILE ECONOMY IS PREDICTED TO CREATE

HALF A MILLION NEW OPPORTUNITIES UP TO 2020
Mobile internet is
projected to be a
significant contributor to
jobs growth.

Forecast contribution
to employment
growth*, 2015-2020Public Services
Trade
Construction
Manufacturing

Half a million jobs

equivalent to 4.6% of
forecast employment
growth up to 2020.

Financial and Business Services

Transport & Communications
Mobile Internet

498

Extraction
Utilities

Agriculture
0
Source: Oxford Economics

500

1,000

1,500

2,000

2,500

3,000

3,500

Headcount jobs, '000s

*The contribution of mobile internet refers to how it is estimated to have boosted the
economys supply side capacity whereas sectoral figures show their demand-side
contribution to employment growth.

Contribution stands
alongside major
industries such as
financial and business
services and transport
and communications.
13

POTENTIAL FUTURE GAINS, 2015-2020

WE EXPECT INDONESIA TO BENEFIT

SUBSTANTIALLY FROM THIS GROWTH
Indonesia

We expect growth in
mobile internet to
translate into
substantial gains
going forward.

2.4%

SE Asia
Myanmar
Vietnam
Cambodia
Philippines

Baseline forecast of a
boost worth 2.4% of
GDP, the best in the
ASEAN region.

Lao PDR
Malaysia
Thailand
Brunei
Singapore
0%
Source: Oxford Economics

1%

1%

2%

2%

3%

3%

Share of 2015 GDP

14

POTENTIAL FUTURE GAINS, 2015-2020

GROWTH CONTINGENT ON FAVOURABLE

INVESTMENT AND REGULATORY CLIMATE

To further widen access to mobile to the wider population it will be

critical to further extend 3G and 4G network access particularly in rural
areas.
On the regulatory side research has demonstrated that investors in the
mobile space feel less comfortable in situations where regulators are
perceived to be applying traditional telecom-type rules.
Fully exploiting the economic and social benefits offered up by mobile
demands will require striking a delicate balance so that incentives to
innovate are maintained.

15

POTENTIAL FUTURE GAINS, 2015-2020

SUPPORTIVE POLICY ENVIRONMENT COULD

EXTEND THESE GAINS EVEN FURTHER
US$ mns, 2015 prices

Baseline forecast

Upside scenario

40,000

Jobs, '000s
700

35,000
6,400
30,000

600
110
500

25,000
400
20,000

300
15,000

30,100

500
200

10,000

100

5,000
0

0
GDP (Left-hand axis)

Jobs (Right-hand axis)

Our analysis underlines

the benefits that can be
realised by a supportive
policy environment.
An additional 10 pp rise
in mobile internet
penetration up to 2020
would boost GDP by a
further $6.4 billion and
create 110,000 extra
jobs.

Source: Oxford Economics

16

POTENTIAL FUTURE GAINS, 2015-2020

SUMMARY OF MAIN FINDINGS

17

OCTOBER 2016
All data shown in tables and charts is Oxford Economics own data, and is
copyright Oxford Economics Ltd, except where otherwise stated and cited in
footnotes.
The modeling and results presented here are based on information provided by
third parties, upon which Oxford Economics has relied in producing its report and
forecasts in good faith. Any subsequent revision or update of those data will affect
the assessments and projections shown.
To discuss the report further please contact:
Henry Worthington: hworthington@oxfordeconomics.com
Oxford Economics
Broadwall House, 21 Broadwall, London, SE1 9PL, UK
Tel: +44 207 803 1425

18

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