Authors: Muthia Azizah, Diah Dwi Cahyaningrum, Anna Alfiyanti Hulu, Hasna Imtiyaz Hanifah

Reviewers: Farid Al-Firdaus, Dwi Martutiningrum, Priska Maya Putri

To achieve the vision of Golden Indonesia 2045 and attain high-income country status by 2038, Indonesia must accelerate inclusive and competitive economic growth. A critical strategy in this endeavor is the strengthening and digital transformation of Micro, Small, and Medium Enterprises (MSMEs), which constitute +99% of all businesses and contribute around 60% to the national Gross Domestic Product (GDP).

As of 2023, Indonesia had 66 million MSMEs. Yet, their export contribution remains low at 15.7%. According to KADIN data, the government aims to raise MSME export share significantly over the next five years. Improving digital literacy from 20% to 50% could add USD 38 billion (IDR 546 trillion) to GDP by 2024. Digitally connected MSMEs are also 4.6 times more likely to enter global markets and create jobs. Despite challenges in digital transformation, strong government support can turn obstacles into opportunities, making MSMEs key drivers of Indonesia’s economic resilience and global competitiveness.

Optimizing MSMEs’ Export Opportunities through Public Sector–Driven Digital Strategies:

Our findings suggest that equitable digitalization through internet infrastructure, accessible digital platforms, and government support can enhance efficiency, expand market reach, and drive national economic growth through MSMEs. Godwin et al. (2024) highlight its positive impact: MSMEs in Bandung saw a 35% revenue increase through e-commerce; in Jakarta, operational efficiency improved by 20% with big data; and in Surabaya, IoT reduced storage costs by 25%. 

To achieve equitable digitalization, the government and digital communities must go beyond infrastructure by offering continuous training and support. This can be done through regional MSME digital literacy centers or by activating local communities committed to digital transformation. With equitable education and mentoring, MSMEs across regions can not only survive but also transform and compete globally by leveraging digital tools as a key driver of growth.

Government’s existing policy in enabling digital empowerment of MSMEs

Through coordinated efforts, Indonesia’s government has advanced MSME digitalization via capacity building, ecosystem support, and digital platforms. Ministry of Communication and Digital Affairs programs like MSME Level-Up (30,000+ beneficiaries), the National Digital Literacy Movement (12 million reached), and the Digital Entrepreneurship Academy (20,000 entrepreneurs trained) have built digital readiness. The Ministry of MSMEs supports over 250,000 MSMEs annually through upgraded PLUT-KUMKM centers. The Ministry of Finance contributes with platforms like Digipay (IDR 1+ trillion in transactions) and lelang.id (545 MSME users, 83.66% success rate), which are all integrated in Portal UMKM. These figures show momentum—but how is progress measured strategically over time?

Evaluating Policy Frameworks for MSME Digitalization

Despite the government’s efforts, Indonesia’s specific digital governance for MSMEs remains underdeveloped. While the 2025–2029 RPJMN outlines general MSME priorities, a targeted digital framework is still lacking. Planning remains unsystematic and not sufficiently evidence-based, complicated by the diversity, geographical spread, and lack of up-to-date MSME data. Many programs are reactive, addressing immediate needs without long-term sustainability. Moreover, interventions are fragmented, with ministries and agencies operating independently and often with overlapping mandates. This lack of strategic alignment underscores the need for a more coherent, inclusive, and future-oriented digital roadmap for MSMEs.

From Startup to Export-Ready: Digital Pathways for Indonesian MSMEs

A strategic digital roadmap for Indonesian MSMEs must replace fragmented efforts with a unified framework supporting growth from startup to export readiness. This transformation starts with ensuring digital literacy, supported by reliable connectivity and affordable, low-risk financing. Robust cross-government agency synergy between NGOs, fintechs, and private-sector platforms is also vital to scale innovation and reach underserved segments.

In accordance with its effectiveness, the government must lead in mapping MSME typologies and assessing their digital readiness—considering size, sector, and IT maturity. Categorizing enterprises as necessary, experimental, or a committed strategic move allows for more tailored interventions. In parallel, digital strategies must clearly define their scope, whether targeting business operations, transactions, marketing, or customer engagement. Thus, advancing with supportive policies must fit MSMEs’ digital stages to drive global integration.

Supporting Policy Measure to Prepare MMSEs for Global Market

The Ministry of Finance supports MSME development through financing—such as export financing—and fiscal facilities, including import duty and VAT exemptions and tax incentives. The Directorate General of Customs and Excise (DGCE) supports MSMEs in becoming export-ready through programs like export clinics, training, and market access support.

Additionally, The KITE IKM (Ease of Import for Export Purposes for Small and Medium Industries) exempts small and medium industries from import duties, VAT, and luxury tax on imported materials and machinery used in producing goods for export. According to Ministry of Finance Regulation No. 149/PMK.04/2022, companies must have an IT Inventory system for goods management. Lastly, DGCE further collaborates with other ministries and institutions to help MSMEs prepare for export. 

Study Case/Learning From Successful Countries

Indonesian MSMEs resemble Thailand’s rural-based model, with 77% employing and 57% involving local communities. According to Indonesia’s Ambassador to Thailand, the One Tambon One Product (OTOP) program offers a strong benchmark by fostering rural entrepreneurship through product development, government support, and digital integration. Its success lies in structured product selection, allowing only premium goods into global markets, and a five-star rating system that evaluates export readiness based on quality, competitiveness, customer trust, and distribution. Supported by digital training and e-commerce platforms, OTOP generated USD 8.6 billion in sales in 2019. SMEs make up 98.5% of Thai businesses, with over 30% of exports coming from e-commerce SMEs.

Conclusion

Equitable digitalization enables Indonesian MSMEs to boost competitiveness and reach global markets. This requires coordinated efforts to ensure fair access to digital literacy, infrastructure, and financing. The government must assess MSMEs’ digital readiness—foundational, exploratory, or strategic—and tailor policies accordingly, including Customs and Excise support. Focusing through this approach will deliver measurable results and build a resilient, globally competitive MSME sector aligned with Indonesia’s 2045 vision.

LIMITATION

This study offers a general overview of MSMEs as a collective group and has yet to address differentiated digital policy interventions tailored to the specific developmental stages of MSMEs—namely, startup enterprises, self-reliant businesses, and those prepared for export.

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