Digitalization of Agri-food Sectors in Indonesia
Indonesia and the Netherlands have seen rapid growth in their tech ecosystems. The Netherlands prioritizes agrifood global chains, while Indonesia aims for high-tech agri-food development in its economic plans. Digitalizing agriculture, named "Agribusiness Digitalization," is crucial for efficiency and worker well-being. However, Indonesia's agriculture sector remains under-digitalized despite significant investments, requiring greater focus.
The Embassy of the Netherlands in Indonesia therefore commissioned a study (and conducted by ANGIN – Angel Investment Network Indonesia) on Digitalization of Agri-food Sectors in Indonesia. The study analyzes digital transformation opportunities in Indonesian agriculture, aiding Dutch entrepreneurs' decisions. The report guides the Dutch embassy on tech priorities and interventions for stronger market positioning of Dutch smart agricultural solutions in promising sub-sectors. The study used quantitative and qualitative methods—desk research, surveys, and interviews—in the first half of 2023.
Digital transformation has been a massive initiative for the Indonesian government, beyond agriculture. However, some initiatives might seem overlapped across ministries or government institutions, for instance in data collection efforts which are available in different programs. Each ministry usually has their own digital transformation roadmap, spearheaded by the Ministry of Communication and Informatics (Kemenkominfo) by setting up hard infrastructure and soft infrastructure; leading to better internet access in some areas, though not equal from provinces to provinces. Policy in agriculture tends to focus on commodities or land, clear policy in digital agriculture is still disintegrated. On the other hand, the digital policy in the Ministry of Finance and OJK are focusing on the startup and innovation context, accelerated by the rapid growth of FinTech including blockchain, decentralized finance (De-Fi); through financial technologies IPO rule and permit to operate.
The digital transformation of agriculture is being approached differently in smallholder farmers and industrial farmers in Indonesia. Smallholder farmers are slowly adopting digital technology to improve their farming practices such as using digital tools to access weather forecasts, market prices, and other agricultural information, while industrial farmers are already using digital technology to improve their marketing and supply chain management. The industrial farmers are usually agribusinesses. Strong agricultural sub-sectors in Indonesia are driven by two factors: government/regulation and the private sector. The regulators are directly related to the stability of domestic consumption, while the private sector subsectors are driven by the demand in both domestic and international markets.
Digital opportunities in the market are motivated by operational efficiency and sustainability, where the top trends are in e-commerce, traceability, sensors and greenhouses. Emerging technologies such as metaverse and blockchain are also used. As the innovator or implementor of digital solutions, agrisolution and agribusiness often needs support from a third party to enable them. Aggregator plays a strategic role in the agriculture for the agrisolution, agribusinesses, and for the farmers to enable the digital opportunities by providing access to network, knowledge and funding. They were initiated from public and private sectors, as well as academic institutions. Civil society organizations as development organizations take cross-cutting focus to provide different interventions to benefit farmers and other beneficiaries in the long term, including gender, youth, poverty, environment, disaster relief and mitigation. Digital literacy is part of the focus of the effort as it is the gate to smart tech adoption for more sustainable and smart farming practices.
The Dutch smart sector can come into becoming an innovative solution in Indonesia through potential partnership models: Business case co-creation, Joint R&D, Unlocking access to finance for farmers, Trade Mission (G2B), as well as G2G Partnerships.
For more information on the study, please contact: jak-lnv@minbuza.nl.
