Indonesia Must Turn the AI Wave into a Productivity Wave
“Indonesia has the scale and entrepreneurial energy to make AI an important part of its development. The next step is disciplined execution: connect infrastructure with adoption, investment with skills, and innovation with public trust”.
By Teguh Anantawikrama - Vice Chairman for Technology and Digital Transformation, Kadin Indonesia
INVESTORTRUST - Indonesia has an opportunity to use artificial intelligence to strengthen its economic foundations, expand opportunity, and improve public services. Realizing that opportunity requires a national effort that connects technology investment with the everyday needs of businesses and citizens. Our ambition should be clear: higher productivity, better-paying jobs, stronger domestic enterprises, and a government that serves people more effectively.
The World Bank’s October 2026 East Asia and Pacific Economic Update, Riding the AI Wave, provides a useful starting point. It forecasts Indonesian growth of 5.2 percent in both 2026 and 2027, followed by 5.3 percent in 2028. Its 2026 projection is 0.5 percentage point higher than previously forecast. Yet Viet Nam is projected to grow by 7.4 percent in 2026 and 7.3 percent in 2027. Economic resilience gives Indonesia a foundation; accelerating productivity must become the next task.
The report also identifies a limitation in Indonesia’s growth model. Government priority programs, state-linked investment, and energy subsidies have supported activity, while fiscal and external imbalances have increased. As fiscal stimulus moderates, private investment will have to contribute more. I believe this makes digital transformation a central economic reform: it can help firms become more productive and make investment more attractive.
The welfare test is particularly important. In its December 2025 assessment, the World Bank reported that real wages declined by an annual average of 1.1 percent between 2018 and 2024. It also observed that much job creation was concentrated in activities with low value added. These findings describe an earlier period, but they establish why growth must translate into better earnings and stronger opportunities for advancement.
AI should be assessed against that challenge. A manufacturer can use it to identify defects and anticipate maintenance needs. A small distributor can improve stock management. A tourism business can serve overseas customers in multiple languages. A farmer cooperative can combine weather information, market signals, and local expertise to support decisions. Such applications require careful testing, but they show how technology can address practical constraints across the economy.
For most countries in the region, the World Bank emphasizes adopting and adapting existing AI technologies, including small tools designed for specific tasks. Indonesia should take that lesson seriously. We can build domestic capabilities through useful applications, local-language adaptation, and industry expertise, while selectively investing in more advanced research. The priority is to make proven tools accessible to firms that lack their own technology teams.
Our digital foundations show both progress and unfinished work. BPS recorded internet access among 72.78 percent of people aged five and above in 2024, up from 69.21 percent in 2023. However, access reached 79.13 percent in urban areas and 63.71 percent in rural areas—a gap of 15.42 percentage points. These figures measure internet use, rather than the quality or reliability of connections. They underline the importance of extending useful connectivity beyond major cities.
A business cannot depend on cloud applications if its connection repeatedly fails. A school cannot prepare students for digital work without reliable access and capable teachers. A community health facility cannot fully participate in connected services if its systems remain isolated. Broadband quality and affordability therefore deserve the same policy attention as headline coverage.
The World Bank’s December 2025 assessment recommended more spectrum for mobile broadband and 5G, fair access to fiber networks and passive infrastructure, and aggregating demand from schools, clinics, and government facilities to support rural broadband investment. These offer practical directions for reform. Implementation should lower deployment costs, improve service quality, and create room for private investment.
Energy is equally fundamental. The October 2026 report highlights the importance of reliable electricity for AI and data centers, alongside the risks of dependence on imported fossil fuels. Indonesia should connect digital investment planning with generation, transmission, and renewable-energy development. Each major project should be evaluated for its power requirements, water use, resilience, and contribution to domestic economic activity.
I believe KADIN can help organize a practical national AI adoption effort. Sector associations should identify priority business problems; technology providers should demonstrate workable solutions; universities and vocational institutions should develop relevant training; and financial institutions should assess viable investment needs. Smaller firms need affordable access and implementation support. Shared services and sector-based training can help them participate.
Success should be measured through operating results: lower rejection rates, shorter delivery times, reduced administrative costs, stronger sales, and improved worker earnings. Participating firms should establish a baseline and evaluate results before expanding deployment. Public support should encourage demonstrable benefits and learning across industries.
Workers must have a clear place in this agenda. AI adoption should be accompanied by opportunities to develop judgment, communication, analytical skills, and technical competence. Employers should explain how tasks will change and provide training linked to actual work. Productivity gains create a stronger basis for better compensation, but sharing those gains requires deliberate management and labor policies.
Government has a parallel responsibility. Public-service transformation should connect services, data, technology, and security around citizens’ needs. Reliable records, interoperable systems, clear accountability, and effective remedies are essential. AI applications should begin with well-defined tasks where accuracy can be assessed and human responsibility remains explicit.
Indonesia can also develop solutions relevant to other countries in the Global South. Affordable tools for multilingual public services, small businesses, agriculture, and dispersed communities could become areas of practical cooperation. Credibility will come from demonstrating results at home and building partnerships that support local skills and enterprise.
Indonesia has the scale and entrepreneurial energy to make AI an important part of its development. The next step is disciplined execution: connect infrastructure with adoption, investment with skills, and innovation with public trust. Our measure of progress should be the ability of an Indonesian worker to earn more, an Indonesian enterprise to compete better, and an Indonesian citizen to receive a better service.
