The Value of Cross-border Digital Transmissions to MSMEs in Indonesia: Implications for Participation in the WTO E-commerce Moratorium

Cross-border digital transmissions are crucial components of the global trading system. Currently, WTO members do not impose custom duties on inward flows, in-keeping with the WTO’s temporary moratorium on e-commerce taxation.

This study analyzes how imported digital transmissions contribute to the growth of Indonesian micro, small, and medium enterprises (MSMEs)i. Experiencing a significant structural shift over the last decade, Indonesian MSMEs are increasingly engaged in services. The services sector is rapidly being digitalized on a global basis, and the same holds true in Indonesia. Accordingly, this study highlights the benefits of the World Trade Organization’s (WTO) e-commerce moratorium to Indonesian MSMEs and the Indonesian economy as a whole. 

Two-thirds of Indonesian MSME output is now in the services sector, which is also the sector that is digitalizing most rapidly. Indonesian MSMEs total digital imports quadrupled over the period 2010-2021, led by wholesale and retail services, followed by “other services”. While much more modest, and starting from a very low base, digital imports by manufacturing MSMEs are growing fastest.. By the end of the decade, nevertheless, the overwhelming bulk of MSME digital imports were destined for the wholesale and retail sector. 

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Authors:
Dr. Badri Narayanan Gopalakrishnan is a Non-Resident Senior Fellow, NCAER, New Delhi, India.
Dr. C. Karthikeyan is a Research Fellow at Infisum Modeling Pvt Ltd, India.
Dr. Ciplis Gema Qor’iah is an Assistant Professor at University of Jember, Indonesia.
Amit Sinha is a Research Assistant at Infisum Modeling Pvt Ltd, India and is currently pursuing higher studies at Indian Institute of Foreign Trade, New Delhi.
Manasi Gupta is a Research Assistant at Infisum Modeling Pvt Ltd, India and is currently pursuing higher studies at Indian Institute of Foreign Trade, New Delhi.
Jane Drake-Brockman is a Visiting Fellow at the Institute for International Trade, The University of Adelaide and Director, Australian Services Roundtable. 

The views expressed here are the author’s alone and not those of the Institute for International Trade.