DYNAMICS OF THE BUSINESS ENVIRONMENT IN THE DIGITAL ERA AND ITS IMPACT ON INDONESIA'S ECONOMIC GROWTH

Abstract

The rapid advancement of digital technology has fundamentally transformed the business environment, altering market structures, consumer behavior, and competitive dynamics across multiple industries globally. This study examines the dynamics of the digital business environment and its consequential impact on economic growth, with particular focus on the Indonesian context. Employing a quantitative approach through systematic literature review and secondary data analysis, this article synthesizes data from government sources, international research institutions, and peer-reviewed academic journals covering the period 2020–2025. Key findings indicate that the digital economy's contribution to Indonesia's Gross Domestic Product has grown consistently from 3.7 percent in 2019 to 5.8 percent in 2023, with projections reaching 7.1–8.0 percent by 2025–2026. Four primary transmission mechanisms are identified: reduction of transaction costs (35–45 percent), expansion of market accessibility, creation of 18 million new employment sectors, and enhancement of productivity (20–30 percent). The digitalization of SMEs has reached 25.5 million units by 2024, demonstrating 52 percent penetration of the total UMKM population. However, significant challenges persist, including geographic infrastructure gaps, low digital literacy in rural areas, and inadequate data governance frameworks. This article concludes that realizing the full potential of Indonesia's digital economy requires coordinated implementation of three strategic priorities: equitable digital infrastructure expansion, capacity strengthening of SMEs for global value chain integration, and establishment of adaptive data governance and cybersecurity regulatory frameworks.