Digital Transformation Targets Southeast Asia's 50%-Plus Informal Employment, Lifting Productivity
Updated
Updated · Asian Development Bank · Jun 29
Digital Transformation Targets Southeast Asia's 50%-Plus Informal Employment, Lifting Productivity
2 articles · Updated · Asian Development Bank · Jun 29
Summary
More than half of Indonesia's employment remains informal even as the economy grows, and the report says the bigger problem is weak movement of workers and firms into higher-productivity activities.
Digital tools can ease that transition by improving job matching, lowering formalization costs, expanding market access and helping firms adopt more productive technologies, with Indonesia's QRIS payment system cited as one example.
2024 labor-force data show formal jobs are concentrated among better-educated workers, while lower-skilled workers remain overrepresented in informal work as firms also struggle to find technical, problem-solving and interpersonal skills.
Manufacturing firms still face financing, skills, infrastructure and organizational barriers to technology adoption, limiting both firm upgrading and demand for higher-level skills.
Across Southeast Asia, the article argues digitalization will raise productivity only if paired with skills systems, firm support, and labor and industrial policies that help workers shift into labor-intensive manufacturing and modern services.
As formal jobs shrink, will digitalization create quality careers or just a new class of precarious gig workers in Indonesia?
Can Indonesia achieve its high-income dream without solving the pollution and low productivity plaguing its informal sector?
With AI demanding English proficiency, is Indonesia's education system preparing its youth for the future or for irrelevance?
Digital Transformation and Informal Employment in Southeast Asia: Challenges, Opportunities, and Policy Solutions
Overview
Southeast Asia is experiencing rapid digital transformation while still facing widespread informal employment. This combination creates both opportunities for inclusive development and risks of greater socio-economic divides. The region’s strong economic growth is challenged by global uncertainties like geopolitical tensions and trade disruptions. Informal employment remains a major focus, as many workers lack social protection and stable incomes. Digital advancements, such as online skills training, offer hope for better livelihoods, but uneven access to technology and digital skills can leave some workers behind. Addressing these challenges is crucial to ensure that digital progress benefits everyone in Southeast Asia.