Introduction Across ASEAN, digital transformation has become a central pillar of development strategies. Governments are investing heavily in industrial digitalization to boost productivity and competitiveness, while simultaneously expanding electronic government platforms to improve service delivery, efficiency, and transparency. In Indonesia, analytical work underpinning Achieving the Golden Indonesia Vision 2045 similarly positions digital transformation as a core element of long-term development. Yet outcomes have been uneven. Firm-level digital adoption remains concentrated among a limited group of early adopters, while the development impact of e-government has often fallen short of expectations. Understanding why requires looking beyond individual technologies or programs and instead examining the interaction between industrial digitalization and digital governance. Analysis The false separation in ASEAN’s digital agenda Industrial digitalization and digital government are often treated as separate reform tracks. Industrial digitalization is framed as a productivity and competitiveness agenda focused on firms, while digital government is viewed as an administrative reform centered on public services. This distinction is intuitive, but it obscures a deeper interdependence. Firm level digital adoption does not occur in a vacuum. Decisions to invest in digital technologies are shaped by regulatory clarity, data availability, system interoperability, and the predictability of government processes. At the same time, digital government reforms struggle to generate sustained economic impact when they remain disconnected from productive activity in the private sector. When pursued in isolation, both agendas risk underperforming—industrial digitalization remains uneven, and e-government improves processes without significantly raising productivity. Why firms struggle to digitalize alone Evidence from industrial digitalization shows that adoption is a gradual process rather than a binary choice. Firms differ widely in digital readiness, capabilities, and risk tolerance. Many face uncertainties over returns, shortages of digital skills, and organizational constraints that limit their ability to deploy more advanced technologies productively. As a result, digital adoption tends to cluster among firms that are already better positioned. Generic, one-size-fits-all support measures often fail to address these differences, limiting diffusion beyond early adopters. This pattern underscores a broader point: firm-level digital transformation depends not only on access to technology but also on the surrounding governance environment that shapes incentives, reduces uncertainty, and enables scale. Figure 1: Industrial Digitalization as a Graduated Process of Firm Capability Development Source: Authors’ elaboration based on López-Gómez, Aji, and Kamiya (2026). Why digitalizing services is not the same as governing digitally Across ASEAN, governments have made significant progress in putting services online. Digital portals, e-licensing systems, and electronic payments have improved convenience and transparency for citizens and businesses. However, digitalizing services does not automatically strengthen state capacity. When systems are developed independently, data remain siloed and institutional responsibilities overlap, digital platforms often replicate existing fragmentation in electronic form. In such settings, governments struggle to coordinate policies, target support effectively, or learn from implementation. Digital government generates development impact only when it moves beyond individual applications toward integration, interoperability, and coordinated governance. The connective tissue: why industrial digitalization struggles to scale without digital governance Industrial digitalization and digital government are not parallel reforms; they are mutually reinforcing system reforms. Industrial digitalization struggles to scale without digital governance capacity because firm-level adoption decisions depend on how effectively systems, data, and institutions are coordinated. Fragmented regulations, non-interoperable platforms, and inconsistent standards raise transaction costs and uncertainty for firms, reducing incentives to invest in more advanced digital solutions. Conversely, coherent digital governance (through common standards, integrated systems, and clear institutional roles) creates conditions in which private adoption can diffuse more broadly. Indonesia’s experience with the Quick Response Code Indonesian Standard (QRIS) illustrates this interaction. By establishing a common, interoperable framework for digital payments, QRIS reduced fragmentation across providers and platforms. While primarily a financial infrastructure reform rather than a digital government initiative per se, it lowered transaction costs for firms (particularly micro, small, and medium sized enterprises) and enabled wider participation in the digital economy. The lesson is not sector-specific replication but the value of coordinated governance in enabling scale. Indonesia as a system-scale laboratory Indonesia offers a useful lens for understanding these dynamics, not because it represents a finished model, but because its scale, diversity, and decentralized structure make system-level interactions visible. As a large emerging economy with wide variation in firm capabilities and administrative capacity across regions, Indonesia faces coordination challenges common to many ASEAN economies—only magnified. Industrial digitalization efforts have had to contend with firm heterogeneity and uneven readiness, while digital government reforms have advanced across multiple institutions and levels of government with varying degrees of integration. Analysis underpinning Achieving the Golden Indonesia Vision 2045 shows that progress in both agendas has been substantial, yet gaps in coordination and interoperability have constrained scalable impact. Where governance arrangements are more coherent, digital adoption tends to diffuse more broadly; where fragmentation persists, adoption remains concentrated among already-advanced firms. What alignment changes Aligning industrial digitalization with digital governance changes the nature of outcomes that governments and firms can achieve. First, alignment improves the targeting and scalability of support to firms. Integrated digital systems enable better understanding of firm characteristics and constraints, allowing support measures to be matched more closely to needs. Second, alignment reduces fragmentation costs. When regulatory processes and reporting requirements are digitally integrated, firms face lower transaction costs and greater predictability—conditions that are particularly important for smaller firms. Third, alignment strengthens feedback loops between policy and practice. Integrated systems allow governments to learn from implementation and adjust policies in response to observed outcomes. These effects can be understood through four interlinked dimensions of effective digital governance—integration, inclusion, innovation, and institutional capacity (the 4i framework)—which together determine whether digital transformation can scale beyond early adopters. Figure 2. Barriers to E-Government Adoption in Indonesia, Structured by the 4i Framework Source: Prasojo, Tominaga, and Aji (2026). Implications First, digital transformation should be approached as a system reform rather than a collection of sector-specific initiatives. Coherence across policies, institutions, and platforms matters as much as progress within individual domains. Second, digital governance capacity is a productive asset. Investments in interoperability, data integration, and coordination shape firm behavior by reducing uncertainty and enabling diffusion, supporting productivity growth alongside firm-level adoption. Third, sequencing and alignment matter more than speed. Rapid rollout of digital initiatives can deliver visibility, but without alignment, their impact remains limited. These implications align with the regional priorities articulated in the ASEAN Digital Masterplan 2030, which underscores interoperability, capability development, and inclusive digital transformation as foundations for deeper regional integration. Resources Asian Development Bank (ADB). 2026. Achieving the Golden Indonesia Vision 2045: Pathways and Challenges. Edited by J. Tominaga, B. P. Resosudarmo, R. Anglingkusumo, and P. Aji. Manila. Association of Southeast Asian Nations (ASEAN). 2026. ASEAN Digital Masterplan 2030. Jakarta. Bank Indonesia. 2024. Quick Response Code Indonesian Standard (QRIS). Jakarta. Ministry of National Development Planning/National Development Planning Agency (Bappenas). 2019. Indonesia 2045: Sovereign, Advanced, Just, and Prosperous. Jakarta. Ask the Experts Priasto Aji Economist, Indonesia Resident Mission, Asian Development Bank Priasto Aji is an economist at the Asian Development Bank’s Indonesia Resident Mission. He conducts macroeconomic surveillance and policy‑oriented research, contributing regularly to the Asian Development Outlook series. His work focuses on structural reform, digital transformation, and industrial upgrading in Indonesia, and he is actively engaged in regional economic policy dialogue in Southeast Asia. He holds an MSc in Business Economics from the University of Strathclyde in the UK and a PhD in Economics from the University of Siena in Italy. Follow Priasto Aji on Jiro Tominaga Deputy Director General, Independent Evaluation Department, Asian Development Bank Jiro Tominaga is the deputy director general of the Asian Development Bank’s Independent Evaluation Department. He previously served as ADB’s country director for Indonesia (2021–2025), where he oversaw the country strategy and operations. He has nearly 30 years of international development experience spanning infrastructure, electronic government, and development evaluation. Before joining ADB, he held positions at the World Bank, Japan’s Ministry of Finance, and the Overseas Economic Cooperation Fund. He holds a master’s degree in economics from the London School of Economics. Asian Development Bank (ADB) The Asian Development Bank is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—49 from the region. Follow Asian Development Bank (ADB) on Leave your question or comment in the section below: View the discussion thread.