The twenty-first century has seen Indonesia emerging as one ofthe biggest tech giants of Southeast Asia, the fastest growing market that hasestablished its place amongst emerging economies.
Robust privateconsumption helped GDP growth to reach 5.0% in 2016 even as investmentdeteriorated. Inflation was restrained, and the current account deficitnarrowed. Reviving investment and external trade are expected to strengthengrowth this year and next, go along with higher inflation and a smaller currentaccount deficit. In addition to infrastructure development and structuralreform, addressing the skills gap is one significant measure required tosustain growth over the medium- to long-term. With fastest growth, fundraisesas big as GoJek’s $550 Mn in August 2016 and Tokopedia’s $147 Mn in April 2016,the entry of tech stalwarts like Jack Ma with Lazada’s acquisition, and aremarkable increase in the number of startups and SMEs, the country is gearingitself to compete head-on with biggest tech majors like the US, China, andIndia.
The nation is on theedge of an online uprising – powered by the rising mobile-first e-commerce, ayounger middle class with a rise in spending capacities and the fact that it isone of Asia’s largest populations at 260 million. E-commerce ventures likeMatahari Mall and Qoo10 Indonesia are capitalizing on these changing patternsand the potential of e-commerce in Indonesia has already attracted many playersincluding East Ventures, 500 Startups, Indosat, and Mountain Kejora Ventures,both foreign and local, to come into the market. On top of that, the countryalso observed the birth of its first unicorn last year, with GoJek rising tounprecedented heights.
TheStruggle between Government and Startups
In 2015, Indonesia’sMinister of Communications and Information Technology, Rudiantara, made anannouncement where he said that he would try to raise $1 Bn from localconglomerates to invest in Indonesia’s IT startups. According to the TechMinister, the agenda was not just to raise capitals for local companies, butalso to influence homegrown and local conglomerates, that had beenconventionally investing in foreign ventures to turn around and considerinvesting in Indonesian companies as well.
President’sVision: 1000 Startups By 2020
The country’sPresident, Joko Widodo, in June 2016 also launched an enterprise called ‘1000Startups Movement’. The enterprise aims to foster 1000 startups by the end of2020, the total valuation for which is anticipated to be around $10 Bn. Theprogramed is planned as a plethora of workshops, hackathons, boot camps, andincubation programmers that will be carried out across ten large Indonesiancities in the coming year. It has been introduced as part of the strategicpartnership between Indonesia’s Ministry of Communication and InformationTechnology and Kibar, a tech startup ecosystem facilitator. Eventually, thevision is to create 200 new startups across the 15 cities, every year, startingnow – which would lead to around 1,000 startups by the end of 2020.
BuildingBridges: Indonesia’s Tech Sector and Administration
As part of the driveto introduced creative initiative for startups that boost motivation and thespirit of private enterprise, the Government has launched HUB.ID, apeer-to-peer platform where entrepreneurs and financiers can connect with eachother. In addition to that, the administration has also selected fourministries to bring together all entrepreneurship related issues in Indonesia.Joko Widodo aims to stand-in startups and lead Indonesia towards becoming athriving startup destination and aims to use technology to galvanize theeconomy. The president teamed with his administration plans to permit fullforeign ownership of ecommerce industries, part of a dismantling of barriers insome industries that earlier had investment restrictions.
The government alsoplans to start a dedicated section within its main stock exchange to host earlypublic offerings by startups, as Indonesia pursuits its vision to become thehub of technology ventures and aspiring entrepreneurs. It wants to set up a newtrading market that will be called ‘technology board – at the Indonesia StockExchange with an aim to ease the process for founders and investors to taketheir companies public in a stress-free way.
Indonesia’sChallenges in Becoming a Tech Hub
Indonesia is Asia’smost enigmatic country. In spite of the inequality in wealth, the country hasone thing that bonds everybody from all walks of life. Indonesia has built areputation for being an extremely tech-savvy country due to its passion withthe Internet and its constant smartphone usage. Indonesia is however, far frombecoming a tech hub and reported investment numbers here are far smaller than India,China and even Singapore. Investments in Indonesia hit $61.8 million as of lastyear, whereas China has drawn $12.9 billion and India has recorded investmentsnear $2.6 billion. All these numbers lead to the fact that investment inIndonesia is considerably less than it should be and as a result it stillremains a very challenging place to do business.
Protectionistregulations presently block foreign investment in e-commerce, an area thegovernment says is primed to develop to $130 billion by 2020 from an estimated$11 billion last year. Another proposed regulation calls on banks and probablyother companies to have data centers in Indonesia rather than letting them tostore information in the cloud. Indonesia has one of the most striking emergingmiddle-classes in the world. By 2030, an estimated 90 million people will bejoining the consuming class. However, Indonesians are true pushovers for salesand discounts. This means competition frequently becomes a race to the bottomand profit margins suffer if you don’t design your discounts perfectly. Anyoneplanning of opening an e-store in Indonesia needs to know the lowest price theycan offer while still being able to turn a profit.
Another challengewith Indonesia is that contrasting a few of its Southeast Asian neighbors,Indonesia suffers from a lack of trained professionals. Indonesia is finding itincreasingly challenging to respond to the skills required of its workforce ina time of increasing globalization, new technology, and changing work designs.Big tech companies like Twitter and Facebook also had difficulties expandingtheir business in Indonesia. While they see Indonesia’s market of 250 millionpeople as promising market, they haven’t made as much headway in makingadvertising revenue as in developed markets. Irrespective of this, consideringIndonesia’s enormous population and rapidly growing internet accessibilitythere is still hope for becoming the next tech hub.
Conclusion:
It’s fair to saythat startups are booming and flourishing in Indonesia, the fourth-most the populated country in the world. Owing to the fastest Internet adoption rate andan online market that is still comparatively untapped and unformed, the countryis moving ahead at a pace that was not anticipated by the government itself. Aventure cannot grow in seclusion. It requires partnerships, funding, and thatinitial push from the regulatory bodies in the country for that mystic tohappen. Asian compatriot, India has understood it, so has Singapore. StartupIndia Movement is the evidence and numerous other measures that have beentaken up by the Indian government here. Singapore’s tech scene too has becomefinancier and startup-friendly as the government launched a series of policiesand initiatives for the same. But the Indonesian entrepreneurial ecosystem alsoneeds the government to approach the problem of insufficient infrastructure ina much-nuanced way, as to endorse entrepreneurship, investment, and technicalsupport.
Accordingto CNN, the world is viewing Indonesia as oneof the “fragile five” emerging economies. The regulatory experts have launcheda range of initiatives and under the current President’s administration, thesituation looks hopeful, as he tries to build a ‘’vibrant tech scene inIndonesia.” The sky is the limit for Indonesia’s tech landscape, and if giventhe right support, there’s certainly seems to be no stopping it.
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