A general view shows under-construction buildings among the city skyline in Jakarta on June 30, 2016. (AFP Photo/Bay Ismoyo)
Indonesia’s strong economic growth in recent years has led to the flourishing of the nation’s digital economy. Over the past decade, Indonesia has been growing at a steady rate of at least 5 percent and is forecasted to become the fourth largest economy by 2050. Along with economic growth comes a growing middle class.
The growing middle class in Indonesia is young and in touch with the latest trends and technologies. As such, the number of internet users in Indonesia is growing every year. A study from Hootsuite shows that Indonesia has 88 million people online and 79 million of them are active social media users. In a report by McKinsey & Company titled “Unlocking Indonesia’s digital opportunity”, it was revealed that if Indonesia fully embraces digitalisation, it can gain an estimated US$250 billion in economic growth by 2025.
Indonesia’s digital economy, while currently growing, isn’t reflective of its full potential yet. One particular industry within this economy however is reaching new heights. Indonesia’s tech startup scene is quietly becoming one that we should all keep our eyes on.
Some might say that Singapore which has been dubbed the region’s Silicon Valley currently has the best startup environment in the region, however Indonesia has all the excitement. Unlike Singapore, we’ve seen some startups become major successes in spite of infrastructure and business environment challenges within the country. Singapore already has a strong ecosystem and support system when it comes to nurturing a tech startup, so much so that it even creates “zombie” startups that exist merely on government funding. Meanwhile, seeing Indonesian startups flourish within the system, gain international funding and receive recognition makes it all the more exciting.
One of Indonesia’s finest examples of a successful tech startup is obviously Go-Jek. Go-Jek is one of the most successful startups in the region with an estimated value of US$4.5 billion. Recently, Go-Jek secured funding worth US$35 million from German insurance company, Allianz. This is part of a funding round by Go-Jek which has already attracted funding from Google and Tencent.
Tokopedia is another one of Indonesia’s early tech startup scene success stories. Founded in 2009, Tokopedia is an online marketspace where users can buy and sell goods on the platform. Last year, Alibaba made an investment worth US$1.1 billion in the company.
Aside from these established startups, the startup scene in Indonesia is thriving and diverse. The startups there aren’t just focusing on safe industries like e-hailing or e-commerce but on a range of different industries. For example, fintech startup Uangteman deals in microlending and has just received funding worth US$12 million last year. There’s also Alodokter, an app that assists users with doctor appointments which received funding worth US$9 million last year.
In 2017, investment in tech startup firms reached US$3 billion, double from 2016. The number could rise this year considering the mushrooming of tech startups in the country. Furthermore, Indonesia’s tech startup scene has even been recognised by international bank, Goldman Sachs. Goldman Sachs says that the next battle for technology companies will be in Indonesia due to the country’s huge population, high economic growth and “untapped market potential”.
Despite all the promise the tech startup scene has, Indonesia is relatively slower compared to Singapore in providing the necessary support for tech startups to grow. In September last year, Jokowi pledged to deregulate startup rules to make it easier for individuals to establish startups.
However, this may not be enough. Jakarta needs to look to Singapore if they want to harness the potential the country has. Deregulation is a step but Indonesia also needs to look at ways it can offer grants and funding like the Singapore government has done.
The government there needs to be aware that new policies can inject new life into the tech startup scene and raise it to new heights. Who knows how many potential Go-Jeks there are out there in Indonesia waiting to be discovered?
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