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By Jake Dahlgren
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Comparing US Businesses to South East Asia

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When thinking of financial excellence, most think of the United States, followed by perhaps Swizerland, and London.

Few think of South East Asia, and if they do, finance in the region is synonymous with Singapore, known for it’s banking and financial expertise. In this article, we explore a nearby sleeping giant, Indonesia. Readers may picture the sunny beaches of Bali and the poetic rice paddies of Ubud. But Indonesia has a lot more to offer than its abundant natural resources. From Jakarta to Bandung, the major cities of Indonesia boast a growing entrepreneurship ecosystem that is full of opportunities for aspiring startups.

Unicorns in the East

With its distinctive culture and colorful history, Indonesia has traditionally been overlooked by foreign investors who tend to favor less challenging, English-oriented ASEAN countries such as Singapore. However, Indonesia, with its massive population, is already the eighth largest economy in the world and is forecast to become the fourth largest by 2050. As emerging economies begin their rise to dominate the future, securing a place in the Indonesian market is the key to both regional and international success.

Deep streams of capital are flowing from throughout the globe towards Indonesia as investors place their bets on the next unicorn to come out of the country. According to a report by Deal Street Asia, Indonesia received the second-highest amount of venture capital (VC) funding in Southeast Asia, only lagging behind Singapore. In addition, Indonesia-based VC companies raised a total of $582 million in 2019, marking a 79 percent increase from the previous year.

Outside of VCs, major international tech companies are similarly funneling investments to Indonesia, with incumbent industry giants pumping funds into the country’s unicorns. In November 2020, Microsoft struck a $100 million investment deal with e-commerce platform Bukalapak. Microsoft’s investment was accompanied by contributions from Singapore’s sovereign wealth fund GIC and local media conglomerate Emtek, taking Bukalapak’s funding round tally to a cool $234 million.

Competitor Google was not to be left out, joining forces with Singapore’s Temasek to inject funds into e-commerce platform Tokopedia, taking the Indonesian unicorn close to decacorn status. This follows Google’s investments in Gojek, a ride hailing-cum-delivery super app that secured $1 billion in funding in 2019 from the likes of Chinese titans Tencent and Facebook and Paypal have backed Gojek as well, taking shares in the company’s fintech arm, GoPay.

Accelerated by the Covid-19 pandemic, Indonesia’s internet economy is booming. According to the e-Conomy SEA 2020 report, Indonesia’s digital economy grew from $8 billion in 2015 to $44 billion in 2020 and is estimated to expand to an impressive $124 billion in 2025. It is already the biggest contributor to Southeast Asia’s internet economy growth and is set to become an important battleground for tech industry goliaths.

Welcome to Indonesia

Aside from attracting the interest of investors, there are many reasons why many entrepreneurs choose to locate their startups in Indonesia. While India and China have traditionally been the center of tech investment in the East, foreign policy and trade (dis)agreements between the Washington and Beijing as well as New Delhi and Beijing can create undesirable tensions and risks. With its relatively neutral position, Indonesia presents a much more conservative option.

The country also lays claim to a massive population, comprising an expanding middle class that is both young, tech-savvy, and ready to spend online. According to the most recent study by Hootsuite, 73.7 percent of the Indonesian population use the Internet with 61.8 percent active on social media. Notably, 98.2 percent of internet users own a smartphone, spending an average of 5 hours a day using mobile internet. In a country of 275 million and growing, the fintech consumer potential is simply staggering.

Aside from providing startups with a significant source of potential customers, the Indonesian population also provides a rich talent pool to help businesses achieve success. With many top universities and a high adult literacy rate of 95.7 percent, Indonesia presents a strong labor market with an excellent command of the English language. The government has played its part in supporting the digital revolution, investing in digital talent scholarships and tech-focused education.

For someone who has worked in the West, the work culture in Indonesia may come as somewhat of a shock. The Indonesian workplace is built on respect for seniority as a sign of moral quality. As a result, workers are extremely deferential to their superiors, to the point of allowing higher-ranking staff to enter or exit a room first. Personal relationships are highly regarded, with co-workers discussing every detail of their private lives and company outings organized with spouses and children in tow. The result is that the workplace is often viewed as a second family, with employees invested in the reputation and success of the business.

With its low costs of living, ready access to capital, diverse economy, and flourishing fintech population, Indonesia is the next logical step for any tech company that wants to get its fingers into the lucrative Southeast Asian pie. As more entrepreneurs, incubators, and accelerators move into the archipelago, we can expect Indonesia to produce more tech innovations and unicorns in the years to come. 

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