The government through its Consulate General of the Republic of Indonesia (KJRI) in San Francisco is exploring investment opportunities in the digital economy in Indonesia in 2019, and the development of The 10 New Bali at the 2019 Indonesia-San Francisco Business Forum. The event was attended by dozens of venture capital companies, information technology firms, and chambers of commerce.

“This business forum is held to bring Indonesia closer to business players and people in northern California,” said the acting Consul General of Indonesia in San Francisco, Hanggiro Setiabudi, as quoted from a press release of KJRI San Francisco, Friday, February 21.

Hanggiro said the forum especially invited investors in the region to invest in potential sectors for international investors in a bid to promote the present Indonesian economy development, particularly in digital economy and tourism destination.

According to Rahardjo Siswohartono, an official from the Indonesia Investment Promotion Center (IIPC) of New York, the digital economy of Indonesia in 2018 proliferated and developed into the largest in Southeast Asia with an estimated value of US$27 billion.

Google and Temasek, he mentioned, estimated the value of the country’s digital economy would grow up to US$100 billion within 10 years.

Rahardjo said the government supported this potential through its 14th economic policy package that eased and expanded the access to the funding of tech startups, tax incentives, consumer security, and human resources education.

Rahardjo also invited investors to the Regional Investment Forum (RIF) on March 11 in Banten. “To directly meet stakeholders in the digital economy sector and explore possible partnerships with scores of developers of tech startups and tourism projects,” he added.

BKPM Role in the new wave of Digital Economy in Indonesia

The Indonesia Investment Coordinating Board (BKPM) is seeking to accelerate the growth of Indonesia’s highly promising digital economy, which might be the future of the country’s economy amid depleting oil and gas resources, by encouraging more investors to invest in the sector.

According to data from the BKPM, currently Indonesia has four startups with assets exceeding US$1 billion: online ride-hailing app Go-Jek, travel services provider Traveloka as well as online retailers Bukalapak and Tokopedia.

Startups with more than $1 billion in assets are commonly referred to as unicorns, using the mythical animal as a metaphor for these startups’ success in solving consumers’ problems while creating various economic multiplier effects along the way.

The BKPM data also recorded that the Indonesian digital economy had been growing impressively within the last five years, with $3 billion foreign direct investment realised in the sector during the period. Due to the amount of investment poured into the industry, the BKPM has ranked digital economy at the top of Indonesia’s most promising investment sources.

One way in which the BKPM strives to help the digital economy in Indonesia to move faster is by encouraging the sector to remain minimally regulated by the government, as it currently is because minimum regulation could help spur innovations in the industry.

The BKPM, meanwhile, attributed the success of our local digital economy to the high chunk of young digital natives entering their productive ages, plus the country’s growing middle-class with their enhanced access to resources and assets to start their businesses.

If Indonesia cannot adopt these innovations rapidly due to bureaucracy, he explained, then Indonesians might prefer to install applications developed by other countries instead. Worse, the country’s infamous red tape could also hinder its adoption of innovations in other sectors related to public welfare, such as transportation, energy and urban planning, he added.

“It is inevitable that digital transformation will affect all aspects of our lives [including public services] to make them better,” Thomas said.

Thomas said that the BKPM strove to maintain the simplicity of investment permit issuance procedures in the digital economy sector while enhancing its services to investors who would like to invest in the sector to lay fertile ground for technologically savvy Indonesian youngsters and middle-class members to take their digital entrepreneurship higher.

He added that the BKPM’s strategy of cutting red tape — known as the greatest hindrance to investment in Indonesia — to support the digital economy was much better to help local players expand their operations internationally to embrace global competition than taking protectionist measures. Due to the digital economy’s seamless nature, protectionist approaches would not do much to help local players at all, he explained.

Read more on the BKPM initiatives to improve the digital economy wave into the Archipelagic country

Instead of being afraid of global competition, Indonesians should embrace it as motivation to further boost their business qualities. Instead, he explained, adding, “Local players should endeavour to sharpen their competitive advantages to go global, or at least go regional.” Go-Jek, for instance, has expanded its operations to other Southeast Asian countries. So far it has been officially operating in Vietnam, while the Philippines and Singapore have shown positive responses to the brand’s expansion plan to their countries. Currently, the brand is attempting to expand to Malaysia as well, despite facing some difficulties in their attempt to penetrate the country’s market.

He added that the Indonesian digital economy could, in fact, thrive thanks to minimum protectionist measures on the government’s part. He continued by saying that the highly protected conventional sectors did not show the same rate of growth as the digital economy in Indonesia precisely because of these protectionist regulations, which might hinder local players from exchanging expertise and knowledge with their international counterparts.

According to Thomas, that protectionist measures hinder the economy this way has also been seen in other countries. He also encouraged Indonesian policymakers to learn from how other countries regulated their digital economy sector.

“We should regulate the digital economy for sure, like in terms of how much tax they have to pay. It would be much easier for us to just model policies which have been proven effective in other countries,” he said, concluding the interview.