While the Indonesia has successfully created impressive tech clusters and thousands of jobs, growth has mainly come from providing cheaper manpower
Why has Indonesia not matched China or India’s spectacular rise in online services and e-commerce giants?
Granted, both India and China boasts more than 1 billion people, large domestic markets, prodigious technological skills and hugely ambitious governments keen to develop the internet and beyond. Both countries have made extraordinary strides in education and prosperity in recent decades, prompting the emergence of an affluent and tech-savvy middle-class.
And both have relatively large numbers of digitally-able young people, many of whom attend prestigious colleges and universities specialising in science and technology and producing legions of software and information technology graduates every year.
INDONESIAN UNICORNS LAGGING BEHIND
But where is the Indonesian Alibaba or Tencent, let alone Facebook or Google?
While China has spawned globally popular applications and software brands, India has been busy closing deals. US retailer Walmart in 2018 spent US$16 billion on almost 80 per cent of e-commerce service Flipkart – a local competitor to Amazon. Snapdeal, an Indian daily deals site, has eclipsed larger foreign players such as eBay and Groupon.
Meanwhile, Indonesia has lagged behind.
True, there are some success stories such as Tokopedia, Gojek, Bukalapak, But to put in perspective, these all are minnows compared with their Chinese counterparts. Some numbers shed light on this phenomenon.
According to the Economic Times, by mid-2020, India had 21 start-ups that had achieved the “unicorn” status of valuation over US$1 billion, with a cumulative valuation of US$73 billion. Meanwhile, China had over 10 times as many unicorns at 227 . Indeed, 11, or over half, of the Indian unicorns have Chinese investors.
What has been lacking, at least until now, are clearly defined international brands and their corresponding ecosystems.
Furthermore, while Beijing has erected its Great Firewall to block out unwelcomed news and reports, the Communist party has not openly banned Google, Facebook or Amazon, even if there have been serious delays. Compared with Chinese single-mindedness and rules, often designed to favour local players, central and regional government policies in Indonesia have tended to be inconsistent and volatile.
Red tape and bureaucracy are also notorious Indonesian bugbears. Meanwhile, credit has also flowed more freely in China for ventures blessed by the party, helping to fuel rapid growth.
Is Indonesian doomed to remain in China and India’s shadow? Not necessarily. Experience shows Indonesian business is often relatively slow off the mark but makes up ground eventually.
For a start, the country has a much longer tradition of openness to the world. Indonesian entrepreneurs are every bit as innovative and canny as their Chinese and Indian counterparts. While not obvious outside the country, internal competition is often fierce. The Indonesian government should therefore find ways to attract more regional unicorns and their founders to the Indonesian start-up ecosystem.
Clearly, skill, talent and drive are not lacking. Instead, minor modifications to regulations, infrastructure and capital markets may be what is missing