Chinese tech companies flock to Indonesia to capitalize on booming internet economy

By Ma Jingjing in Jakarta Source:Global Times Published: 2018/12/23 17:23:39

A worker arranges motor tires at a shop named Hoky Motor in Jakarta, Indonesia on Sunday. Photo: Ma Jingjing

Ahmad Wihandiri decided to relax by smoking a cigarette and having a cup of coffee with his friends near central Jakarta, Indonesia on Saturday whilst tens of thousands celebrated a soccer club's victory of the 2018 Indonesia Cup, of which he is a big fan.

Since Wihandiri, 43, became an independent motorcycle rider in 2004, he has never truly enjoyed himself until he became a driver for Indonesian ride-hailing firm Go-Jek 11 months ago.

"Traditionally, I rode around the city to find customers or waited at railway stations, and there were times when there were no customers for a whole day. But now, customers are there and I can decide whether to accept that order on the app," Wihandiri told the Global Times.

With the increase of customers, Wihandiri's daily income also increased dramatically. "Everyday, I can bring home about 100,000 Indonesian rupiah ($6.8). If I reach the goal of 30 points by taking enough orders, I can get a bonus of 200,000 Indonesian rupiah at the end of the day."

Although the income is more than enough to provide daily needs for his family, Wihandiri has to save money to buy a house and pay for his three children's education.

Fortunately, Go-Jek has launched credit loan for its riders to buy a house, with standards such as how many orders they take everyday, how long they have served Go-Jek and how high their rent is. Wihandiri is trying to reach these standards and apply for a loan.

Explosive digital growth

Wihandiri is only an example of the substantial impact of the internet on more than 130 million internet users in Indonesia. In addition to the creation of significant business opportunities and new jobs, the rapid development of digital Indonesia provides improved access to services and greater connectivity with the global society.

Indonesian President Joko Widodo set a target of making Indonesia the largest digital economy in Southeast Asia by 2020, with the creation of 1,000 high-tech start-ups. This created the birth of a large number of high-tech companies. As of now, Indonesia has four unicorns - all secured investment from Chinese internet giants such as Alibaba, Tencent and - Go-Jek, Tokopedia, Traveloka and Bukalapak. Unicorns are defined as start-ups that are valued over $1 billion.

Using these apps, people can not only buy groceries, order ride-hailing services, book hotels and flights online, but also order barbers and massages.

A report released by Google and Singapore-based investment company Temasek in November showed that Indonesian users spend approximately 4 hours every day using mobile internet, making them among the top 10 globally in terms of engagement.

This factor, together with continuous smartphone penetration, has transformed the Indonesian internet economy into the largest and fastest- growing in Southeast Asia, according to the report.

It is predicted that the market size will grow to $100 billion by 2025 from the current $27 billion in 2018.

Growing investment

As the industry expands rapidly, so does investment. The Google and Temasek report showed that internet companies headquartered in Indonesia raised a total of $6 billion since 2015 , ranking No.2 in Southeast Asia, following Singapore.

The country, with over 260 million people - the most populous country in the region - is the latest hot market for Chinese internet companies. On December 12, a shopping spree in Indonesia, Tokopedia announced that it secured $1.1 billion in its latest funding, led by SoftBank Vision Fund and Alibaba Group.

The year 2018 experienced rapid entry for Chinese tech companies into the Indonesian market, said Roger Wang, Chairman of Executive Committee of Southeast Asia Blockchain Alliance, adding that more than 20 Chinese companies are members of the alliance, representing 40 percent of the total membership.

China-based blockchain company United Digital Assets Exchange (UDAX) was launched in Indonesia in September 2017, in an attempt to build a whole industry chain in the country, involving talent training, cryptocurrency trading, industry applications and media.

Wang, who is also president director of UDAX, said that Indonesia's open policies on blockchain, demographics and quick adoption of modern technologies make it a sound investment destination. "Around a third of the country's population are aged 14 or younger, who are more likely to adopt new technologies and tend to borrow for consumption. This factor drives the penetration of smartphones and the spread of digital economy in Indonesia," he said.

Chinese tech-focused insurer Ping An Insurance Group aims to expand into the peer-to-peer (P2P) lending sector in Indonesia in the near future, an Indonesian close to the matter told the Global Times. Ping An didn't provide comment as of press time.

The P2P sector still has huge growth potential in Indonesia, the man said.

"Financial Services Authority of Indonesia [a government agency that regulates the financial services sector] currently has granted licenses to around 80 fintech firms, but its target is 200. And this will provide so many opportunities."

China experience

Despite huge potential for growth, there is an extraordinary talent shortage in Indonesia's digital sector, like digital professionals and digital-savvy leaders, making it impossible for the country to take a leap forward in advancing technologies.

"Considering the lack of local talent, we are carrying out a talent training plan with PT Telkom [Indonesian telecommunications company]," Wang said, noting that the people trained will specialize in localizing various applications rather than researching and developing apps which would take a much longer period of time.

But not all Chinese internet companies operating in the Southeast Asian country are a success, with some facing legal troubles. In July, Chinese video app Tik Tok was banned in Indonesia due to "negative content," local media reports said. But after only a short period of time, the ban was lifted as Tik Tok promised to establish a team of 20 employees in the country responsible for sanitizing content.

"In the past decade, China's regulation of the internet industry was relatively loose and as a result these companies have a lot of freedom to do whatever they want. But going overseas, they should be more careful, especially in understanding local culture and religion," said Li Yi, a senior research fellow at the Internet Research Center under the Shanghai Academy of Social Sciences.

Above all, free apps and services have made many Southeast Asians users of Chinese apps. According to information from London-based website analysis company SimilarWeb, PUBG Mobile, a mobile game developed by Tencent, ranked No.3 on a list of top App Store apps in Indonesia.

Newspaper headline: Indonesia offers new battleground


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