Into Indonesia — Where do you start?
For a start-up who wants to venture into the vast Indonesian market, where and how do they start? What kind of support will they be able to access? Are there are any lesser known regulations which are good for them to know?
We approached IE Singapore, the government agency that promotes international trade and partners Singapore companies to go global, to give us the answers and also greater insights on the Indonesian start-up ecosystem.
1.Are there any interesting statistics on Indonesia? Particularly interesting for the tech start-up community?
· Facebook, Google, Twitter, Uber and Grab have started their offices in Indonesia.
· Many start-ups are founded with a focus on urban problem solution.
· As of end 2016, internet penetration reached 132.7 million, or 51% of the population.
· It is a mobile-first nation. Mobile subscription is at 371.4 million, far exceeding its population size of 250 million. The urban population owns one or more mobile phone, and yet the unbanked population is more than 50%.
— An average a person spends 3 hours 55 minutes on the internet via a mobile phone each day.
· Mobile is the most preferred device to surf the net and Indonesia is one among the most active countries on social media.
— As of May 2016, it has Facebook’s fourth largest number of users and third largest (#1 in Southeast Asia) number of users of Twitter.
· Indonesia’s ecommerce market holds huge potential,
— In 2013, Indonesia’s e-commerce market size is worth $1.3 billion, it is slated to increase to $10 billion by 2015 and forecasted to hit $25 to $30 billion by 2017
· Indonesia is ASEAN’s largest e-commerce market (by sales).
Indonesia overtook Singapore and Thailand in 2014 to emerge as the largest e-commerce market in ASEAN with online sales of US$1.1 billion. Euromonitor forecasts online revenue to grow by a CAGR of 38% between 2014 and 2017
2.Is there any exciting data on the start-up ecosystem in Indonesia?
The startup scene in Indonesia is exciting especially in the last 3 years. It started with Tokopedia’s US$100 million funding from SoftBank and Sequoia in 2014. In 2015, MatahariMall’s US$500million funding from Lippo Group created buzz in the market. In 2016, Alibaba’s acquisition of Lazada, as well as Go-Jek’s US$550 million funding round led to the birth of Indonesia’s first unicorn, with an official valuation of above US$1billion.
3.What interesting facts are there about Indonesia’s investment community — VC/Angels/Corporate Ventures?
Indonesia’s investment community are usually syndicated with the involvement of family conglomerates and foreign VCs. Some of the prominent family-owned conglomerates are investing in local start-ups through their own VC arms or other names. Examples are the Djarum Group with GDP Ventures, Sinar Mas Group with Sinar Mas Digital Ventures, Lippo Group with Venturra Capital, and Bakrie Group who is the major backer of Convergence Ventures.
4.What industries or sectors have large potential, and are particularly attractive in the Indonesian market today?
E-commerce and fintech are particularly promising in Indonesia. The high mobile penetration rate and large internet-savvy young spenders provide strong support for the growth of E-commerce. On top of this, the large number of unbanked potential customers created a demand for fintech solutions. Ancillary sectors, such as logistics, mobile marketing, data analytics, rewards & rebates systems, etc are also poised to ride on the growth of these two sectors.
5.How does one set up in Indonesia? In terms of government policies, regulations, etc.
The Indonesia Investment Coordinating Board (BKPM) offers a one-stop service to foreign investors seeking to establish a physical presence in Indonesia.
The Jokowi Administration has released a number of economic stimulus packages to boost Indonesia’s economic growth. The 10th economic stimulus package sees the revision of the Negative Investment List, where the government relaxed foreign ownership limitations to attract more foreign investments into key sectors of the market. On the digital front, foreigners are now allowed to own a maximum of 49% for ecommerce marketplaces valued between Rp 10–100 billion, or own up to 100% for marketplaces valued above Rp 100 billion. These were previously closed to foreign investments.
Notably, the 14th economic stimulus package includes an e-commerce roadmap, which is expected to boost the expansion and improvement of community economic activities. The roadmap covers several areas, including funding, tax, consumer protection, education, logistics, communication infrastructure and cyber security.
This E-commerce roadmap signals that the government is playing a more active role in funding start-ups and to encourage the growth of crowd-funding. Other aspects of the policy package involve the government seeking to better protect consumers performing transactions in the e-commerce industry, which include the payment process up to dispute resolution.
6.Are there any programmes from IE Singapore that supports local start-ups venturing into Indonesia?
IE Singapore provides a suite of financial and non-financial assistance to Singapore based companies. In terms of non-financial assistance, IE helps Singapore companies internationalise through its network of more than 35 overseas centres. Through our global network, we help Singapore companies to be connected to the right partners and provide business intelligence to help companies navigate the operating environment.
The recent $100million Global Innovation Alliance (GIA) announced in Budget 2017 is a network of Singapore and overseas partners in major innovation hubs and key demand markets, with a focus on technology and innovation. It will bring together the overseas networks of governments agencies and universities, and provide a common platform to help Singaporean students, researchers and startups gain more exposure to innovation hotbeds around the world and key emerging markets in our region. Beside San Francisco and Beijing, the government is also considering ASEAN cities. More details would be revealed at a later stage.
For more info on IE’s assistance, please visit: https://www.iesingapore.gov.sg/Assistance/Overview
NUS Enterprise @BLK71 would like to thank IE Singapore for their contributions to this article.
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