Media and Information and Communication Technology (ICT)
As the biggest economy in the Southeast Asia region, many foreign businesses have kept an eye out for Indonesia, thanks to its demographic advantages, a large domestic market and plentiful natural resources. Indonesia has several emerging markets, including in the media, and information and communications technology (ICT) sectors. The ICT sector’s outlook shows a promising future. The sector’s output is predicted to reach USD 150 billion in 2025 (McKinsey & Company, 2016).
The development of the ICT sector has been driven by an increasing number of Indonesian internet users since 2014. In 2019, around 185 million Indonesian are active internet users, where 95% of them use mobile platforms (EIBN, 2019). The number is expected to continue to grow and reach 256 million users in 2025 (Statista, 2020). According to Frost & Sullivan Indonesia, the total ICT market in Indonesia is forecasted to grow in three main sectors: telecommunication, digital media and services, and cybersecurity.
Telecommunications and Digital Services
Two state-owned enterprises, PT. Telkom and Indosat, have previously benefited from the exclusive operator duopoly rights. However, now there are a total of nine licensed operators that provide mobile service nationally. The operators are PT. Telkomsel, PT. Indosat, XL Axiata, Hutchison 3, Smartfren. Making Indonesia the third-largest number of mobile operators in Asia-Pacific (EIBN, 2029).
The growing digital services market in Indonesia consists of three main sectors: cloud computing, digital financial services, and e-commerce. The market for cloud services in Indonesia is set for rapid growth. Mainly due to the growing online media consumption, the total cloud computing spending is expected to reach USD 1.2 billion in 2022 with a CAGR of 38,6% (Frost & Sullivan, 2017).
As per September 2020, there are a total of 156 fintech companies that are registered and licensed in the Financial Services Authority or Otoritas Jasa Keuangan (OJK). The top five most popular operating fintech companies are Gopay, OVO, Kredivo, Doku and Amartha. In the digital financial service sector, peer-to-peer lending has become increasingly popular. The accumulated loan disbursement in September 2020 was valued at IDR 110,30 trillion. The total value of the transaction is set to reach USD 150 million by 2021 (Frost & Sullivan, 2017). Meanwhile, the country’s e-commerce sectors have been vastly growing, with a CAGR of 13,2% in the 2020–2025 period and the projected market volume of USD 56,358 million by 2025 (Statista, 2020). Stay tuned, we will be further discussing the fintech environment in Indonesia next week!
Digital Media, Entertainment and Video Games
PwC forecasted that the revenue growth of Indonesia’s entertainment and media will reach 10% or around USD 8,168 million by 2021. Hootsuite analyzes how Indonesian mostly spent their time on the internet. Among the total hours of almost 8 hours, most Indonesian spent their time on social media (3 hours 26 minutes), watching television (3 hours 04 minutes), listening to music in streaming service (1 hour 30 minutes), and playing video games (1 hour 23 minutes).
The pay-tv sector revenue was USD 758.9 million in 2017 but is set to reach USD 4.9 billion in 2022. Compared to the mobile market, the Indonesian pay-tv market is relatively small, with subscriptions at 18% of TV households, representing 7.5 million subscribers (Frost & Sullivan, 2018).
Video streaming service platforms is also an emerging market in Indonesia. Currently, several national and international streaming service providers have entered the Indonesian market. Two national players that have been long in the market (since 2016) are Hooq, focusing on providing western movies, and Iflix, focusing on providing Indonesian movies. International players, Disney+ have just recently entered the market this year.
Newzoo reported that Indonesia is one of the biggest markets for video games in Southeast Asia. In 2018, Indonesian players spent a total of USD 1.1 billion on games. 94% of paying gamers spent money on in-game items or virtual goods. The top five game genres in Indonesia are strategy, multiplayer online battle arena (MOBA), battle royale, racing, and action/adventure. Generally, Indonesia’s gaming industry is forecasted to grow significantly (PwC, 2017).
The video games hardware industry, however, has never reached its full potential. Mainly due to its high price point. The “up-and-coming” new technology, VR, was no longer that popular in 2019 as manufacturers struggled to sell more products (Euromonitor, 2020).
Cybersecurity
With the growing use of any form of digital media, cybersecurity has been a rising major issue in the country. Government organizations and financial institutions are the most vulnerable to cyber-attacks. The cyber-attacks happening in Indonesia are rapidly increasing, doubled each quarter (Frost & Sullivan, 2018). According to Digital Forensik Indonesia, the current cases of cyber-attack are the data breach case of one e-commerce giant in Indonesia, a rideshare app and payment system online fraud, and SIM swap cases.
Currently, the nation’s cybersecurity is underdeveloped and loosely enforced. Hence, Indonesian cybersecurity spending in both the public and private sectors is expected to grow by 140% between 2019 and 2025 (EIBN, 2019). Currently, the country’s spending on cybersecurity is at USD 430 million, the third biggest spender in ASEAN. Thus, Indonesia requires a significant investment in cybersecurity, as its digital economy grows. However, there are still a limited number of domestic cybersecurity technology producers. 60% of the market is dominated by foreign products (Frost & Sullivan, 2018).
Industry Trends, Opportunities, and Challenges
Indonesia’s demographic advantages lead to a growing opportunity for the media and ICT industry. The country possesses many innovative and creative young technopreneurs that have a wide opportunity for growth. Start-ups and small-medium businesses are expected to fuel digital adoption in the country. Within the last few years, there has been rapid development in the e-commerce and fintech sectors. Therefore, the demand for new state-of-the-art ICT technologies is increasing (SGE, 2019).
The industry, mainly driven by the digital adoption from start-ups and small-medium businesses, is expected to increase the use of technology services such as cloud and cybersecurity solutions. Financial technology and the payment gateway will also see an increasing demand in 6–7 years ahead (Frost & Sullivan, 2018).
The industry is wide open for foreign investment. As regulated in the Presidential Regulation №44/2016, several business fields are open 100% for foreign direct investment. This includes the film engineering service, film making, film showcase, recording studio, film distribution, manufacturing and computer assembly, software, computer programming, computer consultation and management service, data and server hosting, web portal, IT, and other computer services.
However, despite all opportunities and potential, the country’s ICT infrastructure is not quite sufficient. Indonesia has one of the slowest Internet connection speeds in the Asia-Pacific, ranked at the bottom with only 7,2 Mbps (Statista, 2017). The internet access is still unequally distributed in the country. The enforcement mechanisms for intellectual property rights is also weak. Even though the government has covered all aspects of intellectual property protection according to the international standard, the enforcement is still in need of improvement.
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Indonesia’s media and the ICT industry have been growing rapidly over the years and will continue to grow in the future. There are many opportunities for investors, both local and foreign in several sectors, such as digital service, digital media, but especially in the cybersecurity sector. As we have mentioned before, Indonesia has just begun developing its digital environment. Therefore, the country has been continuously building and improving its infrastructure.
Invest to Indonesia with BRIGHT Indonesia
The huge investment opportunities in Indonesia’s media and ICT sector may attract your interest. However, you may have some doubts and worries about the complex regulation surrounding the industry.
With BRIGHT Indonesia’s Foreign Direct Investment (FDI) Promotion and Business Partner Engagement services, you won’t need to worry about these hurdles. BRIGHT Indonesia will support you in your investment process to Indonesia. For further information, email info@brightindonesia.net.
