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Indonesia, as Southeast Asia’s largest economy, is beginning to see itself come out on top in the digital sector. In the past four years alone, hundreds of e-commerce companies have sprung up. Everything from making transportation easier to creating a more convenient grocery shopping experiences, young entrepreneurs and business people are quickly improving the country’s economy with their innovations.
As the industry expands, foreign investment does too. Foreign direct investment in Indonesia is increasing rapidly year-on-year. Chinese investors are now looking to invest in other industries aside from shipping and manufacturing, where they have mostly focused on in the past years.
Indonesia has more than 130 million Internet users, making it one of Asia’s largest smartphone markets. Indonesia’s digital economy is now attracting Chinese investors who are looking to take the opportunity to tap into the country’s growing industry.
As people's spending habits continue to shift online, Indonesia's e-commerce market is projected to reach 45 billion US dollars in 2025, coming in third behind China and India. President Joko Widodo has a vision to make Indonesia the “Digital Energy of Asia,” further supporting and enhancing the digital industry, especially the e-commerce market.
“The e-commerce sector and digital economy has, just in the last three or four years, gone from very small to suddenly accounting for 15 to 20 percent of our total annual FDI so I estimate that annual FDI or inflow into the e-commerce industry amounts to 2 to 3 billion US dollars every year now,” said the chairman of the Investment Coordinating Board, Thomas Lembong.
A recent study shows that foreign investments can help Indonesia achieve its economic growth rate of more than 5 percent this year and the e-commerce sector is expected to be the new driver for that growth.
Economist, Bhima Yudhistira, has been closely monitoring the growth of the e-commerce industry and its players.
“We see that in the last three years at least 10 e-commerce startups in Indonesia [were] injected by foreign investors, especially from China. That’s why in 2017, the data says around 4.8 billion US dollars total investment, direct and indirect investment, were made to local start-ups,” said Bhima.
The e-commerce sector alone is growing 20 to 25 percent per year and that number is expected to increase even more by the end of 2018.
“Chinese e-commerce companies and Chinese digital companies are among the most sophisticated and the most advanced and, of course, among the largest technology companies in the world. China is also the largest economy in Asia and a direct neighbor of Indonesia. I think the booming trend of Chinese digital companies, technology companies and e-commerce companies coming to Indonesia is highly natural and strongly welcome,” said Thomas.
Alibaba, JD.id and Tencent are just a few example of companies that are growing its presence in Indonesia. Alibaba invested more than one billion US dollars in Tokopedia, an e-commerce company based in Indonesia. Previously, the Chinese e-commerce giant also acquired Lazada Indonesia, in one of the country’s big e-commerce merge. Tokopedia’s partnership with Alibaba will begin to enhance the quality of the products and services the firm offers its customers, merchants and partners.
The increase in the number of Chinese investors in Indonesia is proof that the two countries are continuously working closely together in hopes to achieve stronger economies.
(REUTERS)
