Can Indonesia Become the Silicon Valley of Southeast Asia?
In June 2016 the "1,000 digital startup movement" was launched by Indonesia's Communication and Information Ministry in cooperation with KIBAR, the nation's technology startup ecosystem builder. This government-backed program targets to see 1,000 startups in the digital economy by the year 2020 with a combined valuation of USD $10 billion. Considering that digitalization has been a key trend around the globe (covering basically all aspects of life), Indonesian authorities want this sector to boom in Indonesia as well, which would also make the whole economy more efficient.
In May 2016 the Association of Internet Service Providers in Indonesia (APJII) announced that Internet penetration in Indonesia has now reached 40 percent of the total population, or roughly 100 million Internet users. Meanwhile, eMarketer added that the number of smartphone users in Indonesia is estimated to rise from 55 million in 2015 to 92 million in 2019 on the back of Indonesia's economic growth, rising availability of affordable 4G smartphones on the Indonesian market and further development of Indonesia's 4G network (including the Palapa Ring project). Currently, Indonesia is already the third-largest smartphone market in the Asia-Pacific region (after China and India).
Joint research conducted by Google Inc. and Temasek Holdings Pte claims that Indonesia's digital market is forecast to account for 40.5 percent - or USD $81 billion - of Southeast Asia's total digital economy (which includes a variety of segments including e-commerce, online games, and online advertising) that is estimated to surge to USD $200 billion by 2025. With an estimated USD $46 billion, Indonesia's e-commerce sector will contribute most to the total, supported by Indonesia's demographic composition, rapidly rising mobile phone as well as smartphone penetration, and rising Internet penetration.
However, although many Indonesians use social media to sell products or services, there have been relatively few digital startups in Indonesia. This is partly attributed to the lack of digital awareness in Indonesia, especially in the rural areas (where the quality of human resources tends to be low). Tech-based startups in Indonesia are gaining some momentum though as the nation's middle class and Internet users are estimated to expand rapidly in the years to come.
Through the "1,000 digital startup movement" program authorities will mentor digital startups in 10 Indonesian cities that have adequate telecommunication infrastructure. These cities are Jakarta, Bandung, Surabaya, Yogyakarta, Semarang, Malang, Medan, Bali, Makassar, and Pontianak.
However, there is few financial support from the government for the program. Startups will be offered co-working space and the government will organize seminars as well as specific workshops to enhance people's entrepreneur skills. Given there is few money to support the program, analysts are pessimistic about the success, particularly considering that usually 90 percent of startups fail.
KIBAR wants to copy the concept of US Silicon Valley. Silicon Valley is a nickname for the southern portion of the San Francisco Bay Area that is home to many of the world's biggest high-tech corporations and thousands of startup companies. KIBAR wants to establish something similar in Indonesia; a place where the business, academic, media and government communities can interact. With Indonesia being the largest e-commerce sector of Southeast Asia, it would make sense for Indonesia to become Southeast Asia's Silicon Valley.
Several successful digital startups in Indonesia that have grown into established names are mobile-based motorcycle taxi Go-Jek, e-commerce stores Bukalapak and Tokopedia, and online travel service Traveloka.
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