Indonesia wants 20 more unicorns like Go-Jek & Tokopedia
The Indonesian government’s focus at the World Economic Forum gathering in Davos is not the rich natural resources that bring in billions of dollars every year. It wants to highlight the country’s startups, especially those working with in digital technology. The country has a specific target to drive its efforts — 20 new unicorns, or privately held companies worth over $1 billion, by 2025.
In an interview with the Nikkei Asian Review, Rudiantara, minister of communication and information technology, vowed, “We want to position Indonesia as digital energy in ASEAN.” The largest and most populous member of the Association of Southeast Asian Nations, Indonesia has set its sights on becoming a player in the thriving digital economy, and has decided the way to go about it is to foster startups.
Rudiantara, known as a reform-minded minister, said he will use deregulation and financial support as tools to encourage more people to start their own businesses. As only a few of such businesses actually survive to create employment and tax revenue in the long run, Rudiantara said the government is no longer asking entrepreneurs to apply for licenses, but only requires online registration, mostly for tax purposes.
“We are going to act less as a regulator and more as a facilitator and accelerator,” he said. One recent effort is sponsored roadshows overseas. He said the government has taken local companies to Japan, South Korea, China and the U.S. to meet with venture capitalists.
The minister said his aim is “to have 20 additional unicorns by 2025.” According to CB Insights, Indonesia now has four — Tokopedia, Traveloka, Go-Jek and Bukalapak — and another one is awaiting an additional round of funding to join them. The focus is on nurturing companies particularly in education, health and fintech.
Indonesia’s emphasis on startups and its efforts toward a more digital-oriented economy are meant to help it leapfrog to the next stage of development. Tom Lembong, chairman of the Investment Coordinating Board, told Nikkei that developing countries like Indonesia suffer a “shortage of everything, from doctors to universities and vocational training.”
Another likely motive is to lure foreign direct investment. For the last two reported quarters of April-June and July-September, FDI recorded negative growth and the first nine months of last year turned minus as well.
Lembong, regarded as President Joko Widodo’s economic brain, attributed the decline to “seasonal factors,” an ordinary slowdown in investment prior to an election. The country is scheduled to hold a presidential poll in April.
But he also admitted that the country has “lost a lot of economic momentum” after four years of the presidency of Widodo, who carried out a series of economic reforms. The emphasis on startups in the digital sector is based on data that Lembong cited.
Four years ago, capital inflow to e-commerce and the digital economy was “close to zero” but now it accounts for around 20% of total FDI into the country. Lembong admits that “without the inflow to e-commerce and digital [sectors], FDI in the last five years would have been down rather than up.”
But a much bigger question is whether successful startups could be produced by changes in government policy. Homegrown unicorns like Go-jek and Tokopedia popped up without the help of a deliberate set of policies. But, as Rudiantara said, “they solved [people’s] problems.”
It remains to be seen whether the Indonesian government’s push can really generate the next Go-jek or Tokopedia.