Indonesia’s Challenges In Becoming A Tech Hub

Indonesia is Asia’s most enigmatic nation. Despite the inequality in wealth, the country has one thing that bonds everyone from all walks of life: technology. Indonesia has built a reputation for being an extremely tech-savvy nation due to its obsession with the Internet and its continuous smartphone usage.

Indonesia is, however, far from becoming a tech hub and reported investment numbers here are far smaller than China, India and even Singapore. Investments in Indonesia hit $61.9 million as of last year, whereas China has drawn $12.8 billion and India has recorded investments near $2.7 billion. All these numbers lead to the fact that investment in Indonesia is significantly less than it should be and therefore still remains a very challenging place to do business.

Protectionist regulations currently block foreign investment in e-commerce, an area the government says is primed to grow to $130 billion by 2020 from an estimated $12 billion last year. Another proposed regulation calls on banks and possibly other companies to have data centers in Indonesia rather than allow them to store information in the cloud.

Indonesia has one of the most attractive emerging middle-classes in the world. By 2030, an estimated 90 million people will have joined the consuming class. However, Indonesians are true suckers for sales and discounts. This means competition often becomes a race to the bottom and profit margins suffer if you don’t plan your discounts perfectly. Anyone thinking about opening an e-store in Indonesia needs to understand the lowest price they can offer while still being able to turn a profit.

Another challenge with Indonesia is that unlike a few of its Southeast Asian neighbors, Indonesia suffers from a lack of skilled professionals. Indonesia is finding it increasingly difficult to respond to the skills needed of its workforce in a time of increasing globalization, new technology, and changing work patterns.

Big tech companies like Twitter and Facebook have also had difficulties expanding in Indonesia. While they see Indonesia’s market of 250 million people as promising, they haven’t made as much headway in generating advertising revenue as in developed markets. Regardless of this, considering Indonesia’s massive population and rapidly growing internet availability there is still hope for becoming the next tech hub.

Saaran Zaman

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