Bank Indonesia (BI) reported the national banking loan growth only 0.12 in September compared to August, which was still grew 1.04 percent due to the pandemic - Photo by DBS Office

JAKARTA (TheInsiderStories) – Indonesia is one of the countries where the development of startups is rapidly increasing. Why are they flourish in Indonesia, the reason because it fits with the Indonesian trade climate.

So, the presence of startup companies, whether they are in the form of unicorns or stubborn ones, cannot be arbitrarily blocked. Because the development of this pilot business has contributed greatly to national economic growth. But to maintain the robust trend, the digital business players need guarantee from the government on their future.

The government itself has facilitated the establishment of companies through rapid online licensing, in addition to providing funding through the development of the “1000 Projects”.

In terms of infrastructure, the government has also developed the Palapa Ring satellite to accelerate internet network connectivity throughout Indonesia, certainly in the context of a holistic digitalization development paradigm to reach the seeds of new businesses in Indonesian society.

According to Indonesia Internet Service Provider Association, 57.5 percent of internet users are contributed from Java Island. Then, Sumatera 19.09 percent, Kalimantan 7.97 percent, Sulawesi 6.73 percent, Bali – Nusa Tenggara 5.63 percent, and Maluku-Papua is the lowest at 2.49 percent.

Beside help the economic growth, there are several impacts of this startup’ growth like breaking the long trading value chain between producers and consumers. In addition, startups have also created new jobs–from informal to formal workers–and creating new innovations that connect people to the world.

This indicated by the presence of 840 startups made by the nation’ during 2018, where there were 46 startups from 18 industrial sectors which received funding of more than US$4 billion. Most of them come from the e-commerce sector, financial technology, enterprise solutions, education, and health-tech.

For startups, investment originating from abroad is not the main problem, considering that the conglomerate in Indonesia is still low. As Chineses’ Alibaba Group class, the majority of the shares are owned is not its founder Jack Ma but Softbank from Japan.

As a startup paradise, Indonesia has produced four unicorn–the biggest among ASEAN countries and already have a valuation of more than $1 billion namely Tokopedia, GOJEK, Traveloka, and Bukalapak. Tokopedia has a valuation $7 billion, GOJEK $1.2 billion, Bukalapak $1 billion, and Traveloka $350 million .

Predicted that the expenditure of industry players in the digital technology sector will reach $78 billion during 2019-2022. While, IDC Indonesia predicts that in 2022 more than 61 percent of Indonesia’ GDP will be digitalized, with growth occurring in each industry.

Ministry of Communication and Information also predicts around 12 percent of Indonesia GDP come from digital business. Indeed, Morgan Stanley estimated that Indonesia’s digital transaction will reach $50 billion value in 2027.

The recent digital transaction growth is outstanding. Last year, digital transaction through financial technology rocketed by 55 percent. Other channels such as e-commerce transaction spiked by 47 percent, bank hiked by 41 percent, cash grew by 35 percent, and cellphone increased by 33 percent.

Nevertheless, digital business wasn’t really implemented by micro small medium enterprises. Ministry of ICT reported, only 9 percent of 59.2 million Indonesian MSMEs sells online in the ministry’ platform. But, around 36 percent sells offline, 37 percent have websites, 18 percent in mid-level, and 9 percent in the platform.

Apart from that, there are some challenges for the MSMEs such as lack of capital and investment, fear over technology, hardship to enter broader market, and low business management skill. Besides, there’s also inequality of internet penetration in Indonesia.

Amid this rapidly growing potency, there are a lot of works to do to support digital business development. It’s not only for government, but also business players and internet providers.

More than that, the government must provide legal certainty to secure consumer rights and the obligation of business digital producers to avoid malpractice that is detrimental to the public and business people themselves.

Although it has closed several illegal fin-tech, but the government’s steps must be fast and not wait too long until the development of digital business is increasingly unable to be controlled rationally and responsibly.

by Daniel Deha and TIS Intelingence Team