Indonesia’s digital economy can be world class – if the right policies are in place

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Borderless recently caught up with Shinta Witoyo Dhanuwardoyo, one of the early pioneers of Indonesia’s Internet economy, who said that Indonesia has the potential to become a world class Internet economy. But to do that, the right policies have to be put in place, she said.

“Definitely Indonesia can become a world class Internet economy,” Witoyo Dhanuwardoyo, CEO and founder of Bubu, told Borderless, adding that this could happen in three to five years, after the right policies are put in place.

Witoyo Dhanuwardoyo is known in Indonesia as one of the nation’s most elite angel investors and serial entrepreneurs, and her company, Bubu, is said to be one of the country’s first Internet companies. The company is also known for holding IDByte, a major event held for digital startups in Indonesia that has brought well known speakers from Internet giants such as Google and Facebook.

Indonesia has around 83.6 million Internet users and the government has an ambitious plan to boost that number to 150 million by 2015. The world’s fourth most populous nation also boasts the world’s third largest number of mobile users of Facebook, after the U.S. and India, and is one of the world’s most active Twitter markets. The country’s middle class is slated to double in the next five years, according to the Boston Consulting Group, potentially boosting the number of online shoppers and other online consumers. Moreover, the nation is home to one of the word’s youngest — half the population is under age 30 — and most digitally savvy demographics.

The archipelago in October made a global media splash after Japanese investment firm SoftBank Corp. and Sequoia Capital invested $100 million into leading Indonesia-based e-commerce company PT Tokopedia. Experts who are upbeat on Indonesia said the move was a glimpse of the vast possibilities ahead. All this is happening as Southeast Asia’s digital economy is rising at a rapid clip and with e-commerce in the region set to boom.

The key for Indonesia, however, is putting in place the right policies and implementing them the right way, Witoyo Dhanuwardoyo said, as currently there is no national strategy to pull together entrepreneurs, government, venture capitalists and other major players.

The government already has in place a strategic plan for broadband and infrastructure, and Witoyo Dhanuwardoyo said she applauds what the country’s minister of communication and information has done so far, such as embracing and coordinating with industry players, and implementing a number of telco and 4G-related policies.

However, more is needed than just policy making, she said, such as someone in government to play the role of chief information officer. “We may be needing a CIO role within the govt who can help orchestrate implementation across departments. This way we can role out various plans faster. And  I believe that we do need IT as backbone and by leapfrogging ICT and broadband is definitely the way to go.”

The country also needs policies to increase the development of entrepreneurship.

“We definitely need policies (to ease the creation of) companies to boost the development of entrepreneurship in the country,” she said. Strong policies for e-commerce, a growing sector in Indonesia, are among the most important ones, she said. Government needs to provide incentives for investors to see capital gains or even an incentive for funds to be open in Indonesia through better tax, financial and legal programs, as most funds are currently set up offshore, she said.

“I myself am an angel investor and at the moment I am preparing to create an angel investor club for tech startups in Indonesia, so it would (be) great to have incentives from the government on this part,” she said.

Better infrastructure is also needed, such as broadband access, sea ports and roads – in order to reduce logistics costs and improve Internet access, she said.

Observers have long noted that logistics are not easy in a country made up of thousands of islands. Because of this, many companies spend twice as much on logistics as neighboring Thailand, for example, and Indonesia’s infrastructure, such as ports and roads, need improvement. This also creates problems for e-commerce companies, which need good infrastructure to ship products that customers order online, some experts noted.

Witoyo Dhanuwardoyo said that aside from infrastructure and policy issues, there is a talent deficit as the country’s digital industry grows, and the country needs to attract more skilled professionals. “Skilled talent is definitely in demand, yet that is what we are lacking,” she said.

The potential of Indonesia as a digital powerhouse has not gone unnoticed in Silicon Valley, and the Jakarta Post reported earlier this month that tech giants such as Facebook, Microsoft and Google are undertaking a number of projects on the archipelago. Facebook, which boasts around 73 million active users in Indonesia, has been working with local telecoms operator PT Indosat to help more Indonesians connect to the Web, as part of its worldwide project, Internet.org. Google has been helping 4,500 small and mid-size businesses (SMEs), from cities like Jakarta, Surabaya, Denpasar and Makassarramp, ramp up their IT competence through a program called Gapura. Microsoft is planning to provide the country’s most rural areas access to free-to-air television through its TV white space project, the Jakarta Post reported earlier this month.

“From my perspective, what the large U.S digital players have done are still below expectation. But it’s good enough to start the ecosystem, to educate Indonesian youngsters into the digital industry,” she said.

She said she’d like to see such companies get more involved in more programs for training, skills development and education, and in much bigger ways. “I have mentioned that our challenge is acquiring expertise and skilled talent, this is definitely what those U.S. tech giants can contribute,” she said.

Witoyo Dhanuwardoyo noted that she herself started SVATA (Silicon Valley Asia Technology Alliance), a U.S.-based nonprofit whose mission is to connect and spur collaboration between the tech ecosystem of Silicon Valley and Indonesia, and then Southeast Asia.  The organization collaborates with Silicon Valley’s top entrepreneurs, venture capitalists and incubators to help high-growth technology companies from emerging markets succeed on a global level. She said there is a need for more collaboration, not only with Silicon Valley but other tech companies of the world. Government support can help speed up‎ the process, she said.

Critics have noted that trust is a major hurdle in creating a world class Internet economy. According to a Nielsen report released last year, 60 percent of Indonesians say providing their credit card information to online vendors is a concern. And while individuals in a number of other ASEAN nations are more likely to make online purchases, Indonesians are more likely to go online only to browse, Nielsen reported.

Witoyo Dhanuwardoyo said while the country needs a more secure online payment system, it’s a fact that only 5 percent of the country have credit cards, and what is needed is a payment solution that caters to local needs. Those could include cash on delivery (C.O.D.), or a “top up” card system or other solutions that cater to the majority of the population and that can be used by the country’s 40 million banked customers‎, she said.

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