Companies looking to capitalize must ride the wave of policy and regulation changes, develop adaptable communications programs and make strategic investments.
As the dust settles from Indonesia’s recent presidential election, the nation is readying itself for a new chapter under Prabowo Subianto. By and large the outlook is positive. The former military general who has secured almost 60% of the national vote, together with vice-presidential candidate Gibran Rakabuming Raka (outgoing president Joko Widodo’s son), vowed to follow through on the policies laid out by the Jokowi administration. The promise of continuity already has people cheering. Financial markets are reacting favorably, as the Jokowi administration has been widely credited for its deft handling of the economy over the years. This has included continued investment in infrastructure to stimulate economic growth, keeping inflation in check and providing support to disadvantaged groups despite global instabilities and the resounding impact of the pandemic.
While the macro mood is buoyant, is Prabowo-Gibran good news for Indonesia’s technology sector? Multinational businesses looking to invest in Southeast Asia’s largest economy need to consider several areas.
Surging investment in infrastructure could spur technological innovation
Building upon Jokowi’s “Golden Indonesia 2045” vision, the Prabowo-Gibran administration prioritizes technology and infrastructure investment as cornerstones for transforming Indonesia into a high-income economy by 2045. This includes continuing downstreaming processes within Indonesia of raw materials like nickel, crucial for high-growth industries like electric vehicles (EVs) and semiconductors. This approach strengthens these industries and aligns with the nation’s net-zero roadmap, requiring investment in clean technologies.
Indonesia boasts one of the world’s largest nickel reserves, supplying about half globally. The previous administration’s push to ban raw nickel exports and build a refined nickel industry has already sparked a “gold rush” with record foreign direct investment (FDI), a third pouring into metals and mining.
Furthermore, to turn Indonesia into an EV hub, attractive tax incentives announced in February 2024 aim to boost domestic EV demand. Unsurprisingly, global giants like Ford, Hyundai and BYD (the world’s largest EV producer) have committed billions to the country, which is expected to continue under the Prabowo-Gibran administration.
The one caveat is that a large portion of FDI has come from China, which means that Indonesia has to dance carefully in wooing companies from the U.S. and other players while staying clear of geopolitical sensitivities. While opportunities abound, tech companies looking to enter Indonesia would do well to perform careful analysis of the policies as they change regularly.
Digital economy and youth underpin aggressive growth target
Indonesia’s tech sector is vibrant, fueled by a young, mobile-first, tech-savvy population and a strong startup ecosystem, home to the second-largest concentration of unicorns in Southeast Asia. It presents significant growth opportunities but requires close attention to how the Prabowo-Gibran administration rolls out its vision. The administration predicts that Indonesia’s economic growth could reach 8% in the next three to five years, underscoring the need for increased investment. It will be a collaborative effort incorporating everyone from micro-, small and medium-sized enterprises (MSMEs) to upper-middle-class entrepreneurs. Presently, MSMEs contribute up to 60% to the GDP.
Beyond relocating the capital city to Nusantara (known as IKN), the government plans to take a holistic approach to address Indonesia’s digital economy development needs. A key focus is nurturing a skilled workforce. This translates into prioritizing initiatives that boost labor productivity and achieve swasembada (self-sufficiency). One of the critical aspects of the Prabowo-Gibran administration plan is to empower millennial tech entrepreneurs through accessible credit for innovative startups.
IKN is poised to become a hub for digital innovation and future economic growth, with a significant portion of infrastructure investments targeted there. National digital programs are projected to create 2.85 million jobs, and IKN is envisioned as the central platform that integrates and aggregates these local digital ecosystems. This strategic positioning naturally creates a demand for robust data centers, including what is poised to be Indonesia’s largest national data center.
During the Digital Summit in November, 2023, the Prabowo-Gibran party outlined ambitious plans for 98 cities across Indonesia to serve as nodes and accelerators in developing the country’s digital ecosystem, with 10 cities focusing on key areas:
- IKN: Genome and nanotechnology industry
- Sumatra 1: Chips and neuroscience industry
- Sumatra 2: IOT and sensors industry
- Java 1: AI and computational technology industry
- Java 2: Mobile devices and VR/AR industry
- Java 3: Robotics and autonomous vehicles industry
- Bali: Human-computer interface and social media industry
- Sulawesi: Biotechnology and agriculture industry
- Maluku: Energy storage industries
- Papua: Satellite and connectivity industry
Such a vision is bold and sweeping, but it is anybody’s guess if these plans will come to fruition. One thing, however, is clear — technology is a critical pillar in realizing the country’s vision for a high-income economy in 2045, and the government will be allocating significant resources in the coming years. Tech players need to stay ahead of regulatory changes and seize new opportunities.
Tips for tech companies looking to build their brand in Indonesia
- Local storytelling for local relevance
Showing how your technology can become a powerful tool for Indonesia’s journey toward achieving the 2045 vision and showcasing local success stories is critical. This demonstrates the effectiveness of the tech solution and resonates deeply with the national spirit of “Indonesia Maju” (Forward Indonesia). It’s also very important to emphasize the “made in Indonesia” aspect of the technology whenever possible. This doesn’t necessarily mean everything has to be physically built in Indonesia but highlighting local partnerships, development teams or contributions to the technology’s creation. By aligning with the national narrative, tech companies can significantly amplify traction and establish a strong connection with the Indonesian market.
- Establish commitment for collaboration
Collaborative innovation is key. The Indonesian government is increasingly prioritizing partnerships with tech companies that go beyond simple transactions. It is looking for collaborations that foster knowledge transfer, which strengthens the country’s overall technological capabilities. Additionally, nurturing local digital talent is a major focus, as it ensures a skilled workforce equipped to drive future advancements. By demonstrating a genuine commitment to these areas, tech companies can establish themselves as valuable partners, not just vendors. This commitment builds trust and a positive reputation with both the public and policymakers. And this positive reputation will ultimately pave the way for mutually beneficial partnerships and opportunities.
- Be alert for change
Indonesia’s political landscape is in flux with a new administration taking office, the capital city undergoing a relocation and a renewed emphasis on data security and inclusivity. This dynamic environment requires tech companies to be highly adaptable. They must navigate these shifting priorities while fostering innovation and bridging the digital divide. To have a good chance of success, revisit your messaging bank to effectively address critical areas like user privacy, digital transformation solutions and plans for promoting digital inclusion. By strategically aligning with these national priorities, you can position yourself to thrive in an otherwise unpredictable environment.
