Vlad Ayukaev is a fintech expert and the CEO of PVG, an Indonesia-based startup builder focusing on B2B payments.
Indonesia is, at present, the largest and among the fastest-growing markets in Southeast Asia, which makes it an incredibly attractive destination for entrepreneurs. This comes as no surprise since the Indonesian economy has been growing and, in just the first eight months of 2022, more than 3,000 digital nomads entered the archipelago.
As the CEO of a company that helps build financial technology startups in Indonesia, I pay close attention to the market and where various industries are headed. From my perspective, there are some areas digital entrepreneurs in Indonesia can consider exploring when building new products next year.
Financial Technology And E-Commerce
Indonesia’s financial technology industry is one of the best-funded, and about half of venture capital investments in this space went into payment startups in 2020.
It’s essential to remember that Indonesia is a huge country with a population of more than 270 million people and about 64.2 million micro, small and medium enterprises. However, the banking infrastructure is not ideal, and there are many underserved populations. Today, Indonesia has more than 300 fintech-related startups. But in my experience, cash remains a popular payment method for users, and only about half of the Indonesian population has an account at a financial institution, according to Statista. Due to this situation and the growth of the middle class, I believe there is significant potential for fintech startups.
Transportation
Indonesia, being a vast archipelago consisting of more than 17,000 islands, faces complex logistical challenges. Passengers and goods require various modes of transportation, including motorcycles, cars, ships and aircraft, to connect point A to point B. This creates a market for companies willing to optimize logistical costs.
In my view, Indonesia also has the potential to become a hub for electric transport production due to its abundant natural resources like nickel and strong manufacturing industry with affordable labor. The demand for electric vehicles in Indonesia is expected to grow significantly in the coming years, with EV sales predicted to reach 21 million by 2025, according to the Indonesia Electric Vehicle Outlook 2023. The Indonesian government has actively invested in this segment, proposing a special EV fund worth $2 billion.
Renewable Energy Sources And Waste Management
Indonesia possesses the potential for a variety of renewable energy sources, including geothermal, hydro and solar power. Investment in energy efficiency is expected to increase to $10 billion annually by 2030. As of 2023, Indonesia still generates much of its electricity through traditional means, particularly burning coal, which pollutes the already not-so-clean air, especially in Jakarta.
Indonesia is also one of the world’s largest plastic waste producers, which can be exacerbated by large cities located directly on the ocean coastline. This leads to water pollution as a primary concern. I have seen efforts in recent years to address these issues by various teams and startups.
Education Technology
Indonesia has a significant number of students, schools and higher education institutions, with many well-known universities and technical schools. However, 42% of 25- to 34-year-olds in Indonesia haven’t “attained an upper secondary qualification,” according to the Organisation for Economic Co-operation and Development. This is much higher than the OECD average of 14%. Analysts estimate that by 2030, 113 million Indonesians will need professional retraining. This could present an opportunity for entrepreneurs in the education technology space, such as those offering full courses, online tutoring services or self-learning options.
Healthcare
Providing quality healthcare is a significant priority on the national agenda. In 2014, the Indonesian government introduced a universal healthcare program, which covers approximately 86% of the country’s population, according to the International Trade Administration. The program’s implementation has led to a considerable increase in the number of individuals with access to healthcare, creating significant growth opportunities for hospital and medical businesses. However, a shortage of healthcare providers and hospitals, inaccessibility and unequal care are still major challenges the Indonesian healthcare space is facing, the ITA also said.
The pandemic has accelerated the growth of digital medicine, making telemedicine an attractive investment area. With the population spread across thousands of islands, telemedicine can help provide medical services, even in remote regions.
Halal Goods And Technology For Muslim Consumers
Indonesia, being a large Muslim-majority country, has a strong demand for halal goods and services. The State of the Global Islamic Economy Report shows that Indonesia is a major market for halal goods and services. Given Indonesia’s experience in Islamic banking and fintech, along with its manufacturing capabilities for halal goods, I believe the country is poised to become a leader in the halal venture.
Where To Start
As I discuss the numerous opportunities for digital businesses in Indonesia in this article, the country still remains somewhat of a terra incognita for Western entrepreneurs. Due to its remoteness and cultural and linguistic versatility, it might get tricky to navigate the local venture landscape. To ease this adventure, I strongly recommend getting visible in the local community as soon as possible.
There is a popular proverb: “It is not what you know; it is who you know in Indonesia.” The most straightforward way to get aboard is to find a reliable local partner or even a co-founder who could show you some shortcuts and open doors to the first clients.
Another piece of advice I like to give to fellow entrepreneurs is about finding the right “center of gravity.” Many newcomers associate Indonesia with Bali and its Hindu culture. No doubt the island is an important part, but in my experience, it has few connections to the big Indonesian businesses. Thus, consider getting an office in Jakarta, where many of the prospective partners and investors are.
Despite being one of the booming markets in Southeast Asia, Indonesia still remains a blank spot on the map for many foreign founders. However, by focusing on a high-potential niche, such as fintech, logistics or renewable energy, as well as following the simple rules of thumb that I shared in this article, many incoming tech entrepreneurs will find themselves in a better position next year.
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