Go SEA or go home. Part 2: Indonesia – Beauty in the Ugly!
I first came to Indonesia seven years ago. My first destinations were the two sexy BBs: Batavia (Jkt) and Bali, two most famous cities of Indonesia. I wanted to finish my “SEA Journey,” and to gain some perspectives of Indonesia as the most populous country in Southeast Asia. In Jakarta, I enjoyed visiting Menteng Dalam in South Jakarta, the area that Barrack Obama had lived there for four years, since the kid “Barry” was 6 years old. After that year, I’ve visited some other cities and realized that there are many interesting cities in the archipelago with different “personalities”. And then I realized Indonesia is one of my most favorite countries in Asia, and keep coming to the country many times. Indonesia, similar to my favorite foods: Rawon and Coto Makassar, look ugly, a bit raw when you’re seeing it from faraway. But it’s real, warm and beautiful when you’re really close to it.
Also read: Go SEA or go home – P1: Thailand vs Vietnam
At first glance, I couldn’t understand its macroeconomic environment nor realize its potential like economy experts’ point of view. I simply liked its people because of their friendliness, and its cultural diversity, for I’m always interested in exploring cultural differences, especially in Asian countries. Then I saw that Indonesia’s population was nearly 250 million at that time, which equaled 1/5 of India’s population. Its GDP at the time, however, equaled almost a half of India’s GDP (893 billion dollars to 1,823 billion dollars.) And also Indian startups were huge back then, but no one said a word about Indonesian startups, though these two countries share great similarities such as varied religions, races, and languages. Remember Indonesia already ranked as the 4th highest populated country in the world (after only China, India and the U.S)
Indonesia is a country that has a lot of distinctive traits in an already diverse Southeast Asia. While Thailand is diversified for it has a great number of expats, Indonesia is diversified because it’s home to more than 300 ethnic groups. The majority group is Javanese with more than 100 million persons, live mostly on Java island. The second largest group is Sundanese with around 40 million persons, and the rest are other minority groups such as Balinese in Bali, Madurese…
The second distinctive trait of Indonesia is religion. Islam was practiced by the majority of the people (87%). Although it’s not the national religion, due to the fact that there are 6 official religions in Indonesia, Islam still dominates: an unwritten rule “the president must mostly be a Muslim” (some even said that the president even must be a Javanese), rules of organizations often follow Islamic codes (though these codes are not as strict as in other Islamic nations.). Christianity ranks in the second place, above Buddhism. One interesting fact is that Borobodur, the world’s largest Buddhist temple, is located in Indonesia, the largest Islamic nation in the world. If you travel back in time, you will know that Buddhism was presented first, while Islam was only imported in the 14th century.
The third distinctive trait of Indonesia is its amount of islands. The country consists of more than 17,000 islands of all sides that make up 5 main groups of islands: Java (Jakarta,) Sumatra (which is so close to Singapore that smoke from forest fires on this group of islands often drifted there,) Kalimantan, Sulawesi and New Guinea. Indonesia’s width exceeds Europe’s because of this reason.
I later realized why Indonesia was a hidden charm. Because Indonesia was under the reign of 2 dictators Sukarno and Suharto for more than 50 years (from 1945 to 1998,) plus Islamic influences, so the media had little clue or interest about the country. Even the number of tourists was limited. That’s why no one noticed Indonesia until huge startups like Tokopedia, Traveloka, Go-Jek, Bukalapak emerged from this country and received fundings from famed investment firms and giants like SoftBank, Sequoia, Alibaba or Tencent. Just last week, one of my friends, who is a global citizen and has worked in US, Europe and Asia mentioned about Indonesia like a bit scary country with some “forest laws” applied to foreigners doing business in the country.
According to Forbes in 2016, Indonesia will have 32 dollar billionaires with net worth range from 1 to 17 billion dollars, but the most recent update for 2017, it’s number is 32 billion credited for Hartono brothers. Credit Suisse predicted that Indonesia will have 151,000 dollar millionaires by 2020 (in 2015 this number was 98,000.)
But it’s not all beer and skittles for Indonesia. The country is facing several problems, which you can learn more about this article Asia’s Newest Trillion-Dollar Economy Faces Bittersweet Win.
History and People
As I have mentioned in my previous article “Thailand vs Vietnam“, Thai people are opposed to Vietnamese in terms of character. Indonesians, on the other hand, have similar traits. If Thais usually beat around the bush together with their politeness, which sometimes might make you wonder what they are thinking, Indonesian are more open and straightforward. I mean in the Southeast Asian people context, if you’re a Westerner, you might find hard to understand this concept.
Perhaps part of the reason for this is because Indonesian was influenced by the Dutch, who is one of the most straightforward European nation when Indonesia was their colony. The Dutch had been here for 200 years. Thais people were made up of locals, Chineses, Indians, and Westerners. All were strangers to each other, so they chose to avoid direct communication to reduce potential conflicts. While in Vietnam, the Americans and French had been in South and North Vietnam for years and also influenced a little bit on the Vietnamese’s manner.
One minority group that plays an important role in Indonesia’s economy is the Chinese Indonesians, in a similar way to those of Chinese descent in Thailand. The main difference is that people of Chinese descent make up to 15% of Thailand’s population, while the same group only make up to 1% of Indonesia’s population. Many of the managers, businessmen, and entrepreneurs that I’ve met are of Chinese descent. Nevertheless, some statistics show that these people control 70% of Indonesia’s listed companies. Besides, Indonesians can be divided into two types of person, managers, and executioners, which is similar to Thai people.
Indonesians are generally more humble than other nationals in Southeast Asia. Perhaps living under the reign of two dictators have caused Indonesians to be more cautious not to attract unpredictable attention. Another reason is that Chinese Indonesians face worst discrimination than their peers in Thailand, in the past. Thousands of Chinese Indonesians were massacred, lost all their savings and families during riots in the 60s and 90s. Therefore, they are more likely to hide their properties as well as their root, I guess.
There’s one major difference between the history of Vietnam and Indonesia that Indonesia is an exploring nation while Vietnam is a more defending one. Indonesians started extending their territory during the Majapahit era. Prime minister Gajah Mada of the Majapahit empire has conquered territories that nowadays belong to Malaysia, Singapore, Thailand, Brunei, and the Philippines.
One of the interesting things and unique about Indonesians that they don’t have family names. Don’t believe? check with your Indonesian friends. While all Thais, each has a nickname and usually you dont know their family name if not in a formal context.
What’s like to work with Indonesians? More research is needed. Here’s one example from my Q&A chat with a former executive of Yahoo Southeast Asia: BeMyGuest New CCO Graham Hills on How to work with Indonesian – get deals done in Asia. Or read my mini-research: Key factors to building partnerships in Asia
Seven years ago when I first came to Indonesia, there were about 7.6 million foreign visitors/tourists in Indonesia, and about 6 million in Vietnam. In 2016, that number was 11.5 million and 10 million respectively. In 2014, this non-smoking industry created USD80 billion for Indonesia’s GDP. It also played a much larger role in the Indonesian economy than the automobile, education, banking/finance, retail, and chemical industries. In 2016, it contributed 11% of Indonesia’s GDP.
Currently Indonesia just recently started granting free 30-day visa for 169 countries, making the travel industry one of the focused industries of the nation. This does not only help the travel/hospitality industry grow but also helps facilitate investments into Indonesia and its startups because business travelers can now get in and out of the country much more easily than before.
Besides Thailand, Singapore, and Malaysia which are already popular travel destinations, Indonesia will soon capture tourists’ interest. The cultural and ethnic diversity as well as unique landscapes and geography will propel the Indonesian travel industry to grow much faster. There are also many niche markets within the travel market with a lot of potential. More details can be found at World Tourism & Travel Council Report about Indonesia
Startup – Ecommerce
Indonesia’s history can explain some parallel happenings among startups. Vietnamese startups are very good at defending their turfs in the local market, but essentially don’t have big influence in the region. Lazada is the dominant player with over 50% market share in Thailand, Singapore, Malaysia, and the Philippines but they struggle to fight super-persistent and resilient competitors in Indonesia (Tokopedia, Bukalapak) and Vietnam (Thegioididong, Tiki, Sendo). Meanwhile, Traveloka is aggressively taking market shares in Thailand, VN, Malaysia, the Philippines. Go-jek is also taking steps to expand to the Philippines and SEA very soon. History can say something about the future right?
Major cities with the largest population
- Jakarta (West, South, North, Central have 18 million people)
- Surabaya: 3 million
- Bandung: 2.5 million
Indonesian startups are quite good at taking advantage of Indonesia’s unique geography to develop their markets instead of simply copying business models of other global companies. For example, Indonesia has a lot of islands, so the number of domestic flights is huge and flight routes are super dense. Traveloka started as a price-comparison site for air tickets. Jakarta is known for traffic jam, so motorbikes are the most flexible and fast transportation mode, that why Go-Jek- the Uber for motorbikes- was born. Go-Jek did not start out with cars like Grab. Similarly, Tiket worked with distributing inter-city train tickets when air tickets were still expensive. You can refer to my interview of Traveloka’s founder four years ago when they were still a small startup “The story behind Traveloka’s pivot from metasearch to OTA”
Bali is like an adopted princess of Indonesia, most people outside of the Muslim country know about the charming island, and somewhat scare or have a mystery feeling about the rest places of Indonesia. Bali might be more well-known than Jakarta. One of the advantages of Bali is it’s variety of beaches. You can go to Kuta beach to go swimming, to Sanur to race canoes, or try to surf in Berawa because it’ has many high waves suitable for surfing.
Surabaya is the second most populous city in Indonesia, after Jakarta, even it’s population is just a fraction of the capital mega city. The peaceful city with lots of green trees along the roads has its name derived from the sea city’s icons: shark (suro) and crocodile (boyo). If you wanna find a taste of shopping behavior here, you might wanna visit Tunjungan Plaza (the oldest one), or Ciputra World, one of the modern malls attracting lots of young people. One of the things I can relate about Surabaya is a sad story, just after one week from my flight leaving Surabaya for Bangkok, the AirAsia airplane departed from Surabaya, was crashed and disappeared into Java sea, together with hundred of passengers. Visiting Surabaya, remember to connect with Henri – a local entrepreneur, founder of a drop-shipping ecommerce site Cakning. Surabaya is also the hometown of one of the ecommerce names, Mr Hadi Wenas of MatahariMall Online.
Yogyakarta or Jogia, the “student city” as known for it’s dozen of universities here. Jogia is also hosting Gadjah Mada University, one of the top universities in Indonesia. Yogya means “suitable, fit, proper”, and karta, “prosperous, flourishing” (i.e., “a city that is fit to prosper”). Jogia is also known as Indonesia center of education, culture such as Batik and music. If you’re traveling to Jogia, should stay near Malioboro, the main road and you will be able to enjoy the night scene, buy some batik souvenirs, enjoy free music shows or eat local foods. Another interesting thing of Jogia is it’s unique Special Region governed by a King – the Sultan of Yogyakarta. So there is a monarchy in a democracy country. From Jogia you can also visit the world wonder Borobudur, the world largest Buddism temple in the world largest Muslim country. If you’re planning to visit Jogia, remember to meet Anngit, CEO of Jakpat, the mobile survey platform based out of Jogia or visit Jogia Digital Valley. Finally, why not read my article: “How to recruit digital talents in Indonesia” if you’re hunting for young talents over there?
Bandung, my most favorite city in Indonesia, also my most visited city (after JKT) with three times. I like Bandung because of it’s cool weather, it’s art and natural atmosphere, it’s local food and of course it’s culture-rich history, finally it’s ease of access from Jakarta. Bandung is also home of ITB (Institut Teknologi Bandung), the most prestigious place for hunting tech talents. For ex: Traveloka team is formed by many of ITB alums.
Founders & Startups
Similar to Thai founders, Indonesian founders mostly come from wealthy families with Chinese origin and large/successful family businesses. They usually studied abroad, have some work experience in the US or work for MNCs or global consulting companies based in Indonesia (examples are founders of Traveloka, Go-Jek, Tiket, BerryBenka, Bilna, MatahariMall). There are some special cases like founders of Tokopedia and Kaskus who only went to local universities and never worked for any large global corporations before starting up. However, their businesses usually depend on the ability to develop the user communities for a long period of time, at least 7-10 years, and cannot scale as fast as startups founded by founders in the first category. Kaskus was just celebrated their 10th year anniversary last two years.
While Thais are strong in arts, design, and marketing and Vietnamese are very good with technology and natural sciences, Indonesians are quite balanced in all of these areas, though generally their art is a bit less refined than Thais and their tech is not as good as Vietnam’s (of course this is compared in a general context and excluded the newly developed unicorns, they’re out of leagues now). You’ll see a modern, nicely designed buildings in Bandung like Bandung Institute of Technology (ITB), which is somewhat influenced by Dutch design. In Yogiakarta you’ll see a lot of graffiti on the streets. And in Bali, you’d want to buy many beautifully handicraft products made by the local people.
If you wanna recruit in Indonesia for your startup, can have a look at my post: “How to recruit digital talents in Indonesia”
Family conglomerates are one of Indonesia’s startup ecosystem’s unique characteristics. Indonesian’s family-owned corporations play an essential role in high-tech and startup businesses.
Djarum Group, Indonesia’s largest family-owned company, started with the cigarette business (In Indonesia, cigarettes are very popular because Islam does not allow alcoholic beverages, I guess). Their GDP Ventures fund was set up in 2010, about 1 year before I came to Indonesia. The fund was led by Martin Hartono, the son of Djarum’s owner. GDP later bought Kaskus, an online community with 7 million users, which was also the largest community at the time. GDP also owns Blibli, one of the top 10 e-commerce websites in Indo, which just bought Tiket and has controlling share of DailySocial and many other startups. Djarum’s cigarette company also owns majority stake in BCA, one of the top banks in Indonesia with great online payment platform.
Next is Lippo Group. Similar to Central Group in Thailand, Vingroup or Thegioididong in VN, Lippo owns the largest retail chain called MatahariMall. However, in the startup and e-commerce realm, Lippo Group has some major innovation. They invested $500M into MatahariMall, established $150M Venturaa venture capital fund for SEA market, with Founding Partners are well-known and influential business figures like Rudy Ramawy (CEO of Google Indonesia), Stephan Jung (Co-founder of SEA Rocket Internet/Lazada). Lippo also owns The Jakarta Globe, which is the leading English newspaper in Indonesia, and many hospitals and universities in the country. Read my article on MatahariMall: “MatahariMall.com CEO on How to go big and scale fast in Indonesian market“.
Then Sinar Mas Group is in the paper, agriculture, real-estate business. They later on expanded into financial services and own Sinar Mas Digital Ventures which invests in a number of startups like aCommerce Thailand, FemailDaily, and HappyFresh.
Besides these corporations, there are at least 5-7 other family-owned groups that have been actively investing and buying startups. I am impressed and also surprised with their vision because their beginnings are very similar to many traditional business groups in Southeast Asia in real-estate, paper, agriculture, cigarettes but have chosen a much more innovative and new way to grow their businesses by digital transformation direction.
VC funds – Incubators
Besides Venturaa by Lippo Group, Indonesia’s best VC fund is probably East Ventures. EV seems to have the Midas touch and invests in many top Indonesia startups, including 2 (out of 4) of the nation’s unicorns: Traveloka and Tokopedia. They also invest in other countries in Southeast Asia and Japan and the US. EV also invests in DailySocial and TechinAsia. Indonesia has about 20 accelerators and incubators.
Leading banks like BCA and Mandiri also set up venture capital investment funds and especially target fintech startups. Indonesia’s three largest mobile carriers including Telkom, Indosat, and XL Axiata also set up a number of investment funds managing somewhere between USD20 to 200 Million to invest in startups. Indonesian government also considers supporting startups as a way to develop the economy and boost employment in the country. They planned to groom 1,000 startups to USD$10 billion by 2020. Last year, President Jokowi brought the 5 most influential startup founders with him on his first official trip to the US called “Jokowi on a startup mission”. The trip was later cancelled due to a forest fire.
Emtek, one of the biggest media and technology groups in Indonesia, is known as the major shareholder of the newest unicorn Bukalapak – an e-commerce market place competing directly with Lazada Indo and Tokopedia.
Kompas Gramedia Group is Indonesia’s largest media corporation with a network of newspapers, radio, and television channels. They later invested in quite successful bookstores and hotel chains like Amaris, Santika and Anvaya. I used to stay at two of their hotels in Bandung and Bogor and noticed that they manage their sub-brands pretty well with clear brand identities.
Kapanlagi, also one of the largest media groups covering entertainment field with celebrities, beauty, automotives, movies, sport, men/women portals…, and recently it’s even entering fintech via it’s backed firm Brilio. Totally Kapanlagi has a readership of more than 40 million each month. In 2015, Media Corps Singapore aqquired 52% of Kapanlagi Network.
MNC Group, one of the largest media groups focusing on television channels. MNC has the largest market share in the free-to-air market with three channels, and also owns some paid channels. In 2017, it was planning for a $2b expansion in multiple sectors.
Indonesian startups are not only great at attracting investment in SEA, they are also pretty good at taking media share on Asia’s top tech blogs like e27, TiA, Forbes Asia, or even Techcrunch in the US, Forbes Asia.
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Also read: Go SEA or go home – P1: Thailand vs Vietnam