Digital Economy

Indonesia’s relevance in the global economic landscape will be determined by its embrace of the future. In this age of digitization, the internet economy is of supreme importance as it may very well define the remainder of Indonesia’s growth story. On this front, Indonesia has made some sweeping advancements, metrics of which are as follows:

 

Internet Penetration Rate – As of 2019, Indonesia had an internet penetration rate of 48%, thus, offering nearly 129 million people to shoulder digital growth. Relative to other countries of comparable economic stature, we find that Indonesia still has significant room for improvement. This is displayed in figure 1. However, the rapid rate at which the Indonesian people are adopting digitization is remarkable. As we can see from figure 2, in just the last seven years, Indonesia has more than three times its internet penetration rate. If this trend were to continue, Indonesia could become the hotspot for technological investment in the future.

 

Fig 1

Internet penetration rate

Fig 2

Internet penetration rate

Internet Economy size – In 2020, the internet economy of Indonesia had a Gross Market Value of US$ 44 billion. There are four segments to the internet economy:

  • E-Commerce
  • Online Travel
  • Online Media
  • Ride Hailing

As the largest emerging market in South East Asia, Indonesia’s internet economy far surpassed those of its neighbors. The chart below depicts the Gross Market Value in 6 major ASEAN nations, indicating the actual value in 2020 and the predicted value for the year 2025. The Indonesian internet economy is more than twice the size of any of its peers’ and is expected to grow by over 200% in the next 5 years, making it a treasure trove of opportunity.

internet economy GMV

Growth over time – The internet economy in Indonesia has grown exponentially since 2015, showcasing a remarkable 450% increase in Gross Market Value over the last five years. The key question, however, is which segments of this economy have performed the best?

 

Internet economy

As the graph below indicates, the e-commerce sector has shown the most growth of all digital sectors since 2015. E-commerce is now the largest contributor to Indonesia’s internet economy, a pedestal formerly occupied by Online Travel. While considerable growth is expected across all four segments, E-commerce will continue dominate the market. 

Gross value by sector

Major Players in the digital space – South East Asia is home to 12 unicorns, and nearly half of these are based in Indonesia. Second only to Singapore, Indonesia is leading the region in start-up success stories, and this is testament not only to the entrepreneurial drive that has cultivated in the nation but also to the innovation that is being spurred there. The four unicorns and one decacorn in Indonesia are as follows:

  1. Total Funding: US$ 5 billion
  2. Latest Valuation: US$ 9.1 billion – Indonesia’s first Decacorn
  3. Business Outline: Originating as a ride hailing app, Gojek has moved to integrated lifestyle apps with advanced payment services supported by more than 1 million drivers. It started its expansion to Vietnam, Thailand and Singapore in 2018

  1. Total Funding: US$ 2.8 billion
  2. Latest Valuation: US$ 6.8 billion
  3. Business Outline: Provision of a C2C business platform for merchants and buyers, thus, creating a marketplace for 4 million merchants and 80 million active users

  1. Total Funding: US$ 1.2 billion
  2. Latest Valuation: US$ 2.75 billion
  3. Business Outline: Provision of flights, hotels and train booking services with 100 airlines and more than 200,000 routes worldwide

  1. Transaction value: US$ 784 million/month
  2. Latest Valuation: US$ 2.5 billion (as of Oct. 2019)
  3. Business Outline: A marketplace for more than 4 million merchants and 50 million active users

  1. Largest E-Wallet Service in Indonesia – accounting for 37% of digital wallet transactions in 2019
  2. Latest Valuation: US$ 2.9 billion (as of March 2019)
  3. Business Outline: Provision of a digital platform for simple payment and smart financial services, with over 110 million users spread across 300 Indonesian cities

To learn more about the Digital economy in Indonesia, follow the link below:

 

https://www.blog.google/documents/47/SEA_Internet_Economy_Report_2019.pdf

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