The dawn of the COVID-19 pandemic in Indonesia marks the remarkable growth of Indonesia’s digital economy. During Gambir Trade Talk #3: “Digital Economy Transformation: Indonesia’s Readiness”, held by the Indonesian Ministry of Trade on October 12, 2021, Willson Cuaca, Co-Founder and Managing Partner of East Ventures said that society’s change of behavior during the pandemic has accelerated digital adoption and increased the amount of digital investments in Indonesia.
Throughout the pandemic, Indonesian people spend an average of 4.7 hours online for personal use every day, and an average of 4.3 hours after the pandemic. Other than that, Indonesia market, which has its own uniqueness, also supports the acceleration of the digital economy. Indonesia is the single, largest homogenous market in Southeast Asia. A case in point is we use one homogenous language, Bahasa Indonesia, that simplifies the making of digital products. Bahasa Indonesia unifies the differences of various tribes in Indonesia, which helps the growth of the digital market wholly.
That being said, the digital investment value in Southeast Asia in Q3 2021 has exceptionally spiked. In 2019 and 2020 respectively, the digital investment values are at US$ 8.9 billion and US$ 8.7 billion. These numbers have doubled into US$ 17.7 billion in Q3 2021 alone.
This also applies to Indonesia’s digital economy investments. The investment value in 2019 is US$ 3.5 million, and US$ 3.4 million in 2020. In Q3 2021 alone, Indonesia’s investment value has reached US$ 4.9 million.
“This increase is identified because of consumers’ behavior that is changing into a digital-based or online behavior. All investors become more aggressive and optimistic, because digital acceleration happens before anything else,” said Willson.
To date, the sector that grows and attracts the most digital economy investors is e-commerce. Next to it are edtech, fintech, healthcare, smart retail, B2B, cloud kitchen, and enabler. For example, there is a 32% increase in beauty product transactions compared to pre-pandemic. So are the transactions in apparels that have a 30% increase and groceries that have a 47% increase.
The increase accelerated by the COVID-19 pandemic also impacts East Ventures’ portfolio startups. For instance, beauty e-commerce Sociolla’s offline stores have increased 10x compared to pre-pandemic, Tokopedia gained 2.8 million new merchants, and marine and fishery logistics startup Aruna also experienced an increase of 86x GMV during the pandemic. Apart from that, the leading edtech in Southeast Asia Ruangguru users increased by 50%, which led the company to win G20 Innovation League 2021, an international forum held in Sorrento, Italy on October 10, 2021, along with Nalagenetics in their respective categories: AI and healthtech.
Aiding Indonesia through the economic recovery
Having worked in the digital industry for 12 years, East Ventures has taken part in developing technology and the growth of startups that have indirectly built an efficient digital infrastructure. With a growing digital ecosystem, we are certain that there are numerous opportunities to enhance the country’s digital economy even further.
However, the arrival of COVID-19 pandemic in 2020 has disrupted the economic growth in Indonesia. This resulted in an economic recession in the same year. Once the pandemic subdued, the economic recovery in Indonesia is predicted to be K-shaped. This means, there will be sectors that grow significantly, but there will also be sectors that decline. The sectors that are able to grow significantly are digital-based and the ones that can adopt the digital technology.
To support and aid the post-COVID economic recovery, East Ventures does these three things.
First, mapping. Before the COVID-19 pandemic landed in Indonesia, East Ventures had done a mapping of the digital economic growth in Indonesia from 2020 in the East Ventures Digital Competitiveness Index (EV-DCI). With this mapping, we are able to take strategic steps to evenly distribute digital access and technological capabilities across the archipelago.
Second, recovery. Through our collaborative movement Indonesia PASTI BISA which was initiated in 2020, East Ventures, along with our portfolio startups stand together to fight COVID-19 pandemic by distributing local test kits, PPE (Personal Protective Equipment), as well as oxygen concentrators to more than 200 hospitals in need across the nation. The collaboration between the government and Indonesian startups makes this movement faster, more coordinated, and makes it possible for us to act timely in addressing the problem.
Last but not least, acceleration. The fast-growing digital economy opens up a huge opportunity for Indonesian MSMEs. Our job is to assist and support these MSMEs implement their strategies in order to accelerate their businesses into a global scale.
Utilizing the huge digital economy opportunities
East Ventures believes that this all-online behavior will continue even after the pandemic subdues in the coming future. This means businesses who have adopted a digital approach, and who are already online will stay online. This is where we see the huge opportunity for MSMEs.
To utilize this opportunity of the growing digital economy, there are three strategies that local MSMEs can do.
Firstly, make use of Indonesia as a local launching pad for MSMEs. This will simplify the access to capitals and local supply chains. Secondly, create authentic storytelling to market MSMEs’ products through social media and digital platforms.
Lastly, discoverability by reaching global supply chains. “Tell the world that there is a unique product in Indonesia. Our coverage is already on a global scale and we are able to get into a global supply chain. This is our acceleration strategy,” said Willson.
East Ventures believes that Indonesia’s digital economy will enter its golden era once the COVID-19 pandemic is resolved. By using the analogy of a slingshot, Indonesia’s digital economy is like a rock that is being pulled back by the pandemic. It may look like it is in a disadvantageous position. However, the tension it gives is actually a huge potential that will give a strong boost to launch forward, bringing Indonesia’s digital economy to its golden era, as well as becoming the digital economy prospects.
Sources: Kompas.id, Bisnis Indonesia, Liputan 6.com, Sari Agri
Click here to watch the full video of Gambir Trade Talk #3