PHOTO: KABIUR RAHMAN RIYAD/UNSPLASH.COM
PHOTO: HUSNIATA SALMA/UNSPLASH.COM
In recent years, Indonesia has become the largest spender on Information Technology in Southeast Asia – seeing an industry growth of 10.6% in 2020. The rapid development of the IT sector is driven by the mass consumption of products, urbanisation, a surge in mobile usage, and a tech-hungry population. Indonesia is seeing especially rapid growth in e-commerce and fintech.
E-commerce in Indonesia is seeing an annual revenue growth rate of 17.7%, which is predicted to result in a IDR 229 trillion (approximately NOK 1,340 billion) market volume by 2022. This sector sees a user penetration rate of 11.8% (~29 million users) as of 2017, and is expected to rise to 15.7% (~44 million users) within the coming years.
Indonesia is one of the most unbanked nations in the world, with only 12% of their 58 million small to medium businesses having access to credit. Paired with the nationwide internet penetration of 67%, Indonesia offers a multitude of opportunities for fintech innovation – namely in lending, cards, and payments. As of May 2019, Indonesia is home to 249 fintech companies, a 78% rise since 2015, and is projected to continue this trend of substantial growth.
Tourism in Indonesia has always been a major economic driver for the archipelago. Despite its historical success, it has managed to double in the past decade, with over 15 million tourists visiting in 2017. This sector has flourished and become a quintessential part of the government’s growth strategy. Moving forward, the Indonesian Government is hoping to replicate the success of Bali as a tourist destination in a number of other locations spread across Indonesia.
In 2016, earnings from tourism totalled USD 16.3 billion, though that number rises to USD 72 billion when indirect and induced incomes from travel and tourism are included – which amounts to roughly 6.2% of the GDP in 2016. This figure classes Indonesia’s tourism industry as the 22nd largest in the world as per the World Travel & Tourism Council. Indonesia is predicted to see strong growth in this sector, with indirect and induced incomes predicted to reach USD 141 billion annually by 2027.
The Indonesian Real Estate Market is expected to register a compound annual growth rate (CAGR) of 17.63% over the next 5 years. The demand in the housing market is expected to increase through the increasing urbanization and rising per capita income of people. Along with this, due to the increase in better infrastructure being put in place by the government (e.g. Mass Rapid Transit (MRT) in Jakarta, new toll roads, etc.) demand for residential property is expected to increase further.
The introduction of a new law allowing foreigners or expats living in Indonesia to own land and houses in Indonesia, has been seen as a major push by the President to attract foreign investment. The regulation stipulates that expats can purchase a house in Indonesia under the right-of-use for an initial period of 30 years, which ownership can then be further extended twice. With previously foreigners having restrictions on house and land ownership, the new Omnibus Law provides a larger opportunity and easier access for foreigner investment in Indonesia.
The Indonesian education sector offers a multitude of opportunities for growth due to the major pool of customers, many of which are leaving for education overseas indebted to a lack of quality domestic supply. With nearly 43% of the country’s population being below 25 years old and the country’s rising income status, the demand for high-quality educational services in Indonesia will continue to grow alongside the new social class’ aspirations for their children’s futures.
Education will play a vital role in whether or not Indonesia evolves from its emerging market status – as research indicates, an educated and skilled workforce has been shown to be the most vital component for sustainable economic growth. Under President Joko Widodo, the Indonesian government has vowed to place greater emphasis on the education sector. In order to maximise the potential of its new generation, the Indonesian government needs to substantially improve the quality of, and the ease of access to formal and non-formal education.
The private sector will play a crucial role in this planned growth because the government simply does not have the capacity to answer all of Indonesia’s educational needs on its own – despite devoting 20% of the state budget to education.