A tale of two tech startups . . .
Indonesia’s startup sector has been abuzz since January with the news that two of the archipelago’s most successful home-grown tech unicorns – private companies valued at over US$1 billion – have been negotiating a merger that could be completed by the end of this month. The deal would have ride-hailing and delivery leader Gojek unite with e-commerce pioneer Tokopedia to create Indonesia’s most comprehensive super-app giving individual and business users access to online retail, delivery logistics, financial, and mobile payment services. The US$18-billion combined venture presents an attractive opportunity for investors to enter one of the fastest-growing digital economies worldwide.
No option but to go digital . . .
The Gojek-Tokopedia merger talks come as Indonesia is experiencing accelerated digitalization spurred by the pandemic. In 2020, the country entered its first recession in more than 20 years, with GDP last year falling 2.07 per cent compared to 2019, when it posted five per cent growth. Nonetheless, following a broader trend in Southeast Asia, Indonesia’s internet economy remains resilient, tracking double-digit growth rates. The number of Indonesian consumers that rely on e-commerce has increased throughout the pandemic as more people stay at home. And a growing number of digital banks and tech startups – with Gojek and Tokopedia at the forefront – are focused on bringing family-run businesses online by offering a wide array of digital tools.
Creating a digital archipelago . . .
Given the growing contribution of the digital sector to the country’s development, the Indonesian government is a major supporter of digitization, issuing numerous policies to foster e-commerce and technology adoption among small and medium enterprises. The government also has a close relationship with the country’s tech startups. Gojek, in particular, has a direct link with Indonesian leadership as its founder, Nadiem Makarim, is Indonesia’s youngest Minister of Education. It is also likely that Indonesia’s tech sector will benefit from major infrastructure investments facilitated through the recently created Indonesian Investment Authority (INA), the country’s own sovereign wealth fund. The fund will partner with domestic and international investors to finance infrastructure development and investments in technology. INA already includes contribution pledges from the Canadian pension fund, CDPQ, opening the door to Canadian investment in Indonesia’s thriving tech ecosystem.