INDONESIA CRUNCH | Is Indonesia selling out to foreigners?

Business district in Jakarta, Indonesia. Photo: Reuters

Is Indonesia selling out to foreigners?

Fear of foreign influence simmers in Indonesia (understandably so after decades of being colonized) and the pot gets stirred in election season. Which candidate is most likely to let foreign investors plunder the archipelago’s resources? Who will open the gates to foreign workers who steal local jobs?

The picture that’s painted here is that Indonesia and its oil and gas, mining, manufacturing, infrastructure, property, media and telco industries, are already partly controlled by foreign companies and that the wrong political candidate might sell off the rest.

The data says otherwise, writes Faisal Basri, an Indonesian economist and university lecturer who runs a good old-fashioned blog (recommended if you can read Indonesian).

Looking at foreign direct investment (FDI) as a percentage of GDP, Indonesia comes last in Southeast Asia, and it’s been this way for a while.


Basri also links to more recent data in a Bloomberg article. Same story here. So far, in 2018, Indonesia’s FDI as a percentage of GDP is lower than other emerging countries. That’s in large parts because the current administration is being cautious about big infrastructure investments from China, unlike some of its neighbours.

Especially enlightening are the comments on Basri’s blog post. When he shared it on Twitter, it got quite a bit of engagement.

Some people talked about the nitty-gritty of which companies do have foreign ownership and to what degree, but they were in the minority. Many more commentators reacted emotionally and inserted their political agendas.

The post was framed as a question: Is it true that the Indonesian economy is controlled by foreigners? Because the top image shows a map of Indonesia with foreign flags, many people jumped to the conclusion that the answer is yes, and chimed in accordingly, without reading the article.

The debate soon becomes political; respondents weave hashtags promoting presidential candidates into their tweets. Then, the debate turns and becomes about how no one appears to have read the actual article. Someone concludes that Indonesia is ‘worst in class’ in Southeast Asia when it comes to reading, not to mention attracting FDI.

To summarize, FDI is actually not a massive factor in Indonesia’s economy at the moment, but it’s an emotional subject that lends itself to be politicised.

Tech around the region

Here are some things that happened in the tech industry in Indonesia/SEA last week.

Moving along in mobile payments

Remember when e-commerce apps like Bukalapak and Shoppee had to halt top-ups to their digital wallets last year because of regulatory issues? Things are finally moving along again. Shoppe says it has obtained the e-money license at last (although it doesn’t show up on Bank Indonesia’s website yet). Bukalapak says its wallet integration with Dana is now complete. Dana is a digital wallet in the ecosystem of Emtek’s group of digital services, to which Bukalapak also belongs. It’s nice to see that come together.

Another step was taken in the banking sector. Indonesia now has a National Payment Gateway and is trying to promote debit cards issued under the scheme. These GPN-labelled debit cards now have the capability to be used for online payments too. In small steps, online payment by debit card will become more mainstream in Indonesia and that should really help move the needle on online transactions overall.

Strict local data storage laws come under review

Indonesia’s relatively strict laws on local data storage (whereby Indonesian user data must be stored in facilities within Indonesian territory) has many entrepreneurs worried. For startups, it’s much easier to start out with cloud hosting solutions which means data could be physically stored anywhere. A regulation related to this is currently under review and if it’s up to IT minister Rudiantara, the rules would be loosened. However, how that’s going to play out, in the end, is still very much unclear.

Central Group + Grab?

Could Grab team up with major retail conglomerateCentral Group in Thailand? Sure, it’s possible. There are many possible synergies and similar constellations are happening with Grab and Lippo in Indonesia and Go-Jek and Djarum. Central Group, however, already has a joint venture with JD in Thailand. And JD is an investor in Go-Jek, which is just about to launch in Thailand. This deal seems to be in the “talks” phase, so anything could happen. If it goes through, I think it’s interesting to note that a big, regional strategy for Southeast Asia where partnerships in one country translate to the next just doesn’t seem to be how things work. Markets are tackled individually and new allegiances and constellations emerge.

Venturra Discovery

Venturra, a VC firm based out of Indonesia, is launching a seed fund. As with Venturra’s previous fund that targets Series A and B rounds, Venturra Discovery also has Lippo Group’s support. The release said that the VC feels it’s now necessary to fill an “early stage gap” because investor attention has moved to later stage deals.

I don’t 100% buy that. I think part of the reason is also that currently, not that many startups are even reaching the stage where Series B money makes sense. Or they get acquired by one of the giants like Go-Jek before that. This is just a hunch and I could be way off, but perhaps while this exit-to-a-fast-growing-platform-trend lasts, it just makes more sense for a VCs to get the foot in the door of a promising new company instead of trying to nurture the next generation of giants.

Reads and recommendations

  • Not brand new, but in case you missed it: a good read about the long-term effects of the China-US trade war on Southeast Asia.
  • Pivot: A brand new podcast with Kara Swisher and Scott Galloway. What’s not to like! Two smart and outspoken people discuss global tech trends. The first episode just came out.

Nadine Freischlad is a Jakarta-based journalist, writing about technology, business, culture, and other things. Follow her on Twitter @texastee and sign up for her newsletter here. 

Disclaimer: DEALSTREETASIA is not responsible for the facts produced in this piece owing to it being a reproduction of a newsletter without editorial cuts.