Indonesians are an optimistic lot and that attitude will help the country rebound quickly from the technical recession it is currently in, predicts Jason Thompson, the CEO of payments platform OVO. He was speaking at the Asia PE-VC Summit 2020 organised by DealStreetAsia last week.
Southeast Asia’s largest economy shrank 3.49 per cent on an annual basis in the third quarter of 2020, according to the Central Statistics Agency (BPS), which followed a 5.32 per cent contraction in the second quarter.
Yet, Indonesians see the glass as half full.
A recent survey of 500 people in six Southeast Asian countries by global market research firm Ipsos in September 2020 found that 75 per cent of Indonesian respondents were convinced that the economy will recover in the next six months — the highest level of optimism in the region.
“Here in Indonesia, people just get on with it and fix things. They work out how they get around it, how they get over it… I think with that attitude, we will bounce back really quickly,” said Thompson at a panel discussion on ‘Indonesia: Does big market translate to big advantage?’ at the summit.
He argued that one of the drivers of economic recovery will be the “massive influx into technology” both in urban and rural areas. OVO’s e-wallet in Indonesia, itself, has seen the adoption of its digital services grow 30 per cent during the pandemic.
“One in three people are new to online services during COVID-19. And based on our surveys, 93 per cent of those new users intend to continue to use the service when life normalises in Indonesia,” said Thompson.
His view was echoed by co-panellist Akshay Garg, co-founder and CEO of online credit platform Kredivo. Garg believes that COVID-19 is becoming a “one-way highway” towards increased online penetration and access to mobile-enabled services in the next few years in Indonesia.
He explained that while Kredivo’s business slowed down in the early phase of the pandemic due to dented purchasing power among consumers, the last few months has seen business going back to normal for Kredivo, which offers instant credit financing for e-commerce and offline purchases and personal loans.
In fact, earlier this month, Kredivo managed to close a debt facility of up to $100 million from Chicago-based private credit firm Victory Park Capital Advisors (VPC), which will be used to grow and further diversify its loan book.
Such a notable deal was possible because the investor understands that while the pandemic has resulted in higher risk in some segments, other areas may continue to thrive amid the crisis. “As long as you’re working with discerning investors and lenders who are able to understand the data, understand the thoughtfulness around how you’re actually approaching this as a problem, I don’t think things really change,” Garg said.
Also speaking at the panel was Insignia Venture Partners managing partner and CEO Yinglan Tan. He argued that while Indonesia, and the rest of Southeast Asia, is set to witness a market rebound, it will not be a V- or U-shape recovery, but rather a K-shaped one, where the strongest companies get even stronger and the weaker companies fall apart.
The fate of companies could be decided by the sectors they operate in. Education, e-commerce, and same-day logistics, for example, have been beneficiaries of COVID-19, while industries like travel and hospitality have been reeling under the pandemic. However, internal elements like leadership also impact how companies fare during the crisis.
“It’s very easy, during COVID, to see, to distinguish between founders who know what they’re doing and those who don’t. And those who know what they’re doing tend to come up better on the other side, and that’s why you spend more time with them and deploy more capital for them,” Tan said.