Google Inc. and Temasek Holdings Pte released joint research that signals Southeast Asia's digital economy (which includes e-commerce, online games, advertising and other economic activities related to the Internet) will surge to USD $200 billion by 2025. Indonesia's digital market will account for 40.5 percent - or USD $81 billion - of this total market. With an estimated USD $46 billion, Indonesia's e-commerce sector will contribute most to the total.
Tony Keusgen, Managing Director of Google Indonesia, said the findings in the research titled 'Economy SEA: Unlocking the USD $200 Billion Opportunity' are interesting and indicate that there are ample opportunities in the online industries of Indonesia over the next 10 years. Local Indonesian companies will have the opportunity to grow from small offline stores to international online stores.
But the biggest market for Southeast Asia's e-commerce industry remains located in Indonesia itself, where a rapidly expanding middle class (reflected by increasing per capita GDP), rising Internet and smartphone penetration, and the growing e-banking industry provide the key ingredients for structural and sharp growth. Indonesia's e-commerce industry is estimated to grow 39 percent per year from a valuation of USD $1.7 billion in 2015 to a spectacular USD $46 billion in 2025.
Research of Google and Temasek also show that there are great opportunities in the online travel industry of Southeast Asia. Ahead of 2025 Indonesia is estimated to become the region's biggest hotel and aviation market. Those online companies that offer services related to these markets can therefore expect to see strong growth. Apart from aviation, other means of transportation in the Southeast Asian region, led by Indonesia, will also provide opportunities for online players. In recent years several app-based transportation services firms, such as Go-Jek, Uber and Grab, have entered the Indonesian market rather successfully, undermining the positions of traditional transportation services such as taxis.
Indonesia is also the most attractive market for Internet-based startups. Currently Indonesia counts 2,033 startups, exceeding Singapore's figure of 1,850. The government of Indonesia highly supports the expansion of startups in the country. Earlier it unveiled its "1,000 startups movement", implying it targets to see 1,000 new startups every year until 2020 (with a total valuation of USD $10 billion). This could be a too ambitious target, especially given that, on average, 90 percent of startups fail. Moreover, the government endorses the project but does not provide financial assistance.
Palapa Ring Project
Indonesia's e-commerce industry, Internet penetration, and other related sectors will surely get a boost from Indonesia's Palapa Ring project. This project is one of Indonesia's priority infrastructure projects and involves a huge undersea fiber-optic cable network that will offer faster broadband to the entire archipelago. Supported by this project the Indonesian government targets to see the nation's digital economy to reach a value of USD $130 billion by 2020 (a target that exceeds the projections of Google and Temasek).