The developing economies of India and Indonesia have prospered in recent years as a result of their mutual cooperation. According to the Indian Embassy assessment, Indian investment in Indonesia is over $15 billion, whereas Indonesia’s investment in India has reached $627 million.
This article deals with various aspects of Indonesia’s digital economy and how doing business in Indonesia for Indian IT companies can be a remunerative opportunity.
Indonesia’s Growing Digital Economy
Indonesia has the most promising digital economies across the ASEAN countries, with its GMV (Gross Merchandise Value) expanding at an annual rate of 40% since 2015. In comparison, the digital economies of Malaysia, Thailand, and Singapore are growing by between 20% and 30%.
The efficiency and ease of e-commerce, online trip bookings, ride-hailing applications, and digital payment are attracting a growing number of internet users in Indonesia (175.4 million in January 2020).
According to International Data Corporation, Indonesia has become the largest spender on IT in Southeast Asia. The public sectors invest heavily in upgrading its internal infrastructure, and the private sectors do so as well to enhance customer service in order to gain a competitive edge in the marketplace.
The Covid-19 pandemic has hastened this trend even further, with e-commerce purchases up by 42% in April 2020. As a result, investor trust in the digital sector is solidating.
Analyzing Indonesia’s Digital Talent Gap
Indonesia is expected to require digital talent in numerous sectors, including 5G, cloud computing and big data. They are also expected to enhance their soft skills to support professionalism in the Industrial 4.0 age.
According to a 2016 World Bank report, the archipelago would face a shortfall of nine million semi-skilled and skilled digital talent over the next 15 years. It will need to generate approx 600,000 talent per year to close the gap.
Number of Indonesia’s IT Graduates
There are around 400,000 IT or vocational school graduates every year in Indonesia produced from hundreds of IT study programs at colleges and vocational schools. To get the most out of IT graduates, the vast majority will need to be upskilled so that they adequately meet all human resources (HR) qualifications.
The Number of IT Graduates Who Become Programmers
According to Decoding’s survey on the demographics of Indonesian developers, only 56% of IT graduates have a career as a programmer in a company, The rest 44% primarily work as freelance programmers.
Workers Are Aware of Reskilling and Upskilling
Cited from a Boston Consulting Group’s survey, 65-70% of Indonesian workers, which is higher than the global average of 61%, acknowledge that technological improvements will have an impact on their careers. They understand the significance of reskilling and upskilling in order to remain relevant, and they are willing to fill up the gaps when necessary.
Furthermore, the J.P. Morgan and Singapore Management University study noticed that training graduates are not only the responsibility of the government and institutions but also the business sector.
To attract more foreign investment in this sector, the government has relaxed rules on the employment for tech-based start-ups operating in special economic zones (SEZs), where they no longer required a government-approved plan to hire skilled foreign employees.
Doing Business in Indonesia for Indian: Benefit from Digital Economy Policies & Reform
In addition to ease regulation on foreign employment for tech-based start-ups, the reforms in investment policies also make up for great investment opportunities for Indian entrepreneurs. Some digital sectors are now open to foreign investment thanks to the latest Positive Investment List:
|KBLI||Sectors||Business Activities||Foreign Ownership||Category|
|63112||Internet Hosting||Web Hosting, Cloud Computing.||100%||Priority|
|62012||E-commerce Application Development||Consulting, Analysis for E-Commerce Application Programming.||100%||Priority|
|62019||Computer Programming||Designing the structure and writing computer code needed for system software; updating and repairing application software, databases, and web pages.||100%||Priority|
|62011||Video Game Development||Game concept design activities, video game software development, graphic asset creation, video game-related animation creation, sound and music creation, video game testing, and other support for video games.||100%||Priority|
Designated as a priority, investment in these digital sectors also will benefit from a range of incentives as follows:
- Foreign companies that fall into the priority group are eligible for a variety of tax and non-tax incentives, including tax holidays.
- Capital intensive businesses over IDR 500 billion receive a 100% cut in Corporate Income Tax for up to 20 years.
- Investments worth IDR 100 – 500 billion will be granted a 50% reduction in Corporate Income Tax, based on Peraturan Menteri Keuangan Nomor: 130/2020 that regulates Indonesia’s tax holiday policy.
Doing Business in Indonesia for Indian: A Mutual Cooperation
India as a technology leader is getting more popular among the Indonesian bigwigs. One of India’s largest software companies, Tata Consultancy Services (TCS), has been handling the software services for Indonesia’s flag carrier Garuda Indonesia. Also, in terms of technological innovation, India can deliver in areas like data analytics, machine learning, artificial intelligence, the internet of things (IoT), blockchain and robotics.
On the other hand Indonesian unicorn Gojek also has acquired three Indian start-ups and is aggressively hiring top-level Indian executives to lead the business in Indonesia.
The rising technological synergy between India and Indonesia will help Indonesia not only acquire the best technologies at low costs but also improve its human resources.
How Can Cekindo Help?
Doing business in Indonesia for Indian seems to be very lucrative, however, setting up an IT company in Indonesia can be tedious and cumbersome. As an integrated business solution for ancillary services, Cekindo offers comprehensive business set-up services like company incorporation, legal services, market research and analysis, accounting, and much more.
Prior to incorporation, Cekindo can ensure that Indian investors know about their target market through our extensive market research and analysis services. Our legal consultants assist investors in making sure that the company complies with all legal obligations. When the business becomes operational, we can help with recruiting fresh talents and take care of tax and accounting, and various other business ancillary services.