January 24, 2021

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Indonesia’s digital economy attracting investments from global tech giants

Several major global tech giants actively exploring investment in Indonesia digital economy and specifically its electric vehicle industry.

Indonesia has been actively trying to attract more foreign companies to set up shop in Indonesia, as part of these companies’ relocation strategies away from traditional locations like China.

A local e-commerce giant has already received significant funding, while another major cloud and web services company has agreed to develop data centres in the country. Further, a stalwart and pioneer of electric vehicles has been personally invited by the nation’s president to establish a plant for electric vehicle manufacturing, as well as to take advantage of Indonesia’s vast deposits of nickel for its lithium batteries.

To make relocation and establishment in Indonesia more attractive, about 4,000 hectares in Central Java province has been allocated in the Batang Industrial Park for interested firms, with a focus on businesses in the pharmaceutical sector.

Indonesia has also taken significant steps to make its investment environment favourable through strong regulatory reform. The Indonesian House of Representative ratified the Jobs Creation Bill (widely known as the “Omnibus Law”) that encompasses amendments to labour laws that have a bone of contention for foreign investors. The Omnibus Law streamlines Indonesia’s notoriously convoluted business licensing regime into four risk categories, and relaxes licensing requirements for businesses in all but the highest category of risk. Seventy-six laws are being amended under the Omnibus Law which is aimed to boost investments and create more jobs in Indonesia.  Among others, the Omnibus Law introduces provisions to simplify business licensing procedures and changes to the existing manpower law.

As part of the government’s efforts to promote job creation under the Omnibus Law, a high-level team met with electric vehicle giant executives in early November 2020. As the company showing potential interest in building a plant in Central Java province,  Indonesia is confident that it can become an integral part of the global supply chain for the flourishing electric vehicle industry,

In fact, the government aims to make Indonesia the biggest producer of lithium batteries with such global partnerships. The country has the world’s largest reserves of nickel and is also the world’s largest producer of nickel – a key component of lithium-based batteries for EVs.

OpenGov Asia recently reported on the nation’s initiatives to expand its charging station network for electric vehicles and the Mining Industry Indonesia plans to form a venture to make batteries to power electric vehicles.

Another tech giant will invest US$2.85 billion to build three data centres in Indonesia’s West Java between 2021 and 2022. This investment represents the biggest influx in Indonesia’s information and technology sector. With the deployment of these centres and associated web services, the government is hopeful that there will be accelerated digitisation of the country’s SMEs who make up 99% of businesses in the nation.

After a US$350 million injection of funds, an Indonesian e-commerce company is set to expand and capitalise on the wave of online transactions due to the pandemic. With 100 million monthly users and over 9 million Indonesian e-commerce retailers, the platform is available in 98% of districts across the archipelago.

Indonesia’s digital economy is projected to be US$130 billion by 2025 and will contribute massively to the national economy as well as drive the nation’s startup ecosystem. Withing this digital sector, there is a vibrant and flourishing e-commerce sector which is expected to be worth US$83 billion by 2025. To strengthen the sector, the government has released its needed e-commerce law, that establishes the legal guidelines and framework for the industry.

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