John Riady, Executive Director, Lippo Group, on Indonesia’s efforts to boost the economic role of ICT

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ID16_ICT_Riady.pngEconomic View: John Riady

What role can technology play in Indonesia to expand digital industry?

John Riady: Indonesia is on the cusp of a digital revolution. This is important because a country like the US has been through five digital cycles, while China has arguably seen two. In Indonesia this the first tech cycle where there has actually been the ecosystem to support a digital world. For digital businesses to work, consumers need to have certain habits, and there should be a specific threshold of smartphone availability as well as affordable broadband internet and qualified engineers, among other things. Without those things, you cannot have a digital world. Only today do we have everything in place. This is our first technological boom of many to come.

However, because this is our first, the pace of change will be swift and intense. The impact will be such that, over the course of the next five to 15 years, all industries will change. There are two kinds of innovation, one is product innovation and the other is systemic innovation. Typically, the latter is the one that transforms industries. This systemic innovation will create a great future for consumers and the market. In terms of business opportunities for entrepreneurs, if you have the skill set and the personality, your odds of success are higher than ever. This democratisation of technology empowers people, and companies have to retool traditional businesses. A new mindset is required, from seeing IT as a support function to seeing it as a core competency. Businesses are moving from information technology to data technology, which is hugely different. Indonesia has along way to go in establishing its tech ecosystem.

How can you develop this tech ecosystem?

RIADY: You need a risk-taking culture. We need more people with the experience of having failed. There is more uncertainty, and this is an opportunity, as the amount of competition has not increased in tandem.

There are 100m digital users in Indonesia. But as well as analysing levels of internet use and access among the population, we should observe the intensity of internet usage for a more detailed picture. Furthermore, once you have the culture, you have to match that with the adequate levels of engineering and human resources. However, the oldest educational institutions are vocational schools and not creative or liberal arts institutions. Unfortunately, standards are lacking in both systems, and we have to do more.

Lastly, the availability of capital is low for emerging companies. The opportunities for venture capital are clear. The entire tech ecosystem in China is worth about $900bn, while in India it is between$40bn and $60bn. In Indonesia the ecosystem’s total value is $2bn-3bn. I don’t think we will reach Chinese or Indian levels any time soon, but we should be able to hit $10bn-15bn, and the gap between our current worth and this target will provide an opportunity for venture capital investment.

Which sectors might benefit most from a proliferation in tech startups?

RIADY: There are a number of opportunities in transport and logistics, and then you have general e-commerce, which has already proven to have huge potential and is performing very well. This is followed by financial services, which is an even bigger industry than retail in terms of economic value. Fintechs are also going to be very big in Indonesia given the current rate of growth in digital activity. Finally, I see health care as benefitting greatly from technology. In all these sectors there is the consumer side to consider, but there is also significant value on the enterprise side of things.

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