Luke,Ma (Flickr) - LeadImage Credit: Luke Ma / Flickr

As the fourth-most populous country in the world with 250 million individuals across thousands of its islands, Indonesia is a land of opportunity. Since the Asian Financial Crisis, its companies have moved up the value chain to focus on high-value manufacturing and the services industries, contributing to a forecasted economic growth of five per cent in 2015. Yet despite a number of advantages – such as a well-educated workforce – growth barriers must be overcome for the startup ecosystem to thrive.

At first glance, the proliferation of mobile subscriptions and a penetration rate of 112 per cent seems encouraging, but low Internet penetration (15 per cent) and social media usage is less than impressive. Also, developing infrastructure for telecommunications is difficult across nearly two million square kilometres. This, however, could change with increased government investments as consumers move from basic mobile devices to cheaper smartphones.

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Even if it is assumed that these Internet subscription rates will pick up in the next few years, underdeveloped electronic payment systems makes it challenging for IoT (Internet of Things) startups as cash payments remain the preferred transaction method.

Above all, the “tax regime, regulatory apparatus, and government bureaucracy”, as The Economist explained, are also a few barriers to starting a business in Indonesia. Chronic corruption of the judiciary and the civil service is commonly cited as an impediment as aspiring entrepreneurs or existing startups may struggle to obtain licences or permits, or deal with demands in the course of their operations. On the 2014 Corruption Perceptions Index, Indonesia ranked 107 out of 175 countries, with the persistence of political corruption “regarded as limiting access to welfare for all Indonesians”.

phalinn (Flickr) Bandung - LeadImage Credit: phalinn / Flickr

Still, amidst all these barriers, there are many opportunities present. For instance, electronic payment systems may be underdeveloped, but this lacuna allows for companies to develop and publicise new e-payment gateways, which could galvanise more e-commerce startups. The per capita GDP may not be as high compared to their neighbours, yet consumption patterns are changing with a rising middle class, within the largest market in the region. “The middle class is a major, major, major driving force”, according to the Head of Consultancy Redwing Daniel Tumiwa, with 125 million expected to be online by the end of 2015. This would bring the Internet penetration rate up to 50 per cent.

And perhaps, it is also a boost that the newly-elected President Joko Widodo started as a pragmatic furniture entrepreneur, and is now calling for young Indonesians to embrace the imminent competition which comes with the ASEAN Economic Community (AEC). “When the AEC is officially established, just imagine if we can overrun [the ASEAN countries] with young entrepreneurs,” he said in a recent interview with local business publication The President Post. This enthusiasm is backed by ambitious plans for reform and an anti-corruption commission to make Indonesia more conducive for businesses.

For these aforementioned reasons, e27 is excited to smash these growth barriers with the Indonesian startup community through our upcoming roadshows in Bandung and Jakarta, as well as the Echelon Indonesia conference.

Echelon Asia Summit 2015 takes place in Singapore from June 23 to June 24, 2015. e27 is currently looking for Asia’s Top 100 startups to be part of this year’s exhibition, so apply now. Get your Super Early Bird ticket to Echelon Asia Summit here.