Millions are getting online in Indonesia, and that’s driving the expansion of the country’s middle class in ways never before imagined.
The country has around 83.6 million Internet users and over 237 million active mobile subscribers. The archipelago has a dynamic, vast economy, and its consumer class is continuously rising. Moreover, it is supported by one of the youngest — half the population is under age 30 — largest and most digitally savvy demographics in the world.
“The Internet has helped people in the lower middle class,” Adrian Li, managing partner at Convergence Ventures, a venture capital fund in Indonesia, told Borderless News Online.
Experts said that in Indonesia, a country often criticized for poor infrastructure that can slow the development of small businesses, the Internet has allowed the little man to leapfrog over such hurdles and has empowered the grass roots economy. And as time goes on and online access becomes cheaper and more accessible — the government has an ambitious plan to dramatically boost Internet access — some experts believe the Web can help expand the middle class in myriad ways.
Among many examples, Li (shown in the photo above) noted the 8Villages mobile phone app, which has allowed farmers to increase their knowledge and beef up the yield on their farms. The Internet has also helped lower middle-class housewives, as well as others who work at home, move up the economic ladder in the Southeast Asian nation. Many have been able to set up virtual shops and home businesses, boosting their income.
In Indonesia, a large chunk of the population is just barely getting by, living off around a dollar a day. And while groups like Internet.org have contended that the Internet can reduce poverty, Li hasn’t seen that in Indonesia. But he has seen people who can afford a basic Internet connection and inexpensive mobile phone move up the economic ladder.
“I think Internet access in Indonesia is not reducing poverty directly yet because you need to have some amount of disposable income to be able to afford the basic tools to get on the Internet,” he said. “But for the people who live off more than (subsistence living) in Indonesia, the Internet has been a powerful force.”
The archipelago‘s consumer class is expected to grow to 90 million by 2030, according to consulting firm McKinsey. Experts said that will increase the amount of money people spend on e-commerce, and boost the ability of vendors to make money by selling products online. Li noted some individuals may need only a mobile phone – which are becoming increasingly cheap — to snap a photo of a product they are selling and put it on an online shopping site. That can get them customers not only in Indonesia, but also from countries worldwide.
Shinta Witoyo Dhanuwardoyo (shown on the left), CEO and founder of Bubu.com, said one company, Go-Jek, helps motorcycle taxi drivers — many of whom earn very little money — become more efficient.
Go-Jek is a mobile app that allows customers to order up a motorcycle taxi — often essential to weaving through traffic-gridlocked Jakarta — reducing the time drivers have to stand around waiting for work, which makes them more efficient and boosts their earnings.
“The average ojek drivers at Go-Jek are now making 300 percent more than a regular ojek driver,” said Witoyo Dhanuwardoyo, one of Indonesia’s digital pioneers, whose founded one of the nation’s first Internet companies. “That is life changing,” she said, referring to the commonly seen motorcycle taxis countrywide.
One problem that Witoyo Dhanuwardoyo and other experts have told Borderless about is the tendency of tech projects to be left unfinished, as some entrepreneurs have dumped good ideas at the first sign of a bumpy ride.
Moreover, many startups may need mentorship to help facilitate and guide them in developing their products. “I see products that are half’ done. Expertise and mentorship are keys in helping these startups,” she said.
Many startups simply use technology to ease the day-to-day lives of lower middle class folks.
“These startups through technology are utilized to help our day to day life. For example, as we all know, Indonesia is an agricultural country, and there are millions of people involved in those sectors. So, we can ask ourselves, ‘how can existing technologies help farmers or fishermen to be more productive?”
Witoyo Dhanuwardoyo said the number of players doing their business online in Indonesia is on the rise, adding that now many are tapping islands outside of the country’s main island, Java, that previously were not accessible. Those companies also provide jobs.
“E-commerce itself is growing massively in Indonesia, means a leapfrog of new market distribution to the vast 17,000 islands of Indonesia,” she said.
Li noted that Indonesia is on track to become one of the world’s top ten economies by 2020. The Internet plays a part in this, because as GDP expands people have more money to spend online to drive the economy, he said. Those sentiments have been echoed by others, including by Paraminder Singh, Twitter’s managing director for Southeast Asia, who wrote recently that Indonesia’s digital economy is key to the economy’s growth.
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