Indonesia is opening its doors to Silicon Valley, offering a digital gold rush opportunity for major US tech giants eager to tap into a fast-growing market of more than 270 million consumers.
This vast island nation is becoming a strategic battleground in Southeast Asia for the supremacy of big technology.
Last month, Apple CEO Tim Cook, Microsoft's Satya Nadella and SpaceX and Tesla boss Elon Musk all flew into Indonesia to meet separately with President Joko “Jokowi” Widodo to discuss manufacturing, artificial intelligence, cloud computing and even Musk's satellite-based internet service, Starlink.
The Indonesian government has made digitalization a top priority and has launched initiatives to improve internet connectivity, promote e-commerce, and foster a thriving startup ecosystem.
“Indonesia is currently experiencing an accelerated national digital transformation, opening up many investment possibilities,” Jokowi said on Monday with Musk on the sidelines of the World Water Forum in Bali. said at the meeting.
“Therefore, we value and actively promote the investment efforts of companies such as SpaceX, Tesla, Neuralink, and Boring in Indonesia,” the president said, referring to Musk's various businesses.
The move comes as Southeast Asia's largest economy seeks to establish itself as a major player in the global technology sector.
China has already made inroads through huge investments in Indonesia's heavy infrastructure, and Chinese tech giant Huawei also has a presence in the country.
The tech billionaire speaks next to Indonesian Health Minister Budi Gunadi Sadikin (left) during the inauguration ceremony of the satellite unit Starlink at a community health center in Denpasar, Indonesia, on May 19, 2024. Elon Musk (second from left). [Sonny Tumbelaka/AFP]
For U.S. technology companies, Indonesia represents an attractive opportunity to expand beyond a saturated market and enter a region with tremendous growth potential.
The country's digital economy is expected to reach US$124 billion by 2025, driven by rising internet penetration, a growing middle class and a booming e-commerce sector, according to a study by Google, Temasek and Bain & Company. There is.
Indonesia is actively seeking investment from Tesla in its ambitious bid to become a global hub for electric vehicle (EV) manufacturing. The country, which is rich in nickel ore reserves, aims to use this resource to produce EV batteries and, eventually, full-scale electric vehicle manufacturing.
Analysts say the country's strategic location and rich natural resources make it an attractive destination for investors focused on the growing EV market.
Analysts say Indonesia's vision is consistent with a ban on exports of rough nickel and encourages investors to refine nickel within Indonesian smelters, where China has invested heavily. In doing so, the country hopes to boost the production of electric vehicle batteries and attract foreign investment in related sectors.
A plane carrying high-tech billionaire Elon Musk arrives at Ngurah Rai International Airport in Denpasar, Indonesia, on May 19, 2024. [Sonny Tumbelaka/AFP]
Jokowi's government has been aggressively courting Musk and Tesla for years, with little success. This included a May 2022 visit in which Mr. Jokowi took Mr. Musk to the SpaceX launch site in Texas.
Hours after Mr Musk arrived in Bali over the weekend, he launched the Starlink service, which aims to improve internet connectivity in remote parts of the archipelago.
Indonesia's Coordinating Maritime and Investment Minister Luhut Pandjaitan said in Bali that he would consider Musk's proposal to set up an EV battery factory in Indonesia.
Late last month, Microsoft's Nadella announced a $1.7 billion investment over the next four years to strengthen Indonesia's digital environment, as well as AI skills training opportunities for 840,000 people and the country's growing developer community. announced support for
This is the largest single investment Microsoft has made in the 29-year history of its operations in the country.
“These initiatives will contribute to achieving the Indonesian government's 'Golden Indonesia 2045 Vision' to transform Indonesia into a global economic powerhouse,” Microsoft said in a blog post.
Satya Nadella, executive chairman and CEO of Microsoft, leaves after attending a meeting with Indonesian President Joko Widodo at the Presidential Palace in Jakarta on April 30, 2024. [Willy Kurniawan/Reuters]
In early April, Cook said Apple would “consider” manufacturing in Indonesia after meeting with Jokowi at the presidential palace in Jakarta.
Analysts say Jakarta is diversifying its economic partnerships by attracting Western investment and reducing dependence on China, which has pumped billions of dollars into infrastructure projects, mining and manufacturing.
“Friends with everyone”
In recent years, Chinese companies have built roads, railways and power plants across the archipelago, boosting connectivity and economic development thanks to Beijing's Belt and Road Initiative.
However, the Indonesian government has also emphasized the importance of diversifying Indonesia's economic partners and attracting investment from other countries.
“Both China and the US welcome investment, but they must work hard to make it happen and not just use Indonesia as a market,” said Heru Study, executive director of the Jakarta-based Institute of Information and Communications Technology.
“Indonesia is friends with everyone. We are not interested in geopolitical games, including geoeconomics,” he told BenarNews.
Amid the trade war between China and the United States, Southeast Asian countries such as Indonesia and Malaysia have emerged as potential beneficiaries of the “China plus one” strategy, in which companies diversify production outside of China.
“This is an opportunity for Indonesia to question these companies about their investment plans,” Heru said.
Chinese Premier Li Qiang (center) attends the 43rd ASEAN Summit at Soekarno-Hatta International Airport in Tangerang, near Jakarta, on September 5, 2023, with Indonesia's Coordinator for Maritime Investment Luhut Binsar Pandjaitan Walking with the Minister. [Antara Foto/Raisan Al Farisi/ via Reuters]
But the influx of investment from U.S. technology companies has also raised concerns about Indonesia's preparedness.
Although the country boasts a young and tech-savvy population, its infrastructure remains underdeveloped and the regulatory framework for the digital economy is still evolving, analysts said.
Experts stress the need to invest heavily in education and skills training to enable Indonesia's workforce to compete in the global technology market. They are calling for greater regulatory clarity and consistency to attract and retain foreign investment.
“The lack of a strong technology ecosystem, including infrastructure, regulation and skilled labor, has prevented us from attracting much investment,” said Tawhid Ahmad, senior economist at the Institute of Economic and Financial Development in Jakarta. .
Tawhid pointed to Tesla's decision to postpone investment in Indonesia, citing the lack of a local supply chain for electric vehicle batteries as an example.
He also said U.S. companies tend to be more cautious than Chinese companies, focusing on the broader Southeast Asian market rather than just Indonesia.
Despite these challenges, Tawhid said he was optimistic about Indonesia's potential.
“Our GDP is stable, we have a large population and consumption levels are high,” he said.
“To realize this potential, we must invest in infrastructure and develop a skilled workforce.”
He suggested the government establish a technology academy modeled on Apple to develop local talent.
“We need to do more than train a few people at Apple Academy,” he says. “We need large numbers of skilled workers who are ready to meet the demands of the technology industry.”
But Suzi Sudarman, a lecturer in international relations at the University of Indonesia, questioned the motives behind the visit by top US officials.
“These people are not long-term investors,” Susie told BenarNews.
She pointed out that Apple's presence in Indonesia is minimal, having only invested $98.5 million to establish Apple Develop Academy in three cities in Indonesia.
“If you are going to invest, you need assurance that your investment will yield a return, and that means transparency.”
“Unfortunately, corruption has permeated our governance,” she said, “which has made our country a haven for fly-by-night entrepreneurs.”
