Digital Economy: Will Indonesia Soon Have Its Own Silicon Valley?
Indonesia does not want to be left behind in terms of developing its digital economic potential. In early March 2021, the Indonesian government inaugurated the "Indonesian-style Silicon Valley" called Nongsa D-Town. This 5,000 m2 area is located on Batam Island, which is positioned very close to Singapore.
The ambition is that Nongsa D-Town will become a digital talent pool for Indonesia's young generation as well as a hub for a range of entities that are focused on the digital economy, such as start-ups and multinational digital companies. Nongsa D-Town is envisaged to become the center of Indonesia's digital economy where all key players gather, encompassing startups, web, applications, digital programs, films, and animation.
The development of this digital center was actually already started, through the construction of the Nongsa Digital Park in 2018, which was inaugurated by the Minister of Foreign Affairs of the Republic of Indonesia Retno Marsudi and the Minister of Foreign Affairs of Singapore Dr Vivian Balakrishnan. Currently, there are around 100 multinational companies such as Glints, R/GA, and WebImp that are officially located in Nongsa Digital Park in Batam.
It was a consortium consisting of Citramas Group and Sinar Mas Land that believed in the potential of this Nongsa D-Town, and therefore spent USD $3 billion to create this exclusive area.
Nongsa D-Town Project in Indonesia:
| Designer | Surbana Jurong from Singapore |
| Capacity | 8,000 workers |
| Total Size | 62 hectares |
| Property | Office towers, shopping malls, digital training center, hotels, and co-working/co-living space |
| Distance | 40 minutes fomr Singapore via ferry 15 minutes from Batam's international airport |
Meanwhile, this project is also believed to strengthen bilateral relations between Indonesia and Singapore. This should optimize foreign direct investment realization considering Singapore is among the largest sources of foreign investment for Indonesia. In 2020, investors from Singapore invested USD $9.78 billion in Indonesia.
Huge Potential for Indonesia's Digital Economy
The e-Conomy SEA report compiled by Google, Temasek, and Bain & Company states that Indonesia's digital economy in 2020 is estimated to be around USD $44 billion - a figure that is equivalent to more than 1/3 of realized state revenue in the same year. And by 2025, the value of Indonesia's digital economy could nearly triple to USD $124 billion. Undoubtedly, as the largest Internet market in Southeast Asia, Indonesia is a very promising market.
Value of Indonesia's Digital Economy:
| Year | Value (in USD billion) |
| 2019 | 21 |
| 2020 | 44 |
| 2025 | 124 |
Source: e-Conomy SEA
These projections from e-Conomy SEA are also in line with the expectations of the Indonesian government, which has even set a more optimistic target for Indonesia's digital economy, namely at USD $133 billion in 2025. Encouraging the country's micro, small and medium enterprises (MSMEs) to go digital is also considered a way to boost this potential. It makes sense, considering a developing economy like Indonesia still relies heavily on the MSMEs and household consumption.
The population of Internet users in Indonesia in 2019 reached 180 million people, or 67 percent of the population, including 150 million active Internet users, equivalent to 56 percent of the population. However, until now, only about 10 million MSMEs, out of a total of around 60 million MSMEs, have entered the digital ecosystem.
How High Can Batam Go?
This question arises without being pessimistic. Of course, Batam still has a long way to go to achieve a status similar to that of Silicon Valley in San Francisco (USA) or in Bangalore (India). However, the degree to which Batam can develop into another Silicon Valley actually has to start with providing certainty over who the authority will be to oversee the digital field in Batam. The problem is that there currently exists dualism in terms of leadership in Batam, namely (1) the Batam city administration and (2) the Batam Concession Agency (BP Batam), an agency that was formed in the 1970s. This leadership dualism is believed to have obstructed plenty of foreign investment realization in Batam.
Moreover, efforts to upgrade Batam into a business district have been around since the Soeharto era. Based on statements from the late B.J Habibie, who at that time served as Minister of Research and Technology, Batam was projected to become a city with a high tech industry. That is why, Habibie also initiated the construction of five bridges connecting Batam Island, Tonton Island, Nipah Island, Rempang Island, Galang Island, and Galang Baru Island (known as the Barelang Bridge).
Batam was also developed to be a logistics and operational base for state-owned energy giant Pertamina. However, after several decades have passed, Batam's current status cannot even match the status of Singapore.
So, is the development of Nongsa D-Town - accompanied by the legal umbrella of the Omnibus Law of the Job Creation Law - sufficient to tackle the bottlenecks that prevent Batam from transforming optimally into a high tech digital center? Hopefully…
This article was written by Elizabet Siregar
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