Week in Review: Digital ‘oomph’ for Indonesian SMEs

By Karamjit Singh November 13, 2015

Malaysia gets US$233mil boost from Germany’s Infineon Technologies
Try this for scale – O2O player Bhinneka aims for US$700mil GMV

Week in Review: Digital ‘oomph’ for Indonesian SMEs THIS week saw some interesting developments in both Indonesia and Malaysia. The two countries have been hit by weakening currencies, weak commodity prices, and shrinking trade surpluses – which then tends to further weaken the currency.

Both governments are trying to manage the current headwinds and lay a foundation for a stronger future. Indonesia has its small and medium enterprises (SMEs) in the crosshairs, knowing well that these businesses must play a bigger role in the country’s economic development.

And central to playing that bigger role is the adoption of technology – hence Digital News Asia (DNA) running a three-part series on the state of SMEs in Indonesia this week.

Not surprisingly, the adoption of technology is low, and this is no surprise – but the country took a big step forward this week in addressing this with the Indonesian Chamber of Commerce announcing a one-stop SME portal at ukmmarket.co.id which will allow SMEs to go digital without having to worry about developing their own sites or payment gateways.

With Indonesia having a massive 58 million businesses that fall under the SME category, clearly it is in the interest of the Government to help them sharpen their competitiveness, and technology adoption is a key tool.

Now in Malaysia, SME development is already powering ahead with the role of technology and innovation a big focus of government and industry bodies.

I had written about this back in November 2013. From introducing the national innoCERT competition in 2010 to get SMEs excited about innovation – with RM1 million (US$229,000) in prize money – to trying to raise productivity and expand the number of high-growth and innovative firms by 10% a year, the Malaysian Government is focusing big time on boosting innovation and productivity through technology adoption among SMEs.

Malaysia this week also received a boost from a multinational corporation (MNC) that has been in the country for over 30 years.

German-based semiconductor company Infineon Technologies said its Malaysian subsidiary will invest RM1 billion (US$233 million) in capacity expansion, innovation, and upgrading its manufacturing facilities in the state of Melaka.

I note that while it was not your typical DNA tech story, it was very well read and had over 600 social media shares. It tells me that DNA readers are interested in a wider range of tech-based stories than just startups or telco pieces.

But beyond the investment amount or the yearly exports of RM6 billion (US$1.37 billion) from that single company in Malaysia, this development also speaks of investor confidence in the capabilities of the Malaysian talent pool and of the expected growth they see in Malaysia.

All welcome news to the Malaysian Government, no doubt.

Naturally, more needs to be done, and both Indonesia and Malaysia are aware of this.

You always hear and read about Indonesia being a big market but it is hard to really grasp the meaning of this. Yet, since we have started covering Indonesia, its size is becoming more real to me.

Just imagine the country having 58 million SMEs – almost double the Malaysian population of 30 million!

And this week, we also ran a funding story where Bhinneka, the pioneer of Indonesia’s online store and its leading O2O (online-to-offline) player received an investment of Rp.300 billion (US$22 million) from local venture capital firm Ideosource.

It is a large amount for a domestically-focused business. But just imagine the market potential.

Exclusive to DNA, Bhinneka chief executive officer Hendrik Tio shared that the company is targeting a Gross Merchandise Value (GMV) of Rp.10 trillion as the trigger for it to go for a listing.

With a current GMV annual growth of 60%, Bhinneka can achieve this in five years. Even when you convert it to US dollars, it is almost US$700 million. Talk about market size and e-commerce potential!

That’s Indonesia for you. And that’s it for me this week. Have a restful weekend and a productive week ahead.

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