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The Comprehensive Economic Partnership Agreement between Indonesia and Australia (IA-CEPA) entered into force on July 5, 2020. IA-CEPA creates a framework for Australia and Indonesia to unlock the potential of a bilateral economic partnership, facilitating economic cooperation between businesses, communities, and individuals. Indonesia, with a population of 264 million, provides significant opportunities for Australian businesses. According to IA-CEPA, 99% of Australian goods will be imported to Indonesia duty-free or under significantly improved preferential terms. IA-CEPA will also support stronger value chains between Australian and Indonesian businesses, ensuring that Australia is well positioned to deepen economic cooperation and participate in Indonesia’s growth. It will also give significant impetus to a number of service sectors, including education and training, tourism, finance, mining, and energy, as well as provide new mechanisms to eliminate non-tariff barriers. Indonesia guarantees the automatic issuance of permits for the import of basic products such as live cattle, frozen beef, mutton, feed grains, rolled steel, citrus products, carrots and potatoes. Unhindered access to the market of services, digital commerce and investments ensures the confidence of Australian enterprises and service providers in the Indonesian market, including guarantees for the protection of Australian property. Indonesia also removes restrictions on the level of the ownership of shares by Australian residents in Indonesian companies, with some exceptions.
Indonesia offers exceptional partnership opportunities in the healthcare sector to Australian businesses.
Digital healthcare has been positioned by the Indonesian government as one of the next key growth areas for startups since 2018, along with educational technology. Services include online consultations, pharmaceutical delivery, and an electronic appointment. These firms often have strong partnerships with established healthcare or technology players such as hospital networks, pharmaceutical firms, and e-commerce platforms.
Indonesia’s digital innovation sector is developing rapidly.
Internet penetration amounts to 64.8%, and by 2025, the “digital economy” will grow to $133 billion per year. Smartphones are a key platform, with 96% of Internet users accessing the Internet through their portable devices. The ecosystem of Indonesian startups is becoming an increasingly important way for Australian businesses to access and participate in the Indonesian market. Indonesia is one of the largest and most diverse startup ecosystems in ASEAN, driven by 215 million Internet users, and the largest economy in ASEAN. Regarding the broader economy, experts estimate Indonesia’s “Internet economy” at $40 billion, with an average growth rate of 49% per year since 2015, which is expected to reach $130 billion by 2025. Startup innovation is crucial for the growing industries of the digital economy, such as e-commerce, digital healthcare, fintech, and educational technology. It is also a force for modernization in traditional sectors such as banking, telecommunications, agriculture, logistics, retail, resources, and public services. As of May 2020, there are more than 2,000 digital startups and 5 technological unicorns in Indonesia. This is supported by a wide range of accelerator/incubator programs, collaboration spaces, and venture investors.
Vocational education and training
Australian vocational education and training providers can open educational institutions owned by the majority of shareholders anywhere in Indonesia and offer all Australian and Indonesian qualification programs. Bilateral trade in services was estimated at $6.2 billion in 2018-2019. Educational trips dominate Australian exports of services to Indonesia.
SaaS (Software as a Service)
SaaS (Software as a Service) is a relatively new phenomenon in Indonesia that has been boosted by the growth of Internet penetration, the need for cost-effectiveness of a cloud storage, and the importance of digital transition. According to a study by Boston Consulting Group, the SaaS market in Indonesia is expected to grow at an annual rate of 31.9% and reach $400 million in 2023, compared with $100 million in 2018. A popular SaaS implementation in Indonesia can be witnessed in business application areas such as payroll and HR management, CRM and file sharing. Key cloud computing companies include Microsoft, AWS, and Telkom Cloud.
Cybersecurity
Indonesia has been particularly vulnerable to cyber attacks, and this vulnerability has increased as many traditional industries modernize their operations, and new digital industries such as e-commerce and digital healthcare and education are experiencing rapid growth. Over the past 3-5 years, the prevailing approach in government and business has shifted from avoiding public recognition of cybersecurity risks to considering cyber resilience as part of a critical national infrastructure. This includes the creation of the National Cybersecurity Agency (BSSN) in January 2018. BSSN creates standards for industry to support the sustainability of Indonesian business and government. Indonesia is one of the few countries with which Australia has concluded an intergovernmental agreement on cooperation in the field of cybersecurity. This memorandum of understanding was signed between Indonesia and Australia in September 2018 with the participation of Indonesian President Joko Widodo and Australian Prime Minister Scott John Morrison. It lays the foundation for strong collaborative relationships in formal, academic, business, and cybersecurity resilience aspects.
Artificial intelligence/data analysis
The growth and success of many Indonesian startups have highlighted the value of data analysis and artificial intelligence (AI) for decision-making. The appetite of enterprises as well as small and medium-sized businesses for the introduction of AI is high. A survey conducted among the companies operating in the sectors such as retail, IT/telecommunications, financial services, and insurance in eight markets in the Asia-Pacific region showed that Indonesian companies top the list for the adoption of AI, with 65% implementing or expanding the use of AI to improve operational efficiency and develop innovative products and solutions that better meet customer needs. The value of the Internet of Things (IoT) is expected to reach $30 billion in the country by 2022. The reported value is the sum of the contribution of several components: content and applications, platforms, IoT devices, as well as networks and gateways.
To Indonesia via Australia
The fastest and most reliable way for a business to enter the Indonesian market.
The Comprehensive Economic Partnership Agreement between Indonesia and Australia (IA-CEPA) entered into force on July 5, 2020. IA-CEPA creates a framework for Australia and Indonesia to unlock the potential of a bilateral economic partnership, facilitating economic cooperation between businesses, communities, and individuals. Indonesia, with a population of 264 million, provides significant opportunities for Australian businesses. According to IA-CEPA, 99% of Australian goods will be imported to Indonesia duty-free or under significantly improved preferential terms. IA-CEPA will also support stronger value chains between Australian and Indonesian businesses, ensuring that Australia is well positioned to deepen economic cooperation and participate in Indonesia’s growth. It will also give significant impetus to a number of service sectors, including education and training, tourism, finance, mining, and energy, as well as provide new mechanisms to eliminate non-tariff barriers. Indonesia guarantees the automatic issuance of permits for the import of basic products such as live cattle, frozen beef, mutton, feed grains, rolled steel, citrus products, carrots and potatoes. Unhindered access to the market of services, digital commerce and investments ensures the confidence of Australian enterprises and service providers in the Indonesian market, including guarantees for the protection of Australian property. Indonesia also removes restrictions on the level of the ownership of shares by Australian residents in Indonesian companies, with some exceptions.
Indonesia offers exceptional partnership opportunities in the healthcare sector to Australian businesses.
Digital healthcare has been positioned by the Indonesian government as one of the next key growth areas for startups since 2018, along with educational technology. Services include online consultations, pharmaceutical delivery, and an electronic appointment. These firms often have strong partnerships with established healthcare or technology players such as hospital networks, pharmaceutical firms, and e-commerce platforms.
Indonesia’s digital innovation sector is developing rapidly.
Internet penetration amounts to 64.8%, and by 2025, the “digital economy” will grow to $133 billion per year. Smartphones are a key platform, with 96% of Internet users accessing the Internet through their portable devices. The ecosystem of Indonesian startups is becoming an increasingly important way for Australian businesses to access and participate in the Indonesian market. Indonesia is one of the largest and most diverse startup ecosystems in ASEAN, driven by 215 million Internet users, and the largest economy in ASEAN. Regarding the broader economy, experts estimate Indonesia’s “Internet economy” at $40 billion, with an average growth rate of 49% per year since 2015, which is expected to reach $130 billion by 2025. Startup innovation is crucial for the growing industries of the digital economy, such as e-commerce, digital healthcare, fintech, and educational technology. It is also a force for modernization in traditional sectors such as banking, telecommunications, agriculture, logistics, retail, resources, and public services. As of May 2020, there are more than 2,000 digital startups and 5 technological unicorns in Indonesia. This is supported by a wide range of accelerator/incubator programs, collaboration spaces, and venture investors.
Vocational education and training
Australian vocational education and training providers can open educational institutions owned by the majority of shareholders anywhere in Indonesia and offer all Australian and Indonesian qualification programs. Bilateral trade in services was estimated at $6.2 billion in 2018-2019. Educational trips dominate Australian exports of services to Indonesia.
SaaS (Software as a Service)
SaaS (Software as a Service) is a relatively new phenomenon in Indonesia that has been boosted by the growth of Internet penetration, the need for cost-effectiveness of a cloud storage, and the importance of digital transition. According to a study by Boston Consulting Group, the SaaS market in Indonesia is expected to grow at an annual rate of 31.9% and reach $400 million in 2023, compared with $100 million in 2018. A popular SaaS implementation in Indonesia can be witnessed in business application areas such as payroll and HR management, CRM and file sharing. Key cloud computing companies include Microsoft, AWS, and Telkom Cloud.
Cybersecurity
Indonesia has been particularly vulnerable to cyber attacks, and this vulnerability has increased as many traditional industries modernize their operations, and new digital industries such as e-commerce and digital healthcare and education are experiencing rapid growth. Over the past 3-5 years, the prevailing approach in government and business has shifted from avoiding public recognition of cybersecurity risks to considering cyber resilience as part of a critical national infrastructure. This includes the creation of the National Cybersecurity Agency (BSSN) in January 2018. BSSN creates standards for industry to support the sustainability of Indonesian business and government. Indonesia is one of the few countries with which Australia has concluded an intergovernmental agreement on cooperation in the field of cybersecurity. This memorandum of understanding was signed between Indonesia and Australia in September 2018 with the participation of Indonesian President Joko Widodo and Australian Prime Minister Scott John Morrison. It lays the foundation for strong collaborative relationships in formal, academic, business, and cybersecurity resilience aspects.
Artificial intelligence/data analysis
The growth and success of many Indonesian startups have highlighted the value of data analysis and artificial intelligence (AI) for decision-making. The appetite of enterprises as well as small and medium-sized businesses for the introduction of AI is high. A survey conducted among the companies operating in the sectors such as retail, IT/telecommunications, financial services, and insurance in eight markets in the Asia-Pacific region showed that Indonesian companies top the list for the adoption of AI, with 65% implementing or expanding the use of AI to improve operational efficiency and develop innovative products and solutions that better meet customer needs. The value of the Internet of Things (IoT) is expected to reach $30 billion in the country by 2022. The reported value is the sum of the contribution of several components: content and applications, platforms, IoT devices, as well as networks and gateways.
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