This article first appeared in The Edge Financial Daily, on June 23, 2016.
KUALA LUMPUR: In Asean, Indonesia is regarded as the prime target for expansion, thanks to its huge population of 250 million, which makes it the largest economy in Southeast Asia, according to global management consulting firm Boston Consulting Group (BCG).
Malaysian firms looking to expand their footprint regionally are no less attracted to the republic, the world’s fourth most populous nation and the 10th-largest economy in terms of purchasing power parity, which offers tremendous opportunities and a large consumer market for almost any business.
However, during the Socio-Economic Research Centre Global Economic Conference 2016 held here on May 30, Eddy Tamboto, senior partner and managing director of BCG Jakarta, said the lack of ease of doing business was one of the major issues that had dragged down the economic growth of Indonesia.
In other words, making inroads into Indonesia is often easier said than done. Fortunately for local technology firms, the Malaysia Digital Economy Corp (MDEC), formerly the Multimedia Development Corp, is ready to lend a helping hand.
MDEC chief executive officer Datuk Yasmin Mahmood said many Malaysian tech firms are keen to enter the Indonesian market.
“As a government agency, we managed to open doors [for some of them]. It would have been harder and taken them a longer time [if they were] to do it on their own,” she said in an interview with The Edge Financial Daily during a trip organised by MDEC to bring local tech firms to Jakarta, Indonesia, under its “Immersion Indonesia” programme.
A total of 31 local firms, five of which were start-ups, took part in the programme, which is part of MDEC’s Global Acceleration Network programme.
Yasmin said those selected to join the programme were able to meet senior management from notable Indonesian firms like PT Anabatic Technologies Tbk, a leading information technology company in the country, and venture capital firms like Sinar Mas Digital Ventures. Sinar Mas Digital is the tech venture capital arm of Sinar Mas, one of the largest conglomerates in the republic.
Today, Yasmin said, Malaysia is the second-largest investor in Indonesia, though mainly in the areas of infrastructure and plantation. “For the technology sector, which is one of the fastest growing sectors, we want to see the same [level of investment],” she noted.
MDEC facilitated three alliances between Malaysian and Indonesian tech firms during the programme. “It’s a good, early start. We think there will be more [collaborations],” she added.
MDEC has also teamed up with the Kejora Group, Indonesia’s leading company-building venture capital firm, to facilitate business expansion opportunities for a mutually beneficial and synergistic relationship between the firms under the portfolio of each party.
This means MDEC will provide Kejora and its affiliated companies access to potential Malaysian clients and a venture capital network, a soft landing platform in Malaysia, and support for insight into financial resources, strategic partners, and business models refinement. In return, Kejora will provide similar support to MDEC in Indonesia.
Yasmin said Kejora has a good understanding of the Indonesian market, so Malaysian companies can capitalise on its expertise and advice for an effective start in Indonesia to gain a strong foothold in their targeted market.
“Kejora is a private sector-run accelerator, specialising in ‘growth hacking’. They have been helping start-ups and companies to scale up and grow. They have a good network of mentoring that can help our local companies do business in Indonesia,” she added.
Meanwhile, despite slower global economy growth expected this year, Yasmin remains optimistic about the tech sector.
“The opportunities are tremendous in the tech sector. Digital innovation has the potential to transform so many aspects of an industry. As time gets tough, people [will] look at [improving] efficiency and productivity. Digital innovation is what drives productivity and efficiency. So there is no reason why the tech sector should not flourish,” she said.
MDEC registered a growth of 56% in approved investments and foreign direct investments in 2015. Total investment inflow from MSC Malaysia companies reached RM19.8 billion last year, when MDEC recorded its highest increase in new investments of RM4.6 billion since its establishment in 1996.
Export sales of 2015 were also the highest in 10 years. Export sales from MSC Malaysia companies contributed RM16.2 billion from RM13.7 billion in 2014, up 18%.