US and Chinese tech giants all eyeing Indonesia

Southeast Asia is increasingly becoming a battleground for tech giants from the United States and China vying for investment opportunities in the region, amid slow growth in the West and heightened political tensions between Washington and Beijing.

At the centre of their battle is Indonesia, the region’s largest digital market. This year, four American tech juggernauts – Google, Microsoft, Facebook and PayPal – have invested in the country’s unicorns, or private tech firms valued at over US$1 billion, and the trend is not expected to abate any time soon, analysts say.

“Indonesia, specifically, is the fourth-largest internet population in the world, has a high number of exciting tech start-ups and is the largest market by population,” said Pinn Lawjindakul, vice-president at Lightspeed Venture Partners in Singapore.

“These investments in Indonesia signal the importance of the country and the wider region in the eyes of these global tech giants. This vote of confidence will have a positive ripple effect. More international companies will be driven to follow suit and invest here, which will encourage more innovation and the creation of more start-ups,” she said.

“It is a very exciting time for founders and investors in Indonesia and the Southeast Asia region as a whole.”

While Indonesia is the obvious place for investors to make regional inroads, “countries such as Singapore, Thailand, Vietnam and the Philippines are also natural candidates for high investment interest in the next few years” owing to their high GDPs and first-time internet user growth, Lawjindakul said, highlighting the bullish nature of tech investors in the region despite pandemic-related headwinds.

Earlier this month, Indonesian e-commerce company Tokopedia announced that it had raised an undisclosed amount of investment – reportedly around US$350 million – from Google and Temasek, Singapore’s sovereign wealth fund. Tokopedia, valued at US$7 billion, is already backed by Chinese tech giant Alibaba, alongside Japanese conglomerate SoftBank Group and venture capital firm Sequoia Capital India. Alibaba owns the Post.

Microsoft has also partnered with an Indonesian unicorn, announcing an undisclosed investment this month in e-commerce firm Bukalapak, which put the company’s valuation at US$2.5 billion to US$3 billion. Bukalapak’s existing investors include China’s Ant Group, which holds a 19.4 per cent share stake in the company. Microsoft is also an investor in Singapore’s ride-hailing and food-delivery behemoth Grab, which rates Indonesia as its major market.

In June, Facebook and PayPal invested an undisclosed amount in Indonesia’s Gojek, Grab’s arch rival. Gojek, which also counts Google as an investor, in a statement said the investment would mainly be used to strengthen GoPay, its payments and financial arm, as it seeks to expand its digital payment business in the cash-reliant region. The 10-year-old Indonesian company is valued at US$10 billion, and has prominent backers such as China’s Tencent and Temasek.

The Gojek investment is Facebook’s first real foray into investing in Indonesia, where it will try to introduce mobile payment services through its ubiquitous WhatsApp messaging application.

Seattle-based tech mammoth Amazon has also set its sights on operating in Indonesia, with West Java Governor Ridwan Kamil announcing on November 16 that the company will invest around US$2 billion to build a data centre for its cloud computing service in the province.

While details on the deal were vague, the investment is expected to pave the way for Amazon to set up an operation in Indonesia, where the US$32 billion domestic e-commerce market is now dominated by local and regional firms.