The Jakarta Post
Companies are opening up so-called digital hubs to foster innovation and develop new business activities despite limited government support and skill-set gaps.
Property developer Sinarmas Land CEO of technology business Irvan Yasni said the company had invested Rp 7 trillion (US$496.78 million) for the next 10 years to develop a digital hub — a 26-hectare area in BSD City filled with digital infrastructure — as part of the company’s strategic plan in the country’s burgeoning digital economy.
“We provide start-ups with working space and [development] assistance to foster collaboration and build a digital community,” he said during a discussion on the digital hub held by Sinarmas Land in cooperation with The Jakarta Post in Banten on Dec. 3.
The digital hub concept derives from Silicon Valley, home to United States technology behemoths from Apple to Facebook and Tesla.
“We will also build an integrated transportation system in BSD to support the ecosystem,” Irvan said, adding that the transportation system would connect the entire city from clusters to homes to support the digital hub.
The company also plans to work together with several local universities such as Prasetiya Mulya and Atma Jaya, to build a knowledge hub next year in a bid to stoke collaboration among the digital community.
Sinarmas Land currently has two digital hubs: one in BSD City, Banten, which is home to the Apple Developer Academy and Plug and Play’s BSD Innovation Labs, and one in Batam that includes companies from Singapore,
“We expect the digital hub to be a home for the digital community and the creative industry,” he said, adding that the digital hub would only allow start-ups and digital companies to operate in the area as they operated based on digital technology.
Indonesia’s digital economy is well on track to dominate Southeast Asia with its market value expected to triple to $130 billion by 2025 from $40 billion in 2019, according to a study conducted by American tech giant Google, Singaporean holding company Temasek and management consulting firm Bain & Company.
US tech giants from Amazon to Google and Microsoft have set their sights on investing in cloud regions or data centers, as has publicly listed state telecommunications giant PT Telekomunikasi Indonesia.
Pricewaterhouse Coopers (PwC) Indonesia digital transformation adviser Ravi Ivaturi said countries such as Malaysia and Ireland were examples of thriving digital hubs, partly due to the government’s support.
“Malaysia and Ireland have programs [to boost the digital economy] such as tax incentives and visa regulations,” he said, adding that the Indonesian government’s 1,000 start-ups program could help foster the digital ecosystem in the country.
“Another thing that could help [the digital ecosystem] is to have a dedicated space with the necessary tax and incentives other than internet connectivity and talent,” he added.
During the same discussion, Ravi said start-ups would need several support systems, namely the availability of talent, financing, an ecosystem for collaboration and innovation, internet connectivity and sufficient infrastructure.
Irvan added that there were several challenges to foster innovation and collaboration at the digital hub in BSD City. “We are having difficulties in providing a talent pool and [we need more] government support [because] when we went abroad, investors asked what the government could give in terms of incentives, especially relating to technology."
According to a study conducted by Deloitte University Press titled How to Innovate the Silicon Valley Way, more than one third of the 141 companies in the Americas, Europe and Asia Pacific that grew to a valuation of greater than $1 billion between 2010 and 2015 were located in the Bay Area.
“Given the Valley’s nearly unique set of assets — the presence of technology giants, world-class universities, abundant venture capital and a hypercompetitive yet collaborative culture,” the report reads.
“To be able to harness Silicon Valley’s innovation ecosystem to their [companies’] advantage, enterprises should have clearly stated objectives and direction, as well as a deep understanding of the local environment.”
The government has previously vowed to improve the regulatory framework related to Indonesia’s digital economy, particularly on e-commerce, data protection and a tax office regulation on e-commerce tax, as it aspires to become Southeast Asia’s digital hub next year.