Willson Cuaca, cofounder and managing partner of East Ventures, said that, while the pandemic pushed up internet usage in Indonesia, the country’s digital economy had already provided a strong basis for growth before the crisis.

“With or without COVID-19, our fundamentals are good. High internet connectivity and efficient digital infrastructure keep the cost of doing business online low, which means companies can become profitable fast,” he said during an online discussion on Oct. 14.

With some 200 million users, Indonesia’s internet penetration rate stood at 73.7 percent in January this year, according to data provider Datareportal.

Cities outside the island of Java have increased their digital competitiveness through wider coverage of mobile communication networks and increased spending on internet data and phone credit.

Read also: Other islands close gap with Java in digital competitiveness

Willson went on to say that, as people become more internet-savvy, local start-ups would not need to spend a lot on marketing or market education, accelerating their path to profitability and attracting more investors.

“Definitely, there will be more investment next year than in 2021,” he said. “Indonesia’s internet economy will boom.”

Indonesia received US$2.24 billion in tech company capital investment in the first half of the year, more than half of the total $4.4 billion invested in Southeast Asia, according to venture capital firm Cento Ventures, which means the country remains the primary destination for investment in the region.

While deal activity in the region reached a new record at almost 400 deals clinched in the first six months of the year, total capital invested was 24 percent lower than in the same period of the previous year.

Cento Ventures general partner Dmitry Levit suggested that global investors were looking into other emerging markets, such as India, and into regions like Latin America and Africa. Thus, less funding went to Southeast Asia.

“I get the impression from our investors in the collective West that Southeast Asia, apart from Latin America, is now seen as the last sizeable unregulated frontier where some of the more sharp-edged business models are still possible,” he said, noting that governments in Europe, India and China had been increasing scrutiny of tech companies.

Similarly, Momentum Works CEO Jianggan Li said the venture capital firm expected to see more deals made in Southeast Asia next year as countries eased COVID-19 travel restrictions.

“Whether the investors will continue to be bullish about Indonesia tech will depend on a number of factors, including the overall liquidity in the capital market, investor sentiment and, crucially, whether investors will be able to successfully exit from current investments with good returns,” he said in an email on Monday.

The government has shown interest in funding more tech companies through state-owned enterprises. SOEs Minister Erick Thohir said he wanted to boost national ownership of tech firms, which have mostly received funding from abroad.

Read also: SOEs Ministry signals appetite to fund local tech start-ups

Indonesia as the region’s biggest digital economy has attracted investment from global tech behemoths like US-based Google and China-based Tencent as well as from Singapore-based VC firms.

Willson of East Ventures does not consider foreign investors a problem and dismissed the notion that local VCs needed to compete with them.

“The more capital inflow to Indonesia the better. If foreign investors can transfer technology, increase companies’ expansion capabilities [...], that is smart capital that we can further develop,” he said. “In the end, the one making calls and running the company is the owner, and the owners are still Indonesian nationals.”