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NEWS UPDATES Asean Affairs                       24  August 2011

Indonesian E-commerce to take off

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Electronic commerce in Indonesia is likely to take off in the next five to eight years as the younger generation of Internet users mature into adults, a prominent local investor said.

“E-commerce in Indonesia could become mature in less than 10 years,” Martin Hartono, the director of venture capital firm Global Digital Prima Ventures, told the Jakarta Globe on Sunday.

The nation will be ready for an e-commerce surge when income per person rises to $5,000, young people start generating their own income and broadband connection becomes cheaper, he said. Based on last year’s gross domestic product, per capita income is currently $3,000.

Hermawan Kartajaya, the president of marketing consultancy MarkPlus predicted that Indonesia’s GDP per capita could hit $5,000 in 2014.

Indonesia’s broadband penetration is currently 18 percent and concentrated in Java’s major cities. Its relatively high cost puts it out of the reach of many of the nation’s 238 million people.

In the past few months, Jakarta-based GDP Ventures has embarked on a series of acquisitions and initiatives to widen its presence. It has identified three divisions as its main pillars for online business — a forum that allows people to buy and sell goods, a company that nurtures start-ups and an e-commerce site.

The company launched Blibli in May, with the intention of making it an “online mall” that integrates e-commerce with social media.

It acquired a majority stake in Kaskus, Indonesia’s largest online community, in March in an investment estimated at more than $50 million.

In the same month, it established Merah Putih, an incubator company that has helped develop local start-ups such as DailySocial, which attracts tech enthusiasts, and Lintas.Me, which uses social media techniques to aggregate content.

Martin, 38, is the third generation of a family that controls Indonesia’s conglomerate Djarum Group, which operates office buildings and a shopping mall in the capital.

“Only a small percentage of Gen[eration] X like me are using online transactions, while the rest are more comfortable to buy stuff directly and would not change their habit,” he said.

“The next generation after me is making use of online transactions even more, but it is the young generation aged 15 to 20 that will become the main consumers of e-commerce. In the next five years, this generation will have graduated from school and start to make their own income,” Martin said.

About 60 percent of Indonesians are younger than 39, and about half are below 29. This demographic profile, which could be maintained for the next decade, has attracted many companies, both foreign and local, seeking to develop e-commerce businesses in Indonesia.

A few prominent players include Japanese online retailer Rakuten, US-based Multiply, as well as Jakarta-based Plasa, Tokopedia and Tokobagus.

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