A closer look at Go-Jek’s impact on Indonesia’s tech scene

In 2017, Go-Jek made it to Fortune’s Change the World List, the only company in Southeast Asia to do so. But is it really changing the world or is this another case of expectations being set too high?

Grand entrance

Indonesia has arrived on the tech scene in a big way, with a raft of homegrown unicorns exploding in market share and valuation. In addition to Go-Jek, there’s travel-booking company Traveloka and online retailer Tokopedia.

Not surprisingly, the rapid growth of consumer-facing tech companies in Indonesia has coincided with a steady economic growth of about 5 percent annually, an expanding middle class with more disposable income, higher mobile phone penetration, and a big acceleration in the volume of e-money transactions.

According to World Bank’s Global Findex, only 19.6 percent of Indonesians over the age of 15 had a bank account in 2011. By 2017, that number had reached nearly 50 percent. Expanding access to basic financial services often piggybacks on greater mobile phone penetration, so it’s no surprise that the percentage of Indonesians who have used a mobile phone to access the internet rose from 53 percent in 2010 to 92 percent in 2016.

And one of the activities that drives Indonesians to use the internet is shopping. In 2011, Bank Indonesia recorded 41 million e-money transactions valued at 981 billion rupiah (US$69.5 million). In 2017, it cleared 943 million e-money transactions worth over 12.37 trillion rupiah (US$877 million). The 2018 figures are expected to be higher still.

Photo credit: kzenon / 123RF

The data tell an interesting story: Indonesians are becoming increasingly digitally literate and connected as they gain more disposable income. This in turn drives massive growth in the country’s digital ecosystem and creates abundant market opportunities.

A unique position

According to a study by Google and Temasek, the value of the ecommerce market in Southeast Asia – including ride-hailing, food delivery, and online shopping – will reach US$240 billion a year by 2025. US$100 billion of that is expected to be generated by Indonesia.

Are companies like Go-Jek causing such a trend? Probably not. Indonesia’s digital economy would still likely be headed in this direction whether Go-Jek, Traveloka, or other local unicorns existed or not.

But with a deep knowledge of domestic market conditions and regulatory environments, these companies are perfectly positioned to take advantage of the US$100 billion opportunity. This explains why venture capitalists like Sequoia Capital and Alibaba have been racing each other to invest hundreds of millions of dollars into Indonesia’s burgeoning ecommerce sector and its tech unicorns.

By reducing transaction costs and making it easier for consumers to buy goods and services, the country’s tech startups are playing an important role in juicing domestic consumption, which has been the main component of the country’s recent economic growth.

Looking at Jakarta’s regional GDP since 2014 (when Go-Jek launched its mobile app), consumption for hotel, restaurant, and food services – Go-Jek and Traveloka’s core offerings – has increased at a significantly faster pace compared to other services.

Greener pasture

The other part of the puzzle – at least in Go-Jek’s case – is whether it is using its immense market power to throttle down wages for the hundreds of thousands of green-jacketed drivers who work for the company. After Uber exited Southeast Asia last year, ride-hailing and app-based delivery services have essentially been cornered by Go-Jek and rival Grab.

A duopoly like this often results in lower prices for consumers, as the two rivals compete for customers. But this situation can be less favorable to workers: their bargaining power erodes since they have nowhere else to go if they are unhappy with working conditions.

Impact on Southeast Asia

An opportune moment