Indonesia still offers a great investment prospect in several industries namely tourism and gaming amidst the 2023 global economic recession threat. Speakers at the Indonesia PE-VC Summit by DealStreetAsia (DSA) concluded that Indonesia still provided lucrative investment opportunities.
DealStreetAsia is a financial news website founded by Joji Thomas Phillip in 2014. It focuses on tracking private equity, venture capital, deal flows, initial public offers, investments, fund-raising, startups and targets to be the go-to destination portal for deal activity in Asia. The company has a number of teams in vital markets such as Indonesia, the Philippines, Vietnam, Hong Kong, China, India, Pakistan, Taiwan, Malaysia, and Thailand. In 2019, Nikkei Inc. purchased the company. Currently, investors such as Singapore Press Holdings, North Bas Media, Hindustan Times (HT), Alpha JWC, K2 VC, Singapore Angel Network (SGAN) and prominent people such as Jim Rogers as well as Paytm founder and CEO Vijay Shekhar Sharma supported the company.
Lucrative sectors on offer
Keynote speaker Sandiaga Salahuddin Uno, Minister of Tourism and Creative Economy, said during the event in Jakarta on January 12, 2023, that Indonesia had many opportunities in tourism and gaming industry.
He revealed that in 2022, Indonesia attracted 4.6 million tourists. Currently, Indonesia is focusing on developing connectivity infrastructure to help promote destinations in the country, with a value-added of nearly IDR 1,300 trillion (US$ 86 billion). Therefore, Indonesia is optimistic that the number of tourists will reach 7.4 million in 2023 while revenue from tourism will reach US$ 6 billion.
Read also: Indonesia offers investment opportunities in tourism sector: Minister Sandiaga
“To invest in Indonesian tourism, you must have a good management and an experienced team with a good track record. Half of incoming tourists visit Bali. We are currently developing five super-priority alternative tourist destinations [Surabaya, Borobudur temple in Central Java, Labuan Bajo in East Nusa Tenggara, Mandalika in West Nusa Tenggara and Likupang in North Sulawesi],” Sandiaga said. “Indonesia is also creating a special government institution that will provide soft loans or funding for the gaming ecosystem.”
He explained that Indonesia would have a big opportunity in the gaming industry due to its estimated 150 million gamers in the country, both amateurs and professionals. The number of booming mobile games is also high.
Indonesia is encouraging local developers as they have not yet become part of the success story of gaming industry by providing special incentives. For the time being, 99% of revenues in the industry are for foreign developers.
Read also: Lucrative business in Indonesia’s gaming industry
Meanwhile, private equity fund manager firm Northstar Group Managing Partner Patrick Walujo said: “The valuations of companies that are growing rapidly have fallen in the last three years but their business performance is suspected to be improving. Exits will be easy for businesses that are running well but bad businesses will find it difficult to exit; with or without funding. Valuations no longer matter. Minimal business risk, leadership, and promising business prospects offer more opportunity.”
Indonesia manages economy well
In his opening remarks, Philip appreciated the Indonesian government for keeping the country away from the stagflation that has been plaguing the global economy.
“Indonesia is one of the few bright spots in the world that has a high risk of recession, high inflation, rising interest rates and also geopolitical risks,” he said.
Phillip praised the government’s achievement, which has succeeded in limiting the fiscal deficit to under US$ 30 billion or 2.38% of Indonesia’s GDP. In 2022, the GDP growth increased sharply to 5.2% from 3.7% in 2021. This achievement was due to the higher fiscal revenues from the initial target of 16% to 30.6%.
Indonesia to receive 60% share of equity fund
Research from DSA’s Data Vantage said the total equity funding deals in Indonesia have reached 253, facilitated by seed-stage investments.
Despite an increase in equity funding deals, due to the impact of the crisis in the global tech sector and the lack of mega funding deals, the number of funds received decreased drastically to US$ 3.71 billion in 2022, or 61% lower than the previous year. Currently, Indonesia has total funding of up to 22% of the total funding for ASEAN in 2022.
According to Phillip, of the US$ 5 billion new funding for ASEAN, more than 60% will be allocated to Indonesia. The funding will help enhance the startup ecosystem.
Risks in tourism and gaming
Nugroho Sumarjiyanto, a lecturer of economy at the University of Diponegoro, wrote in his 2020 journal on “Problems on Tourism Development in Indonesia” that there were several issues in Indonesian tourism. He highlighted the overlapping regulations, lack of quality human resources, lack of publications, insuficient infrastructure, lack of investment, lack of attention to environmental aspects, and lack of attention to religious tourism objects.
The Indonesian Gaming Association (AGI) Program Manager Ardhan Fadhlurrahman said in August 2020 that domestic game developers preferred to develop premium games. He explained that the main challenges for the industry were talents and investments.
