Remarks By Ambassador Blake on Innovation and the Digital Economy, University of Indonesia, Depok
Good morning everyone. It is a pleasure to be back here at this wonderful institution. Your university has much to be proud of – bright students, passionate instructors, and even bragging rights for hosting President Obama in November 2010! I want to thank the University of Indonesia leadership for welcoming me and giving me this valuable opportunity to address Indonesia’s leaders of tomorrow.
Relations between the U.S. and Indonesia reached a new peak with President Jokowi’s successful visit to Washington in late October to meet with President Obama. Our two Presidents elevated our relations to a Strategic Partnership; announced over $20 billion in new U.S. investment and business deals; and enhanced cooperation on strategic regional and global challenges, including to further develop our important trade relationship.
President Obama looks forward to welcoming President Jokowi back to the United States next week along with leaders from throughout ASEAN to pursue a stronger and more robust U.S.-ASEAN partnership.
President Jokowi has set out an ambitious agenda to increase Indonesia’s economic growth and to reduce poverty. To reach his targets, he has rightly pointed out that Indonesia can no longer rely simply on exporting commodities and consumer spending to drive growth.
The Transformative Effect of the Digital Economy
Today, I would like to discuss with you one important issue that has the promise to transform Indonesia’s economic future. I’m talking about Indonesia’s digital economy development and innovation agenda.
We are living in a time of incredible change, with technology playing an increasingly important part of our daily lives. What we now know as the internet was created in the late 1960s by U.S. researchers. That network expanded slowly until 1990, when a British scientist brought order to the Internet in 1990 by creating the world wide web.
The 1990s saw an explosion in the use of the internet, and in 1995, Amazon.com and ebay.com ushered in America’s e-commerce boom and transformed the way millions of Americans, and people around the world, shop.
In the past decade, social media has once again changed the landscape of the internet, allowing instantaneous communication across the world. We’ve come a long way since those early days of the internet just 25 years ago.
The internet has made the world smaller. The Internet and technology innovation have allowed cities to become smart, governments to become more efficient and transparent, and societies to become more connected.
America’s leading digital companies are having a profound effect on America and the world. A few examples:
- The largest hotel company in the world as measured by room bookings is Airbnb – a company that owns no hotels.
- Amazon.com has no retail stores, at least not yet, but took over the title of the largest retailer from Walmart in July 2015.
- And the world’s most popular media owner – Facebook – is a social media company.
All of these companies are changing the face of business not only in the U.S., but in Indonesia and most other parts of the world.
But there is no time to rest on laurels so the march of innovation is proceeding. And we are now seeing the next wave of innovation. The smartphones in your pockets have more computing power than NASA had when they sent a man to the moon.
Cloud computing is reducing costs and increasing mobility. And the industrial internet, the so called “internet of things”, will monitor industrial performance remotely, providing efficiency gains that will be worth hundreds of billions of dollars to the global economy.
And the next wave of innovation is coming fast. Companies around the world are making breakthroughs in advanced robotics, self-driving cars, and artificial intelligence that will continue to fuel 21st century innovation.
Indonesia’s Digital Potential
With more than 85 million Indonesians online already, Indonesia’s digital potential is enormous. With young people like you leading the way, Indonesia can become a leader in e-commerce and digital development. Indeed young Indonesians just like you are already using technology to solve problems for people here and around the world.
When William Tanuwidjaya founded Tokopedia to provide a platform for Indonesians to buy and sell goods online, he probably didn’t expect that it would become Indonesia’s first billion dollar tech company. After receiving a $100 million investment from Japan’s Softbank and U.S. firm Sequoia Capital in 2014, Tokopedia is well on its way to becoming Indonesia’s first ‘Unicorn’.
Gojek roared onto the Indonesian scene in 2015, and now Gojek drivers with their green jackets and helmets are everywhere. Its founder, Nadiem Makarim attended Brown University and then Harvard Business School. Gojek helps to solve a problem we all deal with in Jakarta: traffic. A ride on Gojek can get you to places faster, and Gojek delivery means you can outsource waiting in traffic. The company applies its user-friendly app to an existing and expanding network of ojeks to increase efficiency for us all.
Indonesia’s digital ecosystem is vibrant. But it remains small. Indonesia’s e-commerce sector was valued at about $13 billion in 2015. According to a recent Accenture study, the U.S. internet economy accounts for more than 6% of America’s GDP. Estimates put the Indonesian digital economy at about 1% of GDP. So there is tremendous room for growth in Indonesia. But Indonesia still lags behind its neighbors in some key areas, including internet penetration, and the percentage of the population participating in the digital economy.
So the question is, how can Indonesia achieve its digital potential?
How many of you have heard about the triple helix concept for innovation? The main idea behind the triple helix is that government, academia, and the private sector each have important roles to play to support innovation, and that close collaboration between the three can lead to tremendous breakthroughs and innovative growth. Researchers and students at universities produce innovations and the private sector creates business uses for those innovations. And the Government supports innovation by creating a policy environment for innovators to thrive.
The best example of the triple helix at work is Silicon Valley. You’ve all heard of it. With Stanford University as one focal point, a robust venture capital community, and a regulatory environment to encourage innovators and investors from around the world, Silicon Valley has grown to be the global epicenter of technology innovation.
But Silicon Valley is by no means alone. North Carolina’s “Research Triangle” boasts 25 colleges and universities, attracts more than $2.5 billion in research and development funding each year, and turns out hundreds of startups annually.
Similar things are happening in Boston, New York, and in smaller clusters throughout the United States. What they all have in common is that these universities and their government and private sector partners develop and train entrepreneurs, help inventors patent and license new technologies, and connect researchers and entrepreneurs with venture capital funding, incubators, and business development networks to promote the startup and growth of an endless stream of new companies.
President Jokowi has recognized the importance of digital development to Indonesia’s future, and the government is working to support innovation and technology development to unleash Indonesia’s digital potential. But governments can only do so much. In the United States, the government has created a policy environment where technology innovation can thrive, and then has gotten out of the way of the innovators who can make it happen. Centers of innovation like Silicon Valley have been the result.
The United States tech community has much to offer Indonesia as it pursues its digital goals, and the U.S. government and business community will continue to be a strong partner to Indonesia in its effort to build its digital future. In March, a delegation of U.S. companies and government officials will visit Indonesia as part of a regional “Innovation Roadshow.”
The roadshow will showcase American innovation and demonstrate our support for budding digital economies in Southeast Asia. Stay tuned by following U.S. Embassy Jakarta’s Facebook and Twitter for more information about that.
How Can Indonesia Achieve Its Digital Potential?
In thinking about how Indonesia can achieve its digital potential, it all comes down to expanding access — access to people and markets, access to capital, and access to talent. Let me talk briefly about each.
First, expand Access to People. E-commerce development and digital innovation can only happen if there is a marketplace for the services and products that are created. At just over 30%, Indonesia’s internet penetration lags behind its neighbors, and leaves more than 160 million Indonesians unable to participate in the country’s digital transformation.
To expand internet access, the Indonesian government launched a $20 billion, five-year National Broadband Plan in 2014. The plan seeks to leverage government funding and private sector investment to expand internet access throughout the country, allowing more Indonesians to get connected, and allowing the government to utilize technology to improve service delivery, including health care, education and other e-government initiatives.
The United States, through our U.S. Agency for International Development, supported the development of the National Broadband Plan, and continues to support efforts to identify and test rural connectivity technologies to bring rural communities online. We also recently announced a new “Global Connect” Initiative that aims to bring 1.5 billion additional people around the world online by 2020.
We will work with governments, NGOs, academic institutions like University of Indonesia, and the private sector to mainstream the view that Internet connectivity is as fundamental to economic development as roads, electricity, and other infrastructure. Indonesia can be a key partner to ensure that we all make connectivity a key part of our national development strategies.
The private sector is doing its part too. Google signed agreements with Telkomsel, Indosat, and XL Axiata to begin testing its new Google Loon technology here in Indonesia. Have you heard about this? Google has developed the technology to use large balloons flying high in the atmosphere, like cellular base stations in the sky, that can help Indonesia expand internet access to underserved areas. The effort represents a tremendous partnership between U.S. and Indonesian companies for the benefit of Indonesia’s people.
Access to Capital
Second, we need to ensure that Indonesian innovators have Access to Capital. This is a critical element of any digital economy. As part its recently announced e-commerce roadmap, the government seeks to grow the digital economy ten-fold to $130 billion, and support the creation of 1,000 new “technopreneurs” by 2020. This is an ambitious goal. It is also an achievable goal. But to meet these goals, Indonesia’s innovators will need access to capital, whether it is small seed investments in an entrepreneur with an idea, or the $100 million invested in Tokopedia.
U.S. tech players can play a critical role in helping Indonesia achieve its digital economy goals. Investors that focus on early stage investment represent so-called “smart-money,” as they offer mentorship, connections, and other much-needed intangibles that will help Indonesian startups bring their ideas to market, scale their businesses, and join the global digital economy.
These early venture capital investors are also willing to risk failure in their pursuit to find the next big thing, a critical ingredient to a successful startup ecosystem. Y Combinator, a leading early stage investor and accelerator in Silicon Valley funds more than 100 startups a year with small seed funding. Many of those startups fail. But that’s okay, because among the more than 1,000 startups Y Combinator has funded since 2005 are tech success stories AirBnB, Reddit, Twitch, and many other companies that you may have heard of.
Homegrown Indonesian venture capital investors can provide similar funding and support to local startups, but Indonesian capital is not sufficient to meet the growing needs of Indonesia’s vibrant digital ecosystem. For that reason, we all should welcome and celebrate any capital investment in the Indonesian tech sector, of any size, from any place, as it represents a vote of confidence in Indonesia’s digital future, and will help guide the success of some of those 1,000 technoprenuers the government aims to support.
While the government is contemplating opening up parts of the e-commerce sector to foreign investment, we continue to encourage BKPM to allow foreign investment in e-commerce at all stages of a company’s development. We should provide Indonesia’s tech startups all the tools they need to succeed, and more sources of capital are a critical tool in that toolbox.
Access to Talent
Finally, startups need access to talent. Indonesia has a lot of tech talent out there. But the booming tech sector still suffers from a talent deficit. As startups grow, finding talented engineers, coders, and other tech professionals is becoming increasingly difficult.
And it will continue to be difficult if Indonesia does not increase the number of students pursuing higher education. According to Redwing Asia, only about 22% of college-aged Indonesians are enrolled in school. Compare that to the United States, where more than 65% of young people pursue higher education after high school.
As part of the e-commerce policy roadmap, the government will work to create an educational environment conducive to digital economy growth. That’s where academic institutions like the University of Indonesia come in. Just as MIT and other U.S. universities have become centers of innovation and sources of America’s entrepreneurs and innovators, Indonesian universities can become the engines of Indonesia’s digital economy growth.
To do so, Indonesian universities must become more entrepreneurial, and seek partnerships with the private sector to boost research and development, involving students in cutting edge research. A great example of this is the Geothermal Capacity Building program, a partnership between the University of Southern California, the Bandung Institute of Technology, USAID, and Star Energy, an Indonesian private geothermal company.
The program conducts seminars on geothermal technologies, provides scholarships to students pursuing master’s degrees at ITB, and creates opportunities for students to work alongside and learn from experts from American and Indonesian companies. Through this successful partnership, ITB’s geothermal master’s program is strengthened, and the participating companies gain a steady stream of well-qualified graduates to fill their ranks.
But such partnerships are the exception. Every university in Indonesia should be thinking about how its faculties can partner with the local private sector to create partnerships that will fund university research, train the students in those faculties, and drive the innovation that will create jobs in districts and provinces across Indonesia.
Another priority has to be to strengthen university leadership and management. Through the Higher Education Leadership and Management Project, or HELM, USAID supports the Directorate General for Higher Education to strengthen its strategic planning capacity, while directly assisting 50 higher education institutions across Indonesia to improve general administration practices, quality assurance of academic programs, administrators’ leadership skills, and financial management capacity. By providing technical assistance in support of key reforms, this program is helping to prepare Indonesian educational institutions for tomorrow’s economy.
USAID’s university partnership program has developed more than two dozen long-term partnerships between U.S. and Indonesian universities. These partnerships provide Indonesian faculty and students with links to their counterparts in the United States, and has helped many Indonesian faculty members and graduate students to broaden and deepen their research skills.
For example, the partnership between Bogor Agricultural University (IPB)/Columbia University and Sampoerna University, Tufts University and New York Hall of Science (NYSCI) has supported the development of makerspaces for students, teachers, and faculty to promote innovation at schools through hands-on STEM education.
These spaces are equipped with tools for faculty members and students to carry out their research through innovative processes and equipment, with technical support from their U.S. counterparts. This program has also led to a new partnership with Intel Indonesia, who is providing resources for advanced development of the initial research and products created by these makerspace participants.
While we are committed to strengthening universities in Indonesia to help produce the leaders of tomorrow, we also see tremendous value in promoting educational opportunities in the United States. Study abroad is a great way to ensure Indonesian students can access the finest higher education opportunities. Today, only some 40,000 Indonesians pursue higher education abroad. We are working increase those numbers. Our Education USA advisors are available every day at @america to help you find opportunities for study in the United States.
I am also a huge supporter of Government of Indonesia’s scholarship program, LPDP. What an amazing opportunity for talented Indonesian students. LPDP currently awards nearly 3,000 scholarships annually and intends to award up to 5,000 in the coming years to allow Indonesian students to pursue degrees at foreign universities. We want those LPDP scholars to pursue a world class education at one of the top 55 US universities that are part of the program.
So those of you undergraduates here today contemplating getting a Masters or PhD, there is no better opportunity than at these U.S. universities, from the Ivy League to Stanford to MIT and so many others. And once you are accepted, your government is ready to give you a scholarship.
But there is another pool of talent that can be tapped to help Indonesia meet its ambitious digital growth goals – a global talent pool that has experience building digital economies in the United States and around the world.
Once again, Silicon Valley illustrates my point. Silicon Valley attracts the world’s top entrepreneurs and innovators. Foreign-born workers now make up almost half of the tech workers in Silicon Valley, and foreign talent runs almost half of all Silicon Valley startups. By building their companies in the United States, these foreign workers create jobs and add tremendous value to the American economy.
Indonesia can follow Silicon Valley’s lead and welcome foreign talent into its tech sector to bridge the talent deficit facing the country as it grows its digital economy.
I am excited to see Indonesia’s vibrant tech ecosystem take flight. But Indonesia will not reach its digital potential overnight. It will take time, hard work, and a conducive policy environment to make it happen. It will take the access to people and markets, access to capital, and access to talent that I’ve discussed today. It will take people like you to lead Indonesia’s digital transformation.
I have no doubt that within Indonesia’s young population, and maybe right here in this room, we will find the next Bill Gates, the next Steve Jobs, or the next Mark Zuckerberg. The future is yours, and it is a digital future.