Singapore firms helping to fuel Indonesia's tech sector's growth

Jakarta

TAY Kiat Seng, the executive chairman and chief executive of Singapore water treatment specialist Memiontec Holdings, secured his first project in Indonesia in 1998, despite the turmoil of the financial and political crisis engulfing the country at the time.

Over the past two decades, the Singapore Exchange mainboard listed firm has continued to invest in Indonesia and has established full-fledged Indonesian operations.

Today, Memiontec has multiple projects in Indonesia with both private sector players as well as public municipalities, providing clean drinking water to millions of Indonesians.

In 2016, it entered into a joint venture with state-owned PT Jakarta Propertindo (JakPro) through an introduction by Enterprise Singapore (ESG) in a project to provide drinking water to North Jakarta residents.

The project - which involved taking over an existing plant, a 40 per cent ownership in JakPro, operating the plant and transferring back ownership after 25 years - was a major coup for Memiontec.

"We are the only company in Indonesia using membrane technology to treat water," Mr Tay told The Business Times in a recent interview. "This provides much higher quality for users when compared with local water."

This technology coupled with operational efficiency has propelled Memiontec to the forefront of the industry in Indonesia with the company recently landing a project to provide clean drinking water to some two million residents in Pekan Baru.

"This year, Indonesia will contribute 50 per cent of our total revenue and we expect this figure will be higher once the economy opens up," he said.

"Our success is based on our ability to scale up in terms of design and execution and the Indonesian market for water treatment is huge."

For 2021, the company has an order book of S$93 million with sales revenues of S$45 million, compared with sales revenues of S$34.6 million in 2010.

Armed with cutting-edge technology, strong operational strengths and access to finance, companies such as Memiontec are leading a surge in Singapore investments into Indonesia, South-east Asia's largest economy.

In the first quarter of 2021, Singapore topped the list of approved foreign direct investments into Indonesia with 3,634 projects amounting to US$2.6 billion, according to Indonesia's Ministry of Investment.

Despite the Covid-19 pandemic, Indonesia's investment realisation in the first quarter of 2021 reached 219.7 trillion rupiah (S$22 billion), an increase of 4 per cent compared to the same period in 2020.

FDIs increased by 14 per cent to 98 trillion rupiah compared to the same period last year, said Imam Soejoedi, deputy of Investment Realization Control at the Investment Coordinating Board.

In recent years, Singapore companies have been more involved in Indonesia's growing e-commerce sector and the digital economy.

Bank Indonesia recently forecast in a report that the e-commerce sector will grow by 39 per cent to reach US$25 billion in 2021, while digital banking is expected to increase by 22 per cent to US$2.2 trillion,

"Demand for fintech, edtech and digital health solutions have grown during the pandemic as movement and social gathering restrictions spurred demand for contactless solutions," said ESG's director of global markets Khairul Anwar.

"These sectors offer numerous opportunities for Singapore companies. In particular, fintech in Indonesia is a growth spot that firms should explore," he added.

Singapore's position as a global financial hub also allows venture capital firms and international investors to raise funds for Indonesian startups and tech companies.

ESG, through its Global Innovation Alliance (GIA) node in Indonesia, has been instrumental in fostering this cross-border cooperation. The GIA initiative connects Singapore's startup and innovation ecosystem to global innovation nodes such as Jakarta.

"Through the GIA programmes, Singapore technology startups and SMEs can accelerate their market entry, gain mentorship and explore potential business opportunities with corporate tech adopters in Indonesia, to further their internationalisation plans" Mr Anwar noted.

Beyond the tech sector, Singapore companies have also been active in renewable energy, given that Indonesia is phasing out coal fire plants by 2030 and investing heavily in solar infrastructure.

Enercon Asia, for example, is moving into renewable energy EPC solar projects as well as energy audit and energy efficiency.

Another company, PVFoundry is using its Building Integrated Photovoltaic technology to access the Indonesian market. The technology will be integrated into the government's smart expendable homes.

Bhima Yudhistira, director of the Center of Economic and Law Studies, warns that challenges remain for investors seeking to maximise the opportunities that are emerging in Indonesia, especially at the regional level.

"The biggest challenge for investors is to ensure that regulatory barriers at the regional level can be resolved. Even though the Omnibus Law on Job Creation has been passed, it will take time for local governments to adjust their regulatory policies," he said.

Other challenges include lack of adequate infrastructure and connectivity as well as excessive red tape, he said.