Matthews Asia Snapshot

Postcard From Indonesia

Week of 29 August 2018

The Asian Games, held this year in Indonesia, are the second-largest sporting event in the world after the Olympics.

Jakarta, a densely populated city of 10 million known to be clogged and congested, was impressively clean, clear and green during a recent visit. Measures to reduce pollution and traffic that were implemented prior to the start of the 2018 Asian Games in mid-August appeared to be working. The opening ceremony of the Asian Games, the second-largest sporting event in the world after the Olympics, included Indonesian President Joko Widodo—a self-professed motorcycle buff—pulling off a riding stunt that would fit into a “Mission: Impossible” scene. The event was promoted heavily and signage for the Games was plastered everywhere, from packaging for chips to lifesize mascots around town.
Also highly visible was the sea of vivid green and black jackets donned by drivers for Go-Jek and Grab, two ridesharing services that edged U.S.-based Uber out of the region. It was a visual representation of the digital disruption that Indonesia has experienced in recent years. Underpinning the transformation have been local startups. Besides Go-Jek and Grab, there are e-commerce company Tokopedia and travel booking service Traveloka. These companies have expanded their footprint from transportation services to food delivery and various lifestyle services. Bank Indonesia predicts that online transactions could reach US$130 billion by 2020, up from just US$7.5 billion in 2017.1 This has coincided with fast growth in the number of smartphone users and expansion among Indonesia's middle class, which continues to swell. Indonesia's consumer class could grow to 135 million by 2030, up from 45 million in 2010, translating into an additional 90 million consumers within 20 years, according to McKinsey Global Institute estimates.
E-commerce in Indonesia, which is estimated at only around 3% of overall consumer spending currently2, is expected to be a pillar of support to consumption growth over the next several years. It could benefit from tailwinds provided by the uplift in commodity prices and increased government welfare spending. Indonesia's infrastructure spending push continues to reduce bottlenecks in business operations and improve connectivity. The push is expected to help reduce logistics costs and boost e-commerce-related activity (and overall consumption). A more immediate boost would come from promotional activity and discounts related to the 2018 Asian Games, as well as from the associated boost to tourism.

Reflecting the society's digital transformation, this Asian Games has held demonstration events featuring eSports (computer gaming), a contender for a medal event in the 2022 Asian Games to be held in Hangzhou, China. In early September, the Games conclude and the baton and the spirit of the Games will be passed on in a sign that the next leg of the race is just beginning. We will be watching closely as Indonesia's consumer landscape hits its stride.

Alfred Hong
Research Associate
Matthews Asia

Statista, June 2018
Forrester, UK Office of National Statistic, iResearch, NBS, Euromonitor International, Morgan Stanley Research

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