Week in Review: Indonesia’s digital ambitions gets huge fillip from Grab
By Karamjit Singh February 3, 2017
- Cleverly aligns its US$700 mil investments with nation’s future direction
- Raises the heat on competitors Gojek and Uber in fight to dominate market
IF THERE were any doubts about how important the Indonesian market is, Grab’s announced US$700 million investment into the country over the next four years, till end 2020, will have shattered them.
While the Malaysian founded, Singapore headquartered Grab did not offer a breakdown beyond US$100 million to be invested into an R&D centre, even that investment is likely to be among the largest announced R&D investments into Indonesia, ever. It follows similar announcements made in 2016 notably by Apple and Samsung.
For sure the announcement of its “Grab 4 Indonesia” plan (note the clever word play) has sent a strong surge of optimism and confidence into the country as it maps the way forward into an increasing digital world. And not surprising, tapping into Indonesia’s announced digital ambitions, Grab aims for its investments over the next four years to help drive Indonesia to reach its digital goals.
The move surely raises the heat on its main competitors, Gojek and Uber as Grab has cleverly aligned its investment with Indonesia’s digital ambitions and those ambitions stand no matter the government in power.
And, I can imagine the government now looking kindly on any issues Grab may have in the country as it fights to be the market leader in its space. For, with this announcement, Grab will no more be seen as a pesky foreign startup trying to beat local champion, Gojek, but as one of the leading foreign investors into Indonesia.
And while Grab just raised US$750 million last Aug, you can bet it will be raising another round this year as it beefs up its war chest for this and its other investments in Southeast Asia.
Two data points really grabbed my attention in the Grab announcement. The first was the US$260 million income it claims to have generated for its driver partners in Indonesia. That’s a big amount, and even bigger when converted to Rupiah. And while Grab did not give a time frame for when this was achieved, I am guessing that it must be cumulative since it launched in Indonesia in 2014, starting with Bali.
The second was the claim that it saw a massive 6x increase in business in both its GrabCar and GrabBike services. While Gojek and Uber have not shared how they did in 2016, I do wonder if the growth came at their expense or that the pie just got larger.
While the Indonesian business seems to be going great guns, Grab will face a major challenge in its intention to hire 150 engineers for its R&D centre. Just like Malaysia, many of Indonesia’s best engineers and programmers are plying their trade overseas, especially Singapore. It will be an expensive proposition to try to entice them back home.
As a way around this, one market observer speculates that they will likely hire a core of experienced engineers and leaders with the bulk of the hires being fresh graduates and those with a few years experience. Others also caution that past R&D plans for Indonesia have either failed to materialize or been scaled down due to talent challenges but I am sure Grab and its CEO, Anthony Tan realize this and will be up to the challenge.
And all eyes will definitely be on Grab and Tan, moving forward, as an entire nation looks forward to them delivering on their promised investments and with that, boosting Indonesia’s goals of becoming a digital economy.
Here’s wishing you a restful weekend and a productive week after.