Grab to invest US$700 million in Indonesia over the next 4 years
By Masyitha Baziad & Goh Thean Eu February 2, 2017
- Launch of master plan came five months after it raised US$750 million in a funding round led by Softbank
- Plans to hire 150 engineers for the Research and Development Centre in Jakarta
[Updated at 5:55pm Malaysian Time, with industry players' feedback]
SOUTH East Asia's largest ride-hailing company Grab launched its "Grab 4 Indonesia" 2020 master plan and will be investing a massive US$700 million (RM3.1 billion) over the next four years in the country.
The investment plan was announced just five months after it successfully raised US$750 million in a funding round led by Softbank. It also came almost two years after it announced plans to invest US$100 million in a Research and Development Centre in Singapore.
The US$700 million investment will be mainly used for setting up a Grab Research and Development Centre in Jakarta, launching a social impact fund to invest in companies focused on deepening financial inclusion, and increasing access to mobile payments and financing opportunities across the country.
According to Grab, the "Grab 4 Indonesia" 2020 master plan, which was endorsed by Indonesia Government's Investment Coordinating Board (BKPM), came after the company experienced strong growth in Indonesia - with its GrabCar and GrabBike businesses growing by more than 600% in 2016.
The growth was achieved partly via expansion to new cities. Today, its services are available in Jakarta, Bali, Bandung, Padang, Makassar, Medan, Surabaya and Yogyakarta.
It also added that Grab drivers in Indonesia earn between 40% to 70% more per hour than the average transport or delivery driver in Indonesia, and the company has generated more than US$260 million of income for its driver partners in Indonesia.
"As the largest homegrown technology startup in Southeast Asia, we are excited to make this significant investment in Indonesia’s future and accelerate their transition to a fully integrated digital economy.
"The ‘Grab 4 Indonesia’ 2020 master plan underlines our deep commitment to driving Southeast Asia forward and our excitement about the tremendous opportunities we see in Indonesia to help build and advance the country’s digital infrastructure and ecosystem,” said Grab cofounder and chief executive officer Anthony Tan (pic above) in a statement.
IDC Indonesia country manager Sudev Bangah believes that the master plan will benefit both Grab and the Indonesian Government.
On one hand, it will help the company to expand its presence and market share in the country. On the other hand, the Indonesian government will be able to position itself as an attractive investment destination.
"We are positive that this foreign direct investment is exactly the type of investment the Indonesian government has been seeking to publicize. As such, it bodes well on paper and we look forward to the actualisation of this investment over the next four years," said Sudev.
More details about the master plan
A significant portion of the investment will go to the setting up an Research and Development Centre in Jakarta. It will also be Grab's second Research and Development Centre in SEA.
The Research and Development Centre will focus on developing innovations specific to Indonesia by building on Grab's existing localised solutions, including algorithms to address new road regulations in Jakarta and GrabHitch (Nebeng), a "bike-pooling" service that caters to nearly 1.4 million commuters in greater Jakarta.
Grab also plans to hire 150 engineers for the Research and Development Centre over the next two years.
Meanwhile, to equip Indonesian engineers with globally competitive skills, Grab will provide training opportunities at its Research and Development centres in Singapore, Beijing and Seattle. Fresh graduates with curious minds and a passion to improve lives in Indonesia are welcome to apply, and the company will then select potential engineers through on-campus interviews and partnerships with leading state and engineering universities.
Alpha JWC Ventures cofounder and managing partner Jefrey Joe said that Grab's plan to set up the Research and Development Centre will create a big, positive impact to the country.
"This is definitely a significant amount of investment that will create a great political impact, because it can attract more investors in the digital, tech startup space in the country, and the government needs this kind of money to grow its digital economy.
"From the three pillars, the most impactful pillar is the Research and Development facility which can create knowledge trnsfer to Indonesians and this is what we need the most. However, hiring 150 engineers over the next two years seems a little bit low. We expect to see more hiring and human development," said Jefrey.
Interestingly, Jefrey estimates that the US$2 billion plus invested in Indonesia's tech/ startup sector over the past few years by Gojek, Tokopedia and Grab has gone to customer acquisition, discounts and subsidies, which are inherently low value.
"The ideal scenario would be when the investment is used to build the ecosystem, and so far we have not seen this. Therefore, it would be interesting to see the breakdown of the US$700 million investment. So far, we know that US$100 million will be allocated for the investment in social startups, but where will the other US$600 million go?"
Grab will be investing in startups and aspiring technopreneurs to grow the next wave of Indonesian companies with social aspirations to bring more Indonesians into the digital economy.
"The fund will focus on the mobile and financial services industries, with a particular emphasis on serving smaller cities and communities who have yet to benefit from the digital economy," said the company in the statement.
The investment is also part of the company's commitment to support the "1,000 Digital Startup National Movement" initiated by the Indonesian Government.
Last but not least, a portion of the US$700 million investment will go to increasing Indonesians' access to mobile payments and financing opportunities.
"Grab will expand its mobile payment solutions in Indonesia through GrabPay Credits, its cashless stored value option, and existing partnerships with Mandiri and their e-Cash solution, while also continuing to develop a shared e-money payments platform with Lippo Group and Nobu Bank to enable all Indonesians to use Grab to pay for services and goods at Lippo’s retail partners," said Grab.
Also, Grab will provide its driver partners with access to more financing opportunities to purchase their own smartphones and automotive vehicles, giving them the opportunity to build sustainable livelihoods and become micro-entrepreneurs. Grab will continue to work with its banking partners, including Nobu Bank, to extend financing opportunities to all Indonesian consumers.
Amidst all the excitement over the Grab investment, Sudev cautions that announcing R&D plans are easier said than done.
"In our experience, we have seen many R&D centres built, and end up not achieving their lofty goals. So, it is important for Grab to set their objectives right from the start," he says.