Grab has announced its 2nd Headquarters in Indonesia, during Masayoshi Son’s visit to Jakarta. While there are a lot of articles on the rivalry between increasingly-Indonesia-focused Grab and home-grown Go-Jek, how does this move really impact the development of the digital economy ecosystem in Indonesia? 

Food across the whole chain

Food is an important vertical that Grab is pursuing. It is alleged that the leadership of GrabFood will be transferred to the 2nd headquarters in Indonesia. 

While Singapore enjoys high basket size of food delivery orders, Indonesia’s market is massive. In this market, Grab did a formidable job coming from almost 0 (and GoJek dominating) to catching up with GoFood (by GoJek) really fast. 

Professor of Strategy Nitin Pangarkar, Academic Director of MBA at Singapore’s NUS Business School, is a firm believer that food is a viable and profitable element of the super app strategy, along with a payment that controls the transactions. “The combination of food & ride-hailing creates a very good ground for payment services.”

In fact, it is important to win in Southeast Asia’s biggest market. While food delivery in Indonesia is already a fast-growing billion-dollar industry, along the whole supply chain of food, there are more opportunities to be tapped. Ultimately, food and beverage account for almost 50% of Indonesia’s household consumption

Source: World Bank

Many startups are exploring different opportunities across the value chain. In the latest batch of Grab Ventures accelerator programme, the bulk of the companies are Indonesian, and one of the key focus has been enabling farmers to points of sale for groceries and fresh produce. This is in addition to the HappyFresh investment. 

With GrabFood being housed in the Indonesia HQ, obviously more localised opportunities will be tapped and developed, leveraging the payment ecosystem and user base. 

New lines of business 

Often (outside) investors ask us: “what are the next big opportunities in Indonesia?” The obvious ones – food delivery, e-commerce, logistics – are already heavily invested. 

However, as in any major emerging market, there are plenty of local opportunities which might not be multi-billion but big enough to explore.

Agent networks, community-based fintech, fisheries and halal are some of the fairly Indonesia-specific areas where companies are emerging. Being close to the market obviously means that many such opportunities will get more attention from Grab, which will provide an impetus for development in these sectors. 

Kudo is an agent network-based business acquired by Grab

Talent 

The issue of talent is often raised as a key blocker for Indonesia’s digital economy developing even faster. We tend to disagree, the real issue is experience – the talent is there. 

Many of the young people we have hired from some of the leading universities, including ITB, UGM, UPM and UNPAR, are bright, optimistic, flexible yet unassuming. With the right exposure and guidance, many of them can excel. 

University of Gajah Mada produces very good talent

You can take reference from the waves of entrepreneurship and tech development in China. While the first batch of entrepreneurs typically come from those who came back from the United States, over the years many companies have exited, with original founders supporting their key staff create new companies – a positive cycle. 

Indonesia is still in earlier stages on the curve – however, we already see a number of exits over the last 1.5 years, with some of the founders ready to jump in again or support others. 

The massive infusion of external talent would no doubt bring up the local talent base faster, through exposure to experiences from elsewhere and collective problem-solving. Whether the external talent ends up staying in the country or not is actually not relevant;  once the ecosystem is up, the local talent base will propel each other. 

There is also often a thought that big companies, like Grab, will suck the talent dry, leaving little room for smaller companies, including startups. Well, talent always gravitates towards best opportunities – and often bigger companies provide pretty good ones. That is a universal problem. 

Three years ago, many startups in Singapore complained about Grab expanding its tech centre in the country, making it harder for them to hire good tech talent. Three years on, many startups who ought to shins are shining. The perceived negative impact seemed to be minimal. 

Also, big companies always create a spillover of talent, even if they are hoarding. You can see clear examples in the startup ecosystem around Alibaba campus, or how many ex-Facebook employees become successful entrepreneurs. 

New capital?

Some friends also discussed whether it makes more sense to establish the new headquarters in the new capital. That is unlikely and unnecessary. 

A key point of establishing a new HQ for Indonesia is to be close to the market, and thus be more agile to the market’s needs – and for the foreseeable future, Jakarta will remain the economic core of Indonesia. 

As Jakarta Post has written in a recent editorial – Jakarta will be just fine

Conclusion 

Of course, a new headquarters will not be built overnight – a lot of details will need to be worked out. 

Anyways, an open market with fair competition between Grab and GoJek will create very positive dynamics for Indonesia’s digital economy. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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