Amazon planning $1.3b investment in Indonesia

Amazon will face stiff competition from its Chinese rival Alibaba, which opened its data centre in Indonesia earlier this year.
Amazon will face stiff competition from its Chinese rival Alibaba, which opened its data centre in Indonesia earlier this year.PHOTO: REUTERS

JAKARTA • American tech giant Amazon is planning a 14 trillion rupiah (S$1.3 billion) foray into Indonesia, in another major investment in the South-east Asian digital economy.

The plan was conveyed to Indonesian President Joko Widodo by Amazon vice-president Werner Vogels during their meeting in Jakarta last Friday, according to local news reports.

Finance Minister Sri Mulyani Indrawati, who was also in the meeting, told Tempo news that the investment will be spread over a 10-year period. It will see the introduction of the firm's cloud computing unit, Amazon Web Services, to the Indonesian market.

Cloud computing generally refers to hosting services and applications over the Internet on a pay-for-use basis, and the platform is seen as a key pillar of the growth of Indonesia's vibrant start-up scene.

According to market research firm Statista, cloud computing spending in Indonesia is expected to hit US$1.3 billion (S$1.8 billion) by this year, up from just US$160 million in 2012.

But Amazon will face stiff competition from its Chinese rival Alibaba, which opened its data centre - the first by a major cloud service provider - in Indonesia earlier this year, as part of the company's plan to support local start-ups in the country.

The digital economy in the region is projected to be worth more than US$200 billion by 2025, with Indonesia expected to make up the lion's share of that market.

 

Alibaba has also invested US$1.1 billion in Indonesia's e-commerce unicorn Tokopedia, and already owns Lazada, another online shopping business in South-east Asia. A unicorn refers to a start-up valued at more than US$1 billion.

The digital economy in the region is projected to be worth more than US$200 billion by 2025, with Indonesia - South-east Asia's largest economy - expected to make up the lion's share of that market.

Amazon's plan to enter the Indonesian market comes after it expanded to Singapore last year and will be its second major move into South-east Asia.

Its distribution centre in Singapore for its Prime Now fast delivery service is the firm's largest in the world, occupying about 100,000 sq ft at the Mapletree Logistics Hub near Jurong East.

Francis Chan

A version of this article appeared in the print edition of The Sunday Times on September 23, 2018, with the headline 'Amazon planning $1.3b investment in Indonesia'. Print Edition | Subscribe