Indonesia’s startup economy has grown dramatically over the last 20 years, with the country now leading the way for tech startups in Southeast Asia. However, only this year we have seen the dramatic rise of a previously slow and disregarded sector: AI in tech.
In recent years, many have followed the tech industry in Southeast Asia with a great deal of interest in its potential for growth. A 2017 report from McKinsey & Company on artificial intelligence (AI) points to tech trends underway with Indonesian AI startups that might’ve foreshadowed future growth. Though this has been borne out in some areas of the tech industry, AI continued to lag behind.
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More recently, a 2019 report pointed out the potential for 27 million new full-time jobs in Indonesia by 2030 if the country embraces greater automation and digitisation. The report also emphasises the risk Indonesia faces if it doesn’t adopt AI and automation tech, potentially losing its competitive edge in the ASEAN marketplace.
AI Trends in Indonesia and across the region
It’s worth noting that a growing AI industry can also have negative repercussions. As McKinsey & Company stated in its 2017 report on AI in Southeast Asia, “Because they can dramatically boost productivity, AI technologies may have a disruptive impact on the region’s economies—and its workers.” They cite previous MGI research, which estimated that this kind of tech could automate over half of the work activities performed in Indonesia. However, they go on to explain that these negative impacts are not inevitable and that harnessing AI tech in the right way can lead to positive social outcomes in ASEAN. They do this by citing the potential role of machine learning innovations in credit models and financial inclusion, as well as AI solutions in preventive and remote health care.
For several years Singapore has been investing in its AI industry, including its Smart Mobility 2030 plan for an Intelligent Transport system, using an AI system to manage trains, busses, cars, and bicycles in real-time. Not to be left behind, Indonesia also has some smart city programmes underway, as does the Philippines and Cambodia. There are also several notable Indonesian AI startups, including Kata.ai, who are developing natural language processing algorithms for both Bahasa Indonesia and Melayu, the principal languages for a quarter of a billion people in Indonesia and Malaysia. Kata.ai recently joined the prestigious Google for Startups Accelerator Southeast Asia programme, which will help it to raise funds and its profile in a highly competitive market.
AI and its role in health have been subjects of research for many years. IBM’s ‘Watson’, an AI capable of answering questions posed in casual language, has been studied for its potential to support clinical decisions. The previously mentioned McKinsey report stated that “Countries with large populations but not enough doctors and specialists stand to gain the most from these technologies. IBM’s Watson could be of service in Indonesia, which in 2014 had 41 radiation oncologists for its 250 million people and suffered almost 200,000 deaths from cancer.”
The COVID-19 pandemic and the resulting lockdown has led to a surge in demand for AI technology. Many countries, like the US, South Korea, and Taiwan, are using AI to slow the spread of COVID-19, through technology in track and trace programmes, as well as to accelerate the development of testing kits and treatments.
Indonesia’s AI startup ecosystem
One Indonesian startup, Ruangguru, is exploring personalised education services through machine learning. Virtual learning is a growing sector, given impetus by the COVID induced lockdowns, and Ruangguru already has over 7 million users in Indonesia and has seen business increase tenfold since July. Thus, part of the cause of this boom is ironically the same thing causing slumps and slowdowns across other sectors in Southeast Asia.
Currently, there are 74 startups in Indonesia focused on AI development. Among them are Nodeflux, who have developed number plate recognition software that helped recover almost $10 million USD for the Indonesian Government and are also working on facial recognition software for banking.
Fintech has been a growing industry in Indonesia for some time, and KoinWorks are at the forefront. It has used AI to develop a P2P lending platform for small businesses. In response to the impact of the pandemic, Koinworks recently introduced more flexible repayment terms for small companies currently struggling.
Research and Technology Minister, and head of the National Research and Innovation Agency, Bambang Brodjonegoro, has outlined a national AI strategy. The country intends to develop AI projects focussed on many sectors, including education, health services, and food security as well as mobility and smart cities. This strategy shows the governmental support vital for the development of AI.
Indonesian AI startups are finally catching up with other tech startups in Southeast Asia, driven by changes in demand, the inherent benefits of AI in tech, as well as national efforts to invest in the sector.