Indonesia and ASEAN: Why They Are the ‘Lands of Opportunity’

Indonesia and ASEAN: Why They Are the ‘Lands of Opportunity’

I recently returned from a week-long lecture series at a university in Jakarta. This experience gave me the opportunity to revisit the digital financial innovation ecosystems in major ASEAN countries, which I had thoroughly investigated before the COVID-19 pandemic. Comparing the developments over the past five years, I found some remarkable changes.

The fully digital automated immigration system at Jakarta International Airport exemplifies the rapid digital transformation in Indonesia’s public infrastructure and finance sectors, arguably progressing even faster than in Korea. During my lectures, students used ChatGPT and Google Gemini in real-time, showcasing their adaptability and engagement with new technologies.

Indonesia, with a population exceeding 280 million and a median age of 30.2 years, is on the cusp of a significant economic shift. The nominal GDP per capita has surpassed US$5,000, and it is approaching US$17,000 in PPP terms. This economic environment is reminiscent of Korea’s high-growth era in the 1980s and 1990s. Apart from the COVID-19 period, Indonesia’s economy has consistently grown at about 5% annually over the past decade.

Comprising about 18,000 islands, of which around 14,000 are registered with the UN and approximately 7,000 are inhabited, Indonesia’s geographical spread has historically hindered the realization of economies of scale. However, the ongoing digital transformation is now connecting these inhabited islands, enabling the young and dynamic population to leverage significant economies of scale. The youth, driven by a strong desire for growth, demonstrate high educational enthusiasm and a strong acceptance of new technologies and cultures.

Industries such as future mobility (including automobiles and UAM), fintech and digital finance, consumer electronics and devices, consumer goods, education and healthcare services, petrochemicals, and applied industries are poised for exponential growth over the next 15-20 years, driven by technological innovation. Indonesia is already a key player in the “New Partner Cooperation Belt: Japan-Indonesia-Vietnam-India,” established by the U.S. to counterbalance China.

The ASEAN region, with a population of approximately 685 million, a PPP-based GDP per capita of about US$18,000 (population-weighted average), and a median age of 30.6 years (weighted average), is brimming with potential. Indonesia stands out as the leading nation in this promising region.

Post-COVID-19, I have explored innovation hubs in the eastern (New York) and western (LA and Silicon Valley) United States, across Europe (northern, eastern, western, and southern Europe), the Dominican Republic, Japan, and Indonesia. The U.S. continues to lead in creative innovation (Something New), while China, despite its substantial efforts, is not yet widely accepted in the market. The ASEAN region is now the battleground for productive innovation (Something Better), with the market dynamics shifting focus to the U.S. and ASEAN blocks following China’s move towards a more closed market stance.

For South Korean companies, the key to thriving lies in building creative innovation capabilities through partnerships with U.S. companies and markets, enhancing productive innovation capabilities through connections with ASEAN companies and markets, and seamlessly integrating the U.S. and ASEAN markets. This strategic approach is crucial for success.

Moving forward, I plan to focus a significant part of my global activities on the ASEAN region.

© Dr. Young D. Lee