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EduTech in Indonesia: Challenges and opportunities

EduTech in Indonesia: Challenges and opportunities

A formidable newcomer is reshaping the educational narrative within Indonesia’s dynamic education technology (EduTech) landscape. Positioned as a significant player within EduTech in Indonesia, Duolingo is introducing novel approaches to learning.

The current state of the EdTech industry in Indonesia

Data from Tech in Asia shows a significant increase in investment flow into education technology (also known as EdTech) companies since 2020. The number of funding deals for startup EduTech reached 18 agreements, driven by the online learning trend due to the pandemic.

Although the number of deals in the following years was lower, it still indicates a healthy figure. Tech in Asia identified at least 59 EdTech technology companies operating in Indonesia that are divided into six categories:

Categories Description
K-12 Providing online learning materials for primary and secondary education.
Professional and upskilling Offering materials for professionals to advance their careers.
School digitization and learning management systems (LMS) Assisting in digitalizing school operations and teaching efficiency.
Education loans Providing educational loans to students.
Children’s activities The program offers a range of activities designed to support and nurture children’s interests and talents.
Language The service offers specialized content for learning foreign languages.

The professional and upskilling sector has the most players, totaling 29 companies. The figure has grown significantly with the introduction of the government-initiated Kartu Prakerja program.

Since its launch in April 2020 until the end of 2022, the Kartu Prakerja Program has been used by 16.42 million people.

Duolingo’s investment in SEA language learning

Duolingo is a language app based in the United States. The company intends to expand its influence in Southeast Asia, a competitive EduTech market with approximately 1 million daily active users.

Haina Xiang, Duolingo’s Regional Marketing Director for Asia Pacific, revealed that the company’s most rapidly growing markets in this region include Vietnam, Indonesia, and Thailand, with users spending around 13 to 15 minutes daily on the app.

Despite intense competition from various EdTech companies in Southeast Asia, particularly in the language learning market, Duolingo aims to capitalize on its expertise in gamifying online lessons instead of primarily focusing on test preparation.

Read more: 15 Strategies for global business expansion in Indonesia

The potential for EdTech investment

The EdTech sector offers significant growth potential driven by increasing demand for tech-based education solutions. Various factors influence this potential:

1. Government policies

Government initiatives and education reforms can create opportunities for EdTech companies. Regulations related to education, technology, and data privacy are crucial.

2. Economic impact

Funding levels in education, especially for digital infrastructure and technology, can boost the EdTech market. Economic health affects affordability and accessibility.

3. Changing societal needs

Growing demand for lifelong learning, skill development, and flexible education options drives EdTech adoption. Digital literacy is crucial, and efforts to enhance it support sector growth.

4. Technological advancements

Innovations like AI, VR, AR, and cloud computing enhance learning experiences and accessibility. Technology infrastructure quality and availability play a significant role.

5. Environmental responsibility

Companies focusing on eco-friendly practices can gain a competitive edge.

6. Legal considerations

Data privacy, security, and consent regulations impact EdTech. Intellectual property laws and patent regulations affect innovation and competition.

The combined influence of these factors fosters expansion and creates opportunities within the education technology sector.

Why should EdTech companies invest in Indonesia?

EduTech in Indonesia: A new challenger

Indonesia, the largest Southeast Asian economy, saw its digital economy grow by 11% during the pandemic, reaching a value of USD 44 billion.

The country has a youthful demographic with a population of 267 million, half under 30 years old, and around 60 million students. Almost 70% of Indonesians had internet access in 2020, one of the world’s highest rates.

There is also a rising demand for high-quality and extracurricular education due to increasing aspirations. According to a Ravenry report, Indonesia’s EdTech industry, valued at USD 112 million in 2019, is projected to grow by 24.9% annually.

Approximately 113 million Indonesians will need retraining to stay relevant in the job market by 2030. The government aims to add 57 million skilled workers to the economy by the same year.

Duolingo inspires EdTech investment

Duolingo has a unique outlook on competition. Instead of seeing other educational apps as foes, Duolingo considers itself a competitor for users’ attention, not just against educational apps but also entertainment giants like TikTok and Facebook.

However, Haina Xiang, Asia Regional Marketing Director, acknowledges the varied preferences in Southeast Asia. Some learners may be drawn to local alternatives, and Duolingo sees this as a chance for personal growth and a way to enrich the market.

Challenges and opportunities in the EdTech sector in Indonesia

EdTech companies face the ongoing challenge of staying relevant and innovative in an industry that is seeing a general decline.

As schools reopen, these businesses, particularly those focused on digital education in Indonesia, need to adapt and complement traditional learning. The need for digital infrastructure is another hurdle for their growth.

Traditional and digital learning encounter the common issue of ensuring students can easily absorb the materials without compromising the quality of education.

These are persistent challenges faced by EdTech companies in Indonesia.

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Start investing in the Indonesian EdTech market

By tapping into the nation’s dynamic education technology landscape, investors can contribute to the advancement of learning and position themselves strategically in a sector with substantial growth potential.

InCorp Indonesia offers company registration and Investor KITAS services tailored for investors seeking to enter the realm of education technology in Indonesia.

With more than a decade of experience, we provide experienced consultants who can assist you in penetrating one of the most promising EdTech markets in the world.

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    Pandu Biasramadhan

    Senior Consulting Manager at InCorp Indonesia

    An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Frequently Asked Questions

    Investors considering investments in Indonesia should assess existing International Investment Agreements between Indonesia and other countries. Having a business presence in countries with such agreements may offer incentives like stronger investment protection and higher foreign shareholding in Indonesia.

    The difficulty level depends on your country of origin. Indonesia lists restricted countries, including Afghanistan, Guinea, Israel, North Korea, Cameroon, Liberia, Niger, Nigeria, and Somalia. Citizens from those countries will find the process complicated and challenging, with a high possibility that their application will be rejected.

    In Indonesia, a PMA company is typically required to submit various reports to relevant authorities, such as:

    • Annual financial report
    • Investment realisation report
    • Manpower and employee welfare report
    • Expatriate utilisation report
    • Company loan repot
    • Foreign exchange and prudential principles report

    However, depending on the business activities and classification relevant authority may require additional reports from a PMA company.

    Dividends can be distributed from company net profits after allocating reserves, depending on a positive profit balance. Approval from the general meeting of shareholders is necessary. Interim dividends may be distributed if specific requirements are met.

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