NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Last month I had the distinct pleasure of spending two full days with five entrepreneurs from Indonesia. These entrepreneurs are unique in many ways – but bound together by a sincere desire to lead change in Indonesia – through certified forest products; tidal wave power; and even handicrafts for the wedding sector (yes, may sound trivial, but Dewi, the entrepreneur, will be quick to tell you that in Indonesia over 200 of the 240 MM population want to get married!).

What struck me most about the two days was not the ambition, determination and innovation of these entrepreneurs. I am fortunate enough to see these characteristics with relative frequency thanks to our six New Ventures Centers in Latin America and Asia. What most intrigued me about them was their overwhelming optimism (sometimes with a flair of nationalism) but nonetheless contagious and sincere. Their optimism enabled me to get wrapped up in what is possible, rather than what is not possible, something that is often too apparent in a country as complex as Indonesia. Too often, I hear the stats: Indonesia is consistently ranked low in Ease of Doing Business Reports (IFC 2010 – Indonesia in 122 out of 183); 40% of population lives in poverty; it has the sixth highest rate of deforestation, and so forth.

Yet these entrepreneurs – and the few New Ventures Indonesia alums that also participated in the event – do what entrepreneurs do best: overcome challenges and find opportunities. They see a country that is changing slowly, but steadily; and moving in the right direction. With its 5% GDP growth and second fully democratic transition, Indonesia could very well become a key player in the drive toward environmental sustainability in South East Asia. Simon Bell, partner at APEX, a consulting firm in Indonesia that has been working with the NVI program for almost five years now also acknowledges the growth of environmental sectors in the Indonesian market. In fact, he sees five key sectors as potential drivers of economic growth in Indonesia – in his own words:

• Agriculture: Indonesia’s biggest sector and probably the largest employer after the government. This is one sector that has the highest appeal to meeting triple line returns. Working with producers of sustainable pesticides and fertilizers, such as NVI’s SMS Indoputra, could help the sector to grow more efficiently, by reduce costs, increase yields and driving long term job creation.
• Power generation and distribution: Indonesia clearly faces massive power generation and distribution challenges. The point where energy problems meet business’ ability to deliver added with the consumer benefits of green / clean technology seems to stand out as a high-impact sector.
• Certified/Sustainable Furniture: Currently, this sector is limited to very small enterprises. However, given the context of Copenhagen, the possibility of REDD, and the intensive support and resources channeled from development agencies, particularly from Europe, companies in this sector, such as KWAS have significant potential to grow and prosper.
• Recycled Materials (particularly paper): This sector would focus on larger sized businesses or the top end of “medium sized”. But the amount of forest resources used for paper manufacturing is massive. Moving toward a significant increase in the use of recycled paper would create significant green and sustainable results.
• Waste water and waste management: The major player in this sector is the government of Indonesia, so initial success in both sectors would require relying on government contracts. Past experience shows, however, these areas are eventually privatized, so again, Indonesia’s massive challenges in these areas will provide significant opportunity to the private sector in the medium to longer terms and for the rights businesses – perhaps even in the short term.

These sectors, and others that link economic growth with inclusion of BoP markets and environmental sustainability can drive the country onto a new path. Most entrepreneurs still need much support to make their enterprises financially viable and successful. Furthermore, there is a pervasive feeling throughout Indonesia, almost entrenched in the culture, that it is still the government’s responsibility to create and provide jobs; as a result, not many view entrepreneurship in Indonesia as an attractive proposition. Still, these barriers are surmountable and can be addressed – through enterprise development activities, the dissemination of successful cases, and an increase in the “enabling infrastructure” that supports these entrepreneurial activities in Java, and throughout.

More notably, these issues must be addressed. Indonesia is one of the most important countries when it comes to forest resources. Not only does Indonesia hold 10% of the world’s remaining tropical forests, but its high deforestation rates make it the third largest global emitter of GHG gases. Furthermore, the demographics of Indonesia, with high unemployment rates, particularly among the younger populations and a notable presence of terrorist’s sects, paint a picture of the future that is not so favorable.

Positioning entrepreneurship as a fundamental part of Indonesia’s growth strategy would help to put the country on a path toward sustainable, inclusive, economic growth. This will not happen overnight; you can ask Dewi how long it has taken her to get her company off its feet. Yet, she is doing it and others are as too. The question remains will we let these be isolated cases or will they be examples used to drive a new generation of entrepreneurs in Indonesia.