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Internet Sparks Business Growth in Indonesia

Budding entrepreneur Nadiem Makarim started Go-Jek, a motorcycle taxi service, which recently won a US State Department-sponsored competition and has already received commitments from angel investors

Internet growth in Indonesia is surging and a new generation of young entrepreneurs is hoping to build the next global brand. Their businesses are a mix of innovative solutions to local problems and copycat models of other, proven ideas, but they are optimistic about a local entrepreneurial climate that some say is the best in the world.

The next Silicon Valley?

Andy Sjarif, 40, founder of Sitti, says the next billion-dollar company will come out of Indonesia. Sjarif is one of many local entrepreneurs hoping to take Indonesia's many small enterprises that are already powering the economy, and boost their business by connecting them online.

"I think we are a hotbed in technology growth right now. To say could we be the next Silicon Valley, I think we are in a different format," said Sjarif.

Sjarif's company is trying to emulate Silicon Valley success by placing advertisements on websites. The ads are written in Bahasa Indonesia, a language understood by most of the country's estimated 45 million Internet users, but not supported by Google's similar advertising program, AdWords.

Reworking ideas for the Indonesian market

With the rising popularity of social media, other entrepreneurs are joining in Indonesia's tech boom. They say their companies, while not always innovative, are modifying and adapting a proven model to fit an Indonesian context.

Selina Limman is the creator of Urbanesia, an online directory that offers points to users who write reviews and share information.

"I'm not going to lie. I'm not saying this is a new innovation. I know about Yelp, and Citysearch. I can see the need, the demand. There's a hole there. Right now there's nothing like this here in Indonesia," Limman explained.

Western angel investors already reaching out

With more than 700 startups already online and as many as seven launched each week, Sjarif is only one of many calling Indonesia the next Silicon Valley. The country's biggest bank, Mandiri, extended $5 billion to early entrepreneurs last year and will soon launch a program focused on what it calls "technoprenuers."

But the proliferation of budding businesses is not limited to those online. More than 500 hopeful business owners recently participated in a competition held by the U.S. State Department's Global Entrepreneurship Program, which helps link entrepreneurs to mentors and financing.

The eight finalists included a natural cosmetics business, waste recycling, micro turbine electricity generation, and winners Indomog and Go-Jek.

Indomog is trying to help the 88 percent of Indonesians who do not own a credit card to be able to buy goods and services online. The service started out as a video game site before moving into online payments.

Go-Jek is a transportation and delivery service focused on improving the efficiency of Jakarta's disorganized and chaotic motorcycle taxi system. Using a call center, online maps and cell phones, Go-Jek matches available jobs with nearby drivers. The service promises speedier deliveries for its customers and better paychecks for its 200 drivers.

Founder Nadiem Makarim, 27, a Harvard Business School graduate, says a pragmatic approach to doing business is the way of the future for Indonesia.

"If you want to do good there needs to be a business model behind it," said Makarim. "If you want sustainable impact then you need a market incentive to do that. I firmly believe that business and just straight up rational business growth, profitable business growth and social impact are not mutually exclusive."

Entrepreneurs welcome

Entrepreneurs comprise less than 0.2 percent of the workforce in Indonesia, compared to 11.5 percent in the United States and 7.2 percent in Singapore. Economists say Indonesia will need to boost its ratio to at least two percent if it hopes to narrow the wealth gap in a nation where half the population still lives on less than two dollars a day.

Although Indonesia's current growth rate of six percent makes it one of the fastest growing economies in Asia, youth unemployment remains chronically high.

U.S. officials say they support entrepreneurship as a way to create jobs and strengthen social and political stability.

Secretary of State Hillary Clinton, who spoke before a crowd of hundreds of young Southeast Asian entrepreneurs during the recent Association of Southeast Asian Nations' summit, says she hopes U.S. efforts to foster investor groups and push for policy changes will encourage more startups.

Currently the biggest challenge for new businesses is the lack of access to financing, along with unfriendly regulations and paltry infrastructure. Many new companies, like Go-Jek, are trying to make money by solving these obstacles. Others are using the growth of the Internet to start their businesses online.

It helps that Indonesia has a culture that is fairly supportive of self-starters.

Leonard Theosabrata, the co-founder of Whiteboard Journal, an online space that helps young designers promote their products and connect them to customers, says although copycat companies are common, there is huge potential for new ideas.

"If you're a pioneer here most likely you can succeed, because so many concepts haven't been done," said Theosabrata.

The potential for success and the ability to shape the market is drawing back many Indonesians who have gone abroad to study. Many of their businesses are now attracting attention from domestic and foreign investors eager to establish a foothold in Indonesia.

With a middle class of around 30 million people and a young population that is tech-savvy and anxious to try new things, Indonesia is ripe for business.

Economists and business people say the most important thing now is to encourage young people to innovate by establishing the business networks that will connect them with funding.

As part of the global entrepreneurship program, a visiting 11-member delegation of top U.S. entrepreneurs held sessions where young start-ups pitched their business ideas.

Investor Arthur Benjamin, who recently committed funds to Go-Jek, says he was impressed with what he saw.

"Based on the 19 and 20 years olds that I've seen here and their hunger for success, I need to go and light a fire on some of the American youth to get moving again," noted Benjamin.

There are now more than 10 places in Indonesia where entrepreneurs are getting mentoring, help with marketing, and even office space.