What problems await Nadiem Makarim in office?

There’s plenty to cheer for, though there are a few contrarian voices.

This week has redefined Indonesia’s tech landscape. On Sunday, in Jakarta, the country’s president Joko Widodo and his vice president Ma’ruf Amin were sworn in for Widodo’s second and final term. Three days later, the president announced the members of his cabinet.

To the surprise of the Indonesian tech and digital community, Gojek’s co-founder and then-CEO Nadiem Makarim was appointed as minister of education and cultural affairs for the 2019–24 term.

Rumors about Makarim joining Widodo’s cabinet were already swirling after Widodo won the general election that was held in April. The president has publicly expressed his interest in appointing millennials in some ministerial positions, as he believes that today’s world needs fast-moving, young people who can execute government programs quickly.

However, many doubted that Makarim would accept Widodo’s proposal and leave Gojek, which he built from scratch in 2010 with co-founders Kevin Aluwi and Michaelangelo Moran. (Moran left the startup in 2016.)

Makarim announced his resignation from Gojek on Monday, stating that he will be focusing on his new role in the government. Following the cabinet announcement, Makarim sent a goodbye email to all staff at Gojek:

We started this company with nothing, other than a deep desire to change things for the better. With just that initial desire to improve life for everyone, as well as a large amount of support from countless friends, partners, investors, and stakeholders, we’ve created Gojek. We’re no longer a ride-hailing company, we’re now a technology business with the power to really improve life across the board—consumers, drivers, merchants, service providers, and their families. Everyone has benefited, whether we’ve reduced friction in their daily lives or we’ve created income-earning opportunities for those who need it most.

He also said that Indonesia’s educational system needs to be disrupted, like how they forced change in the country’s transportation system almost a decade ago:

So, what is the next logical step in our journey? Gojek thrives on talent and if Indonesia is to produce more high-quality talent, the country’s educational system is going to have to undergo a transformation just like the one that began on the streets of Jakarta in 2010. Our schools and academic institutions are going to have to meet the demands of our future economy. That’s why, when I received the mandate to be the Minister of Education and Culture, I knew it was something I had to do. I am so grateful for the trust that President Joko Widodo has placed in me and I will do my best to support his vision in improving the country’s educational system.

Makarim is succeeded by Kevin Aluwi and Andre Soelistyo (who was previously Gojek’s president) as co-CEOs.

According to an official statement from Gojek, Soelistyo will focus on corporate functions and the management of capital allocation, international expansion, as well as the payments and financial services businesses, while Aluwi will focus on the product development elements of the Gojek business as well as marketing, organizational development, and the transportation and food delivery businesses.

At 35 years old, Makarim is the youngest minister in the cabinet. His entry into government service is generally welcomed by the public with hopes for a more robust education system developed by someone who is young and innovative. However, mixed responses emerged from the tech community and analysts regarding Makarim’s appointment.

While most people are confident that Makarim will be able to create major disruption in the sector, some believe that the problems endemic to Indonesia’s education industry is all about politics, not technology, and that Makarim’s brilliance would be more useful in his area of expertise.

Nadiem Makarim with finance minister Sri Mulyani (left) and minister of foreign affairs Retno Marsudi (right). Photo courtesy of Indonesian cabinet secretariat.

Hope for an improved education system

According to a report published by the Lowy Institute, “Beyond Access: Making Indonesia’s Education System Work,” Indonesia’s biggest problems in education are not simply low public spending, human resource deficits, perverse incentive structures, or poor management. It has always been a matter of politics and power.

The Indonesian government is making serious efforts to change that, starting by allocating 20% of its annual budget to the education sector. It also aims to have a globally competitive education system by 2025, although the report suggests that it will take longer for the government to solve all chronic problems in the country’s education ministry.

Seeing these issues, Yansen Kamto, founder of the investment firm Kinesys Group, believes that this is the right time for Makarim to step up and reorganize the education ministry. He said that after focusing on building physical and digital infrastructure in the past five years, it only makes sense that President Widodo now pays more attention to developing human capital.

“In this digital era, we compete and collaborate with everyone globally, it’s almost borderless. Having said that, we need the human resource that is ready to compete and collaborate globally,” he told KrASIA. “Much of human capital development starts with education. As someone with a strong background in digital and tech startups, Nadiem has proven himself by building a world class company that is recognized and respected globally. As a minister of education, Nadiem will also work together with other ministers to achieve the president’s vision. I think Nadiem can contribute a lot to this cabinet.”

Makarim’s success in building Gojek—Indonesia’s most valuable startup—shows that he is ready to make similar breakthroughs in bureaucracy and government, Kamto said. “During his speech, President Widodo mentioned the importance of delivering results. I think Nadiem is very much a results-oriented person and he will continue doing that. He might need some time to adjust to the process inside the system, but I believe he will accelerate change and improvement.”

David Sumual, chief economist of BCA, shares similar views. He believes that a figure like Makarim, with a fresh mind and passion to shatter the status quo, is needed to transform education in Indonesia. “Transforming the education system and human resources is becoming one of Widodo’s priorities in his second term as president, as the curriculum in Indonesia currently doesn’t match the needs of industry,” he said. Sumual hopes that Makarim can help the government solve problems by simplifying the bureaucracy and reducing unnecessary regulations.

“With his background in the tech business, Makarim can contribute his thoughts to build an education system to advance the digital economy. For example, in several countries, students are required to learn computational thinking through basic coding training, which is a good thing to emulate,” Sumual added.

The obstacle: An unwieldy and complicated bureaucracy

On the flip side, Bhima Yudhistira, an analyst from the Institute for Development of Economics and Finance (INDEF), said that although disruption sounds good on paper, it will not be easy to bring major innovations into the education system due to its complicated bureaucracy.

“The ministry of education has long had a reputation for its complicated bureaucracy. Decision-making and execution have to involve the regional education offices across the country. The minister is entitled to set up policies and curriculum standards, but the implementation has a long way to go. Does Nadiem have experience dealing with this sort of bureaucracy? I’m not sure. To improve the education system requires not only skills in tech and digital development, but also great bureaucratic skills,” Yudhistira said.

Nadiem is not the first outside professional to lead the ministry. Before him, Anies Baswedan, a scholar, was appointed as minister of education and culture in 2014. Baswedan did not complete his tenure due to a cabinet reshuffle in 2016, Yudhistira said. “Baswedan offered many good ideas, but they were difficult to be implemented quickly as there are problems in the office that led to slow changes. Meanwhile, in digital startups, every development has to be done quickly, so bureaucracy and politics will be big challenges for Nadiem.”

Even so, the appointment of Nadiem could pave the way for the education sector to adopt technological innovations and collaborate with edtech startups like Ruangguru.

Yudhistira said that before being appointed as the country’s education minister, there was a rumor that Makarim would lead a new ministry institution that focuses on the digital economy and investment, which would align with Makarim’s background. However, the government seemed to have scrapped that plan. “Creating a new ministry institution is difficult and requires a high budget, so maybe that’s why the plan was cancelled,” Yudhistira said.

Gojek’s business after Makarim’s departure

Analysts remain bullish on Gojek’s future business following Makarim’s transition to public service. Although Makarim has been long known as the face of Gojek, the firm is already maturing and has many other bright, talented people, according to Yansen Kamto. “Yes, perhaps most of the people only know Nadiem as the leader at Gojek. But we know that Gojek has people like Andre Soelistyo, Kevin Aluwi, Catherine Hindra (chief food officer), Aldi Haryapratomo (CEO of GoPay), and more. I believe Gojek, as a company, will keep growing and keep expanding. Gojek is never a one-man show, it has always a team effort involving many of the brightest talents of Indonesia.”

Yudhistira added that since Gojek’s business line has been increasingly developed and diversified, leadership in the company also has been decentralized. Therefore, there is nothing to worry about regarding the future of Gojek, he believes.

Kevin Aluwi and Andre Soelistyo, co-CEOs of Gojek. Image courtesy of Gojek

According to a press statement from Gojek, a number of its investors have also expressed their confidence with the new arrangement, showing optimism from all of Gojek’s shareholders about the company’s future.

However, there are some who doubt Gojek will progress as it has been, especially considering the firm is currently struggling to develop its business regionally.

“Gojek has had trouble expanding outside Indonesia, as seen by the leadership changes in Vietnam and the low market share achieved in Singapore. Gojek is also still in the process of fundraising. The company is nowhere near a mature level for the CEO and founders to leave. It is odd that Nadiem is choosing to leave now and it feels like he is a captain jumping ship,” a source familiar with the industry told KrASIA.

Gojek is experiencing a tumultuous ride in overseas markets, especially in Vietnam. Go-Viet’s CEO stepped down from her position in September, only five months after she took the helm. The platform still only has three basic services in Vietnam—Go-Bike, Go-Send, and Go-Food—making it difficult to challenge incumbents like Grab as well as local providers FastGo and Be.

The firm’s expansion into the Philippines also hit roadblocks after the regulator rejected its ride-hailing application, as it didn’t meet local ownership criteria. Gojek is currently preparing an entry to Malaysia, where the government already gave Gojek a green light to operate a two-wheeled ride-hailing service despite local online transportation companies feeling threatened by the Indonesian company’s presence on their home turf.

Even though there is much optimism, it looks like Gojek’s new co-CEOs will have to prove that Gojek’s business is sustainable in Southeast Asia after Makarim’s departure.

Will there be conflict of interest?

Undeniably, Gojek now has close relations with the government. Besides Makarim, another prominent figure that has close ties with Gojek is the newly appointed minister of state enterprises, Erick Thohir. He is a brother of Garibaldi Thohir, president commissioner of Gojek. The Thohirs come from a family of entrepreneurs well known in Indonesia and abroad. Their father is a co-owner of Astra International, one of Indonesia’s most valuable conglomerates. Astra is an investor in Gojek.

According to a source that spoke to KrASIA, Makarim’s appointment will not affect Gojek’s competition with other players. “The onus is on Nadiem to show that he can be a fair, neutral arbitrator of government policies and its impact on former rivals. Given the amount of foreign direct investment flowing into Indonesia’s digital economy space, investors need to know their money is going into an industry with a level playing field. Investors will be spooked if Nadiem shows signs of favoritism or cronyism toward Gojek, and it may hurt funding to other Indonesian unicorns.”

Yet Yudhistira said that a conflict of interest might arise, especially considering that Gojek is a decacorn company that is still dependent on investor funds. If there’s any global economic recession in the future, startups like Gojek would feel the impact. “Other potential risks are related to partnerships with digital startups. The government is expected to always be impartial to protect the national interest,” Yudhistira said.

In order to overcome these concerns, the government must be transparent in all of its activities, including when they want to involve startups for government projects. Makarim now represents the voice of the Indonesian people, not the voice of one company only, Yudhistira added.

It is common to see entrepreneurs enter politics in Indonesia and elsewhere. As digital entrepreneurs create ideas, innovation, and disrupt conventional industries, their participation in the government is expected to bring about rapid and positive change to the entire nation, and Makarim now carries that burden on his shoulders.

Here’s to Nadiem Makarim and his new role as education minister of Indonesia!

With additional reporting from Cindy Silviana