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The Indonesian Governments Support for Start-Up Companies

The brisk growth of the Indonesian economy has made the country a hub for foreign investors. At the same time the Indonesian market is facing several challenges due to mounting income inequality. Despite the economic growth, the rate of unemployment is increasing in the country. Many economists think that the Indonesian market is heading in the same direction as the US market.

According to Dr. Gusti Muhammad Hatta, an Indonesian government official, it is urgent that the government takes initiative to maintain a balance between foreign and local start-ups. The increasing number of foreign start-up programs may reduce the opportunities for local Small and Medium Enterprise (SME) in Indonesia.

The government of Indonesia is taking measures to provide opportunities for start-up companies. Hera is a close look at some of their appreciable efforts.

 

Startup Incubator Program

The Ministry of Cooperative and SME will take measures for the regulation of incubator programs for startups. The government has implemented this program in order to promote local entrepreneurs and provide small business starters adequate opportunities for establishing a business. The Startup Incubator program is also focusing on the telecommunication and technology industry, because there are not many local entrepreneurs in this sector. According to the Ministry, the program aims at bridging the gap between entrepreneurship and business mentoring in the communication sector.

Photo Courtesy KomInfo.

Photo Courtesy KomInfo.

Moreover the government is also providing opportunities for students to learn about practical business and market trends by implementing the Incubator program in four major Indonesian universities: the Bandung Institute of Technology for manufacturing, the Brawijaya University for agro-business, the Surabaya Institute of Technology for creative technology and the Bogor Institute of Agriculture.

 

PENSA

In order to provide small business owners with adequate financial assistance, the government of Indonesia has launched PENSA (Program for Eastern Indonesian Small and Medium Enterprise Assistance) in collaboration with International Finance Center (IFC). IFC is an international organization which helps SME by providing a wide range of financial solutions.

The government of Indonesia is trying to achieve the following objectives through the implementation of PENSA:

  1. Promote awareness among local business owners to adopt social and environmentally friendly corporate practices.

  2. Educate start-ups about the global marketing strategies for establishing business.

  3. Promote collaboration between the local and federal government for successful implementation of PENSA and other entrepreneurship programs.

  4. Guide startup companies about adopting practices which can increase business productivity.

  5. Assist the private sector to progress by reducing the expenditures on licensing.

  6. Train new business owners about supplying quality products.

 





Is Negative Investment List in favor of Local Start-Ups?

In order to maintain a balance between local and foreign investors, the government of Indonesia has released a ìNegative Investment Listî which contains areas that are restricted for foreign investors with the hope of providing a platform to Indonesian business owners for establishing their business. The list also aims at restricting the exploitation of natural resources in Indonesia. However, the list was revised to relax the foreign investment limitations in a number of industrial sectors like telecommunication and technology.

 

Is Financial Sector Playing its Role?

According to Kristanto Santosa and Nehru, head of Business Innovation Center, the financial sector is not playing an effective role in promoting local entrepreneurship in the country. Banks have complex loan policies which make it difficult for the startup companies to make adequate investments in the business.

This is the reason that most startups are entering the mainstream market as internet-based companies; online businesses are easy and cost-effective to start but they have long-term expenditures. Most of the online companies rely on credit card transactions, but according to a global report, the Indonesian credit card industry is one of the most unreliable and bankrupt industries in the world.

Although the government of Indonesia is observing the importance of providing opportunities to local start-up companies to reducing the income inequality, it still needs to revise some of its policies regarding foreign investments in the Indonesian market. [1]

 

Indonesian Startup Investments Grow 60 Times Larger

Based on research conducted by Google and AT Kearney, a number of investments towards startup companies have increased 68 folds in the past five years. This trend shows that investor confidence in the startup industry has improved significantly.

ìThe growth of Ventura Capital (VC) in Indonesia during the past five years has been explosive by improving 60 times larger,î said Mifza Muzayan, Google Sales Operations & Strategy Lead. He predicts a positive outlook for Indonesia in the next year or two.

Photo Courtesy Liputan6.

Photo Courtesy Liputan6.

In 2016, the total amount of investments in startup companies amounted to US$1,4 billion. That number has since risen to US$3,0 billion up to the eighth month of 2017.

We can see the startup investment momentum has increased two folds compared to 2016. This discovery is really useful, and we hope that it can help elevate investments towards the startup ecosystem even further,” said Managing Director of Google Indonesia Tony Keusgen.

Venture capital investors continue to believe in the Indonesian investment opportunity, considering the economic growth of the country, the rising number of the middle class, and the large population of young people that are tech-literate.

An interview conducted with the venture capitals has highlighted four main areas that can accelerate the growth of Indonesiaís startup ecosystem. They are the development of human resources, tax incentives, funding options, and the ease in facilitating a startup. [2]

 

Indonesia: Rapid tech growth & Bali as startup epicenter

I hate to say it, but I always thought of Eat Pray Love whenever I thought of Bali. But that has changed. Bali is in fact a Southeast Asian startup hub. As if I ever needed a reason to visit the tropical island, I started legitimately thinking of relocating to the place. I began with some innocent research (trying to answer some of the questions posed in my last post) and next thing I knew I was searching job listings instead (turns out there are very few actual jobs in Bali, aside from starting ones own.)

Letís rewind for a minute. I have already established the high prospects of Indonesia as a whole in my CIVETS post. But to reiterate, big things are happening in Indonesia. It is already the worldís fourth most populous country. And now McKinsey suggests that by 2030 their economy may be the seventh largest in the world, surpassing Germany and the UK. Even more, it is important to note that Indonesia follows a democratic government system with smooth running parliament and presidential elections. And the nationís economy has been steadily growing at about 5-6 percent in the last two decades.

According to Boston Consulting Group, Indonesia is Asia’s next big opportunity. BCG looks at the growth of the middle-class and affluent costumer (MAC) base as a key indication for the predicted growth.

As their middle class proliferates, so does consumer spending. Already more than half of Indonesia’s GDP comes from domestic consumption. Cue the abounding business opportunities.

Measuring Indonesiaís internet usage, a survey commissioned by Indonesian Internet Service Providers Association (APJII) revealed that the number of users in 2012 reached 63 million people, or 24.23% of the total population. Looking ahead, for 2013 the figure is expected to rise to 82 million users and continue to grow to approximately 139 million or 50% of the total population in 2015. Likewise, Indonesia’s technology industry is expected to flourish. The country already has tech-centered blogs, like dailysocial.net.

Nonetheless, allegedly no quality startups. While Indonesian’s apparently recognize the rampant growth, not able to effectively create domestic companies to benefit from this growth. Lack of entrepreneurs willing to take risks. Opening doors up for outsiders. However, I think I am a bit late at noticing this trend, because apparently tons of foreigners have already relocated to Indonesia notably Bali.

Two of my friends in Bangkok just returned from a Bali vacation. One of the girls absolutely loved it and wanted to return. The other hated it. Why? I asked. Too many foreigners. She further explained Bali was not filled with the typical backpacker you see throughout SE Asia. Rather, there was an abundance of yuppies. Families in white linen clothing, pushing around toddlers in strollers. And it was clear many of them were not on vacation, but actually lived there.

Still thinking of Eat Pray Love, I wondered what the heck all these foreigners were all doing there. After some internet research, it became obvious they were not doing the typical English teaching or NGO work that so many other foreigners tend to do.

One of the first things I came upon was a blog dedicated to starting a global business from oneís laptop, Tropical MBA. While this guy appears to have startups functioning across many countries, he is chose to live in Bali and explains why in a detailed article.

Photo Courtesy ASIA Today.

Photo Courtesy ASIA Today.

However, casual searching for jobs in Bali brought me very few results, primarily for IT or web developer positions. Apparently there is a major lack of actual jobs in Bali for foreigners. Less than 1% of the Bali workforce is non-Indonesian; employment laws remain strict to keep it this way. The only exception is being a highly skilled worker who can offer unmatched training to unskilled workers.

On the other hand, search results returned lots of information startups. For example startupabroad.org promotes this concept where entrepreneurial mined people live TOGETHER in a house to exchange startup ideas. Sounds interesting, but also a little too liberal for my taste. (I like the idea of people getting together, but living under one roof? Im seeing shades of MTV’s Real World.)

Similarly, startupcitybali.com is this new tech startup incubator (whatever that means). On the whole, it seems like Bali is more of a place to live to build a business network, not actually run a business (at least a business that operates solely in Indonesia).

In sum, Indonesia is filled with growth and people seem to be noticing. Bali itself, however, is more of a place where entrepreneurs from around the world congregate. Something like an ideal location to channel creativity and live short-term, not actually hold down a long-term position for another business.

I still have lots of questions regarding Bali that the internet alone won’t be able to answer. Perhaps I’ll have to make a trip for some investigative journalism. A girl can dream, right? [3]

 

Indonesian Economy Enters the Year of Politics

Will different series of political events affect performance of the Indonesian economy?
Seismic political events within the next two years will not disrupt the Indonesian economy. Such optimism was shared by a number of government officials and business leaders when referring to the 2018 simultaneous regional elections, the 2019 parliamentary election and the 2019 presidential election.

They argued that the nation had got accustomed to the countryís five-year cycle of general and local elections, Mediaindonesia.com reported. Another factor behind the optimism is the strengthening of the peopleís buying power.

ìFrom 2004 (general election), economic dynamisms have prevailed. The business world should expand aggressively next year. Just be confident,î Bank Indonesia Deputy Governor Mirza Adityaswara said in Jakarta on Monday (31/10).

Mirza explained that the improvement of the Indonesian economy went in line with the countryís commodity price hikes on the world market from the fourth quarter of 2016. He estimated that Indonesiaís economy would continue growing to reach 5.1 ñ 5.2 percent in the third quarter of 2017.

ìEconomic growth will still need to get support from household consumption, export and investment,î Mediaindonesia.com quoted Mirza as saying. He reasoned that government spending through the State Budget (APBN) is relatively small.

Meanwhile, Bank Indonesia Governor Agus Martowardojo said the worldís trade volume, which provides a barometer for global economic growth, is getting better. According to the former Finance Minister, world trade volume grew 1.4 percent in 2016 and will rise at an estimated rate of 2.9 percent this year. ìThere is optimism in Europe and China,î the central bank chief said.

Indonesia Stock Exchange (BEI) President Director Tito Sulistio shared the same view. He is confident that the country’s political agendas next year and in 2019 will not disrupt the capital market. ìMarket capitalization at the bourse has just reached Rp 6,659 trillion. It will rise to Rp 7,000 trillion in 3-4 years time, Tito said.

But some remain pessimistic and view that consumers are not spending their money.

On this, Minister of Finance Sri Mulyani Indrawati is against the view that peopleís buying power is declining. She mentioned that the economic activities are growing as evidenced by the 16.6 percent increase in tax revenue from the industrial sector, and by 18.7 percent increase in trade, 9 percent in finance, 4.6 percent in telecommunication and information, 2.4 percent in construction, 9.2 percent in transportation, and 23.1 percent in agriculture.

We are hopeful that this development will reduce pessimisms about buying power, Minister Sri Mulyani noted.

Premium E-commerce Lazada Indonesiaís chief marketing officer Achmad Alkatiri said transactions at his company had grown by 40 percent this year from 2016. This only shows that peopleís buying power is still strong, according to him.

Also estimated to further grow in 2018 will be trade, advertising as well as hotel and restaurant businesses, according to Institute for Economic and Development Finance (INDEF) analyst Bima Yudhistira.

Like in the 2014 elections, buying power in 2018 will likely strengthen thanks to the stimulus of social assistance, village assistance funds and political spending. All this pushes the lower class buying power, Bima said as reported by the same media.

Added to all the optimism is the governments plan to issue a presidential regulation on labor-intensive projects next year. This is aimed to absorb large numbers of workers and consequently help increase peoples buying power. [4]

 

This Article Curated by Benang Merah Komunikasi’s Editorial team.

We consider to take journalism ethics and contents reposting etiquette seriously, that you can find hereabout media ethics. We do curation article for our audiences, not for search engine bots. By addressing this growing area of concern we hope reader can be smart to filter and understand between content plagiarism and content curation method.

References Sources:

[1] Taken from The Indonesian Governments Support for Start-Up Companies written by Global Indonesian Voices and Global Indonesian Voices.

[2] Taken from Indonesian Startup Investments Grow 60 Times Larger written by Hendartyo Hanggi for TEMPO.

[3] Taken from Indonesia: Rapid tech growth & Bali as startup epicenter written by Laurence Bradford.

[4] Taken from Indonesian Economy Enters the Year of Politics written by Leo Jegho.

Editorial Benang Merah Komunikasi

Author Editorial Benang Merah Komunikasi

“Benang Merah Komunikasi Indonesia seeks to become a global leader in digital media solutions and digital marketing in the era of AEC ( ASEAN Economic Community ) in 2017 and it has been started since early 2015, especially in Indonesia. We hope that we can give our customers something to create breakthrough digital content, spread in the media and services, measure and optimize from time to time, and achieve greater business success. We help our customers create, manage, promote and monetize their content in each channel and display. We are passionate creative entrepreneurs and strategists working with forward-thinking brands, institutions, and agencies.”

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