Startups Entering Indonesia
The Singaporean government has a financing program to assist Singaporean startups for expansion into Indonesia. The program has received mixed reviews from Indonesian economists.
The booming Indonesian economy has significant potential for foreign investors. A number of foreign companies have been exploring possibility of investment in a wide-range of sectors in Indonesia like industrial manufacturing, extractive industries and telecommunication.
iSTART@Indonesia
In 2010, the Singaporean Government launched iSTART, a funding program for local startups, soon after the release of the ‘Negative Investment List’ by the Indonesian government. It would provide an opportunity to Singaporean business starters for establishing business and capture booming markets like Indonesia. iSTART@Indonesia is a program that will focus on telecommunication starters and mobile app developers. Keeping in view the scope of e-commerce in Indonesia, the program will support designers of web apps, digital applications, social media and many more. All the participating entrepreneurs and companies could also attend networking events like Startup Asia Jakarta where they can meet market analysts and other Indonesian investors.
The government of Singapore is also taking measures like promoting business consultations with industry practitioners and conducting educational programs for making startups aware of potential corporate opportunities in countries like Indonesia and Thailand.
The program provides an opportunity to Indonesian investors for expanding their business in the telecommunication sector. It requires participating companies to visit their intended markets, meet investors and market mentors. This will allow Indonesian marketers to recruit the most competent Singaporean companies. Moreover, it will also allow the company to progress in the sectors of e-commerce and telecommunication.
Indonesian Investment Law
The Indonesian government introduced an Investment Law at the end of 2007. The investment law included a ‘Negative Investment List’ in which the government expanded a number of sectors for foreign investment which were previously restricted. The list was revised in 2010 to include the healthcare sector.
The law also relaxed foreign equity limitations in a number of sectors like the film industry, medicine, telecommunication, construction and e-commerce. This opened new doors for countries like Singapore, to invest particularly in telecommunication and information technology sectors.
Keeping in view the keen interest of foreign investors, the Indonesian government has taken several measures to attract more investors such as the adoption of several pro-investment policies.
In order to provide more opportunities to investors, the government has attempted to improve tax policies and strengthen the Investment Coordinating Board. In the year 2010, the government also relaxed a number of limitations on foreign investment particularly in the telecommunication sector. This has provided a number of opportunities to countries like Singapore for investing in different sectors.
The Dark Side
Although iSTART will provide an opportunity for e-commerce startup expansion in Indonesia, there are certain potential drawbacks of this program. In Indonesia, some argue that Singaporean startups will be preferred over the local businesses as Singapore is much more advanced in IT sector than Indonesia. The program could also potentially increase unemployment rate in Singapore, as businesses prefer to expand their activity outside of Singapore.
Nevertheless, the program can potentially be beneficial for both the Singaporean and Indonesian IT sector if the government takes adequate measures to provide equal opportunities to foreign and local startups.
Reference: Techinasia