Indonesia Among Least Attractive Markets for Startups & Venture Capital

Indonesia has a thriving digital economy due to the huge population that is increasingly connected to the Internet. Meanwhile, growth still comes from a low base and therefore there are plenty of foreign and domestic investors ready to invest in Indonesia’s digital economy, for example through capital injections in startups.

However, the latest research conducted by New York-based ValuePenguin ranks Indonesia among the least attractive investment destinations in the Asia-Pacific region in terms of investment in startups. The weak ranking is particularly the result of the unconducive business environment and weak quality of Indonesia’s human resources.

Jefri Sirait, Chairman of the Venture Capital Association for Indonesian Startups (Amvesindo), said Indonesia’s ranking in ValuePenguin’s research makes sense when matters such as the ease of business, the investment climate and quality of human resources are included. Hence, it is no surprise to see Singapore on top of the list. Moreover, Singapore has become the gateway for investment in the Southeast Asian region as well as the region’s dominant startup hub due to its government’s pro-business policies, ease of doing business and efficient tax regime (including tax incentives for startups).

Sirait also believes India is on the right track to become a hub for startups and venture capital as its government has been busy (since 2016) to improve the environment for startups and venture capital.

To those who want to invest in Indonesian startups, Sirait says investors need to be aware of the specific dynamics and unique context of the Indonesian market. For example, Indonesia’s first unicorn Go-Jek – an Indonesian hyperlocal transport, logistics and payments startup – could not have become a success in Europe or South Korea.

 

[Source: indonesia-investments.com, March 2018]