JAKARTA (TheInsiderStories) - Nine venture capital (VC) companies have been launched in the last two months after securing permits from the Indonesia’s Financial Service Agency (OJK). It appears that these companies are trying to take advantages of the flourishing growth of the online business in the country.
OJK, which oversees banking and non-banking industry, has issued a package of regulations on VC to support alternative financing for the country’s small enterprises and startups.
The financial regulator issued four regulations on venture capital on Dec. 31 last year that require investors or companies wishing to finance traditional and non-traditional small businesses to establish legal business entities.
Dumoly F Pardede, Deputy Commissioner of Non-Bank Financial Institutions of OJK, said after giving permit to PT Nusa Makmur Ventura, PT Reliance Venture Capital, PT Cakrabuana Ventura Indonesia and PT Corpus Prima Ventura, now six companies from China, Hong Kong, Malaysia and Indonesia are proposing to get permits from the regulator.
Firdaus Djaelani, OJK commissioner overseeing the non-banking financial industry, said OJK has identified 15 foreign venture capital companies planning to invest in local start-ups.
Earlier, OJK has informed that foreign venture capital firms should form a joint venture (JV) with local partners, to run their business in Indonesia. The regulation is an attempt by the OJK to supervise the inflow of foreign funds into the country, in particular through venture capitals.
Based on the regulation, in order to establish a venture capital fund, an investor or institution is required to provide minimum paid-up capital of Rp 50 billion (US$3.6 million) for a limited company (PT) and Rp 25 billion for either a cooperative or a limited partnership (CV).
The rule also said, an investor or institution wishing to establish an Islamic-based venture capital company is required to provide minimum paid-up capital of Rp20 billion for a PT and Rp10 billion for either a cooperative or CV.
Under the OJK regulation, if venture capital firms want to operate in Indonesia, they must set up joint venture firm and own as high as 85 percent and 15 percent is own by their local partners.
Overall, the policies regulate four matters related to the venture capital sector, namely licensing and institutional matters, doing business, good corporate governance as well as direct supervision by the OJK.
OJK assesses that these capital inflows need to be regulated so that it can monitor the inflow of capital from abroad. The regulator also claimed that this step was also an attempt to help avoid money laundering.
The decision is also part of efforts to protect the local venture capital industry and start-up companies, he said, adding that OJK is planning to work with the Investment Coordinating Board, the Ministry of Communication and Information Technology and Economic Creative Agency to regulate online companies offering various financial services.
OJK and other parties discovered that many so-called “angel” investors, mostly foreign ones, were already shopping around in many business incubator centers across the country. With their creative nature, venture capital companies were expected to help fund innovative breakthroughs for small businesses and startups that were struggling to expand, Dumoly said.
The development came after the regulator intensified its monitoring of the foreign capital inflow into startup companies and incubators. Dumoly said the ruling regulates the technical aspects in setting up joint venture, the establishment of venture capital business and would regulate the tax relief from the government as a move to stimulate the growth of these incubators. (*)