Unicorns benefit Indonesians: BKPM

Winny Tang



The government has given an assurance that foreign investment in Indonesian unicorns, a term used for startups valued over US$1 billion, will not be easily taken out by foreign investors, and that unicorns will bring considerable benefit for Indonesian people.


Thomas Lembong, head of the Investment Coordinating Board (BKPM), said investors that placed their money in e-commerce or start-ups had a long-term commitment because they were looking for huge profits.


“Investment in e-commerce and start-ups is very different compared to [investing] in time deposits in banks that can be cashed out anytime. Investors in e-commerce or start-ups realize that it is not going to be easy to take out the money they invest,” he said recently.


There were only several ways that foreign investment could go away, including initial public offerings or if shareholders sold their shares to other parties, he explained.


During the Feb. 17 presidential debate, presidential contender Prabowo Subianto said unicorns would not benefit Indonesian people because investment from foreign investors into the start-ups would not stay long.


Based on data from the BKPM, total foreign direct investment reached $9 to $12 billion annually. Of that figure, 15 to 20 percent went into e-commerce and start-ups.


“We estimate that about $2 .5 billion per year [of FDI] went into e-commerce and startup companies,” he said, adding that investment inflow into the digital economy was one of the two sectors that increased Indonesia’s international investment.


Currently, there are four unicorns in Indonesia: super app Go-Jek, e-commerce marketplaces Tokopedia and Bukakapak, as well as airline ticketing and hotel booking service Traveloka.


They are among the 10 Southeast Asian unicorns, four of which are from Singapore (Lazada, Grab, Trax, and PropertyGuru), while Vietnam has VNG and the Philippines has Revolution Precrafted.


At the same event, Communications and Information Minister Rudiantara emphasized that the business model of start-ups was different from conventional businesses, because in startups, controlling shareholders usually do not want to intervene in the day-to-day business operations, they prefer to be passive investors.


“Local Investors such as Djarum or Astra that have invested hundreds of millions of US dollars, at most only have their representative as commissioners. While the unicorn founders maintain control of the management,” he said.


While the founders of Indonesian unicorns lead the company’s vision to become bigger, Indonesian people will benefit from their existence because these tech startups can solve society’s problems.


Previously, Go-Jek announced it had received Series F funding led by Google, JD.com and Tencent. Go-Jek ensured that its founders would maintain control of the decision-making and direction of the company in the future.


Creco Consulting senior economist and researcher, Raden Pardede, recently said the increase in Go-Jek’s valuation with new funding is similar to global companies that use a dual-class shares scheme when releasing some shares to investors.


“Dual-class shares are a good thing for digital companies. That might be adopted by Go-Jek in Indonesia. This method generally means investors trust the company’s founder to lead and manage [the company],” he said.


The government has been focusing on developing the digital economy and helping Indonesian start-ups to grow. Rudiantara said the country’s next unicorns might come from three sectors, namely health, education and leisure.


The reason for this prediction was that a significant portion of the government’s state budget allocation of Rp 500 trillion this year went to those three sectors, he said.


Source : The Jakarta Post