Indonesia’s startups to face tougher regulations in 2017, say experts

Arguably Indonesia’s biggest and most well-known startup, Go-Jek is a motorbike-hailing service which runs through an app. The startup has expanded to other services like on-demand beauticians – and even rolled out cars to take on Uber. Photo credit: Go-Jek.

The days of startups pulling an Uber and speeding away from the law are over.

That’s particularly true in Indonesia, where startups “will see a lot more regulation” next year, forecasts Mandiri Capital CEO Eddi Danusaputro, speaking onstage today at TIA Jakarta 2016.

It used to be that regulation took a backseat to starting and scaling up, viewed as something to be dealt with later on. Take for example Uber, which at the beginning was met with strong opposition for having no license in a lot of its markets. “There’s an expression – it’s easier to ask for forgiveness than ask for permission,” Eddi quips.

But that has started to change. In Indonesia, Eddi highlights the tech ministry, trade ministry, Indonesia’s central bank, and the financial services authority as four government bodies that will take a more active role in oversight in 2017.

Startups can’t take regulation for granted anymore.

In some sectors, it’s already happening. “You now have to have a paid capital of x rupiah, have systems in place, and get licenses especially if you’re managing or taking investors’ money,” says Eddi.

The Indonesian government has come up with new rules for the transport and ecommerce sectors, specifically. In April, the ministry of transportation worked out rules for how taxi companies, car rental services, and transportation apps can co-exist. There are also some restrictions affecting online stores (like this and this), and a plan to come out with rules for fintech startups to collaborate with the traditional banking sector.

A strategy right from the beginning

While regulation is mostly playing catch-up with innovation in Indonesia as well as other Southeast Asian markets, Plern Tee Suraphongchai, a partner at Venturra Capital, advises startups to have a strategy for it from the get-go. She also points out how some startups may not yet be directly regulated, but have to comply with whatever law is already in place.

L-R: Andi Boediman, managing partner at Ideosource; Plern Tee Suraphongchai, partner at Venturra Capital; and Eddi Danusaputro, CEO of Mandiri Capital Indonesia chat with Tech in Asia’s David Corbin about venture capital in Southeast Asia at TIAJKT2016.

What they encourage, Tee says, is to have a relationship with the regulatory authority. “We don’t expect it to be just one-sided. We do feel these regulators are very welcoming in terms of a conversation and a dialogue. They want to promote businesses but don’t want to create instability within the system as well.”

Eddie says the Indonesian government – to its credit – doesn’t want to hinder technology and consults ecosystem stakeholders when drafting a set of regulations. President Joko Widodo himself approved a plan to create 1,000 startups by 2020. “[Regulation] is coming. For the ecosystem, I think it’s a healthy development. We just hope that we continue to be engaged,” he adds.

Tee’s final piece of advice: “Focus on the relationship with the authority. You need to have a dialogue, a channel, otherwise it will be very hard to foresee what will happen and you’d be caught off guard.”