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Merah Putih Fund: Building a Nationalist Investment Climate



Together with the Ministry of State-Owned Enterprises, President Jokowi had just launched Merah Putih Fund on Friday (12/7), a program directed to give the final push for Indonesian "soonicorns" or companies who are soon to attain Unicorn status. The late program was initiated because numerous foreign-owned ventures currently fund Indonesian startups instead of state-owned ventures. For the funding distribution, according to the Minister of State-Owned Enterprises, Erick Thohir, these startup candidates must meet three criteria: they must be founded by Indonesians, operate in Indonesia, and conduct an initial public offering (IPO) in Indonesia. The fund is targeted for startup companies that have a track record of previous fundraising and companies with a valuation ranging from US$100 million to US$200 million or looking for a series C funding and above. These terms would then filter companies with already established strong customer bases, revenue streams, and proven growth histories, minimizing potential investment risks within these startups.


CEO of Mandiri Capital Indonesia, Eddi Danusaputro, explained that the capital raised in the Merah Putih Fund is targeted to reach US$300 million or Rp4.305 trillion (conversion rate Rp14,352) by the first quarter of the year 2022, while the investment for some startups will begin in the second quarter of the same year. Still, there is no quantifiable aim for the number of businesses supported by the program. The fund will be managed by five state-owned venture capitals that are the subsidiaries of Telkom Indonesia, Telekomunikasi Selular, Bank Mandiri, Bank Rakyat Indonesia, and Bank Negara Indonesia. Indonesia Investment Authority (INA), as Indonesia's Sovereign Wealth Fund (SWF), will also contribute to the program's financing measures and be followed by private investors or entities to take the same action. Erick Thohir plans to bring Merah Putih Fund to an initial public offering (IPO) on IDX. "I am very optimistic, especially when I get direct support from the President. This (refers to Merah Putih Fund's IPO) is something we have to prioritize," said Minister Thohir to IDX Channel on Thursday (12/16).


Some countries have issued regulations mentioning the state's investment terms to flourish local potential startups. China had released some policies regarding the funding of their startups and Foreign Direct Investments (FDI), similar to Indonesia's further plan. The government is concerned about the security of startup user data if most shareholders consist of foreign investors. In the same nuance, India has been implementing a new investment screening policy since April 2020, making foreign entities that wish to acquire stakes in India's businesses must obtain approval from the government. Nonetheless, the dominance of foreign investors in Indonesia's startups is nothing new. According to the General Chairperson of the Indonesian E-Commerce Association (idEA), Bima Laga, the late trajectory is influenced by the startup ecosystem that has long been developed in foreign countries, especially in the United States. Many startups, seen in this sector, are funded by global venture capitals within these circumstances. He also mentioned that eventually, foreign investors bring significant funds, knowledge, experiences, and business networks, enabling local startups to be known more quickly in the global landscape. In essence, the purpose of the late Merah Putih Fund is to foster a more nationalist investment climate and accelerate local startups' growth. Yet, the presence of foreign investors in the respective entities brings countless sentiments and growth factors. This initiative should open up the state's future of the digital ecosystem in our financial scope, marking numerous transitions ahead.


Sources

CNBC Indonesia

CNN Indonesia

IDX Channel

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