Rudiantara: Less regulation is good regulation

Minister of Communication and Informatics Rudiantara said recently that “less regulation is good regulation” when it came to the startup industry. “The government should not over regulate [startups] because the industry is still in the infancy stage. We should even preferably loosen up regulations [for this industry] for the next 3 or 5 years,” he added.

Rudiantara has been actively engaged with the startup industry. Ever since taking his ministerial post roughly six months ago, Rudiantara has helped spearhead initiatives such as the e-commerce roadmap.

The minister has also attended several gatherings organized by the industry and communities within it to learn more about the concerns of players in the ecosystem.

According to Rudiantara, nicknamed Chief RA, the government should, nevertheless, put in effort to protect the industry as startups work on scaling up their sizes. And on elements needed to foster a strong startup ecosystem, Rudiantara said that human capital was key. Startups, however, find it a challenge to capture good talent.

“Some days ago, I visited a university strong in IT. However, most of these IT students end up joining the manufacturing industry instead of becoming programmers in startup companies, such as e-commerce,” he pointed out.

He further said fiscal issues were another tough spot. Elevated capital gain taxes, which would impact exit values, affect decisions to set up startups in Indonesia, he noted.

Indonesia tax rules outline that during an initial public offering (IPO), founder shares are subject to an additional final tax of 0.5% on the share value regardless if the shares are withheld or released after the offering. Capital gains from the sale of Indonesian assets owned by foreigners are also taxable at a rate of 5% of the gross proceeds.

“There are also issues of customs and investment policies in this country,” he added.

Foreign investment in e-commerce falls under the Indonesian government’s negative investment list, a rule e-commerce players are lobbying the government to strike out. The policy is seen as counterproductive, considering that foreign venture capitalists have great desire in and cash reserves to invest significantly in the country.

Rudiantara added that for Indonesia, it is best that the government be the driver of the startup industry.

He further said that emulating the US model would be difficult instead, given that the dotcom industry in Silicon Valley was born out of the preceding chip industry.

“We are not taking off from the same point [as the U.S.] because our startups are rooted in the provision of services instead,” he noted.