Two thousand and twenty-one has been a terrifying year for the COVID-19-affected — both businesses and individuals. However, we must admit that the year also served as one of the most extraordinary periods for Southeast Asia. The year witnessed the birth of several unicorns and a flurry of exits. While patience and perseverance played a crucial role in helping tech companies scale heights, various government policies and initiatives also made things easy for them. These policies in turn are giving a fillip to an already burgeoning startup ecosystem.
If you want to catch up with what is happening on the ground, these policies and initiatives should be on your radar as they would immensely impact the local and regional ecosystems in future.
Singapore
- Listing framework for Special purpose acquisition companies (SPACs)
On September 2, 2021, the Singapore Exchange (SGX) released new listing rules for SPACs on its Mainboard, marking it the first Asian bourse to approve that since the SPAC craze began last year.
As SPAC is a publicly listed “blank cheque” corporation founded to merge with or acquire private firms, SGX aims to produce strong target firms listed on the bourse.
The SPAC framework will provide companies, including startups looking for an IPO, with an alternative funding option while securing greater certainty on price and execution. This also assists investors with more choices and opportunities for investments and exits.
Under the SPAC framework, some significant criteria included in an SGX listing are:
- The minimum market capitalisation of S$150 million (~US$109.5 million).
- De-SPAC must occur within 24 months of IPO with an extension of up to 12 months subject to fulfilment of prescribed conditions.
- Sponsors must subscribe to at least 2.5 per cent to 3.5 per cent of the IPO shares/units/warrants depending on the market capitalisation of the SPAC.
- Sponsor’s promote a limit of up to 20 per cent of issued shares at IPO.
- Funding to boost IPOs
The Singapore government has unveiled a US$1.1 billion (S$1.5 billion) fund as part of a package to attract listings to the city-state’s market. The goal is to boost its exposure to the region’s burgeoning IT industry.
In this plan, the state-owned Temasek has co-invested to provide late-stage private financing and investment for IPOs on the Singapore Exchange. The financial regulator, the Monetary Authority of Singapore (MAS), will also increase its grants to help companies defray the cost of listing.
Also read: Startup IPOs in 2021 are encouraging founders& investors’ interests in Asia
- First crypto service license
In August, the MAS preliminarily granted a Singapore license to the Australian cryptocurrency exchange Independent Reserve, which has been operating in Singapore since 2019. Once the license is fully approved, it will be one of the first regulated digital payment token services providers under Singapore’s Payment Services Act, which came into force in January 2020.
Later in September, local fintech Fomo Pay obtained licenses from the MAS to operate three new regulated activities, including facilitating transactions with digital payment tokens such as cryptocurrencies and the central bank digital currency (CBDC).
According to the MAS, while a significant number of applicants failed to meet its standards in terms of money laundering, terrorism financing and technology risk controls, it had received over 480 crypto-related license applications by the end of July.
This heralds a new era of regulated cryptocurrency adoption in the region as companies can “move out of the grey area” to operate. However, Singapore’s regulations have long been perceived as crypto-friendly for investors and entrepreneurs.
Indonesia
- New Investment List
The New Investment List, a key implementing regulation for Indonesia’s Law No. 11 of 2020 regarding Job Creation (the Omnibus Law), was issued in March 2021, easing foreign investment restrictions for firms across the country.
The previous foreign ownership restriction of 67 per cent was eliminated for wholesale distribution and telecommunications, media, and technology (TMT) firms.
Under the rule, foreign investments in local digital startups in special economic zones (SEZ) are exempted from the minimum investment threshold of IDR10 billion (US$693,550).
All business lines not included in the law or the New Investment List are also open for any investment.
However, the new rules require careful application according to sector-specific legislation, especially in the broader law reforms introduced by the Omnibus Law.
- Merah Putih Fund
In December, Indonesian President Joko Widodo, popularly known as Jokowi, announced the launch of the Merah Putih Fund, targeting soon-to-be unicorns (or soonicorns) with predetermined criteria.
According to his announcement, to be eligible for the funding, startups must be founded by Indonesian nationals, operate in the homeland, have plans to go public domestically, pay taxes, and have a proven track record of fundraising with a valuation of above US$200 million.
Merah Putih Fund is backed by state-owned enterprises (SOEs) and slated to raise around US$300 (IDR 4.26 trillion) in H1 2022. Some of its initial investors are Mandiri Capital, BRI Ventures, MDI Ventures, and Telkom Mitra Inovasi.
Also read: The 27 Indonesian startups that have taken the ecosystem to next level this year
Vietnam
The Vietnamese government introduced several initiatives to support the local startup community in recent years. These included the legal framework for VC funds under Decree No.38/2018/ND-CP, which opens up capital channels into early-stage startups.
Vietnam National Innovation Center (NIC) was also established in 2019 to promote technological transfer, R&D, and commercialisation for SMEs and startups in a favourable regulatory environment.
For the last five years, the National Program 844, or the Initiative for Startup Ecosystem in Vietnam (ISEV), has constantly supported the startup ecosystem by establishing and improving the legal framework and providing grants for activities spanning startup incubation, acceleration, market development, networking and/or communication.
- National Strategy on the Fourth Industrial Revolution towards 2030
The Prime Minister’s “National Strategy on the Fourth Industrial Revolution towards 2030” was adopted in January 2021 with a variety of objectives, including making the digital economy accounted for about 30 per cent of the country’s GDP, universalising the 5G mobile network services, and completing the construction of the digital government.
For startups, the strategy maps out the needed undertakings of ministries and ministry-level agencies, including:
- Apply a regulatory sandbox for new business lines to create a legal framework for innovative products and services;
- Review and improve regulations towards encouraging domestic digital technology enterprises to invest in development and research to master the core technologies to participate in the Fourth Industrial Revolution actively;
- Review and amend regulations for innovative startup investment towards facilitating capital contribution, share purchase, merger and acquisition of technology enterprises;
- Renovate and strengthen universal education to increase practical activities, particularly in science, technology, engineering, and mathematics (STEM). Internship programmes in innovation support centres and startups are encouraged;
- Invest, research, and develop several prioritised technologies to actively participate in the Fourth Industrial Revolution, such as robot technology, advanced materials, renewable energy, artificial intelligence, healthcare technology, IoT, big data, and blockchain.
This follows the previous Prime Minister’s decision dated June 3, 2020, approving “The national digital transformation programme to 2025, with a vision towards the year 2030“. To set the foundation for the digital transformation, the government will give strong incentives and support for startup development and encourage large and traditional enterprises to apply these technologies in manufacturing and commercial activities.
In addition, the country will focus on developing four types of digital technology enterprise models, including startups applying digital technology in the development of new socio-economic products and services and startups innovative in terms of digital technology.
- Decree 31/2021/ND-CP on the elaboration of some articles of the Law on Investment
Approved in March 2021, the Decree provides details on which objects are eligible for investment incentives such as lower rate of corporate income tax, exemption or reduction of land rents, land levy, etc.
The beneficiaries include startup projects (with predetermined criteria specified in the Decree), the National Innovation Centre (NIC) established under the Prime Minister’s decision, and innovation centres established by agencies, organisations and individuals to assist startup ecosystem and R&D activities in the centres.
Also read: The 27 Vietnam startups that have grabbed our attention this year
Malaysia
- Malaysia Digital Economy Blueprint (MyDIGITAL)
Launched in February, The Malaysia Digital Economy Blueprint (MyDIGITAL) aims to transform Malaysia into a digitally-driven, high-income nation and a regional leader in the digital economy until 2030.
As stated in the Blueprint, the government set out several targets, including driving 875,000 MSMEs to migrate to e-commerce, onboard two unicorns, and catalysing the growth of 5,000 startups in the following five years.
These initiatives will serve as a springboard for attracting RM70 billion (~US$16.5 billion) in digital investments from inside and outside of Malaysia.
- Malaysia Startup Ecosystem Roadmap
Launched by Malaysia’s Ministry of Science, Technology and Innovation (Mosti), the Malaysia Startup Ecosystem Roadmap (SUPER) 2021-2030 aims to create 5,000 startups and achieve five unicorn-status companies by 2025, as well as nurture the country into one of the world’s top 20 startup ecosystems by 2030.
Considering feedback from more than 300 ecosystem stakeholders, SUPER identifies 16 interventions under five Ecosystem Drivers. It aims to increase Malaysia’s gross domestic product (GDP) and is expected to contribute to high-value job creation and expand deeptech investments by 2030.
As a part of the plan, a digital information resource portal, dubbed MYStartup, will be created to provide comprehensive facilitation services for startup ecosystem networks, helping ecosystem players navigate the startup ecosystem and drive local innovation. In its first year, the platform is expected to benefit more than 1,000 startup ecosystem stakeholders through the listed initiatives and programmes such as funding, bootcamp programmes, accelerator programmes, hackathons, coaching, and training courses.
- MaGICARE
MaGICARE is a compilation of initiatives in collaborating with Malaysian ministries and agencies to support startups impacted by the Covid-19 pandemic. It was launched by the government-funded Malaysian Global Innovation and Creativity Centre (MaGIC) in July.
The initiative aims to provide entrepreneurs with resources, rejuvenation, and recovery aid, which can apply until December 2021. It offers a 50 per cent subsidy for one-on-one counselling sessions for ten persons per month.
On the MaGICARE website, there is a list of financial aid, grant, financing programmes, and humanitarian help providers for startups.
Also read: 25 notable startups in Malaysia that have taken off in 2021
Thailand
- SME-PO scheme
Thailand’s Securities and Exchange Commission (SEC) announced a prospective new scheme in September that would allow SMEs and startups in Thailand to raise financing through public offerings. The SEC is scheduled to issue regulations to implement this new scheme in the first quarter of 2022.
According to SEC’s rules, SMEs and startups in Thailand can raise funds via private investments or crowdfunding. The new scheme can raise capital on a larger scale through a new sort of IPO — called SME-PO.
Risk-tolerant and well-capitalised investors such as institutional investors, private equity or venture capital firms, angel investors, or SMEs’ directors, employees, or affiliates, can join the round.
SMEs and startups that want to pursue an SME-PO under the new SEC scheme must be structured as public companies with investor protection mechanisms in compliance with the Public Company Act, B.E. 2535. (1992). However, the SEC may also relax certain requirements of filing for approval, the appointment of an independent financial advisor, and fees for SME-POs.
For example, an information-based approach will be applied instead of the normal approval process for public offerings, though further details have yet been revealed.
SEC also intends to create the “SME Board,” a secondary market for trading SMEs’ equities.
Also read: Exit Strategies: Ways to get your money back besides IPOs and M&A
- BOI’s Investment Acceleration Measures 2021
In a bid to accelerate investments in large-scale high-tech projects, Thailand’s Board of Investment (BOI) has introduced the Investment Acceleration Measures 2021. Accordingly, investments in specific target sectors with a realised investment of at least THB 1 Billion (~US$ 30 million) within 12 months from the date on which the BOI promotion certificate is issued would be entitled to an additional 50 per cent corporate income tax (CIT) deduction for five years. This is in addition to the standard CIT exemption period of five to eight years which is generally granted by the BOI.
Furthermore, BOI has offered to grant a CIT exemption for 50 per cent of the investment value for three years for existing businesses in select industries, such as software integration, AI, machine learning, and big data analytics. Qualified companies may apply for this investment promotion scheme until the last working day of 2022.
Cambodia
- Cambodia Digital Economy and Society Policy Framework 2021-2035
The Cambodia Digital Economy and Society Policy Framework 2021-2035 promotes the digital adoption and transformation in all social actors, including states, citizens, and businesses, to foster economic growth and improve social welfare in the “new normal”. It sets out a long-term vision for building Cambodia into a digital economy.
In this framework, the Royal Government promotes digital business in three areas — promoting the digital transformation of enterprises, creating the entrepreneurial and startup ecosystems, and enhancing linkage to regional and global value chains in the digital sector.
The framework also establishes an institutional framework and coordination mechanism for monitoring and evaluating the policy framework implementation.
- Startup Cambodia National Programme
In December, the Ministry of Economy and Finance launched the “Startup Cambodia National Programme”, aiming to enhance the entrepreneurial environment through digital platforms.
As a part of the programme, the platform (startupcambodia.gov.kh.), co-managed by Techo Startup Centre and Khmer Enterprise, will engage stakeholders in incubating startups by providing mutual support through co-creation mechanisms.
The platform is also set to be used for cultural exchange initiatives and startup ecosystem assessments and support the government in making critical intervention policies to navigate the sector through digital transformation and modernisation processes.
The Philippines
The Philippine government has constantly provided initiatives to support its startup community, including the Philippine roadmap for digital startups in 2015, the Kapatid Mentor Me Programme and QBO Innovation Hub in 2016, and the Startup Research Grant Programme in 2017.
- Innovative Startup Act
In March this year, the Philippines’ Department of Information and Communications Technology (DICT), Department of Science and Technology (DOST), and Department of Trade and Industry (DTI) officially signed a joint administrative order (JAO) to establish a steering committee to implement the Innovative Startup Act and its Implementing Rules and Regulations (IRR).
The Innovative Startup Act (RA 11337), which was signed into law in 2019, provides the startup ecosystem with benefits and initiatives including the provision of startup visas, expedited processes, establishment of the Startup Venture Fund, Grants-In-Aid, the crafting of the Startup Ecosystem Development Program, and the establishment of Startup Ecozones, among others.
Also read: Why the Philippines is set to become the crypto capital in Southeast Asia
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