Mar'ie confident of overcoming economic hurdles

JAKARTA (JP): Finance Minister Mar'ie Muhammad is confident Indonesia will weather the current economic storms to anchor with a much stronger economic structure.

"I believe we're all confident that we'll come out as winners from the current difficulties, and with a stronger economic backbone than before. Amen," he said in a short speech at a signing ceremony to form PT Mitra Ventura Indonesia, a holding company of about 25 venture capital operations in the country.

He did not elaborate as he was leaving in a hurry to avoid reporters.

The minister, however, said earlier in his speech that one important lesson learned from the economic crisis was that small and medium enterprises were amazingly resilient, "due to their flexibility to the situation".

"This is a golden opportunity for us to further develop small to medium enterprises and cooperatives," he said. But he added that the important role of large businesses should not be neglected.

He said that with the launch of the holding company, Indonesia had taken a further step in developing its small and medium businesses.

Mitra Ventura is a holding company of some 25 local venture capital operations in the country. It is a joint venture operation with state venture capital firm PT Bahana Artha Ventura.

Mitra will have the backing of an international network from the Export Supporting Council (DPE), since many of the 25 venture capital firms' clients are exporters.

Backbone

Mar'ie said the holding company would be the backbone of the regional venture capital companies, especially when making larger business deals.

Venture capital is funds used for investors in small companies that are considered to be in their first phase of growth. Funding is provided by private and institutional investors.

Anwar Surjadi, director general of small business, said venture capital was a positive alternative to bank financing because it did not charge interest being based on profit sharing or equity participation.

He said that since 1994, when the first venture capital project was launched, some Rp 90 billion had been extended in loans to more than 1,400 small and medium businesses.

Bahana Artha is a unit of state investment firm PT Bahana Pembinaan Usaha Indonesia. The firm has actively sponsored the establishment of venture capital operations throughout the country.

Erwin Bantovani, a director at Bahana Artha, said the firm planned to sponsor a launch of two new venture capital firms in East Timor and East Nusa Tenggara.

He said the only foreign institution actively involved in financing the firm's venture capital project was Japan's Exim Bank, which as of last year had poured in 21 billion.

"But many other foreign institutions have started sending us proposals," he told The Jakarta Post.

He refused to divulge the foreign firms' names because negotiations are still in process.

He said small and medium businesses were quite profitable, with a report claiming an internal rate of return (IRR) of up to 40 percent or higher.

The IRR minimum requirement to get venture capital financing is 18.5 percent and many of the firm's clients had IRR levels above the minimum.

Erwin said the average lending package was about Rp 250 million (US$26,216), up to a maximum Rp 500 million. The average assets of target businesses were about Rp 600 million. (08)