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Economy

ASEAN and Japan aim to foster startups in Southeast Asia

With venture capital flooding in, opportunities for business growth abound

Leaders of the ASEAN-Japan Innovation Network launched their alliance in Tokyo on April 7. (Courtesy of JETRO)

TOKYO Venture capital investment is booming in Southeast Asia, boding well for the region's startups. And there is greater scope for collaboration between businesses in the region and in Japan to make innovation happen.

That was the message at the ASEAN-Japan Open Innovation Forum in Tokyo on April 7, as speakers ranging from startup founders to a venture capitalist to media experts discussed the latest developments in a market that is just picking up steam.

"Risk money is steadily gathering in Southeast Asia," said Takahiro Suzuki, the Jakarta head of Japan's CyberAgent Ventures, which is an investor in Indonesia's Tokopedia, an online marketplace. According to data cited by Suzuki, total venture capital investment in Southeast Asia reached $2.6 billion in 2016, about 60% more than the previous year.

Suzuki said more than 20 companies in the region had raised at least $10 million since October 2015, including Indonesia's popular ride-hailing app Go-Jek, which is growing fast by helping people navigate Jakarta's notorious traffic jams.

He noted that more startups are also seeking an exit. Global companies, including Chinese tech giants Alibaba Group Holding and Tencent Holdings, are the big startup buyers in the region, he said.

THERE FOR THE TAKING Speakers said Southeast Asian startups are attracting funds because emerging economies have different business opportunities than those of developed nations. Lagging economic development and rising social problems open the door to solutions driven by information technology. Because most people in the region don't have bank accounts or credit cards, fintech businesses -- including digital money and mobile payment systems -- may take off. "Integrating IT into existing industries could proceed at a faster pace than in Japan," Suzuki said.

Keiichiro Oizumi, a senior economist at the Japan Research Institute added: "In ASEAN, having few incumbents and loose regulations are also factors that accelerate innovation."

David Corbin, the Japan head of Tech in Asia, an online news service that focuses on startups, said Thailand's Ookbee and Malaysia's iflix are successfully raising capital. These two startups provide online media content, such as digital magazines and on-demand video.

The Tokyo forum, which drew about 700 people, was sponsored by Japan's Ministry of Economy, Trade and Industry, the Japan External Trade Organization and two other organizations. Its goal was to promote collaboration between ASEAN startups and Japanese companies.

To that end, at the beginning of the meeting, the ASEAN Business Club, a group of leading companies in Southeast Asia, signed a memorandum of cooperation with nine Japanese business associations to form the ASEAN-Japan Innovation Network. The alliance hopes to nurture industries and facilitate collaboration through networking and research. It also plans to host trade fairs and support government bodies with educational and technical exchanges.

"The network's collective strengths and resources will help spearhead innovation in ASEAN, providing an effective platform for dialogue, and eventually opportunities for joint projects," said Munir Majid, president of the ASEAN Business Club.

The alliance is a response to Japanese Prime Minister Shinzo Abe's call last September at a meeting in Laos for stronger economic links between ASEAN and Japan. He hopes to see supply chains strengthened and more Japanese technology used in new industries.

Speaking at the forum, Apiradi Tantraporn, Thailand's minister of commerce, said the signing of the memorandum was "an excellent starting point to exchange information, to explore common interests, to propel innovation and [to] facilitate the private sector for further business collaboration and create new business and new industries between ASEAN and Japan."

JETRO Chairman Hiroyuki Ishige stressed in his remarks that technological innovation in new business areas is important for ASEAN's long-term growth. "Japan's previous experience in overcoming problems, and the country's technological expertise, will help [with] this," he said.

Nikkei staff writer CK Tan in Kuala Lumpur contributed to this report.

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