Indonesia’s venture capital industry holds significant potential to drive innovation, digital economic growth, and job creation. As an alternative source of financing, venture capital plays a critical role for startups and MSMEs that often struggle to access bank financing due to collateral requirements. This role is particularly important given that MSMEs contribute more than 60% of Indonesia’s GDP and account for approximately 97% of total employment, yet only around 30% have access to formal financing. The study finds that venture capital investment has already generated substantial economic benefits. Between 2020 and 2025, venture capital activities contributed approximately IDR 351.97 trillion to national GDP and supported around 1.35 million jobs, demonstrating that venture capital is not merely a financing instrument but also a key catalyst for economic growth and innovation-driven development.

The study also reveals that Indonesia’s venture capital ecosystem remains constrained by declining startup investment, heavy reliance on foreign investors, and limited fiscal incentives. Startup investment, which peaked at IDR 144.06 trillion in 2021, fell sharply to just IDR 5.39 trillion by November 2024. At the same time, domestic investors accounted for only around 11% of total startup funding, highlighting the ecosystem’s strong dependence on foreign capital. Regulatory inconsistencies between financial sector regulations and tax policies further undermine the competitiveness of domestic venture capital firms, particularly when compared to countries such as Malaysia and Singapore, which have implemented more progressive fiscal incentives and flexible financing frameworks.

The analysis demonstrates that fiscal incentives could generate substantial economic benefits for Indonesia. Countries that provide fiscal incentives for the venture capital industry record investment levels up to 155% higher than those without such incentives. Simulation results suggest that if Indonesia introduces fiscal incentives for venture capital firms, GDP could increase from IDR 2.75 trillion to IDR 3.21 trillion by 2029. Labor income could rise from IDR 1.38 trillion to IDR 1.56 trillion, business surplus from IDR 1.39 trillion to IDR 1.63 trillion, and employment could expand from 10.56 thousand to 12.33 thousand jobs. These findings suggest that fiscal incentives for venture capital should not be viewed merely as a tax expenditure, but as a strategic policy investment capable of accelerating economic growth, creating jobs, strengthening the digital economy, and generating long-term economic returns that outweigh the short-term fiscal costs.