Funding Creativity in Indonesia | Allen & Overy LLP

      Comments Off on Funding Creativity in Indonesia | Allen & Overy LLP

As part of the support provided by the Government of Indonesia (Government) to actors in the creative economy in accordance with the mandate of the Creative Economy Law No. 24 of 2019, the Government issued Government Regulation No. 24 of 2022 on the creative economy, which will come into force in 2023.

Under this government regulation, the government provides incentives to creative economy actors (e.g. musicians, artists, designers and production houses) and introduces creative economy funding. Creative economy financing enables actors in the creative economy to obtain financing from banks and financial institutions on the basis of intellectual property-based financing mechanisms.

Funding schemes allow actors in the creative economy to encumber their intellectual property1 to banks and financial institutions with the aim of obtaining financing from these institutions. Charging is permissible as long as (a) the intellectual property has been registered with the Ministry of Law and Human Rights (e.g. copyrights, trademarks, patents and trade secrets) under intellectual property laws and regulations, and (b) the intellectual property has been properly managed and/or the rights

on this intellectual property have been transferred to other parties (eg, royalty). Government regulations affirm the position that banks and financial institutions can guarantee intellectual property (in the form of a fiduciary guarantee), contracts entered into by actors in the creative economy (e.g. licensing agreements) and/or collection rights (eg royalties).

Access to finance

Although Indonesian law has previously allowed intellectual property rights holders to encumber their rights in the form of a fiduciary security (jaminan fidusia), this government regulation is specifically aimed at increasing creative economy actors’ access to finance. In order to secure creative economy funding from banks and financial institutions, creative economy actors must submit a proposal to these banks and financial institutions, have an intellectual property agreement (e.g. license agreement or royalty agreement) and have a registration letter or intellectual property certificate with the Ministry of Law and Human Rights (i.e. Directorate General of Intellectual Property).

Banks and financial institutions are required to conduct business verification and intellectual property assessment. The valuation of intellectual property must be undertaken by a public appraiser who is

  • registered with the Ministry of Finance and the Ministry of Tourism and Creative Economy, and (b) certified as a public appraiser who can carry out an appraisal of intellectual property.

In addition, creative economy actors who obtain funding from banks and financial institutions must register the loan with the Ministry of Tourism and Creative Economy.2 It is also interesting to note that government regulations introduce the possibility for creative economy actors to also obtain guarantee facilities (fasilitas penjaminan) from credit guarantee companies (perusahaan penjaminan) for financing.

In addition to obtaining funding from banks and financial institutions, government regulations also allow actors in the creative economy to participate in an alternative funding system in the form of peer-to-peer lending and securities offerings.

in the form of crowdfunding (urun dana). This alternative financing scheme follows capital market laws and regulations and is subject to the prior approval of the Financial Services Authority.

Other incentives

The government regulation further stipulates that there are two types of incentives, which are tax incentives and non-tax incentives, to be granted to actors in the creative economy. Fiscal incentives will be provided by central government (tax, customs and tariff facilities) and regional government (local tax incentives and retribution). Meanwhile, for non-tax incentives, government regulations provide several types of incentives, such as easing business licensing and IP registration application processes.

All of a sudden

As government regulation paves the way for creative economy actors to access funding from banks and financial institutions, it will be interesting to see the appetite of said banks and financial institutions for this specific type of funding and the cost of financing an artistic project. .

In particular, this pattern raises questions about how the economic valuation of intellectual property works and how banks and financial institutions value this intellectual property.
property as collateral, in the same way as they have done for other assets.

Additionally, it remains to be seen how this government regulation will fit into the rise of digital art and technology, i.e. NFTs, which are currently the most popular medium for young artists. Indonesians to promote their art publicly.

Nevertheless, this government regulation introduces various opportunities not only for creative economy actors and banks and financial institutions, but also for public investors to participate in the growth of the creative economy by enabling public crowdfunding and lending. among peers for creative economy activities.

1 Government regulations broadly define intellectual property and include all types of works in the fields of technology, science, art, and literature.
2 However, the mechanism is yet to be regulated under government regulations and, presumably, it will be further regulated under the implementing regulations issued by the Ministry of Tourism and Creative Economy.