Bit by Bit

Indonesia

Economic News

22 Jul 2010
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In late August, Indonesia's state officials announced the formation of a special committee to promote information technology (IT) development, which has been welcomed by many in the sector.



Sofyan Djalil, the state minister for information and communication, explained to a press gathering that President Susilo Bambang Yudhoyono had instructed officials to establish a National Committee for Information Technology.



This permanent committee, to be led by Boediono, the coordinating minister for the economy under the direct auspices of Yudhoyono, is intended to support and direct the development of the IT sector. The committee has been tasked by Yudhoyono to draft a blueprint for the sector.



Currently, the IT sector in Indonesia is relatively underdeveloped when compared to other countries in the region.



Recently, Betti Alisjahbana, the president director of IBM Indonesia, told OBG "if we compare Indonesia with Singapore, Malaysia or Thailand, the percentage of IT spending compared to GDP is still low". While this indicates a lower priority for IT, Alisjahbana asserted that "it also means we have more room to grow".



One reason often cited for the limited role IT plays in Indonesia's economy is the lack of basic infrastructure.



Under Yudhoyono's government, the country has been trying to catch up, with a focus on improving the country's transportation infrastructure, with investments in roads and ports. With the creation of the special committee, it is expected that investment in infrastructure will extend to communication.



Many businessmen still consider communication costs relatively high in Indonesia, thwarting the country's drive to attract foreign direct investment (FDI).



Fixed line penetration is very low and phone calls are considered expensive. A consequence of this is extremely low internet penetration, with some sources estimating that 8% of Indonesian's population of roughly 242m can access the internet either directly in their homes or businesses, at a neighbour's home or an internet cafe. This is the lowest penetration rate in the region. Overcoming this obstacle will be a challenge for the new committee.



Also, the protection of intellectual property rights will be on the committee's agenda.



During the announcement of the special committee, attention was given to the negative effects of piracy for the development of the IT sector in Indonesia.



Tony Chen, president director of Microsoft Indonesia who accompanied Djalil during the announcement, shared with reporters that in 2006, 87% of all software in Indonesia was pirated. The country moved up in the world's piracy ranking from fifth to third place, behind Ukraine and Vietnam.



According to Chen, "a 10% cut in the piracy rate could help triple economic activities in the IT sector, contribute five times more taxes to the government and create 13 times more employment opportunities" as reported by The Jakarta Post.



Alisjahbana agrees, "I think it is very important that we honour intellectual property rights, but at the same time, we need to make sure that IT is affordable to most people in Indonesia."



In an effort to deal with this challenge, the government launched the Indonesia Goes Open Source (IGOS) initiative in 2005. Under this programme, the government promotes the use of open source software among governmental and state institutions as an affordable and legal alternative to expensive licensed software.



Adi J Rusli, the managing director of Oracle Indonesia, sees improving human resources as another major challenge for IT and highlights the opportunity that foreign company outsourcing could provide the country.



"If we look at India, Malaysia and Philippines, they all serve companies globally using English. While in Indonesia, English has long not been a priority," he recently told OBG.



"We need to educate and provide the necessary skills to make Indonesian companies savvier in business" Rusli continued.



Observers blame incomplete and insufficient education for the lack of language and business skills. Most major software companies are therefore busy setting up programmes with schools and universities, introducing fundamentals and correct use of IT as early in the curriculum as possible.

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