Firming Up Software


Economic News

22 Jul 2010
Text size +-
Indonesia's IT industry could be in line for an increase in state support, with the government looking to boost funding for infrastructure while backing calls for greater assistance to the domestic software sector.

In late October, the newly appointed information and communications minister, Tifatul Sembiring, said more needed to be done to promote the development and use of domestic computer software. To accelerate this process, the minister said the distribution of local software products would be coordinated with other ministries in the future.

"We need extra efforts to boost the production of local software products," said Tifatul. "This is, in turn, solely aimed at improving the quality of the nation's human resources."

By increasing the levels of local software, Indonesia could reduce its outlays on imported products, which total around $740m a year, he said.

Another to throw its weight behind strengthening the local information and communications technology (ICT) sector is the Indonesian Chamber of Commerce and Industry (KADIN). In mid-October, the organisation called for the setting up of a fund to provide finance to micro, small and medium-sized ICT players, with funding to come from taxes levied on the telecommunications sector.

It is not the first time that KADIN has proposed state support for the IT industry. Earlier this year, KADIN's deputy chairman, Anindya Bakrie, said the government should consider putting in place tax incentives and make it easier for IT firms to gain access to credit.

"Currently, the tax on locally made IT products is higher than on the imported ones," Anindya said. "The IT sector has a huge potential in Indonesia. Despite the lack of incentives and financing access, it's been growing well in the country. It would grow much faster if the government just provided the incentives and wider access to the financing system."

Though Anindya said many IT projects, particularly those of small and medium-sized companies, struggle to get financing support, the sector was expanding, with growth this year expected to reach 10%.

However, for Indonesia to get full benefits from a more robust IT industry, and in particular a stronger software segment, it will need to do more to combat software piracy. According to a study by the Business Software Alliance (BSA), the unauthorised copying and use of software in Indonesia is rampant.

Released in September, the BSA report said that 85% of all software in use in Indonesia was pirated, unchanged from the levels recorded in January last year. The report, entitled "Resilience Amid Turmoil: Benchmarking IT Industry Competitiveness 2009", also lowered Indonesia's IT competitiveness rating, with its ranking dropping one rung down the ladder to 59th out of the 66 countries assessed. In particular, Indonesia was rated poorly in the categories of IT infrastructure and its research and development environment.

Having thrown his weight behind supporting local research and development firms, Tifatul has also vowed to address Indonesia's infrastructure shortfalls. Only days after coming to office in late October, the minister said 25,000 remote villages would be fully connected to the phone grid by the end of 2009, while also stepping up an existing programme to distribute computers to villages and smaller communities.

If carried through, such measures would improve IT access across Indonesia. Though penetration rates are high in built-up areas, in rural and more remote regions, internet connectivity levels are well below the national figure of around 11%.

With all but 3m of Indonesia's estimated 25m internet users still having to rely on dial-up connections, there is a growing need to improve speed and access for net users, something the minister said will be made a priority.

Tifatul has also promised to increase the pace of implementing Indonesia's e-government programme, giving more people greater access to state services online.

Not only would an enhanced e-government capacity improve the provision of services to the public, it would also reduce the opportunities for collusion, corruption and nepotism through bolstering accountability and transparency, he said.

In the future, all state officials should work under an online system so they would not receive money directly from the general public, he said on October 21 before being confirmed as minister.

As part of his drive to support his portfolio Tifatul has launched a new slogan, "Smooth Communications, Accurate Information", which he said should be integrated into education programmes to raise awareness of technology.

It will take more than slogans and promises to strengthen Indonesia's IT sector and lift its competitive ratings, though with the state having given a commitment to support the industry, and having identified what needs to be done, there are grounds for optimism.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Indonesia

How will China’s economic slowdown affect emerging markets?

With China’s economy slowing on the back of a strict Covid-19 containment strategy, there are concerns about the effects this might have on several emerging markets.


Emerging markets are targeting a share of the global electric vehicle...

With electric vehicles (EVs) set to proliferate and become more accessible to drivers around the world, several emerging markets are looking to expand their EV manufacturing.