Indonesia requires digital connectivity<\/p>\n
Craig Warren Smith and Idris F Sulaiman, Jakarta<\/p>\n
Now that election is over, Indonesia can at last deal address
\nits single most important issue. No, not the terrorist threat.
\nNot creating jobs for the poor. Not reversing Indonesia's slump
\nin foreign investment. Those issues are important, but the matter
\nthat underlies those problems is to devise a business model for
\nextending digital connectivity to all of Indonesia's 220 million
\ncitizens. This rather complicated issue was ignored amid the
\npopulist furor of the presidential campaign. Now it must be faced
\nsquarely.<\/p>\n
Within the next few months, the new Susilo government will be
\nputting together its own team to work out this issue. Rather than
\nwait to see which individuals fill key slots and then try to
\ncurry favor, the investors should formulate their own vision of a
\nconnected Indonesia. Though they are locked into cut-throat
\ncompetition at the affluent end of the market, they all stand to
\ngain from historic collaboration at the low end.<\/p>\n
There is room for all -- different operating systems such as
\nLinux and Windows, GSM plus CDMA, broadband plus dial-up
\nconnection. Most importantly, there can be room for both big
\ninternational players and small local entrepreneurs. Rather than
\nwait for governments to invite them to the table, these private
\nsector warriors should bring their best thinking and their most
\ninnovative technology to the table to address how even the most
\nremote Indonesians could be connected -- and uplifted -- in the
\ndigital age.<\/p>\n
Indonesia is behind its Neighbors in IT and
\nTelecommunications Indicators<\/p>\n
Indonesia Malaysia Thailand Philippines Singapore<\/p>\n
Computer: 1.01% 12.6% 2.78% 1.93% 47%<\/p>\n
Telephone: 3.11 % 20.5% 12.6% 8.91% 47%<\/p>\n
Internet: 1.82% 27.31% 6.7% 4.27% 48%<\/p>\n
Source: Digital Review of Asia Pacific, Asia-Pacific
\nDevelopment Information Programme (APDIP-UNDP), IDRC-CRDI Canada
\nand Orbicom Network, 2003.<\/p>\n
The stakes are high. If investor coalition fails to shape new
\ncollaborations, the government and the private sector will surely
\nback off from each other once again. Cynicism will set in. The
\nnumbers-crunchers within investment banks will once again set
\ntheir sights on only the most affluent Indonesian IT customers.
\nGovernment bureaucrats, for their part, will once again return to
\na fantasy world -- setting \"targets\" for spreading the internet
\ninto the countryside that cannot be fulfilled, launching \"pilot
\nprojects\" that quickly disappear, and creating telecom policy
\nreforms that never get really implemented.<\/p>\n
Such business\/government dysfunction explains why Indonesia
\nhas become Asia's most significant failure in the effort to close
\nthe digital divide. Each year Indonesia ranks lower and lower in
\n\"e-readiness\" indicators. This may seem an arcane matter but
\nthe implications are clear: Angry and more isolated, more
\nIndonesians will sympathize with terrorists. Without jobs, fewer
\nwill have a stake in the economy. One cannot simply generate
\nsustained job growth in the country, secondary towns and in the
\nrural areas without addressing this problem. More than half
\nIndonesia's 70,000 villages (or about 43,000 villages) don't even
\nhave access to a single public telephone.<\/p>\n
The Warnet or public Internet kiosks are thinly distributed
\nare declining partly because the authorities are constantly
\nharassing them and partly because there is regulatory
\nmismanagement. Only a tiny percentage of the Indonesian
\npopulation that have fixed phones (3.8 percent) and mobiles
\n(9.8 percent) pay among the highest world's rates, explaining why
\nmarkets are only slowly being created for Internet service
\nproviders.<\/p>\n
The basis of the digital divide is acute here. In the Eastern
\nIndonesia provinces, only 0.02 percent of the population has
\nfixed-line phones. The cell-phone revolution, a bright light in
\nIndonesian economy, pales behind Indonesia's Asian neighbors,
\nwith only an estimated 20 million mobile numbers, many owned by
\naffluent Jakartans with more than one phone number. The PC
\n(0.9 percent) and Internet (0.4 percent) penetration rate is
\namong the lowest in Asia -- a tenth of Thailand's rate, a
\nfiftieth of South Korea's. Indonesian schools have fewer
\ncomputers per capita than obscure countries like Mongolia.
\nIndonesia has hardly any citizen services from e-government, e-
\nhealth and e-education -- all preconditions for making government
\nwork smoothly and transparently.<\/p>\n
Dramatic reforms in regulatory policies could reverse these
\nfacts. Despite a few years of liberalized telecom policies, the
\ngovernment still protects vested interests while honest ISP and
\nWarnet entrepreneurs, such as those affected by the recent
\n\"sweepings\" in Yogyakarta, are shut out. It was very good news
\nthis year when the country's \"universal services obligation\"
\n(USO) tax of 0.75 percent of telecom revenues were announced. The
\nplan is to create a fund to extend telecom to the poor in the
\nremote and rural areas. But it is unclear where funds will go,
\nwho will benefit, or whether non-incumbent telecom operators will
\nbe able to bid for the build-out.<\/p>\n
How to change this circumstance? The key lies in the
\nformation of powerful strategic alliances that combine reformers
\nin government with commercial providers armed with the latest
\nwireless technologies. Lacking a Thaksin-like strong man, many
\nthink that Indonesia will be forever stuck with a poor regulatory
\nregime. But investor coalitions that project a united view of
\nIndonesias economic transformation can become a powerful lever
\nfor change.<\/p>\n
The good news is that investors are no longer skittish. A few
\nyears ago, at the end of the Soeharto period, foreign telecom
\ninvestors like France Telecom, NTT, Australia's Telstra and AT&T
\ngot burned after being invited into to help build a new telecom
\ninfrastructure of Indonesia. The mood began to shift two years
\nago when Singapore's Singtel and STT showed that significant
\nprofits could be made by opening up mobile markets in Indonesia
\nin partnership with PT Telkom and PT Indosat. Now the mood is
\nmore upbeat still.<\/p>\n
\"There is a new willingness among investors to work this out,\"
\nsays Lai Yit-Loong, Managing Director of Intel-SE Asia, sponsor
\nof an upcoming Oct. 5, Harvard Club Jakarta meeting for ICT
\nInvestors that will focus on this issue. \"For businesses it about
\nbringing at least 100 million Indonesians into established
\nmarkets. Finding the right formula for doing so can help the poor
\nand boost security at the same time.\"<\/p>\n
Tomorrow, in the second part of this series, we will consider
\nfour new trends that make possible new strategic alliances that
\ncan extend the benefits of information and communications
\ntechnology to all Indonesians.<\/p>\n
Craig Warren Smith (craigwarrensmith@hotmail.com), a visiting
\nscholar with the Fairbank Center for East Asian Studies, Harvard
\nUniversity, helped created the UN ICT Task Force. Idris F
\nSulaiman (idriss@indo.net.id), international affairs advisor to
\nthe Indonesia IT Federation.<\/p>",
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