Dotcom euphoria

Hardly a day goes by in Indonesia now without a news announcement of a new dotcom company, a new web or portal site, or a new Internet Service Provider opening shop. Although a late starter compared to most other Asian countries, Indonesia has finally been caught up in the dotcom euphoria.

Dotcom is probably about the only business that has thrived these past few months while the Indonesian economy struggles to come out of its deep recession. So much money, most originating from abroad, has poured into the nascent industry. The way foreign investors are coming in, they obviously need no convincing about the prospects of the dotcom business in Indonesia, even as the country's political climate and security conditions remain uncertain. Unlike investors in manufacturing and other sectors, they did not wait around for more government assurances about the security of their business.

Indonesia's dotcom business has marched on even after the bubble burst in many parts of the world last month. Share prices of many overseas dotcom companies plunged then, but they have since recovered to again reinvigorate the business worldwide. The ILOVEYOU virus attack on millions of computers around the world last week will most likely be regarded as a small glitch when the dust settles. Indonesia's backwardness in computer usage has its merits as it is not as exposed to computer glitches as most other countries. But with the country now finally joining others in the digital era, Indonesia cannot count on being spared from similar attacks in the future.

Given the huge sums of money and resources devoted to building these dotcom companies, one would have thought that this is a money-spinning industry. But that is not the case. It is far from a surefire business. The bottom line is that only a few dotcom companies are profitable ventures. Many of the large ones, including popular bookseller Amazon.com, are losing millions of dollars. While some Indonesian dotcom companies may boast of making some money, they can hardly cover their operations, let alone the initial investments.

Although most dotcom companies have yet to figure out where the streams of revenue will come from, that has not stopped investors from believing that this is where the future is. They know that computers and the Internet will sooner or later revolutionize the way people communicate and conduct business. This is where dotcom companies come in. However, with uncertainties about their commercial viability, only a few of these, if any, will survive the rigorous competition. These are likely to be the ones with enough capital backing to outlast competitors. Hence the reason for dotcom companies rushing to make initial public offerings (IPOs) to raise capital through the stock exchange.

Indonesia, with a population of over 210 million, is certainly an alluring business proposition for dotcom companies. Just imagine what it would mean for business even if only half or a quarter of the population was connected to the Internet. Any optimistic prediction however must be tempered with reality. There are currently only 200,000 Internet subscribers and 1.5 million users in Indonesia at the last count. And only two million people in Indonesia currently have personal computers.

The number of people with access to computers or the Internet will certainly grow, but at what speed will largely be determined by the development of the infrastructure, particularly fixed telephone lines. Telkom currently has only managed to provide six million telephone lines throughout the country.

There will be many other problems encountered along the way before we can expect the number of people using dotcom services to pick up significantly in this country. Personal computers are still considered a luxury for most people and so it will be some time before even a significant minority of the population adapt to the e-commerce world. Telephone rates in Indonesia are still prohibitively high for people to want to log on to the Internet for any reasonable length of time.

There is no doubt that Indonesia will have to catch up with other countries in moving toward the digital era. What is sorely lacking in Indonesia is government involvement in the endeavor. The government would do well to emulate Singapore and the United States where public usage of the computer and the Internet are being encouraged, sometimes with government financial assistance.

The way things have been developing in Indonesia, the corporate world appears to have taken the lead in pulling the country into the digital era. The dotcom euphoria so far is a corporate phenomenon. The public has been slower to adapt, and the government, which is seemingly ignorant of the challenges of the digital world, is lagging even further behind.