Mon, 13 Mar 2000

E-business to boom after 5 years

JAKARTA (JP): Despite the continued launching of new Internet sites, portals and related services by local and foreign firms, Indonesia's Internet market will start booming only in the next five to six years, an analyst has said.

The chief of the research division at securities company PT Nomura Indonesia, Goei Siauw Hong, said that within the five-to- six-year period Indonesia was expected to develop a densely populated online community and an adequate infrastructure to create a more conducive market for e-business.

"Internet business is surely very promising. But it's not going to earn a company profit in a year or two if it operates in such an unprepared market like Indonesia," he told The Jakarta Post on Saturday.

He said Internet companies operating in Indonesia could start generating profit in three to five years after they commenced operations in line with an increase in online advertising.

He said Indonesia with its 210 million population and predicted five million Internet users by 2002 was undoubtedly a highly potential market for e-business.

However, many foreign investors do not see Indonesia as attractive as neighboring countries like Singapore or Hong Kong because they consider the market here less feasible, he said.

"Most investors always head for the ripe markets first. They stormed the U.S. market when the Internet craze hit the country a couple of years ago and are now moving to Asia, especially Singapore and Hong Kong, where there is so much hype about dot- com," he said.

Hong said Indonesia's Internet market was two or three years behind the U.S. and one year behind Singapore and Hong Kong, where Internet infrastructure and online communities were already well developed and listed Internet companies were aplenty on the local markets.

There are currently only 2.06 million telephone lines in Indonesia. There are an estimated four million personal computers in the country, while the estimated number of Internet users is over one million.

There is hardly any Internet-oriented companies with good track records listed on the Indonesia stock markets.

Several listed firms, like insurance firm Asuransi Lippo Life (Lippo E-net) and electronics and office equipment suppliers Astra Graphia, Multipolar and Metrodata Electronics, have announced their plan to establish Internet companies.

Multipolar says it will develop high speed Internet access using fiber optic with an investment of Rp 130 billion (US$18.5 million); Metrodata will create a portal site, Internet service and business-to-business e-commerce worth at least $2.5 million; and Lippo Life will expand business to Internet and e-commerce businesses.

Hong said it was still not clear whether these companies were serious in developing on the Internet or had just taken advantage of the Internet fever taking many stock markets by storm, including Indonesia, to boost the sales of their stocks.

"We have not seen any clear, detailed business plans made by these companies to explain their strategies in developing their new Internet businesses," he said.

Several of the newly established e-companies, such as news portal, which is jointly owned by local PT Agrakom and Hong Kong-based venture capital firm, and consumer-based portal, which is owned by international business information firm Castle Group and India- based Internet application developer Edge NetVentures, have also announced their plans to go public in the near future.

They said they needed to raise more funds to finance their Internet development.

Some analysts predict that shares that could lure foreign investors the most would likely be those owned by Metrodata Electronics because the company's operations focus on the supply of computers, which was currently the most used medium for Internet access.

Hong said he expected to see more foreign investors enter the Indonesian market to look for potential listed or nonlisted companies next year.

He said that while some investors preferred to wait for the market to ripen, others decided to start their investments here early amid the currently undeveloped market in order to build a solid foundation for their future businesses.

Foreign investors already here include Singapore's Arboc Investments Pte Ltd., Hong Kong's Axiom Funds Management and Geneva-based Alternative Investment Management Group, which entered Indonesia's Internet market late last year through its Southeast Asia portal operator Group, which bought a local existing Internet firm and developed a new search engine portal,

California-based IT company Inc. is also reportedly ready to acquire a 90 percent stake of local multimedia firm PT Jaring Data Interaktif.

Through the alliance, and Jaring Data said they would focus the business on providing Internet access through telephone and satellite as well as developing web server and e- commerce services. (cst)