Four roads to e-commerce development in RI

Four roads to e-commerce development in RI

By Christiani Tumelap

JAKARTA (JP): E-commerce was only beginning to be discussed by
certain interest groups here in 1995, when the worldwide web had
already become popular and useful for many companies in the
United States.

There are various economic and social factors hampering the
introduction of Internet use and Internet trade in Indonesia. The
country is lacking a solid and clear vision, or a plan of action
to boost the development of e-commerce, according to keen
observer in telecommunications, Risa Bhinekawati.

Risa, who is the executive director of the Indonesian
Telecommunications Society (MASTEL), believes that Indonesia will
eventually enjoy the benefits of e-commerce, if the government
and concerned parties speed up the establishment of required
infrastructures.

MASTEL is an open and independent organization of
telecommunications executives from the private and public
sectors.

Risa, who joined MASTEL in early 1997, took a year off in 1998
when she was awarded the Australian Merdeka Fellowship to pursue
an MBA degree in Managing in Asia at the Australian National
University. In 1999, Risa returned to continue her work at
MASTEL.

In a recent interview conducted by e-mail, Risa, 34, shared
with The Jakarta Post her analysis of and recommendations for
better and faster e-commerce service in Indonesia.

Question: How do you describe the current state of e-commerce
practices in Indonesia?

Answer: E-commerce is still at an early stage of development
here although the trend is very promising as the growth of
Internet connections and domain names (website addresses) is
predicted to exceed 100 percent in the next few years.

So far, there is no total e-commerce system in place as
banking settlements are still done traditionally. The Indonesian
market is still underdeveloped and unexplored.

The development of e-commerce is very much related to the
socio-economic conditions of a country. There are only six
million telephone lines -- which is the most basic element to
enable e-commerce practice -- available in this country of over
210 million people.

Another factor behind the low penetration of computer use in
this country is the fact that not many people, or only about 2.5
million, have accesses to computers. And of the 2.5 million, only
about 200,000 people subscribe to Internet service providers.

Not many can afford computers, a condition which is not too
surprising since our annual income per capita is still around
US$500. Furthermore, the holders of debit and credit cards are
still limited to medium to high-income earners living in big
cities.

How many companies are now involved in either business-to-
business or business-to-customer e-commerce in Indonesia?

There are no real statistics about the number of companies.
But as in many other countries, in Indonesia the b-to-b market is
much bigger than b-to-c. I can mention several major players such
as Indosat with its Indosatcom specializing in b-to-b services.
Their clients include Martha Tilaar, which focuses on b-to-b
trade within its chain of productions, and Indonesia Interactive
(I-2) mall, which specializes in b-to-c commerce.

PT Pos Indonesia through its wasantaranet also facilitates e-
commerce for small and medium enterprises (SMEs). Other companies
involved in b-to-c commerce are Sanur Book Store, Javacraft and
BII.

The domain names have been growing very fast, doubling from
600 sites in 1997 to 1,200 sites in 1998. The Indonesian ISP
Association predicts that annual growth will exceed 100 percent
for the next few years.

I don't have specific data on e-commerce transactions in
Indonesia. But the International Data Corporation (IDC) estimated
that Indonesians spent less than US$20 million on Internet
commerce from 1996 to 1999. The IDC predicted that figure will
double to about $40 million this year. Another source, Forrester
Research, estimates that the total e-commerce transaction value
in Indonesia in 2000 is around $100 million, only 0.026 percent
of total world transactions which is around $390 billion.

You were involved in a recent conference on the Internet in
Vancouver where you met delegations from other countries. What
was the most striking difference you found about Internet and e-
commerce development in Indonesia as compared to that of other
countries?

Malaysia, Singapore, Thailand and the Philippines have already
positioned e-commerce as a national strategy, although each
country has its own vision. Singapore's vision is to become the
hub of e-commerce activity in ASEAN, while Thailand aims to use
e-commerce as a driving force for economic recovery, especially
in boosting its export activities. Governments in the four
countries function as effective facilitators in coordinating e-
commerce development so that public and private sectors have
clear guidelines concerning e-commerce development in their
countries.

In Indonesia, unfortunately, efforts to develop e-commerce are
still very fragmented, although e-commerce has been developed to
some extent, anyway. We do have Nusantara 21 or "Telematika
Nasional" as a national vision for the Indonesian information
infrastructure where e-commerce is part of the concept. But, the
vision is not adequately shared among stakeholders yet.

How does e-commerce benefit people?

E-commerce basically is a tool of trade. One thing for sure,
it will help common people to buy things easily and effectively
without having to spend their time in traffic jams to reach the
packed malls and queue in front of the cashiers.

As for the companies, it will bring new markets, new services,
competitive advantage increments, customer expansion, better
company and product relations, work processing reductions,
efficient business processes and less bureaucracy.

Have you tried e-commerce?

When I was in Australia, I reserved my accommodations and made
travel arrangements through the Internet. It was really
convenient.

Have any complaints been heard from providers or users?

One of the main concerns is security, i.e., insecurities about
using a credit card on the Net.

How do people feel about the need for e-commerce?

Small niches of people and companies have started to feel the
need for the e-commerce. But generally, people don't. It takes
education and socialization, even for highly educated and high-
income earners because practicing e-commerce also means changing
some attitudes in doing business.

Do you really think that the traditional way of shopping,
which involves all the fun of visiting malls, touching, sensing
and bargaining, can be replaced by virtual shopping?

I think it will depend on what kind of products or services
the consumer wants to buy. For some products such as books or
software, e-commerce transaction will be easier to adopt. For
products such as fashion and jewelry where the customer wants a
particular fit, I think it will take some time for Indonesian
consumers to really believe that e-commerce is a good way to
shop. I know that in other countries such as the U.S., chain
stores like JC Penney offers customer an exact size of their
clothes by fitting the consumers' sizes with the clothes they
order virtually.

Should we speed up the familiarizing of e-commerce despite the
fact that we are lacking infrastructure?

Yes, as soon as we can afford PC and an Internet access, we
should. At least we should make efforts to familiarize ourselves
with digital practices, such as e-mails and finding information
through the Net. Indonesia should gradually increase its
"bandwidth consumption" from mere telephony bandwidth (using
telephones for voice communication) to Internet bandwidth. There
is no doubt that e-commerce will become the future tool of the
trade.

Is there any law that regulates and guarantee the practice in
Indonesia?

There is currently no specific law on that. The UN has a model
law on e-commerce and e-signatures that could be adopted by
countries that practice e-commerce. In Indonesia, I am aware that
this law is being studied by several institutions including the
Ministry of Law and Regulations and the University of Indonesia.

What are the challenges and the prospects of practicing e-
commerce in Indonesia?

I think some of the biggest challenges facing Indonesia in
practicing e-commerce include the lack of national vision and
strategy at the highest level, causing fragmented efforts in the
implementation of e-commerce. We still don't have good synergy
among players, including the government and companies. It would
be good if we had a road map about what has been done and what to
do next.

We are lacking adequate infrastructure, such as telephone
lines, while the existing equipment and services -- including
computers and Internet services -- are not affordable to many
because they are too expensive. Our human resources also lack the
capability to adopt adequate technology diffusion.

I believe that Indonesia can catch up if we are committed to
overcoming all the obstacles. Significant improvements in overall
economic conditions in Indonesia will certainly propel the
penetration of computers.

What should be done here in order to boost the development of
e-commerce?

Efforts to develop Indonesian capabilities in e-commerce are
not easy, but it is not impossible.

In general there are four key agendas to be followed by the
government, public and players. First, building trust in the
digital economy. That includes the establishment of firm
protections of security, privacy and consumer's rights.

Second, clarifying marketplace rules. It includes the removal
of barriers to the use of e-commerce, establishment of the legal
and commercial framework, financial issues and taxation, and
intellectual property protection. Legal frameworks are important
to provide security for both players and customers.

Third, strengthening the information infrastructure. E-
commerce will not grow without a strong platform that includes
network access and availability and open standards.

And fourth, realizing the opportunities. E-commerce is part of
a broader process of economic, social and cultural change. It is
characterized by the globalization of markets and the shift
towards an economy based on knowledge and information.

We also need to repackage the way we introduce e-commerce so
that common people don't see it as something too sophisticated
but simply as a tool to do business. We need to develop programs
in Bahasa Indonesia so that Internet can be more easily
understood and used by Indonesians.