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.