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Indonesia

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Indonesia

  1. 1. Indonesia!Assessing the case for a business software provider entering this market GIP Group 59!1121227          1113221          0937052          1120739          1131940          1120642    
  2. 2. 9! Political (Utexas)  Group 59 | Business Software Provider - Indonesia  
  3. 3. 9 Political (Masjamal  Blogde2k)   (Sejarahku,  2011)   (Ysulaiman)     Prabowo Subianto Aburizal Bakrie MegawatiGroup 59 | Business Software Provider - Indonesia   Sukarnoputri
  4. 4. 9 Political •  Global competitiveness •  Business friendly political climate •  Increasing political stability (Umpungeng)  Group 59 | Business Software Provider - Indonesia  
  5. 5. 9 Political •  Wide Spread corruption•  Political interventionGroup 59 | Business Software Provider - Indonesia  
  6. 6. 9! Political Strengths   Weaknesses   Improving  compe22veness     Widespread  corrup2on     Business-­‐friendly  poli2cal   Poli2cal  interven2on   climate  Group 59 | Business Software Provider - Indonesia  
  7. 7. 9! EconomicGroup 59 | Business Software Provider - Indonesia  
  8. 8. 9 Economic•  One of the fastest growing and most promising economy in the world•  Expected to become 7th largest economy of the world by 2030•  Strong fiscal position, high net capital inflows, growing consumer class -> credit rating updated to investment grade by Fitch and Moody’s -> therefore increasing foreign investors interest Foreign  direct  investment,  net  inflows  (BoP,  current  US$)   20,000,000,000   15,000,000,000   10,000,000,000   5,000,000,000   0   2003   2004   2005   2006   2007   2008   2009   2010   2011   -­‐5,000,000,000   Source:  The  World  Bank  Group 59 | Business Software Provider - Indonesia  
  9. 9. 9 GDP trends - Economic Figure  1.  GDP  and  GDP  growth  in  Indonesia    •  Constant GDP growth of around 6% since 2010 and 1600   10   trend expected to continue 1400   9   8   1200   7  •  High domestic consumption 1000   Growth  rate  (%)   6   (around 75% of GDP) and $  Billion   800   5   small contribution of exports 600   4   to GDP allow it to cope well 3   400   with crisis and slowdowns 2   200   1   0   0   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   Source:  IMF,  2012   GDP  Group 59 | Business Software Provider - Indonesia  
  10. 10. 9 Inflation & Unemployment - Economic Figure  3.    Indonesia’s  InflaLon,  consumer  prices  (annual  %)  •  In 2012, record low inflation of 16   4.3% because of weaker 14   growth 12   10  •  However, expected to 8   6   increase to 5.2% in 2013 4   because of strong growth 2   momentum 0   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   Source:  The  World  Bank,  2012  •  Various government measures helped decrease unemployment constantly since 2006Group 59 | Business Software Provider - Indonesia  
  11. 11. 9 Interest Rates - Economic•  Central bank holds interest rates at a record low level of 5.75% after concerns due to 2012 slowing growth•  Consumer demand has therefore increased Group 59 | Business Software Provider - Indonesia  
  12. 12. 9 Exchange rates - Economic•  Indonesia Rupiah represent a real risk for foreign investors•  Considered as one of Asian worst performing currency in 2012•  Expected to continue its weakening in 2013 before recovering in 2014 Figure  5.  Indonesian  Rupiah  per  US  Dollar   12000   11500   11000   10500   10000   9500   9000   8500   8000   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   Source:  The  World  Bank,  2012  Group 59 | Business Software Provider - Indonesia  
  13. 13. 9! Economic Strengths   Weaknesses   Solid  macroeconomic   Too  dependent  on  Asian   environment     countries   Stable  economic  growth   Vola2le  exchange  rates   High  FDI  inflows  especially  in  IT   Low  GDP  per  capita   High  domes2c  consump2on   Diversified  economy    Group 59 | Business Software Provider - Indonesia  
  14. 14. 9! Sociological Group 59 | Business Software Provider - Indonesia  
  15. 15. 9 Young Work Force - Sociological The  Demographics  of  Indonesia   80.0   70.0   60.0   50.0   40.0   30.0   20.0   10.0   0.0   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   Popula2on  ages  0-­‐14  (%  of  total)  SP.POP.0014.TO.ZS   Popula2on  ages  15-­‐64  (%  of  total)  SP.POP.1564.TO.ZS   Popula2on  ages  65  and  above  (%  of  total)  SP.POP.65UP.TO.ZS   Data  from  WorldBank(2012)  Group 59 | Business Software Provider - Indonesia  
  16. 16. 9 Skilled? - Sociological Labour  force  educaLon   70.0   60.0   50.0   40.0   30.0   20.0   10.0   0.0   1993   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   Labor  force  with  primary  educa2on  (%  of  total)  SL.TLF.PRIM.ZS   Labor  force  with  secondary  educa2on  (%  of  total)  SL.TLF.SECO.ZS   Labor  force  with  ter2ary  educa2on  (%  of  total)  SL.TLF.TERT.ZS   Data  from  WorldBank(2012)  Group 59 | Business Software Provider - Indonesia  
  17. 17. 9 Work culture - Sociological (Morris  2005)  Group 59 | Business Software Provider - Indonesia  
  18. 18. 9 Work culture - Sociological Group 59 | Business Software Provider - Indonesia   Data  from  WorldBank(2012)  
  19. 19. 9 Consumerism … (TheBestTravelDestinations 2012) (MercyCorps 2011)Group 59 | Business Software Provider - Indonesia  
  20. 20. 9 Digital Literacy Internet  users  (per  100  people)   Mobile  cellular  subscripLons   20   (per  100  people)   120   18   16   100   14   12   80   10   60   8   6   40   4   20   2   0   0   1995   1997   1998   1999   2001   2005   2007   2008   2009   2011   1994   1996   2000   2002   2003   2004   2006   2010   2003   2004   2005   2006   2007   2008   2009   2010   2011   Data from WorldBank(2012)Group 59 | Business Software Provider - Indonesia  
  21. 21. 9! Sociological Strengths   Weaknesses   Young  and  educated  work  force   Social  tension   Low  Wage   ‘Par2cular’  work  culture   Employee  loyalty   Scarce  skilled  labour     Growing  consumerist  culture   Stagnant  labour  produc2vity   Digitally  literate  popula2on  Group 59 | Business Software Provider - Indonesia  
  22. 22. 9! Technological Group 59 | Business Software Provider - Indonesia  
  23. 23. 9 Mobile vs Domestic - Technological•  Greater use of mobile technology•  Broadband services mainly business orientated Internet  users  (per  100  people)   Mobile  cellular  subscripLons  (per  100  people)   20   120   100   15   80   10   60   40   5   20   0   0   1994   1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2003   2004   2005   2006   2007   2008   2009   2010   2011   Data from WorldBank(2012)Group 59 | Business Software Provider - Indonesia  
  24. 24. 9 R&D - Technological•  Government’s R&D budget is less than 1% of total state expenditure •  Low innovationHowever,•  USA partnership•  4G due soonGroup 59 | Business Software Provider - Indonesia  
  25. 25. 9! Technological Strengths   Weaknesses   A  4G  Network   Low  R&D  spending   Strong  current  growth   Lifle  innova2on   Large  poten2al   Sogware  piracy  Group 59 | Business Software Provider - Indonesia  
  26. 26. 9! Legal Group 59 | Business Software Provider - Indonesia  
  27. 27. 9 Anti-Corruption Law - Legal •  Stricter laws •  New corruption court However, •  Weak Enforcement!Group 59 | Business Software Provider - Indonesia   (News.Az,  2011)  
  28. 28. 9 Intellectual Property Law - Legal •  Computer software piracy rate •  87% •  Weak protection of copyright •  Lack of transparency in court system •  Unable to learn legal principlesGroup 59 | Business Software Provider - Indonesia  
  29. 29. 9 Labour Law - Legal •  Rigid! •  Terminating employment contracts? •  High severance pay •  Outsourcing? •  No longer available!Group 59 | Business Software Provider - Indonesia   (Anurag  Tomar  and  Associates)  
  30. 30. 9 Income Tax Law - Legal •  Reduced from 28% to 25% •  Relatively low? •  Germany: 29.48% However, •  UK 2013: 23% •  Hong Kong: 16.5% •  Slight attractionGroup 59 | Business Software Provider - Indonesia  
  31. 31. 9! Legal Strengths   Weaknesses   New  an2-­‐corrup2on  legisla2on   Social  prevalence  of  piracy     Low  flat  corporate  tax     Corrup2on  and  lack  of   transparency  in  the  court   system   Rigid  labour  laws    Group 59 | Business Software Provider - Indonesia  
  32. 32. 9! Environmental Group 59 | Business Software Provider - Indonesia  
  33. 33. 9 Environmental SUPPORT  FOR  GEOTHERMAL  AND  GAS  INDUSTRY     •   Op2mising  energy  mix.   •  Scaling  up  renewable  energy                sources  such  as  geothermal     (Giz  Renewable  Energy  Project)                                                                ABUNDANCE  OF  NATURAL  RESOURCES     •   Unexplored  due  to  the              lack  of  technology   •  Revising  the  law  to  permit     (The  Wall  Street  Journal,  2010)            foreign  investors  Group 59 | Business Software Provider - Indonesia  
  34. 34. 9 Environmental WATER AND AIR POLLUTION •  Inadequate measurement in monitoring the air quality •  Emission test on vehicles and Car Free day •  Water sanitation program is being launchGroup 59 | Business Software Provider - Indonesia  
  35. 35. 9 Environmental NATURAL DISASTER •  Situated between the Pacific Ring of Fire and the Alpide Belt •  Recent examples : •  earthquake with a magnitude of 8.6 •  Mount Lokon, a volcanic mountain had erupted •  Flooding in Jakarta (The  Guardian,  2012)  Group 59 | Business Software Provider - Indonesia  
  36. 36. 9! Environmental Strengths   Weaknesses   Government  support  for   High  occurence  of  natural   geothermal  and  natural  gas   disasters  such  as  floods  and   industry   earthquake   Abundance  of  natural   Need  for  advanced  technology     resources     Ac2ons  against  air  and  water   pollu2on   Resilient  businesses    Group 59 | Business Software Provider - Indonesia  
  37. 37. 9! Porter’s FactorsGroup 59 | Business Software Provider - Indonesia  
  38. 38. 9 Porters Factors PHYSICAL RESOURCES •  Diverse natural resources but largely remains untapped due to lack of technology. •  Government is scaling up renewable resources •  Renewable Energy Sources in Eastern Indonesia, Metropolitan Sanitation Management and Health Project II, Water Supply and Sanitation Sector Development, Geothermal Power Development Project. KNOWLEDGE RESOURCES •  Privatisation lead to upgrade in IT system. •  Companies have low awareness on IT upgrade. •  High levels of piracy reducing incentives to innovate. Group 59 | Business Software Provider - Indonesia  
  39. 39. 9 Porters Factors PERSONNEL •  Labour force is becoming more qualified •  Competitive salaries provide cost-saving. •  Collaboration with Germany, Japan, and US in education program to improve the quality of personnel in IT industry. INFRASTRUCTURE •  Archipelago’s infrastructure need to be improve. •  Public Private Partnership (PPP) scheme. •  Extensive roads, railways, waterways and 652 airports ensuring high accessibility. •  Fastest growing mobile phone market in Asia-Pacific.Group 59 | Business Software Provider - Indonesia  
  40. 40. 9 Porters Factors CAPITAL RESOURCES •  Credit rating improvement. •  Relatively low-cost of issuing debt. •  Government is encouraging private firms to issue bonds. •  Low liquidity in stock market. •  Domestic-oriented economy •  Bond market is vulnerable towards global shrinking in capital and risk aversion. Group 59 | Business Software Provider - Indonesia  
  41. 41. 9 Conclusion" ! Strengths Weaknesses Rising demand Weak IPR for software protection Improving Corruption infrastructure and skilled labour force. Political Natural disaster- unpredictability resistant business environment Low IT business penetration Low wages UnconventionalGroup 59 | Business Software Provider - Indonesia   work  culture  
  42. 42. 9 References •  hfp://www.reuters.com/ar2cle/2012/10/22/us-­‐indonesia-­‐economy-­‐fdi-­‐idUSBRE89L04220121022   •  Morris,  D.P.  (2005).  Women  work  in  the  Sampoerna  clove  cigarefe  factory  in  East  Java  of   Indonesia.  [Online].  (URL  hfp://dpm888.photoshelter.com/image/I00002XNWM7ytxzA).  (Accessed   06.02.2013)   •  TheBestTravelDes2na2ons.  (2012).  Afrac2ons  in  Jakarta.  [Online].  (URL   hfp://thebesfraveldes2na2ons.com/wp-­‐content/uploads/2010/03/Jakarta2-­‐600x408.jpg).   (Accessed  06.02.2013).   •  MercyCorps  (2011).  Boos2ng  disaster  resilience.  [Online].  ( hfp://www.mercycorps.org/contributors/bijagutoff?page=3)  (Accessed  06.02.2013).     •  Giz  renewable  energy  project,  Geothermal  Plant  (online  image).  Available  at:  hfp:// www.renewableenergy.org.vn/uploads/news/id1751/Geothermal%201.jpg  (Accessed:  5th  february   2013)   •  The  Guardian,  Mount  Lokon  Erup2on  (Online  image)  available  at:  hfp://cdn.theguardian.tv/bc/ 281851582/281851582_1056003248001_20110715volcano-­‐4946336.jpg?pubId=281851582   (accessed:  5th  January  2013)   •  The  Wall  Street  Journal,  Oil  Drilling  (online  image).  Available  at:  hfp://si.wsj.net/public/resources/ images/OB-­‐HZ730_oildri_G_20100331084657.jpg  (Accessed:  9th  February  2013)   •  The  Jakarta  Post,  Car  Free  Day  Emission  reduc2on  (Online  image).  Available  at:  hfp://si.wsj.net/ public/resources/images/OB-­‐HZ730_oildri_G_20100331084657.jpg  (Accessed:  9th  February  2013)    Group 59 | Business Software Provider - Indonesia  

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