1. PRODUCT MARKET STUDY: ICT in Indonesia
Date: May 2011
1. Overview of the Industry
ICT sector in Indonesia is highly regulated by the Ministry of
Telecommunication and Information Technology
(www.depkominfo.go.id). The Ministry of Communication and
Information Technology (Departemen Komunikasi dan Informatika
Republik Indonesia) is responsible for national policy formulation, policy
implementation, and technical policies in the field of communication and
informatics, including the postal, telecommunications, broadcasting,
information technology and communications, multimedia services and
the dissemination of information.
The Minister of infomation and technology Tifatul Sembiring recently
obtained exciting news through diplomatic correlation from Ambassador at
the Permanent Representative of Indonesia in Geneva on news Indonesia
ranked at the World Economic Forum Global Information and Technology
Report (GITR) from 2010 to 2011.
The Diplomatic correlation which is also addressed to the Minister for
Economy, Minister of Foreign Affairs, Minister of Finance and Minister of
Trade. According to the report, in GITR year 2010 - 2011, Indonesia
ranked NRI (Networked Readiness Index) to-53, up from rank 67 in 2009-
2010.
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2. Thus, Indonesia is ranked ahead of NRI rankings from a number of certain
developed countries (major emerging economies) and countries in Europe
and Latin America such as Brazil, South Africa, Poland, Turkey, Russia
and Argentina. Meanwhile, among the ASEAN member countries,
Indonesia ranked no-3 after Singapore and Malaysia.
2. Demand and Market Development
The Indonesian IT market should grow at a compound annual growth
rate (CAGR) of 17% over the 2011-2015 period, with a revival in
business spending building on momentum from consumer spending in
2010. In 2010, demand for IT products and services recorded double-
digit growth.
Industry Development in 2010, Indonesia’s information society
development received a boost when the government said that the
immigration office would start to introduce e-passports. Indonesia will
thus follow in the footsteps of other South East Asian countries like
Singapore, Malaysia and Thailand. The immigration department plans
to distribute 10,000 e-passports in the first phase, with these being
mainly available in immigration offices in Jakarta, Semarang and
Surabaya.
In April 2010, the government said it was ready eliminate duties on
personal computer (PC) components in a bid to assist the local PC
industry. Nearly all PC components, such as motherboards and graphic
cards, used by the industry are imported which means manufacturers
have to pay import duties.
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3. ICT sector is also part of Government infrastructure development as
stated in Instruksi Presiden No. 01 2010. The government has set a clear
concept of developing ICT infrastructure so it would be useful in facilitating
efficient public economic activities, especially the businessmen’s activities
to support economic development. The concept is as follow:
 distributing access trough universal service obligation (USO)
program by developing access subscriber for 25,000 villages all
over Indonesia.
 developing ‘desa pinter’ (smart village) which is distributing internet
access to villages. Government has been preparing the project
auction for developing 5,748 district internet service centres.
 accelerating the development of broadband access or broadband,
with or without cable, as well as broadband backbone network. The
development of the backbone broadband network is the priority and
has been started through Palapa Ring Project in Eastern Indonesia.
The Palapa Ring Project consists of a total of 35,280 km subsea cable
(16,000 km shallow sea, 12,885 km middle sea and 6,394 km deep sea)
including buoy. The total of 20,739 km land cable (Sumatera 7,402,5 km,
Jawa 3,542 km, Kalimantan 5,345 km, Sulawesi 5,813 km, Maluku 2,988
km, Nusa Tenggara 3,480 km and Irian 4,958 km) and consist of 2,063 km
Connecting Rings (redundancy, fail over loops)7 Rings connecting 465
municipals city within 33 Province.
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4. 3. Prospects of IT Industry in Indonesia
Progressive deregulation of the Indonesian telecommunication sector,
increased technology adoption, and a large youth population (aged less
than 25 years) represent both long-term opportunities and short-term
challenges for the market. The recent establishment of copyright
protection laws, Internet subscriber growth, and the increase in IT
expenditure by corporate sectors will lead to a new chapter of IT
development in Indonesia.
Indonesia is expected to be one of the best regional IT market growth
propects over Business Monitor International (BMI) five-year forecast
period. IT spending is forecast to increase to US$5.1billion in 2011, up
from US$4.5 billion in 2010. Some fundamental drivers, including low
computer penetration and growing affordability, should ensure that the
market remains firmly in positive growth territory. Growing investment in
data centres and other ICT infrastructure will drive demand for IT services.
By 2015, Indonesia’s hardware dominated IT market is projected to reach
a value of US$9.6 billion. With information and communication technology
(ICT) penetration of around just 20% and development restricted to richer
areas such as Java, the market has much growth potential.
The internet in Indonesia was launched in 1998 with 134,000 subscribers.
In 2004 that figure had grown to 1.3 million and in 2010, there were 30
million Internet users in Indonesia or about 13 percent of the population.
Broadband use is only about 18 percent of all internet users in Indonesia.
At the moment, Indonesia is the 5th largest Internet market in Asia (after
China, Japan, India, and South Korea). The number of Internet users in
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5. Indonesia is growing really fast (the highest growth among Asia countries
after China), especially the number of users who use their mobile phone to
access the Internet. In five years, about half of the Indonesian population
or 150 million people are projected to have access to the Internet (most of
them through their mobile phone).
4. Assessment of Prospects for and Opportunities for Malaysian
Exporters
1. E-government
* E-government is expected to emerge as an area of growing opportunity for
IT vendors over the next couple of years. Currently, several ministries at
both federal and province level are planning to implement projects. In
2008, a number of projects were launched, including an e-procurement
system by the State Ministry for State Enterprise, which covered 25 state-
owned enterprises, including oil and gas company Pertamina and
electricity company Perusahaan Listrik Negara.
* The government is also rolling out new e-learning initiatives, which could
see education’s share of local IT spending rise from its estimated level of
around 4%. The current ratio of PCs to students in public schools is
around 1:3,200 and the government wants to increase this to 1:20. As
there are 53 million students in Indonesia’s schools system, this would
require at least 2.5 million computers.
2. Hardware
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6. * Hardware BMI forecasts 2010 Indonesian computer hardware spending of
around US$2.8 billion, up from US$2.5 billion last year. Growth
decelerated in 2009 but is forecast to return to double digits this year, with
the market rising to a value of nearly US$4.7 billion by 2014. Spending in
2009 surpassed initial expectations, due largely to notebook sales, which
surged with the popularity of netbooks; notebook sales grew faster than
desktop in year 2009.
* Hardware accounts for more than 70% of Indonesian IT spending. In
2009, the main driver was the consumer segment, which accounts for
around 25% of computer demand. In 2009, consumer demand was
resilient, growing 5.5% in Quarter 1 2009. The main drivers were growing
affordability and more credit availability.
3. Software
* Indonesia’s software sales are projected by BMI at US$475 million in
2010, up from an estimated US$410 million in 2009. In 2010, sales of
Microsoft’s new Windows 7 operating system has the potential to have an
impact, although much will depend on consumer and business confidence.
* There should also be a boost from systems upgrades delayed from 2009.
One market inhibitor is the continuing software piracy problem which, by
the local government’s own figures, loses Indonesian software companies
alone more than US$100 million a year. Over the forecast period,
enterprise resource planning (ERP) software continues to be of most
interest to the small and medium-sized enterprises (SMEs) market as
currently only around 20% of Indonesian SMEs are estimated to make use
of IT.
4. IT Services
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7. * Indonesia’s IT services market was estimated to be worth US$683 million
in 2010, recording double-digit growth from US$601 million in 2009, based
on BMI estimates. Currently, IT services account for only 17% of
Indonesia’s hardware-centric IT market sales. Hardware deployment
services remain the largest Indonesian IT services category, with
approximately a 20% share.
* In 2009, the banking sector continued to provide opportunities for IT
vendors, despite the fallout from the global financial crisis. Banks
continued with transformation strategies driven by factors such as new
technologies and services as well as regulatory compliance. However,
most opportunities are currently in fundamental service areas such as
system integration, support systems, training, professional services,
outsourcing and internet services.
5. E-Readiness
* Low telephone line density, high charges and low PC penetration are all
significant obstacles to higher internet penetration. However, the picture is
not all bad as there are signs of faster growth in user numbers and recent
surveys have shown that, amongst a very small elite, there is fast
adoption, by regional standards, of broadband and a willingness to pay for
video conferencing, security and other additional features. The
government is encouraging fixed wireless deployments, including WiMAX,
to bring the internet to more remote areas.
* The government is also rolling out an internet-based National
EducationNetwork, which involves 1,000 network points in five clusters
nationwide, designed to facilitate the use of the internet in schools.
Despite some advances in e-education, constraints remain due to poor
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8. infrastructure and lack of public awareness in a country where only
20million people own fixed-line telephones.
5. Issues in ICT Market in Indonesia
Under Article 72 of the Copyright Law No.19 of 2002, the use of
unlicensed software for commercial purposes is a criminal offence
punishable with imprisonment of a maximum of 5 (five) years and/or a fine
of a maximum of Rp. 500 million.
Companies need to be reminded that software piracy does not only mean
using an illegal piece of software bought from the streets. It includes
copying from an original CD-ROM for commercial use without adequate
licenses to use the software, and installing the software in more
computers than what the license allows.
As far as Indonesia is concerned, it remains one of the top ranking
countries with one of the highest software piracy rates in the world. As
Indonesia struggles to bring its problem with software piracy under control,
industry players say the problem is not pricing but awareness. According
to a representative from the Business Software Alliance, people in
Indonesia are not fully aware of how to find genuine software or how to
use official licenses.
Software piracy rates in Indonesia rose 1 percentage point to 87 percent
last year, according to the study, when commercial value of unlicensed
software installed on personal computers in the country reached $1.32
billion.
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9. 6. Conclusion
Malaysian companies interested to penetrate Indonesian ICT market is
advice to have direct contact with the key players and market visits is
often the best strategy. However, it has to be noted that many projects in
Indonesia have a long gestation period. It is often necessary to have some
in-market representation to maintain an awareness of project priorities,
follow issues driving the decision making process and consult with
interested parties on a regular basis.
The e-business sector in Indonesia is heavily dependent on intermediaries
such as software integrators, therefore a well established partner is
advisable. For consumer related products, traditional marketing strategies
such as advertising, promotions and product launches still apply. The
trend for Indonesia is focusing on telecommunications infrastructure and
solutions. There is also growing demand for mobile phone-related
applications/contents, and for niche/creative solutions including banking
and finance IT.
Useful Contact
Asosiasi Pengusaha Komputer Indonesia/Indonesia Computers Business
Association (APKOMINDO)
Mr.Suhanda Wijaya (General Chairman)
Harco Mangga Dua Blok I no.28
Jl. Mangga dua raya, Jakarta 10730
Tel: +62 21 6123781/6120143
Fax: +62 21 6120957
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10. E-mail: apkomindo.indo.net.id
Web: www.apkomindo.or.id
Asosiasi Piranti Lunak Telematika Indonesia/Indonesia Telematic
Software Association (ASPILUKI)
Mr. Djarot Subiantoro (President)
c/o. Pt Sigma Cipta Caraka
Menara Dea lt. 8 Mega Kuningan
Jl. Kuningan Barat IX Kav. E4.3 No.1
Jakarta 12950
Tel: +62 21 5762150, 93640738
Fax: +62 21 5762155
Email: aspiluki@indo.net.id
Website: www.aspiluki.or.id
Federasi Teknologi Informasi Indonesia/Indonesian Information
Technology Federation (FTII)
Mr. Teddy Sukardi (President)
Gedung Arthaloka lt. 11
Jl. Jend Sudirman
Tel: +62 21 36697792 / 6221 95992368
Fax: + 62 21 57939152
Email: ftii.info@gmail.com
Website: www.ftii.or.id
Association of Indonesian Internet Service Provider
Cyber Bld 11th floor, Jl. Kuningan Barat No 8
Jakarta 12710 Indonesia,
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11. Tel: +62-21 5296 0634
Fax: +62-21 5296 0635
Website: www.apjii.or.id
MASYARAKAT TELEMATIKA INDONESIA (MASTEL)
Graha MIK Lt 5 R. 504A, Taman Perkantoran Kuningan. Jl. Setiabudi Selatan
Kav.16-17, Jakarta 12920
Tel. +62-21 57941807, 57941813 ,
Fax. +62-21 57941813
Email : info@mastel.or.id,
http://www.mastel.or.id
Indonesian Mobile and Online Content Provider Association
www.imoca.or.id
Exhibition
IndoComtech 2011
Exhibition Dates : 9 – 13 November 2011
Exhibition Hours : 1000 – 1800 hrs
Venue : JCC (Jakarta Convention Center)
Event Organiser : PT.Dyandra Promosindo
The City Tower (TCT) 7th floor
Jl. M.H.Thamrin 81, Jakarta Pusat
Telp: 62-21-3199 6077
Fax: 62-21-3199 6177
Website: www.dyandra.com
Prepared by:
MATRADE Jakarta
May, 2011
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