e-Commerce Empowerment for SMEs: Indonesia Case
Onno W. Purbo
Independent IT Writer
onno@indo.net.id
Indonesia
January 2001
Abstract
In this paper, we will look at human resource & knowledge issues in e-commerce
activities. Proposed strategy to empower the small medium enterprises (SME) based on
real life experience in building the Internet society in Indonesia will be described. Small
businesses would be the major focus in our case, as it will influence the majority of the
Indonesian people. In terms of business community, large firms who have ample
resources to upgrade their capabilities & adopt advance e-commerce to grow faster.
Schools and educational sector would be the most strategic entry point for long lasting
effect to move the country towards knowledge based society. Educate the society &
exposure to Internet would flatten the road for IT adoption & IT retention within the
society and, thus, transforming the society towards knowledge based society. The
proposed major strategies would be fairly simple:
o Knowledge generation in local language would be important to enable to society
towards information age. Several incentives should be given, such as:
 Incentive for IT writer to write more IT books.
 Training for trainers to create more IT evangelist. Normally, a good IT
writer may also be a good IT evangelist.
o Create knowledge infrastructure to enable efficient knowledge sharing. Legal
framework should be build especially for those who afraid to lose their
intellectual property right.
o Adopt simple e-commerce mechanisms. Focus on activities that enable larger
economical impact, such as, creating mailing list for B2B & regional marketplace.
Acknowledgement
I would like to thank many of my colleagues in the Indonesian Internet mailing lists
specially ukmnet@egroups.com, genetika@egroups.com, asosiasi-warnet@egroups.com,
friends at MASTEL, friends at Ministry of Foreign Affair as well as APEC secretariat
that enable me to do these tasks. Special thank should go to my colleague Derry
Pantjadarma derry@citn.or.id and Budi Kawi telebiro.bandung0@clubmember.org for
their in depth critical review of the preliminary manuscript.
References
References for this work are mostly downloadable from various Indonesian Websites &
mailing list archives. Regulatory & policy framework can be downloaded from:
http://www.dprin.go.id
http://www.depkop.go.id
http://www.postel.go.id
http://www.bps.go.id
http://www.mastel.or.id
http://www.apjii.or.id
- Ministry of Industry & Trade.
- Ministry of Cooperative.
- Ministry of Telecommunication.
- Indonesian Statistical Bureau
- MASTEL the Indonesian Infocom Society
- Indonesian ISP Association
Active Indonesian Internet communities can be found in various mailing lists, mostly
hosted at egroups.com, such as:
mastel-e-commerce@egroups.com
ukmnet@egroups.com
asosiasi-warnet@egroups.com
asosiasi-warnet-broadband@egroups.com
genetika@egroups.com
telematika@egroups.com
Archives of their discussions can be read at http://www.egroups.com.
Background
Indonesia - an archipelago country, cast stretches of seas, big distances both over land
and over water. Population is dispersed. The country is divided into at least 26 provinces;
each province is subdivided in districts (kabupaten) and municipalities (kotamadya).
Districts and municipalities are further divided into counties (kecamatan). There are
about 400 districts and municipalities, a few thousand counties and some 70,000 villages.
Population in each province is varied, from 25 million to less than 3 million populations.
Indonesia is not completely backwards in telecommunications, thanks to the significant
investments since the early '70s up to the economic crisis (1998). These investments
include the operation of a domestic satellite communication system since 1976. Although
the density of telephones is still quite small, that is approximately 6 million lines for ~220
million population (or 2.8 per 100 people).
Resale of telecommunication access point would be the main method in delivering
telecommunication service to public. It represents the availability of 150.000+ public
telecommunications service centers, small "shops" or "stalls" operated by small private
companies.
The nationwide PCs (Personal Computers) population is still very low - ~2.5 million.
Thanks to the liberalization policy taken by the government - no restriction in the number
ISP has been imposed, currently ~150 ISP licenses have been granted.
Internet sharing access such as in Internet Kiosk would fit the natural IT infrastructure
condition in Indonesia. MarkPlus & SWA magazine’s survey indicates 60-70%
Indonesian accessing Internet from these 1200+ Internet Kiosks (Internet Community
Center a.k.a WARNET) all over Indonesia. Indonesian Internet Kiosk communities
normally hangs out at asosiasi-warnet@egrouips.com and more recently at asosiasiwarnet-broadband@egroups.com for those who wish to have broadband access. The
availability of these WARNETs open up the possibility for people to access Internet at
surprisingly low hourly cost ~US$0.5! at broadband speed 1.5 Mbps uplink to the global
Internet with 11 Mbps Metropolitan Area Network (MAN) speed among the kiosks. High
speed 2-11 Mbps wireless Internet access on ISM Band 2.4 & 5.8 GHz would be a
favorite alternative for these WARNETs instead of using the dearly expensive DSL /
ISDN service provided by the incumbent operator.
Unfortunately, most WARNETs are located in
Java-Bali region so that the impact of Internet
would be limited to the relatively advanced
region. As a result, the knowledgeable becomes
more intelligent while the disadvantaged
lagging behind. In terms of business
community, large firms who have ample
resources to upgrade their capabilities to grow
faster. Conversely, SMEs with much less
capabilities would be locked in their vicious
circle of under-development.
All of these activities spur the doubling of
Indonesian Internet users every year shown
clearly
in
the
figure
(APJII
http://www.apjii.or.id source) with estimated 3 million users by the end of year 2001.
Schools & universities would be the strategic point for enabling the Indonesian eeconomy as these are the future generation who would cast the their path for future
Indonesia.
Interestingly, it is quite a large community aggregating 20+ million potential young
Indonesians with ability to pay their own Internet sharing access at affordable price
US$0.3 / month / student – all we have to do is to provide 25.000 lines for all high
schools & universities in Indonesia to see 20+ million young Indonesians connected to
the Internet – hopefully by the year 2004. At the moment only < 1% of these people are
connected to the Internet.
Quality of human resource would be the key of success for any Internet-based activities
including e-commerce. The agility to maneuver in Internet correlates directly to
education level of the mass. Sadly, out of 85+ million Indonesian labor force only 3-4
million are university graduate, thus, significantly render the agility of Indonesian in the
Information world such as the Internet.
Focus on e-commerce, specially its human resource issues. I would like to suggest if we
closely look at the profile of Indonesian businesses & industries. Based on Ministry of
Cooperative data (http://www.depkop.go.id) Indonesia consists of ~38 million businesses
dominated >98% by small-medium businesses. Their turn over annually < Rp. 50 million
(which is very low) employing 58 million workers.
As reported by BPS-KOMPAS in August 2000 - considering the Indonesian population small and micro-scale industries (IKM) of 2.7 million establishments with some six
million workers it can be seen that despite its size the contribution to national economic
output is still low (See the following table).
Scale of Industry
Large-Medium
Small
Household
Total
No. Firms
22,997
241,169
2,501,735
2,765,901
No. Workers
4,214,957
2,077,298
4,075,763
10,368,028
Output (Billion Rp.)
264,270
14,858
11,312
290,440
Household/Micro, small industries and small business in general are characterized by
relatively low level of education combined with poor access to sources of finance,
technology and information. As a consequence, they exhibit low productivity with very
limited innovation crucial for firm competitiveness and eventually, contribute to high
incidence of poverty in Indonesia.
Thus, it would be an art in itself in transforming the Indonesian society towards
knowledge-based society and narrowing the large existing gap of digital divide.
Focus on maximizing e-Impact
Let us now focusing our effort on maximizing the e-commerce impact on the society
based on the data provided above. I am fully aware that there are more efficient, secure
solutions such as using XML, CA, PKI, EDI, DES, RSA, broadband access, payment
gateway etc. – and most of the high end Indonesian corporate with their knowledge and
capital would be able to access and utilize such technology with minimal government
intervention for their global market access.
In this paper, I would like to focus on maximizing the impact for the majority of
Indonesian businesses, industries & society in general, which are unfortunately those
with low education level & small businesses. There are several major issues identified,
i.e.:

Social & Cultural Aspects – mostly due to the low level of education of the
Indonesian workforce. It may require a national movement on IT literacy
specially focus on SME for high impact on the economy & the whole society.



Currently, less than 0.5% of the population is using the Internet. Schools
especially vocational schools may be one of the best entries to create significant
change in immediate time.
Lack of IT knowledge – preferably in local Indonesian language.
Qualified Human Resource – lack of teachers & educators with strong IT
knowledge.
Infrastructure – lack of telecommunication & Internet access as well as PC /
computer penetration. Although, IT infrastructure can always be blamed as one of
the major reason behind any lag in Indonesian e-commerce. I personally think
having the knowledge on building & operating the equipment is a much better
approach rather than having the equipments.
Solving the above problem requires committed people at long period of time. Basic
believe on the strategy that may create a significant impact on the society would be:



Creation of mass of qualified human resource is the key of success.
IT retention can only be maintained if:
o Demand side - Enough carrots in marketplace for such IT knowledge.
Socialization of the existence of these carrots through various media is
equally important.
o Supply side - Abundant & accessible IT knowledge available at low & no
cost preferable via Internet as well as bookstores.
o Regulatory & policy framework – Make sure it can be implemented - selffinance & sustainable.
Language & number of published IT literature in Indonesian would be the major
barrier in Indonesia. Not to mention the slowness in knowledge distribution
within Indonesia as most of the information & knowledge distribution is currently
using the slow conventional media to reach the large mass in Indonesia.
The challenges are quite clear. Aiming for high impact on the majority of the society, I
would to propose to use:
o Simple policy.
o Simple technology – sometime as simple as replacing phone calls / fax using email or VoIP while maximizing the economical impact of the e-commerce
activities.
Simple Proposed Strategies
Having involved & talk with many SME involve in Internet based activities, some of
them can be found at ukmnet@egroups.com & http://www.citn.or.id. In real life, the kind
of skills needed is something simple such as:
o Ability to read, write & communicate in English.
o Limited knowledge on computer & Internet – most of the time, they need only to
know how to communicate via e-mail & accessing the Web.
o No marketplace suits their product / need – sometimes an Internet mailing list
(such as egroups.com) would suit their need. However, it may be difficult to run a
mailing list & get significant output if there is a large social, cultural & language
gap among its member.
o No much information & knowledge that Internet can be accessed at very low cost,
e.g. US$1 / hour or even US$5 / month for e-mail access – if one can share the
access through Internet café.
Lack of these skills will reduce one confidence & in turn impede one to participate in ecommerce & cyber media for the expansion of their business – even the one who may
have significant success in their brick and mortar SMEs. Simple strategies should be
implemented to reduce the knowledge gap, which hopefully may trim down any
existence of cultural & social barriers.
Proposed strategies to create large mass & demand within the society can be divided into
three (3) main strategies, namely:
o Focus & integrate mass centers into Internet – with >20.000 schools &
universities and > 20 million students, education sector would be of interest to
create a large mass in the Internet with only sacrificing 25.000 lines from the local
Telco operators. Having these mass of students connected to the Internet – it
would be easier for us to plug into disseminate the knowledge to their parents.
Not to mention the 1000+ Internet kiosks & the 150.000 Telecommunication
Kiosks that may contribute another 20-30 million people onto the net.
o Focus & adopt simple e-commerce mechanism, such as, use e-mail & VoIP as
substitute for telephone & FAX; create a simple B2B community / forum e.g.
using Internet mailing list & use conventional payment mechanisms (no CA, PKI
etc). Although, those high end corporate are always welcome to adopt the latest
International e-commerce standards (such as CA, PKI, XML) to do their business.
o Create a simple market place & extend it into Internet. Encourage commerce
transaction with neighboring economies directly with Indonesian provinces as the
Indonesian provinces is now getting more autonomy for managing their economy.
For example:
o
o
o
o
The currently active, Aceh & North Sumatra with Singapore or Malaysia.
North Sulawesi with Philippine.
Maluku & Papua with the Pacific.
Bali, Nusa Tenggara & Maluku with Australia
Automate the commerce processes using something like EDI, if needed one may
put the e-commerce gateway at local universities which normally more
knowledge aware.
As distribution &
management
of
knowledge would
be create the grand
effect to overall
Indonesian
economy.
The
overall strategy in
distributing
&
managing the ecommerce
knowledge is shown
in the figure. The
strategy is actually
not limited to ecommerce.
The basic strategy comprises three (3) main aspects namely:
o Building the knowledge based, a simple example of it is digital library.
o One-way knowledge dissemination.
o Two ways interactions
The Actor
To obtain the highest impact within the society, the proposed main target / actor in
Indonesian e-commerce would be

The small medium industries & businesses. It may give significant impact to the
~80 million work force, 30+ million business entities & 2.5+ million industries.
In addition, several side targets should be focused, as it will create significant multiplying
effects within the society. These are:
o Education sector – vocational schools, schools, higher education, collages &
universities. We have ~25.000 high schools, rural Islamic schools & higher
education institutions which may contribute to ~20 million educated people in
Indonesia. Real example of these communities is located in
sekolah2000@egroups.com,
dikmenjur@egroups.com
&
kopertisiv@egroups.com.
o Established sustainable community-based telecenters (can be located at local
schools, universities, public library, industry clusters etc.), which are connected to
Internet and assume roles as information/knowledge providers to the SMEs, agent
of change (capacity building) and point of contact with outside 'world' through
extensive networking.

Development consultants – these NGOs will act as the main partner for the SME
during the development & adoption of the technology. A real example of it is
located at ukmnet@egroups.com.
Building the knowledge based
It will be the most difficult task among all other tasks to build the knowledge based
especially in local Indonesian language. Abundant e-commerce knowledge available on
the Internet mostly written in English, thus, manual translation of these knowledge
needed to be perform to enable Indonesian to access it easily. Not many Indonesian &
translators would be of interest to translate the knowledge, not to mention the spirit in
sharing the knowledge with others.
One of the best way in accumulating the local knowledge in local language is by asking
the students to electronically submit their essays in various IT topics and accumulating
their knowledge in a simple media, e.g. CD-ROM, digital library for others to access. It
would be much better if the universities enforce the students to publish any of their term
paper as well as their final thesis electronically on the Web. I personally did these
activities with my students and manage these papers, essays to accumulate the
knowledge. Most of them can be downloaded at http://www.bogor.net/idkf/ no copyright
attached while GNU public license is normally used.
Intellectual property right may also be the major factor, which impede the knowledge
distribution. Most Indonesian researchers in the universities worries about the future of
their findings if they distribute their papers / knowledge over the Internet.
20+ Indonesian libraries are now working on linking their library network within the
Indonesia running over the existing Internet infrastructure. Two major groups are now
working to build such infrastructure, namely:


Indonesian Digital Library Network (IDLN), sample of their effort can be viewed
at http://digital.lib.itb.ac.id.
Indonesian Cyber Library Society – i_c_s@egroups.com.
This knowledge infrastructure is mainly focused on managing the explicit knowledge
generated within large Indonesian universities. Thus, knowledge infrastructure is actually
easy to implement – the major problem remains on how to fill it with knowledge in
digital form.
Activities to encourage writers to put their knowledge in printed and electronic media
would be a significant contribution for building the knowledge based including ecommerce knowledge in Indonesia.
One Way Knowledge Dissemination
One-way infrastructure for disseminating explicit knowledge is quite established in
Indonesia. Alternatives vary & can reach 100th thousand of people from:
o Close to 20 dedicated IT magazines published weekly or monthly. It may reach
100th thousand of people in Indonesia.
o Many newspapers now carry IT column. It may reach million of people.
o Currently close to 100 IT book title in Indonesian mostly are translation from
English publication as there are not many productive IT writer in Indonesia. Thus,
incentive & encouragement should be taken to increase the number of IT books
in Indonesian.
o Since year 2000, dedicated IT associations & activists, such as APKOMINDO –
http://www.apkomindo.com are sponsoring the distribution of thousands CDROM containing of hundreds of free / public domain IT knowledge in Indonesian
language.
o To address dissemination of codified knowledge the Office of Minister research
& technology has sponsored development of Science& technology Information
Kiosk (WARINTEK). These kiosks hopefully will facilitate local communities to
tap into information resources cheaply and, thus, act as a catalyst for growth. In
concert, to facilitate the transfer of tacit knowledge an incentive system for
technology and management upgrading for technology-based SME is also put in
place. Here, relevant experts will be working alongside the workers of SMEs and
the info kiosk will supply the necessary information. It would be ideal if these
kiosks are networked one with another forming community-based networks
armed with abundant information available in the Internet. Again, capability of
human resources to manage information properly is critical (5R information:
Right information at the Right time with Right Quality and Right Quantity to the
Right person). The resume of these activities can be found at
http://www.iptek.net.id & http://www.citn.or.id.
Two ways interaction
Two ways interaction is used to transfer the implicit / tacit knowledge of the expert over
to the community. We have to admit that egroups.com mailing lists really help us in
Indonesia in building the community as well as exchanging the tacit knowledge among
us. To effectively use the mailing lists, someone / some groups have to lead the
discussion within the community.
In addition, many activities are on-going in various cities in Indonesia, such as:
o IT seminars & workshops such as Millennium Internet Road show MIR 2001 in
15 cities, which will start in March 2001. Normally, we have 2-6 IT seminars /
week in various cities all over Indonesia. It is a surprisingly high & hectic for
those who gets the job as IT evangelist. Most of these activities are self-financed
& self-organized with very minimal support from the government. It would be
great if after each seminar concrete action plan is implemented consistently.
o There are at least two (2) weekly radio talk shows by Indonesian major online
media detik.com.
As the number of IT speakers, trainers are limited – those who has the knowledge in IT
will normally overbooked by requests for giving talk in many cities. Thus, training for
these trainers would be required to accelerate the dissemination of e-commerce
knowledge.
Summary
General:
o Knowing the current situation in Indonesia, high impact on the society can only
be maintained if focus is given towards the small businesses & industries.
o Schools and educational sector would be the most strategic entry point for long
lasting effect for enabling the country towards knowledge based society. It would
be easier to influence the SME through their young ones rather than directly
through the older businessman.
Proposed Major Strategies:
o Knowledge generation in local language would be important to enable to society
towards information age. Several activities should be performed, such as:
 Incentive for IT writer to write more IT books.
 Training for trainers to create more IT evangelist. Normally, a good IT
writer may also be a good IT evangelist.
o Create knowledge infrastructure to enable efficient knowledge sharing. Legal
framework should be build especially for those afraid to lose their intellectual
property right.
o Adopt simple e-commerce mechanisms. Focus on activities that enable larger
economical impact, such as, creating mailing lists for B2B & regional
marketplace. Established sustainable community-based nodes (can be located at
local schools, universities, public library, industry clusters etc.), which are
connected to Internet and assume roles as information/knowledge providers to the
SMEs, agent of change (capacity building) and point of contact with outside
'world' through extensive networking.
Onno W. Purbo
Retired Indonesian Civil Servant & retired teaching staff
member at Electrical Engineering Department, Institute of
Technology Bandung (ITB). His main interest is in
Internet & related activities. He has been active in
building TCP/IP radio network since 1986 on ham radio
band with call YC1DAV & it becomes main trust of his
current Internet journey. He remains currently active as
one of the provocateur in Computer Network Research
Group (CNRG) & Knowledge Management Research Group (KMRG) at ITB.
Being a free man, he works mainly at home to write articles and books with a single
purpose to educate Indonesians on IT. Most of his articles are distributed freely in the
Internet & can be found at http://www.bogor.net/idkf/. He basically works for no one,
although many of his colleague editors & seminar / workshop organizers set deadlines for
articles / papers.
He has been writing hundreds if not thousand of IT articles published in various
seminars, workshops, national as well as international conferences. More than 10 Internet
related books have been published at Elexmedia Komputindo (Gramedia group). One of
its bestseller is "Teknologi Warung Internet" (Internet Cafe Technology) - which leads to
become one of the main provocateur of Indonesian Internet Cafe Association (AWARI)
at their virtual base asosiasi-warnet@egroups.com.
He can be reached via e-mail at onno@indo.net.id.