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	- Ministry of Industry & Trade.
http://www.depkop.go.id	- Ministry of Cooperative.
http://www.postel.go.id	- Ministry of Telecommunication.
http://www.bps.go.id		- Indonesian Statistical Bureau
http://www.mastel.or.id	- MASTEL the Indonesian Infocom Society
http://www.apjii.or.id		- 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 asosiasi-warnet-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 e-economy 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	No. Firms	No. Workers	Output (Billion Rp.)	
Large-Medium	22,997	4,214,957	264,270	
Small	241,169	2,077,298	14,858	
Household 	2,501,735	4,075,763	11,312	
Total	2,765,901	10,368,028	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 - self-finance & 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 e-mail 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 e-commerce & 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	The currently active, Aceh & North Sumatra with Singapore or Malaysia.
o	North Sulawesi with Philippine.
o	Maluku & Papua with the Pacific.
o	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 e-commerce knowledge is shown in the figure. The strategy is actually not limited to e-commerce.

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 & kopertis-iv@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 e-commerce 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 CD-ROM 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.