IICFReport AppendixA-D-Final 10dec Web

Coordinating Ministry for Economic Affairs
THE INDONESIA ICT CONSULTATIVE FORUM:

2014 REVIEW AND 2015 PRIORITIES
December 2014
CONTENTS'
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WELCOME'MESSAGE'.................................................................................................'2'
ACKNOWLEDGEMENTS'..............................................................................................'4'
EXECUTIVE'SUMMARY'...............................................................................................'6'
BACKGROUND'OF'IICF'................................................................................................'8'
OBJECTIVES'.............................................................................................................'10'
STRUCTURE'.............................................................................................................'11'
KEY'MILESTONES'.....................................................................................................'13'
KEY'THEMES'............................................................................................................'15'
Enabling(The(Benefits(Of(Cloud(Computing(In(Indonesia(......................................................................(15(
Securing(Indonesias(Digital(Environment(............................................................................................(17(
EBCommerce(In(Indonesia(.....................................................................................................................(22(
Best(Practices(In(Encouraging(Trade(And(Investment(In(Indonesias(ICT(Industry(................................(28(
CONCLUSION'AND'NEXT'STEPS'................................................................................'33'
APPENDIX'................................................................................................................'35'
Appendix(A:((Decree(Regarding(The(Establishment(Of(Indonesia(ICT(Consultative(Forum((IICF)(Team(
Appendix(B:(Minutes(From(1st(Executive(Meeting((IICF((April(1,(2014)((
Appendix(C:(Minutes(From(2nd(Executive(Meeting((IICF((June(24,(2014)(
Appendix(D:(Minutes(From(3rd(Executive(Meeting((IICF((October(2,(2014)(
Appendix(E:(Supplementary(Materials(
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WELCOME'MESSAGE''
'
Indonesia'has'enjoyed'remarkable'economic'growth'in'recent'years.'New'technologies'
have'played'a'powerful'role'in'connecting'and'empowering'Indonesias'citizens.'As'an'
example,'mobile'phone'ownership'in'Indonesia'is'estimated'at'300'million'active'
mobile'telephone'numbers'with'over'120'percent'penetration'rate.'However,'in'terms'
of'using'Information'and'Communication'Technology'(ICT)'for'more'productive'
economic'activities,'Indonesia'still'lags'behind'peer'countries'due'to'limitations'in'
connection'speed'and'local'content.'
'
As'Indonesia'begins'a'new'chapter,'there'are'tremendous'opportunities'to'use'
advances'in'technology'to'develop'a'knowledgeRbased'economy.'The'impact'reaches'
far'beyond'the'ICT'industry.'Technology'can'help'improve'government'services,'
education,'and'healthcare.'To'realize'these'benefits,'it'is'critical'to'develop'a'robust'
ICT'ecosystem'where'innovation'and'entrepreneurship'can'thrive.'Collaborative'
platforms'such'as'the'Indonesia'ICT'Consultative'Forum'(IICF)'enable'government'and'
industry'to'improve'mutual'understanding'in'the'areas'of'innovation,'investment,'and'
regulation.'Together,'we'can'develop'progressive'ICT'policies'that'will'help'Indonesia'
grow.'
'
In'2014,'the'IICF'focused'on'a'dialogue'about'the'issues.'We'deepened'our'mutual'
understanding'of'regulatory'developments,'learned'together'about'emerging'global'
ICT'issues,'and'identified'opportunities'to'grow'the'local'ICT'industry.''The'publication'
of'this'report'highlights'this'work,'outlines'related'policy'considerations,'and'lays'out'
next'steps'for'the'IICF'in'2015.'In'the'coming'year,'we'look'forward'to'delivering'policy'
results'based'on'our'mutual'learning'this'past'year.''
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The(Indonesia(ICT(Consultative(Forum:(2014(Review(and(2015(Priorities(
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We'look'forward'to'working'together'to'ensure'our'collective'vision'of'an'innovative,'
prosperous,'and'dynamic'ICT'ecosystem'in'Indonesia'becomes'a'reality.'
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Eddy'Satriya'
CoRChair,'IICF'Executive'Committee'
Deputy'Assistant'for'ICT'and'Utility,'Coordinating'Ministry'for'
Economic'Affairs'
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Elizabeth'Hernandez'
CoRChair,'IICF'Executive'Committee'
ICT'Committee'Chair,'USRASEAN'Business'Council'
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December(2014(
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ACKNOWLEDGEMENTS''
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This'report'has'been'a'collaborative'effort'between'the'Coordinating'Ministry'for'
Economic'Affairs'(CMEA)'and'the'USRASEAN'Business'Council'(USABC).'We'would'like'
to'thank'the'CMEA'and'USABC'staff'for'their'strong'support'of'this'project'throughout'
the'process.'In'addition,'we'would'also'like'thank'the'many'individuals'and'
organizations'involved'for'their'contributions'to'this'publication,'in'particular:'Cisco,'
Google,'HP,'Intel,'Microsoft,'Qualcomm,'and'Seagate.''
'
We'are'grateful'for'all'those'who'contributed'their'expertise'to'make'this'years'
activities'rich'and'informative,'including'Luky'Eko'Wuryanto,'Deputy'Minister'for'
Infrastructure'and'Regional'Planning,'CMEA;'C.'Triharso,'Director'of'Electronics'and'
Telematics'Industry,'Ministry'of'Industry;'Fetnayeti,'Director'of'Domestic'Business'
Development'and'Enterprise'Registration,'Ministry'of'Trade;'Ismail,'Director'of'Special'
Telecommunication,'Broadcasting'and'USO,'Ministry'of'Communication'and'
Information'Technology;'Prakoso,'Deputy'Assistant'for'Coordination'of'
Telecommunication'and'Informatics,'Coordinating'Ministry'for'Political,'Legal'and'
Security'Affairs;'Erma'Dewi'Pujawati,'Director'of'International'Business'Cooperation,'
BKPM;'Lolly'Amalia'Abdullah,'Director'of'Cooperation'and'Facilitation,'Ministry'of'
Tourism'and'Creative'Economy;'Didi'Sumedi,'Director'of'Import,'Ministry'of'Trade;'
Tony'Seno'Hartono,'National'Technology'Officer,'Microsoft;'Zainuddin'H.'Nasution,'
Section'Head,'Department'of'Banking'Research'and'Regulation'(DPNP),'Financial'
Service'Authority'(OJK);'Hasyim'Gautama,'Section'Head'of'Security'Management,'
Director'General'of'Informatics'Applications,'Ministry'of'Communication'and'
Informatics;'Jonathan'Selvasegaram,'Corporate'Attorney,'Digital'Crime'Unit,'Microsoft;'
Marco'Ogliengo,'Managing'Director,'Zalora;'Budi'Gandasoebrata,'Director'and'VP,'
Veritrans'Indonesia;'Bert'Verschelde'and'Erik'van'der'Mare,'European'Center'of'
International'Political'Economy,'Brussels'(ECIPE);'Alexander'Rusli,'President'Director'
and'CEO,'Indosat;'Irni'Palar,'Director'&'Country'Manager,'MasterCard'Indonesia;'
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Shinto'Nugroho,'Head'of'Public'Policy'and'Government'Relations,'Google'Indonesia;'
Eddy'Thoyib,'Executive'Director,'Indonesian'ICT'Society'(MASTEL);'Nurul'Ichwan,'
Deputy'Director'for'Manufacturing'Industry'Promotion,'Indonesia'Investment'
Coordinating'Board'(BKPM);'Chris'Zull,'Spectrum'Director,'Asia'Pacific,'GSMA;'and'
David'Siow,'Regional'Manager,'Products'Compliance'and'Certification,'Cisco.'
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EXECUTIVE'SUMMARY''
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The'advancement'of'ICT'is'one'of'the'key'pillars'of'the'Indonesian'governments'
efforts'to'accelerate'and'expand'the'Indonesias'economic'development.'To'help'drive'
towards'this'goal,'the'Indonesia'ICT'Consultative'Forum'(IICF)'was'conceived'as'a'joint'
initiative'between'Indonesias'Coordinating'Ministry'for'Economic'Affairs'(CMEA)'and'
the'USRASEAN'Business'Council'(USABC).'The'aim'of'the'IICF'is'to'serve'as'a'
collaborative'platform'between'government'and'industry'to'develop'Indonesias'ICT'
industry'and'to'support'the'creation'of'a'knowledgeRbased'economy'in'Indonesia.'In'
the'IICFs'quarterly'Executive'Committee'meetings'in'2014,'main'discussion'topics'
included'cloud'computing,'cyber'security,'eRCommerce,'and'encouraging'trade'and'
investment'in'Indonesias'ICT'industry.''
'
The'focus'of'the'discussion'on'cloud'computing'in'Indonesia'was'managing'the'tension'
between'data'localisation'requirements'and'their'downstream'effects'on'economic'
competitiveness.'Cyber'security'was'also'a'major'consideration,'with'fraud'identified'
as'the'most'prevalent'cyber'threat'to'the'country.'The'private'sector'shared'existing'
fraud'prevention'solutions'while'the'Ministry'of'Communication'and'Information'
Technologys'(MCIT)'Directorate'of'Information'Security'presented'on'existing'
government'measures'to'combat'cyber'threats.'In'order'to'enhance'cyber'security,'
recommendations'were'made'to'strengthen'legal'frameworks,'technical'and'
procedural'measures,'organizational'structures,'capacity'building'initiatives,'and'
international'cooperation.''
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The'potential'for'eRCommerce'growth'is'limited'in'Indonesia'by'fraud'concerns,'lack'of'
secure'infrastructure'for'online'payments,'and'low'credit'card'penetration'rates.'To'
exploit'the'benefits'of'ICT'and'mobileR'and'webRbased'retail'applications,'
recommendations'were'made'to'secure'online'transactions,'utilize'innovative'
payment'solutions'such'as'mobile'money,'and'use'education'campaigns'to'address'the'
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fraudRrelated'concerns'of'consumers,'merchants,'and'banks.'Extending'eRCommerce'
support'to'SMEs,'who'typically'face'greater'constraints'in'adopting'ICT,'was'also'a'key'
discussion'point.'
'
Lastly,'in'order'to'encourage'IT'investment'in'Indonesia,'the'industry'shared'best'
practices'in'simplifying'and'expediting'product'certification'and'compliance'while'
maintaining'consumer'safety.'Other'topics'of'discussion'related'to'supporting'
broadband'development'in'Indonesia'and'taxation'policies.'The'IICF'recognized'the'
need'for'shaping'the'regulatory'framework'to'create'a'businessRfriendly'environment'
in'Indonesia'that'would'attract'greater'investments'to'the'country,'and'facilitate'
greater'certainty,'predictability,'and'ease'of'doing'business'in'the'country.''
'
In'its'inaugural'year,'the'IICFs'quarterly'meetings'centered'on'building'a'strong'
foundation'for'ICT'to'thrive'in'Indonesia.'As'the'IICF'enters'its'second'year,'we'propose'
for'the'focus'to'be'on'understanding'the'impact'of'ICT'across'key'sectors,'in'particular,'
eRGovernment,'eRHealth,'eREducation,'eRbanking,'and'big'data'applications,'as'well'as'
streamlining'government'and'regulatory'processes'impacting'business'operations'in'
Indonesia.'''
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BACKGROUND'OF'IICF'
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Rapid'developments'in'Information'and'Communication'Technology'(ICT)'present'
substantial'growth'opportunities'for'multiple'sectors'across'Indonesia.'With'a'highly'
competitive'telecommunications'market'and'high'mobile'penetration'rates,'disruptive'
technologies'such'as'the'mobile'Internet,'cloud'technology,'and'big'data'present'
leapfrogging'opportunities'for'the'rapidly'growing'country.''Beyond'increasing'the'
competitiveness'of'the'local'economy,'these'ICT'applications'create'more'inclusive'
growth'by'extending'the'reach'of'formal'banking'services,'education,'and'health'care,'
as'well'as'by'lowering'the'barriers'to'entry'for'SMEs.'
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Given'that'the'advancement'of'ICT'is'one'of'
the'main'economic'activities'that'supports'
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the'Master'Plan'for'the'Acceleration'and'
Development'of'ICT'should'
continue'to'be'accelerated'in'
order'to'improve'the'nations'
competitiveness'to'create'a'
knowledgeRbased'economy'
Expansion'of'Indonesian'Economic'
Development'2011R2025'(MP3EI),'the'
government'of'Indonesia'(GOI)'saw'the'
forum'between'the'government'of'
B(Master(Plan(for(the(Acceleration(&(
Expansion(of(Indonesian(Economic(
Development(2011B2025(
'
Indonesia'and'the'ICT'industry'to'encourage'
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need'for'an'integrated'and'coordinated'
innovation'and'growth'in'the'ICT'ecosystem.'
'
In'accordance'with'national'priorities,'the'Indonesia'ICT'Consultative'Forum'(IICF)'was'
conceived'as'a'joint'initiative'between'the'USRASEAN'Business'Council'(USABC)'and'
Indonesias'Coordinating'Ministry'for'Economic'Affairs'(CMEA).'This'forum'serves'as'a'
collaborative'platform'between'government'and'industry'to'develop'Indonesias'ICT'
industry'and'support'the'implementation'of'MP3EI.'''
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The'purpose'of'this'report'is'to'highlight'key'findings'from'the'quarterly'IICF'meetings'
held'in'2014.'It'includes'the'key'themes'discussed,'policy'design'considerations'for'the'
incoming'administration,'and'recommendations'for'the'2015'IICF'agenda.''
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OBJECTIVES '
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Develop'a'common'understanding'on'ICTRrelated'regulatory'developments,'
schemes,'and'investment'policies'in'Indonesia.'Understand'the'underlying'
principles'behind'government'policies'allows'the'business'community'to'offer'
solutions'that'are'suited'to'the'Indonesian'context.'
'
Facilitate'the'sharing'of'trends'and'best'practices'in'the'ICT'industry'at'the'local,'
regional,'and'global'level'to'achieve'the'shared'goal'of'creating'a'knowledgeRbased'
economy'in'Indonesia.'
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CoXCreate'winXwin'policies'through'industry'consultation'in'the'development'of'
ICT'policy'and'regulation'in'Indonesia,'offering'government'incentives,'and'
leveraging'on'private'sectors'expertise'and'innovation'to'promote'growth'and'
solve'challenges'faced'in'ICTRadoption.'
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STRUCTURE'
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The'IICF'consists'of'a'Steering'Committee,'an'Executive'Committee,'and'Work'Streams'
(Figure'1).'
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Figure!1:!IICF!Structure!
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Steering!Committee!
The'Steering'Committee'is'chaired'by'the'Deputy'Minister'for'Infrastructure'and'
Regional'Planning'in'the'Coordinating'Ministry'for'Economic'Affairs'(CMEA)'and'
comprises'government'officials'at'the'Deputy'Minister,'Director'General,'and'Deputy'
Chairman'level'(Echelon'1).''
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The'Steering'Committee'is'tasked'to'provide'direction'to'the'Executive'Committee'in'
terms'of'determining'and'formulating'recommendations'for'ICT'activities'and'to'assess'
the'execution'of'activities'carried'out'by'the'Executive'Committee.''
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Executive!Committee''
The'Executive'Committee'is'coRchaired'by'Eddy'Satriya,'Deputy'Assistant'for'ICT'and'
Utility'in'CMEA,'and'Elizabeth'Hernandez,'the'ICT'Committee'Chair'of'USABC.'The'
committee'comprises'government'officials'at'the'Deputy'Assistant'and'Director'level'
(Echelon'2),'and'private'companies'from'USABCs'ICT'Committee,'the'American'
Chamber'of'Commerce'(AmCham)'Indonesias'IT'&'Teleconnectivity'Committee,'
MASTEL,'and'KADIN.'
'
The'Executive'Committee'is'tasked'to'develop'and'execute'IICF'work'plans'and'
determine'activities'for'the'work'stream'leaders.'In'the'Executive'Committee'
Quarterly'Forums,'committee'members'and'ICT'associations'meet'to'discuss'new'
initiatives'and'policy'and'regulatory'issues.'
'
The'results'of'the'quarterly'forums'will'be'reported'to'the'Coordinating'Minister'for'
Economic'Affairs,'as'well'as'Ministers'from'relevant'Ministries,'through'the'Chairman'
of'the'Steering'Committee.'
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Work!Streams!
The'work'streams'are'directed'by'the'Executive'Committee'and'provide'an'avenue'to'
discuss'issues'in'depth.'Each'work'stream'is'led'by'a'member'from'USABCs'ICT'
Committee'and'will'provide'detailed'inputs'and'timely'updates.'Given'that'this'is'a'
consultative'forum,'the'scope'of'each'work'stream'is'open'and'subject'to'change.'In'
2014,'the'identified'work'streams'were:'
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Regulatory'Insights'
Leaders:(Google,(Cisco(
Incentivizing'Localization'
Leader:(Intel(
Emerging'Digital'Trends'
Leaders:(Microsoft,(Qualcomm(
Examining'local'and'global'
regulations'and'best'practices'
that'advance'sustainable,'longR
term'growth'in'the'ICT'sector'
Identifying'opportunities'to'grow'
the'local'ICT'industry'
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Updates'on'global'industry'trends'
and'relevance'to'the'ICT'
ecosystem'in'Indonesia.'
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KEY'MILESTONES''
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1st'Executive'Committee'Forum,'April'1st'2014''
Introduction'of'the'IICF'concept,'goals,'and'structure'
Work'stream'leaders'introduced'their'2014'focus'areas'and'plans''
o Regulatory'Insights:'The'importance'of'industry'consultation'to'develop'
robust'and'timely'regulations'that'will'increase'the'competitiveness'of'
Indonesias'ICT'sector.''
o Incentivizing'Localization:'The'need'for'government'leadership'in'
stimulating'investment'interest.''
o Emerging'Digital'Trends:'Trends'in'Indonesias'digital'landscape'and'the'
impact'of'cloud'computing'on'the'Indonesian'government'and'
businesses.'
Discussion'of'IICF'next'steps'
o Inclusion'of'the'financial'services'committee'due'to'the'inherent'
overlap'between'ensuring'access'to'financial'services'and'realizing'
Indonesias'ICT'potential'
o Consideration'for'infrastructure'requirements'(hard'and'soft)'and'SMEs'
access'to'them'
o Consideration'for'security'and'privacy'in'a'changing'digital'landscape''
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2nd'Executive'Committee'Forum,'June'24th'2014''
Ministries'shared'their'top'ICTRrelated'issues'
o Rise'of'cybercrime'and'existing'government'initiatives'to'safeguard'
Indonesias'digital'landscape''
o Financial'institutions'usage'of'ICT'in'risk'management'and'eRbanking'
services'and'the'cyber'threats'they'face'
o The'Indonesian'Broadband'Plan'2014R2019'and'its'infrastructure'and'
security'needs''
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Industry'shared'existing'solutions'to'combat'cybercrime'and'safeguarding'online'
transactions'''
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3rd'Executive'Committee'Forum,'October'2nd,'2014'
Vision'for'Indonesias'ICT'ecosystem:'The'three'key'pillars'are'infrastructure,'
payment'systems,'and'building'content'and'investment.''
Supporting'Indonesias'eRCommerce'Market''
o Developing'a'robust'and'secure'payment'infrastructure''
o Adopting'innovative'payment'solutions'
o Formalizing'SME'support'in'eRCommerce'
Encouraging'trade'and'investment'in'Indonesias'ICT'industry'
o Product'compliance'and'consumer'safety''
o Fiscal'policies'and'the'proposed'luxury'tax'on'imported'mobile'phones''
o Supporting'broadband'development'in'Indonesia:'Developing'standards'
and'infrastructure'
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KEY'THEMES'
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Enabling(the(Benefits(of(Cloud(
Computing(in(Indonesia((
'
Benefits'of'Cloud'Computing'in'
Indonesia'
Job'Creation:'CloudRrelated'
jobs'expected'to'grow'by'
102%'between'2012'and'2015.'''
SME'Growth:'High'levels'of'
computing'power'and'lower'
costs'of'production''
Rural'Access:'Improved'
remote'access'to'healthcare,'
education,'and'eRGovernment'
services'
Emergency'Preparedness'&'
Disaster'Relief:'Improved'
communication'and'data'
sharing'
Indonesias'escalating'online'population'and'
high'mobile'phone'penetration'rates'
positions'it'to'well'reap'the'benefits'of'
cloud'computing.'This'revolutionary'
development'has'been'identified'by'the'
Emerging'Digital'Trends'work'stream'as'an'
area'that'will'create'significant'new'
opportunities'for'consumers,'governments,'
and'businesses'in'Indonesia.''
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To'realize'the'full'potential'of'cloud'
computing,'it'is'crucial'for'the'regulatory'
regime'to'keep'pace'with'rapid'
developments'in'the'industry'and'to'
implement'positive'policies.'
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Consequences'of'EconomyX
wide'Data'Localisation'
Measures'on'Competitiveness''
GDP:'R'0.8%'
Domestic'Investments:'R'2.3%'
Exports:'R'1.7%''
Source:(ECIPE((2014).(The(Costs(of(Data(
Localisation:(The(Friendly(Fire(on(Economic(
Recovery.(
C'
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A'key'issue'in'policy'design'is'balancing'law'enforcement'and'security'with'industry'
growth.'Managing'this'tension'influences'the'extent'to'which'economies'of'scale'can'
be'reaped'in'the'provision'of'scalable'services'through'a'relatively'small'number'of'
strategically'located'data'centres.'''
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The'industry'is'mindful'that'the'Ministry'of'Communications'and'Information'
Technologys'(MCIT)'Regulation'No.82'of'2012'regarding'the'Implementation'of'
Electronic'Transactions'and'Systems'requirement'for'electronic'systems'operators'of'
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public'services'to'set'up'a'local'data'and'disaster'recovery'centre'is'for'the'purpose'of'
law'enforcement'and'data'protection.'However,'policymakers'should'consider'the'
economic'consequences'of'data'localization'requirements'and'related'data'privacy'
and'security'laws'that'exclude'foreign'suppliers'of'data'and'downstream'goods'and'
service'providers.''
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Data'localization'and'processing'requirements'face'a'complex'interRrelationship'
between'crossRborder'data'flows,'supplyRchain'fragmentation,'and'domestic'prices.'It'
is'not'just'internet'companies'that'are'affected,'companies'in'the'financial,'retail,'
logistics,'manufacturing,'and'communications'sectors'all'use'personal'data'across'their'
supply'chains'and'are'similarly'impacted.'''
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Indonesian'businesses'rely'on'access'to'personal'data'to'efficiently'design,'produce,'
sell,'and'deliver'goods'and'services,'making'global'and'domestic'data'a'new'form'of'
currency'that'SMEs'can'leverage'on'to'become'global'players.'Furthermore,'it'is'likely'
that'SMEs'will'be'the'first'to'be'displaced'from'the'market'as'they'lack'the'resources'
to'adapt'to'the'regulatory'changes.''
'
Policy'Consideration:'In'order'to'maximize'the'benefits'of'cloud'computing,'it'is'
important'to'strike'a'balance'between'data'protection'measures'and'the'
downstream'effects'of'data'localization'requirements'of'GDP,'investments,'and'
welfare.'There'also'needs'to'be'a'clearer'legal'standing'on'data'centres'in'
Indonesia'and'more'coordination'between'the'Ministry'of'Communication'and'
Information'Technology'(MCIT),'the'Financial'Services'Authority'(OJK),'and'other'
related'government'institutions.'
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Securing(Indonesias(Digital(Environment(((
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Indonesias'rapid'development'has'been'accompanied'by'the'widespread'adoption'of'
ICT'by'the'domestic'economy'and'civil'society'at'large.'This'naturally'leads'to'increased'
cyber'threats'to'all'aspects'of'society,'including'the'free'and'accurate'flow'of'
information,'trust,'and'socioReconomies.''
'
Boosting'the'countrys'resilience'to'cyber'threats'necessitates'the'involvement'of'
multiple'stakeholders'from'government'regulation'and'industry'interest'to'user'
awareness'and'the'educational'system.''
'
According'to'research'by'DAKA'Advisory,'
Indonesia'is'currently'more'susceptible'to'
less'sophisticated'cybercrimes'like'fraud'
Cyber'Crime'in'Indonesia'
and'other'contentRrelated'challenges.'The'
MCITs'Directorate'of'Information'Security'
identified'the'five'top'areas'of'vulnerability'
in'Indonesia'today'as'malware,'phishing,'
mobile'threats,'social'media,'and'
hacktivism.''
'
During'the'Executive'Committee'Meeting'in'
Ranked'tenth'in'Symantecs'
global'list'as'country'
accounted'for'2.4%'of'worlds'
cybercrimes'in'2011.''
Of'the'39'million'attacks'in'
2012,'35%'originated'from'
outside'the'country,'while'65%'
came'from'within.'
86%'of'Internet'users'in'
Indonesia'reported'being'
victims'of'cybercrime'in'2010.''
'
Source:(DAKA(Advisory(Report((
'
June'2014,'there'was'consensus'among'participants'that'cybercrimes'stem'mainly'
from'a'lack'of'awareness.'An'MCIT'representative'shared'that'unlike'private'sector'
companies'who'typically'abide'by'ISO'27001'Standards'for'Information'Security'
Management,'many'ministries'and'public'agencies'remain'unaware'of'such'standards'
and'fail'to'adopt'the'appropriate'security'measures.'In'addition,'users'insufficient'
knowledge'on'IT'security'makes'them'especially'vulnerable'to'deceptive'websites'and'
SMSR'and'emailRphishing.'Many'are'unaware'of'the'existence'of'security'solutions'for'
their'mobile'devices'and'the'risks'associated'with'having'a'social'media'account.'
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Indonesias'largest'fashion'eRcommerce'site,'Zalora,'highlighted'that'the'prevalence'of'
fraud'(and'the'resulting'dearth'of'consumer'trust)'limits'eRCommerces'growth'
potential.'Regulators'should'go'beyond'protecting'banks'and'consumers,'and'protect'
merchants'as'well.'For'example,'in'the'case'of'a'friendly'fraud,'the'perpetrators'are'
usually'consumers'against'merchants.'
'
Existing'Private'Sector'Solutions''
Online'payment'gateway,'Veritrans'Indonesia,'presented'on'existing'fraud'prevention'
techniques'to'secure'online'transactions.'From'a'payment'gateways'point'of'view,'out'
of'the'three'categories'of'fraud,'internal'fraud'(compared'to'consumer'and'merchant'
fraud)'has'the'potential'to'cause'the'most'damage.'Internal'fraud'occurs'when'there'is'
a'breach'of'data,'which'can'be'used'for'fraud'transaction.'Current'fraud'prevention'
solutions'include:'a'manual'review,'CVV/Security'Code,'3DRsecure,'BIN'check,'velocity'
of'change,'velocity'of'use,'and'fraud'rules.''
'
Besides'fraud'prevention'techniques,'maintaining'a'secure'digital'environment'
involves'addressing'issues'such'as'weak/default'passwords,'lack'of'employee'
education,'security'deficiencies,'and'slow'selfRdetection.'Indicators'of'an'insecure'
environment'are'the'lack'of'awareness,'little'incentive'to'reRengineer'processes,'
merging'different'people'and'processes,'slow'adoption'of'evolving'technology,'and'
unnecessary'exposure'to'sensitive'data.'In'this'case,'prevention'techniques'include'
identifying'and'isolating'privileged'users,'auditing'user'end'password,'alert'and'
monitoring,'and'reviewing'access'rules.'Best'practices'include'devaluating'data'
whenever'possible,'continuous'improvement,'and'stop'thinking'scope,'start'thinking'
risk.''
'
Microsoft'also'gave'an'introduction'of'their'new'Digital'Crimes'Unit'that'focuses'on'
cyber'security'in'three'main'areas:'malicious'software'crimes,'particularly'botnetR
driven'Internet'attacks;'piracy'and'intellectual'property'crimes;'and'technologyR
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facilitated'towards'exploitation'of'children'and'the'elderly.'The'Digital'Crimes'Unit'
protects'consumers'by'adopting'an'offensive'approach'that'uses'stronger'programs'
like'information'protection,'access'control,'antiRmalware,'policy'management,'
research'and'response,'and'secure'development.'Microsoft'emphasized'the'following'
best'practices'in'protecting'Indonesians'against'cybercrime:'investment'in'the'latest'
tools'and'technologies;'proRactive'disruption;'strong'and'secure'products'and'cloud'
services;'secure'banking'IT'infrastructure;'education'on'safe'online'banking'practices;'
and'the'use'of'genuine'software.'
'
Current'Government'Initiatives''
MCITs'Directorate'of'Information'Security'pointed'out'that'in'order'to'safeguard'
Indonesias'cyber'space,'the'Global'Cybersecurity'Agenda'(IDRGCA)'needs'to'be'
addressed'within'all'pillars'in'Indonesia:'legal'framework,'technical'and'procedural'
measures,'organizational'structures,'capacity'building,'and'international'cooperation.'
After'the'representative'shared'existing'government'initiatives'in'these'areas'(Figure'
2),'the'forum'participants'made'the'following'recommendations'in'strengthening'
these'pillars.''
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Figure!2:!Pillars!of!Cyber!Security!in!Indonesia!
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'
Legal'Framework:'The'Telecommunications'Act'No.'36/1999'only'mentions'
telecommunications'infrastructure'security'briefly'and'does'not'discuss'it'in'the'
specific'context'of'the'Internet.'While'the'more'recent'Information'Transaction'
Electronic'Act'No.'11/2008'provides'the'basis'for'law'enforcement,'in'order'to'
prosecute'criminals,'it'often'needs'to'be'supplemented'by'other'Acts,'such'as'the'
Copyright'Law,'No.'28/2014.'Currently'a'regulation'on'Data'Privacy'Protection'is'being'
completed.'However,'there'needs'to'be'a'common'understanding'on'the'definition'
and'semantics'of'cyber'law.'
'
Technical'and'Procedural'Measures:'While'Indonesia'has'developed'technical'and'
procedural'measures'to'address'vulnerabilities,'more'investment'is'needed'to'enhance'
efforts'and'resources.'There'are'debates'regarding'whether'information'on'
vulnerabilities'should'be'disclosed'and'policymakers'are'torn'in'deciding'if'it'is'
worthwhile'to'invest'in'developing'security'standards'which'go'beyond'basic'legal'
compliance.''
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Organizational'Structures:'While'the'Coordinating'Ministry'for'Politics,'Law,'and'
Security's'Desk'for'National'Cyber'Information'Resilience'and'Security'has'been'begun'
operating'and'is'constructing'a'convergent'regulation'to'be'implemented'by'the'
incoming'administration,'a'legal'source'is'still'needed.'In'addition,'cyberRrelated'issues'
in'Indonesia'are'not'well'coordinated'among'government'agencies.'While'the'Desk'is'
under'coordination'of'the'Ministry'of'Defence,'which'focuses'on'cyber'defence,'it'also'
addresses'other'cyberrelated'matters'such'as'cybercrimes.''
'
Capacity'Building:'More'investment'is'needed'to'enhance'cyber'security'expertise,'
particularly'in'the'public'sector.'SMEs'under'the'coordination'of'MCIT'also'require'
assistance'for'training'and'education,'and'need'additional'help'to'comply'with'new'
legislative'measures.''
'
International'Cooperation:'While'maintaining'Indonesias'sovereignty'in'the'cyber'
world'is'important,'cyber'criminals'exploitation'of'the'blurred'legal'jurisdictions'
between'countries'makes'interRstate'relations'a'top'priority.'Building'an'international'
framework'for'cybersecurity'with'highRlevel'principles'is'vital'in'conducting'cybercrime'
investigation.'This'makes'it'vital'to'hold'discussions'leading'to'Memorandums'of'
Understanding'towards'agreement'to'collaborate'on'specific'areas'of'cyber'security'
through'ASEAN'Network'Security'Action'Council'Working'Group,'International'
Telecommunication'Union'(ITU),'bilateral'cooperation,'Asia'Pacific'Computer'
Emergency'Response'Team'(APCERT),'Forum'of'Incident'Response'and'Security'Teams'
(FIRST)'and'other'related'forums.''
'
Policy'Considerations:''
There'should'be'a'synergetic'effort'between'regulators,'practitioners,'and'
customers'in'constructing'better'cyber'security'measures.'This'involves'
managing'the'tension'between'leveraging'on'new'technology'trends'and'
strict'regulations.'For'example,'rather'than'imposing'overly'strict'and'
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cumbersome'regulations,'little'things'such'as'posting'education'material'and'
warnings'of'cybercrime'on'banks'homepages'can'go'a'long'way'in'improving'
cyber'security.'
'
A'key'enabler'of'eRgovernment'initiatives'is'to'enhance'the'public'sectors'
cyber'security'expertise'and'mandate'public'agencies'adherence'to'
standards'such'as'ISO'27001'for'Information'Security'Management.'More'
coordination'is'also'needed'between'agencies'to'facilitate'information'
sharing,'avoid'duplicate'efforts,'and'prevent'regulatory'gaps.''
'
The'transRboundary'nature'of'cybercrimes'makes'it'crucial'for'international'
coordination'in'the'development'of'an'international'framework'for'
cybersecurity'with'highRlevel'principles.'
'
'
EBCommerce(in(Indonesia(
'
While'B2C'eRCommerce'in'Indonesia'currently'accounts'for'a'mere'0.1%'of'all'retail'
expenditures1,'the'industry'is'set'for'substantial'growth'owing'to'factors'such'as'a'
rising'youth'population,'rising'disposable'incomes,'rapid'urbanization,'and'the'
increasing'adoption'and'penetration'of'technology'such'as'the'internet'and'mobile'
phones.'To'fully'realize'the'potential'of'this'nascent'industry,'providing'regulatory'
certainty,'developing'the'necessary'infrastructure,'and'facilitating'the'inclusion'of'
SMEs'are'key.''
'
'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
'
1
'ASEAN(eCommerce:(Is(ASEAN(at(an(inflection(point(for(eCommerce?,'UBS'Global'Research,'June'13,'
2014.''
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According'to'Zalora,'Indonesia'performs'relatively'well'in'terms'of'logistical'
infrastructure'to'enable'timely'delivery.'Even'though'the'proportion'of'fixed'
broadband'subscribers'in'Indonesia'is'low'compared'to'large'developing'countries,'the'
countrys'high'penetration'rates'for'mobile'broadband'makes'eRCommerce'accessible'
even'in'remote'areas'(Figure'3).'Instead,'the'major'roadblock'to'eRCommerce'growth'
in'Indonesia'is'the'combination'of'poor'payment'infrastructure'and'a'lack'of'consumer'
trust'in'making'online'payments.'This'concern'was'echoed'by'many'forum'
participants.'
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Figure!3:!Fixed!broadband!and!mobile!phone!penetration!
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Developing'a'robust'payment'infrastructure''
Indonesia'is'a'largely'cashRbased'economy'with'low'credit'and'debit'card'penetration.'
According'to'Euromonitors'2013'international'data,'92'million'bank'accounts'in'
Indonesia'have'linked'bank'cards'out'of'a'population'of'240'million.'This'has'prompted'
many'retail'merchants'to'offer'cashRuponRdelivery'services.'According'to'MasterCard,'
cash'payments'account'for'37.9%'of'eRCommerce'transactions,'followed'by'bank'
transfers'(27.5%)'and'lastly,'credit'card'payments'(10%)2.'While'cash'upon'delivery'is'a'
practical'solution'in'the'short'run,'it'imposes'significant'financial'costs'on'companies'in'
the'form'of'labour,'cash'handling,'and'higher'returns'of'purchased'items.'These'
additional'costs'will'have'the'most'significant'impact'on'resourceRconstrained'SMEs.''
'
In'order'to'increase'credit'card'penetration,'MasterCard'and'other'industry'players'
emphasized'the'need'for'merchants,'bank'partners,'OJK,'and'IT'and'payment'
companies'to'convene'to'address'payment'issues.'For'example,'reducing'fraudRrelated'
concerns'through'a'concerted'effort'to'educate'consumers'and'banks,'increased'
openness'in'awarding'licenses'to'foreign'payment'processors,'and'tightening'security'
through'the'use'of'One'Time'Passwords'(OTPs)'as'a'fraud'prevention'tool.'
'
Adopting'innovative'payment'solutions'
In'line'with'Indonesias'National'Movement'of'NonRCash'(GNNT),'mobile'payments'are'
an'increasingly'feasible'payment'platform'for'online'goods'and'services.'Given'the'
high'mobile'phone'penetration'rate'in'Indonesia'and'rural'populations'limited'
physical'access'to'banks'and'other'financial'institutions,'the'provision'of'mobile'
wallets'by'telecommunication'operators'extends'eRcommerce'and'financial'services'to'
previously'unbanked'Indonesians.''
'
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'
2
'MasterCard'Accelerates'ERcommerce'Industry'Development'in'Indonesia,'MasterCard'press'release,'
August'14,'2014.''
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While'Indonesias'three'major'telecommunication'operators''Indosat,'Telkomsel,'and'
XL'Axiata''investments'in'making'mobile'money'interoperable'to'enable'realRtime'
transfers'across'independent'networks'is'a'big'step'in'eRcommerce,'customer'adoption'
of'mobile'money'remains'low'due'to'low'awareness'and'the'fear'of'sending'money'to'
the'wrong'number3.'Operators'should'work'together'to'raise'awareness'of'the'
benefits'of'electronic'transactions'and'educate'consumers'on'the'safeguards'that'have'
been'put'in'place,'for'example,'the'ceiling'on'mobile'money'usage'and'the'reassurance'
that'the'mobile'device'is'merely'a'delivery'mechanism'(cash'remains'in'the'bank).''
'
Given'that'the'eRCommerce'and'mobile'money'industry'is'still'in'its'infancy,'the'
regulatory'environment'is'still'being'formed.'As'online'services'grow'in'popularity,'it'is'
necessary'to'harmonize'regulatory'licenses'across'districts,'implement'a'common'
solution'for'merchant'payments,'and'develop'processes'for'issues'like'dispute'
resolution.'Panelists'also'highlighted'the'need'for'large'private'companies'to'provide'
more'efficient'and'delivery'systems'for'eRCommerce.''
'
Extending'eXCommerce'support'to'SMEs'
The'SME'segment'in'Indonesia'is'growing'rapidly'and'makes'a'significant'contribution'
to'the'countrys'Gross'Domestic'Product'(GDP).'In'2011,'SME's'contribution'to'national'
GDP'was'about'57.94%'(or'equal'to'IDR'4.303.571,5'Trillion)'and'this'increased'to'
59.08%'(or'equal'to'IDR'4.869.568,1'Trillion)'in'20124.'These'contributions'have'made'
SMEs'one'of'the'key'sectors'to'enhance'Indonesias'economy.'''
'
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'
3
4
'Visa(MultiBCountry(Research(Study:(Mobile(Money(Insights,'TNS'Research,'January'2013.''
'Promoting(the(SMEs(Exports(in(the(OIC(Member(States,'COMCEC'Coordination'Office,'June'2013.''''
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USXASEAN'Business'Alliance'for'Competitive'SMEs'Activities'for'2014X2015'
2014!activities!
!
Goal:'Improve'SMEs'access'to'technology'and'assist'in'capacity'building'
Smart'technology'for'smarter'business''workshop''
In'collaboration'with'Indonesias'annual'SMEs'Co.'Festival,'conducted'SMEs'in'a'Digital,'
Borderless,'Competitive,'and'Greener'World:'Development'Trends'and'Tools'workshop'
In'collaboration'with'the'ASEAN'Foundation'and'Microsoft,'developed'two'basic'training'
courses'for'young'entrepreneurs'on'using'ICT'tools'for'business'development'and'
management.'
'
Upcoming!activities!in!2015!
!
Goal:'Increase'domestic'competitiveness'of'ASEAN'SMEs'and'better'integrate'them'into'regional'
and'global'value'chains''
ASEAN'Online'SME'Academy:'Provides'SMEs'with'free,'centralized,'online'access'to'relevant'
and'countryRspecific'information'for'business'startRups,'training'resources,'networking'
platform,'trade'and'market'linkage'resources,'and'finance'information.'
ERCommerce'offers'a'significant'opportunity'for'SMEs'through'enabling'access'to'new'
markets,'expanding'the'scope'of'marketing,'reducing'the'cost'of'operations,'and'
developing'new'partnerships'with'suppliers'and'other'collaborators.'However,'SMEs'
face'significant'and'unique'challenges'in'eRCommerce'adoption.'First,'SMEs'are'slow'
adopters'of'eRCommerce'and'ICT'in'general.'This'is'due'to'low'computer'literacy,'
limited'knowledge'of'eRcommerce'models,'low'awareness'of'the'benefits'of'ICT,'and'
uncertainty'about'the'returns'on'investments.''
'
Second,'SMEs'need'for'broadband'services'are'not'always'served'by'
telecommunication'service'providers.'Indosat'shared'that'fixed'services'are'offered'
typically'to'corporate'and'larger'SMEs,'and'while'the'company'is'pushing'for'strategies'
to'offer'cellular'services'to'smaller'SMEs,'they'face'challenges'is'addressing'the'fine'
line'between'smaller'SMEs'and'the'highRend'consumer'market.''
'
Third,'Indonesian'banks'rigid'standards'in'areas'such'as'merchant'underwriting'limits'
linkages'between'SME'eRCommerce'activities'and'banks.'This'is'exacerbated'by'SMEs'
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low'capital'base'and'lack'of'collateral'property'to'secure'loans.'While'banks'are'
beginning'to'offer'smallerRsized'loans'to'SMEs,'more'needs'to'be'done'in'developing'a'
national'lending'infrastructure'that'improves'the'environment'for'SMEs'to'gain'greater'
access'to'trade'finance,'reduce'the'cost'of'finance,'and'encourage'lending/extension'
of'credit'to'SMEs.''
'
The'provision'of'wholesale'infrastructure'through'angel'and'venture'capital'financing'
is'another'way'to'catalyze'SME'growth.'One'example'is'Indosats'collaborations'with'
Mountain'Partners'AG'and'Softbank'which'helps'to'develop'ICT'startRups'and'increase'
their'visibility'and'valuation'by'exposing'them'to'international'markets.'However,'the'
outcomes'of'such'initiatives'are'eroded'by'existing'regulations'such'as'the'new'
Negative'Investment'List'that'closes'eRCommerce'to'foreign'investors'and'the'new'
Trade'Law'that'mandates'for'exports'to'be'carried'out'only'by'registered'exporters.'
This'hampers'domesticallyRproduced'exports'by'SMEs,'thus'hampering'the'scalability'
of'their'services'(Figure'4).'
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Figure!4:!Share!of!SMEs!contribution!to!total!exports,!1990J2006!
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Policy!Design!Considerations!
As'eRCommerce'in'Indonesia'is'at'its'infancy,'involving'all'stakeholders'in'
developing'regulations'is'crucial'to'realizing'its'full'growth'potential.''
Having'a'developed'payment'industry'is'a'key'enabler'to'eRCommerce'growth'
and'there'should'be'a'platform'for'stakeholders'such'as'Bank'Indonesia,'OJK,'
and'IT'and'payment'companies'to'convene'to'address'payment'issues.''
SMEs'make'up'90%'of'businesses'in'Indonesia'and'eRCommerce'presents'a'
significant'growth'opportunity'for'them.'More'initiatives'are'needed'to'
ensure'inclusion'of'SMEs'in'this'opportunity'such'as'facilitating'their'access'to'
related'financial'services'and'infrastructure.'
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(
Best(Practices(in(Encouraging(Trade(and(Investment(in(
Indonesias(ICT(Industry(
'
Indonesias'fiscal,'regulatory,'and'licensing'policies,'as'well'as'government'support'for'
infrastructure,'R&D,'and'human'capital'development,'all'have'a'profound'influence'on'
ICT'investment'and'adoption.''
'
Product'Compliance'and'Consumer'Safety'
The'key'issue'regulators'face'in'product'compliance'is'managing'the'tension'between'
consumer'safety'and'overly'complex'certification'and'enforcement'procedures'that'
increase'the'burden'of'doing'business'in'Indonesia.'Given'the'short'lifeRcycle'of'the'
timeRsensitive'handset'industry,'the'timeRconsuming'certification'process'has'resulted'
in'handset'manufacturers'rechanneling'their'investments'elsewhere,'thus'limiting'
access'to'a'range'of'innovative'products.''
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The'following'are'international'best'practices'in'simplifying'and'expediting'product'
compliance'to'enhance'the'ease'of'doing'business'while'ensuring'that'safety'and'
compliance'concerns'are'adequately'addressed.''
'
Best(Practice(1:(A(tiered(approach,(or(different(levels(of(adherence(to(standards,(for(
different(product(types(can(expedite(the(certification(process(((
In'Singapore,'the'Infocomm'Development'Authority'(IDA)'approves'products'through'
different'registration'schemes'that'differ'based'on'productRtype'and'the'likelihood'of'
it'causing'interference.'Similarly,'under'the'US'Federal'Communications'Commission'
(FCC)'Approval'Scheme,'Class'A'devices,'which'are'marketed'for'commercial'and'
industrial'use,'undergo'a'less'stringent'verification'process'where'the'manufacturer'
takes'the'necessary'steps'to'ensure'compliance'and'the'submission'of'representative'
data'is'not'required.'On'the'other'hand,'Class'B'devices,'which'are'marketed'for'use'in'
a'residential'environment,'are'subject'to'stricter'requirements'and'gain'market'entry'
via'a'Declaration'of'Conformity'where'products'must'be'tested'in'an'accredited'lab'
that'is'based'on'ISO'17025'standards.'Strict'requirements'are'also'imposed'on'radioR
based'products'that'must'undergo'a'certification'process'which'is'authorized'by'the'
FCC,'based'on'the'submitted'representative'and'test'data.'
'
Best(Practice(2:(Recognition(of(other(certifications(to(avoid(duplicate(processes(
In'the'EU,'all'products'are'regulated'by'EU'directives'which'mandate'that'once'a'
product'bearing'the'CE'marking'is'placed'in'the'EU'market,'member'states'shall'
presume'compliance'with'the'EU'Directives'and'shall'not'prohibit,'restrict,'or'impede'
the'placement'of'this'product'or'service'in'their'market,'unless'they'have'evidence'to'
the'contrary.'In'the'US,'telecommunication'products'with'a'Declaration'of'Conformity'
are'exempted'from'further'review'by'the'regulator.'
(
Best(Practice(3:(PostBmarket(surveillance(to(enforce(compliance((
As'opposed'to'the'typical'approval'regime'where'product'compliance'is'verified'before'
entering'the'market,'the'EU'market'surveillance'authorities'only'conduct'random'
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compliance'checks'after'the'products'are'on'the'market.'This'allows'consumers'to'
have'faster'access'to'stateRofRtheRart'technology'rather'than'being'held'up'by'a'
backlog'of'regulatory'approvals.'Similarly'in'the'US,'the'FCC'Enforcement'Bureau'as'
well'as'the'Authorization'lab'only'investigate'reports'of'nonRcompliant'products'being'
imported,'as'well'as'reported'cases'of'interference.'In'Singapore,'as'a'postRsurveillance'
measure,'IDA'may'require'the'supplier'to'submit'the'test'results'or'evidence'of'
equipment'certification'as'proof'of'conformity'with'the'applicable'IDA'Technical'
specifications.'
'
Fiscal'Policies''
Tariff'and'taxation'policies'impact'the'
affordability'of'ICT'products'and'services'
Best'Practices'in'Supporting'
an'Effective'Tax'System''
and'can'be'a'significant'barrier'to'its'
adoption.'The'proposed'luxury'tax'on'
imported'mobile'phones'by'the'Ministry'of'
Industry'and'the'Ministry'of'Trade'is'
intended'to'spur'growth'in'the'domestic'
mobile'phone'industry'and'to'address'
Indonesias'trade'deficit'by'slowing'imports.'
However,'there'are'concerns'surrounding'
the'negative'unintended'consequences'of'
ICTRsector'specific'taxes.''
'
In'general,'taxation'should'be'
broadRbased'
Taxes'should'account'for'
sector'and'product'
externalities,'such'as'the'
positive'benefits'of'mobile'
The'tax'and'regulatory'system'
should'be'simple,'easily'
understandable'and'enforced'
Dynamic'incentives'should'be'
unaffected'
Taxes'should'be'equitable,'and'
the'burden'of'taxation''
should'not'fall'
disproportionately'on'the'poor'
Source:(GSMA/Deloitte(Report(
'
According'to'a'2011'Deloitte'and'GSMA'study,'mobile'telephony'is'more'extensive'
than'fixed'access'telephony'due'to'underdeveloped'networks.'Given'that'mobile'
telephony'represents'the'universal'access'to'telephony'and'broadband,'handset'taxes'
will'increase'the'cost'of'mobile'ownership'and'exacerbate'the'existing'digital'divide.''
'
In'addition,'current'decreases'in'handset'and'smartphone'prices'offer'significant'
opportunities'in'terms'of'a'positive'contribution'to'GDP'and'jobs,'increased'innovation'
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and'productivity,'and'more'inclusive'socioReconomic'outcomes'through'increased'
access'to'mobileRhealth,'Rgovernment,'and'Reducation.'The'Indonesia'Cellphone'
Association'has'indicated'that'the'proposed'20%'luxury'tax'could'lead'to'a'drop'in'
smartphone'sales'by'50%,'and'erode'the'benefits'of'current'price'reductions.''
'
Conversely,'lowering'handset'taxation'has'been'shown'to'increase'mobile'penetration'
and'mobile'broadband'penetration.'In'August'2009,'the'Kenyan'government'removed'
the'16%'VAT'on'mobile'phone'handsets.'Since'then'handset'purchases'have'increased'
by'more'than'200%'and'mobile'connection'penetration'has'increased'from'50%'to'
70%'of'the'Kenyan'population.''A'2014'GSMA/Deloitte'study'also'showed'that'when'
mobile'taxes'were'reduced,'the'shortRterm'loss'in'government'revenues'was'quickly'
recovered'in'the'mediumRterm'due'to'the'growth'in'the'tax'base'(Figure'5).''
'
Figure!5:!Ability!of!market!to!recover!lost!tax!in!years!following!an!adJvalorem!tax!reduction!
'
Supporting'broadband'development'in'Indonesia''
While'broadband'is'a'key'enabler'of'the'ICT'industry,'it'faces'current'challenges'in'
terms'of'limited'bandwidth'and'lack'of'broadband'infrastructure'in'rural'areas.''
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Currently,'Indonesia'only'has'50MHz'of'spectrum'allocated'for'wireless'broadband.'
With'9'operators'in'Indonesia'and'limited'bandwidth'available,'more'spectrum'needs'
to'be'allocated'for'broadband'to'accommodate'the'forecasted'increase'in'demand.'
Besides'having'a'regulatory'platform'that'will'also'allow'the'acceleration'of'ICT'
infrastructure'development,'ICT'standards'must'be'constantly'updated'to'remain'
relevant'to'the'rapidly'changing'technological'environment'and'to'support'the'
emergence'of'bandwidthRintensive'applications.''
'
In'Indonesia,'the'current'WiRFi'bandwidth'is'limited'to'20'MHz'despite'the'availability'
of'latest'WiRFi'technologies'that'support'bandwidths'of'40'MHz'and'80'MHz'and'
private'users'access'to'expanded'frequency'bands'of'5150R5350'MHz'and'5470''5725'
MHz.'In'order'for'Indonesian'consumers'and'businesses'to'fully'exploit'the'benefits'of'
cloud'computing'technologies,'faster'data'transfer,'and'the'other'benefits'of'new'
bandwidthRintensive'applications,'the'industry'and'policymakers'must'convene'to'
develop'broadband'networks'and'services'that'meet'industry'standards.'
'
Policy!Design!Consideration:!A'wellRdesigned'framework'for'certification'and'
licensing'that'balances'regulatory'certainty,'flexibility,'and'consumer'protection'
is'important.'ForwardRlooking'fiscal'and'customs'policy'will'help'facilitate'the'
growth'of'the'ICT'industry.'Industry'partners'should'be'involved'in'the'
development'of'national'standards'for'IT'products'that'have'clear'requirements,'
specifications'and'guidelines,'and'enables'the'adoption'of'the'latest'technology'
that'will'bring'benefits'to'businesses'and'consumers'in'Indonesia.'
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CONCLUSION'AND'NEXT'STEPS'
'
Emerging'Information'and'Communication'Technologies'(ICT)'are'powerful'catalysts'
for'improving'a'nations'competitiveness'and'creating'a'knowledgeRbased'economy.'
This'makes'the'IICF'a'critical'platform'for'government'and'industry'leaders'to'convene'
and'develop'a'common'understanding'on'regulations'and'policies,'share'digital'trends'
and'best'practices,'and'identify'opportunities'for'publicRprivate'partnerships'to'
achieve'the'shared'goal'of'growth'in'the'ICT'industry'and'solving'challenges'in'ICT'
adoption.'
'
In'IICFs'trailblazing'inaugural'year,'the'quarterly'forums'centered'on'developing'a'
strong'foundation'for'ICT'development'in'Indonesia.'Underpinning'a'thriving'ICT'
ecosystem'is'the'need'for'wellRdeveloped'broadband,'mobile,'and'cloud'
infrastructures'that'are'supported'by'strong'cyber'security'measures.'As'IICF'enters'its'
second'year,'we'recommend'the'priority'be'on'understanding'the'impact'of'ICT'across'
Indonesias'key'sectors'while'also'reviewing'existing'government'and'regulatory'
processes'to'streamline'them'for'greater'business'efficiency'and'enabling'the'rapid'
deployment'of'ICT'to'support'the'broader'Indonesia'economy.'
'
A'recent'McKinsey'Global'Institute'report5'identifies'five'digital'technologies'most'
likely'to'have'a'significant'impact'on'Southeast'Asia'across'a'number'of'important'
sectors:'the'mobile'Internet,'big'data,'the'Internet'of'Things,'the'automation'of'
knowledge'work,'and'cloud'technology.'The'report'forecasts'the'potential'economic'
impact'of'these'disruptive'technologies'across'key'sectors6'in'ASEAN'to'be'between'
$220'billion'and'$625'billion'annually'by'2030'(Figure'6).'In'2015,'we'propose'the'IICF'
'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
'
5
'Southeast(Asia(at(the(crossroads:(Three(paths(to(prosperity,'McKinsey'Global'Institute,'November'
2014.'
6
'Key'sectors:'infrastructure,'financial'services,'education,'manufacturing,'agriculture,'health'care,'
government'services,'and'consumer'and'retail.'
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considerbased'on'stakeholder'needsan'agenda'that'addresses'challenges'and'
opportunities'to'realizing'technologyRdriven'growth'across'these'sectors.''
'
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Figure!6:!Impact!of!disruptive!technologies!across!key!sectors!in!ASEAN!economies!
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APPENDIX'
'
APPENDIX'A'
Decree(regarding(the(establishment(of(
Indonesia(ICT(Consultative(Forum((IICF)(Team(
APPENDIX'B'
Minutes(from(1st(Executive(Meeting((IICF(
(April(1,(2014)(
APPENDIX'C'
Minutes(from(2nd(Executive(Meeting((IICF((
(June(24,(2014)(
APPENDIX'D'
Minutes(from(3rd(Executive(Meeting((IICF((
(October(2,(2014)(
APPENDIX'E'
Supplementary(Materials(
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!
!
!
!
APPENDIX!A!
Decree%regarding%the%establishment%of%
Indonesia%ICT%Consultative%Forum%(IICF)%Team%
!
!
!
!
!
!
APPENDIX!B!
Minutes%from%1st%Executive%Meeting%%IICF%
(April%1,%2014)%
!
%
%
1st Executive Meeting Indonesia ICT Consultative Forum

April 1st, 2014
Welcoming Remarks
Luky Eko Wuryanto, Deputy Minister for Infrastructure and Regional Planning,
Coordinating Ministry for Economic Affairs (CMEA)
o Opened the forum, encouraging the sharing of perspectives, the involvement of
higher officials and focused on outcomes that will result in concrete
improvements
Alex Feldman, President, US-ASEAN Business Council (USABC)
USABC looks forward to an ongoing and long-term programme. Indonesia is one of the
top five countries when it comes to tech use, including mobile technology, Facebook, and
Twitter. The Indonesia ICT Consultative Forum aims to spur ICT in industry in
Indonesia, as well as connect Indonesia to opportunities outside the country.
2014 is a big year:
o The Councils 30th anniversary
o Indonesias Parliamentary Elections
o USABC is launching ASEAN Matters for America and American Matters
for ASEAN
o USABCs CEO Mission to Vietnam and the Philippines, where CEOs will
meet with the President and members of cabinet and leaders of business
community. This follows a CEO Mission in 2013 to Indonesia and
Malaysia.
Indonesia is half the population of SE Asia and more than half of its economic
activity. As economic activity continues, ICT will play a critical role in growth
and Indonesias success. Getting policies right is critical to ensuring people
benefit and growth continues across the world. There are opportunities in the
region, as demonstrated through entrepreneurs in the region making headlines
through development of apps and games that are becoming some of the most
popular in the world. Indonesia has a lot to gain in this sector, and there is great
excitement for this new collaborative platform.
Presentation on IICF Concept & Plan
Eddy Satriya, Deputy Assistant for ICT and Utility, CMEA
Purpose
The Indonesia ICT Consultative Forum (IICF), an initiative started by the US-ASEAN
Business Councils ICT Committee and Coordinating Ministry of Economic Affairs aims
to create a collaborative platform between government and industry to support
Indonesias long-term policy of building a local ICT industry and toward fulfillment of a
shared goal of creating an innovation and knowledge-based economy in Indonesia.
Currently, every ministry has their own pilot projects involving ICT applications, thus
these experiences can be shared and learned from. The Forum will also serve to improve
mutual understanding in the areas of innovation, investment and regulation and will assist
in the development of future ICT policy in Indonesia.
He welcomes comments on the draft decree and proposes that the forum name IICF can
still change.
Implementation
Several objectives of the work streams include reducing coordination issues and
providing timely information before policies are made. In addition, they can be used to
promote local ICT industries.
Structure
The forum will be comprised of a Senior Official Committee including representatives
from the Government of Indonesia, as well as the USABC and local stakeholders.
The Senior Official Committee will report findings to the relevant Ministers on
current ICT issues as identified by the Executive Committee. Under the Senior
Official Committee is the Executive Committee which will be led by co-chairs from
USABCs ICT Committee and CMEA. The Executive Committee is responsible for
providing a fora for ICT policy discussion, annual work plans, and identifying new
initiatives, etc. Under the Executive Committee are the three work streams that will
organize regular activities and provide timely updates on the relevant issues.
Schedule
Key milestones have been identified including:
1)
2)
3)
4)
Mid/late April Executive Dialogue Launch and Panel Discussion

June Executive Committee workshop/meeting
September Executive Committee workshop/meeting
Nov 16/Dec 8 Senior Official/Ministerial Committee and Indonesia Business
Mission
Elizabeth Hernandez, ICT Committee Chair, US-ASEAN Business Council
Key purpose of the IICF is to ensure greater predictability, so that companies can
see where the government is coming from and how the business community can
help meet the common objective of a vibrant ICT sector in Indonesia.
Shared objectives Government and companies want the same thing a vibrant
ICT sector. IICF envisions working toward shared objectives, not as individual
companies or ministries, but as thought leaders toward development of an
innovative, knowledge based community with local ICT industry development as
an enabler to achieving this goal.
Workstreams Workstreams are tools to discuss relevant issues in depth and
serve as a starting pointing. Given that this is a consultative forum, the scope is
open and subject to change. Identified work streams are:
o Emerging Digital Trends The transformational nature of ICT is an
enabler for economic growth. This includes new areas like: cloud
computing and analytics, as well as others new styles of IT. These new
trends need to be understood and regulatory frameworks need to be
aligned with the new trends, thus providing an environment to expand
business and create a knowledge base. To be led by Microsoft and
Qualcomm.
o Incentivizing Localization This workstream looks at how to increase
investment interest. There is a need to level playing field and remove
barriers, but also incentives need to be in place encourage investments. In
turn, greater ICT investment leads to job creation. To be led by Intel.
o Regulatory Insights Initially, regulatory framework changes triggered
the need for forum. IICF wants to understand challenges and looking
forward to share best practices from other countries who are also creating
a domestic ICT industry. This information exchange helps address
Indonesias needs and allows companies to be more effective. To be led
by Google.
Outcomes - Today is an outcome. At a minimum, the outcome IICF hopes to
achieve are regular dialogues to minimize surprise. Such that if new
regulations come up, there is a chance for consultation to allow companies to
prepare operations to remain in compliance of the new policies. Beyond
sharing of information, there can be a sharing of best practices and
development of a roadmap toward the vision to create a knowledge base.
Response from Eddy Satriya, Deputy Assistant for ICT and Utility, CMEA
Last September during USABCs ICT Business Mission to Indonesia this Forum was
first conceived in order to create a robust ICT ecosystem.
Predictability A win-win can be established using the input of government
local incentives, timely regulation and using the expertise of companies.
Outcomes: In addition to reporting our findings from the work streams, we

should consider other measures of success including other metrics or media
involvement.
Participation: Attendees ideas and interaction are welcome. Questions to
consider: Which workstream is of most value? What topics would you like to
hear from experts about?
Work stream leaders presentation on objectives & plans
Emerging Digital Trends - Ruben Hattari (Microsoft) and Nies Purwati (Qualcomm)
Purpose: Provide updates to stakeholders on global industry trends;
international best practices; case studies; government policies for long term
growth in the ICT sector.
Cloud technology: how it can help government and businesses, like SMEs.
o Used in healthcare, politics and education to improve the sectors
o Important for SMEs in Indonesia given their desire for flexibility,
collaboration, mobility and low costs. Also, considering around 90%
of industries in Indonesia are SME, this amounts to a large number of
companies.
o Broadband connectivity is difficult given Indonesias large and
dispersed geography/size, particularly in Eastern Indonesia where
connectivity is needed.
Concerns: cyber security, online privacy
Potential technology, such as smart cities and smart phones, will be discussed
in this workstream, as well as policy challenges that new technology creates.
Incentivizing Localization, Deva Rachman (Intel)
Local demand - The education sector has the biggest need for ICT industry
Local government needs to add input but also the upcoming new government
[national election coming up] requires leadership in this area as localization
needs to be in line with Medium Term National Plan 2019.
Regulatory Insights, Shinto Nugroho (Google)
Regulatory insight Government needs to be in dialogue with private sector
as another source of information on how to make regulations that will
continue to create jobs and opportunities. Companies can share their good and
bad experiences in regards to the impact regulations had on the ICT sector.
Timeliness Government needs robust regulations to help Indonesia build
human resources to increase competitiveness.
Q&A
Suggestion that high-level meetings be moved forward to allow
recommendations for ICT industry to be put forward for the incoming
government and ask for chance to present to the new leadership.
Presentation: Cloud Computing and Its Impact on Our Lives

Speaker: Tony Seno Hartono, National Technology Officer, Microsoft
Key points
Cloud computing touches all aspects of our life social, economic, political,
healthcare
Cloud technology provides choices Private, Public, Hybrid (Public/Private)
and Community clouds exist. Each option provides a different level of
privacy.
o Clouds allow for automization, massive scalability and connectivity,
which is relevant given Indonesias size/population/dispersed islands.
Therefore, the Indonesia government should create positive policies for
cloud computing given these important benefits.
o Allow software developers to use the online market to download and get
revenue, or regional governments with no infrastructure to manage
infrastructure using eservices.
ISO 31,000 Risk Management framework can help make decisions about
public/private cloud and when to use each. Some require services on premise,
others off-premise or some in-between.
Need to have back-up/baskets depending on expected service level agreement
(SLA) and solutions need to be designed accordingly.
Digital trends in Indonesia
Young demographic in Indonesia - 54 million students = cloud computing
opportunity.
Population growth will increase internet use, particularly the 12-34 year olds
users who are often with a higher education.
Growth is primarily in mobile phones
High social media use.
Opportunities for cloud computing in education, healthcare, and politics
Shared responsibility - Government and citizens working together provide
highest ROI thus internet access should be shared responsibility between
government and citizens.
Challenge of internet connectivity
o TV Band White Spaces Use unused frequency spectrum of TV for
data
o Potential to provide all citizens with free internet access to equalize
access
The power of cloud computing to transform government services such as
healthcare and education. Thus, we should maximize benefits of cloud
computing.
Open Discussion
Regulatory environment
AmCham Indonesia Stresses the importance of getting the regulations right.
A study assessing US investment in Indonesia showed that over the last 9
years over 65 billion USD has been put into Indonesia. And projections over
the next 3-5 years expect an additional 61 billion. It showed that with every 1
job created, an additional 10 Indonesian jobs were created showing a
multiplier effect on investment and job creation.
The IT sector is particularly relevant as it creates jobs, forms the backbone of
other sectors investment (i.e. manufacturing) thus compels US investment.
This group is critical to getting this right which is a challenge given that
technology changes quickly. Companies look for: 1) Good regulatory
environment; and 2) Infrastructure. If the regulatory environment is wrong,
the problem is compounded by 10 (i.e. 10 Indonesian jobs not created because
investment doesnt come in).
Creating local demand
Ministry of Industry Focuses on start-up companies in ICT
Asks how to collaborate between the government and private sector on ICT
issues.
Proposes for next meetings:
o Look at how ICT has increased investment in Indonesia
o Look at how to grow the local ICT industry. The benefits of cloud
computing are known but the ministry struggles with how to support ICT
growth and grab the local market.
o Proposes looking at practices to grow local ICT industry in other countries
looking at bad practices and also incentives needed to support ICT.
Workstream on incentivizing localization will address the creation of local
demand and will bring best practices, case studies. (i.e. Vietnam). These case
studies will be from closer to Indonesia and other emerging economies.
Security
Concerns expressed regarding data security with cloud computing. Point of view
that certain data may be considered strategic thus making data security and
protection very important.
Security and privacy are important issues that must be addressed. However, this is
a period of transitioning from data in a physical way to where data is on the cloud.
There are different levels of data security and privacy such that government data
is different and private. Today, data doesnt have boundaries such that data is a
new form of currency. We need to think that data is accessible globally by banks
or enterprises and need to maximize this digital economy, particularly to the

benefit of SMEs to facilitate turning them into global players.
Financing / SMEs
Local industry needs to be supported, especially in ICT because it is hard for
start-ups to get funding from banking institutions. Start-ups usually get funding
from venture capital firms and telcos.
Investment is needed but also there are lots of SMEs who need coordination under
Ministry of Industry and Communication. In this context, the ministry is
concerned about security but cannot avoid new technologies so instead require
assistance for training and education. Ministry is challenged by all the new
concerns and balancing the need for technology with the need to comply to
legislative measures because this is the way forward.
Financial services
Bank of Indonesia Recommends inviting Indonesia Financial Authority (OJK) to join
IICF
Regulates non-banks and banks.
Given cross-over with financial services, Financial Services Committee should
also be included.
Infrastructure requirements
KOMINFO There is a need for a responsive regulatory environment and asks
what this new environment would look like. But also raises concern on what
infrastructure is needed and the funding required; what infrastructure is needed to
ensure is internet free and once it is built how to maintain good quality
infrastructure and continuity of infrastructure operators.
Need to collaborate with other systems like transport and logistics. However, its
also important to consider the soft infrastructure i.e. human capital. Hard and
soft infrastructure are both needed. There is currently US government support for
entrepreneurship support in Indonesia such that companies can help with
training, entrepreneurship, and promotion of hackathons in tech space.
Discussion of IICF Next Steps
Workstream leaders will make respective work plans. Companies are encouraged
to sign up, if they havent already. Also, there is a need to reach each out to
different agencies so these meetings can be taking place on a regular working
level.
There is a need for case studies, experts and guest speakers to share more
information on this ICT transition in Indonesia.
Appendix
Resources
Presentation: IICF Concept & Plan
Draft decree
Presentation: Cloud Computing and its Impact on Economy
ASEAN Matters for America report
Partners in Prosperity: US Investment in Indonesia
Attendees
GOI
Luky Eko Wuryanto, Deputy Minister for Infrastructure and Regional Planning,
CMEA
Coordinating Ministry for Politics, Law and Security
Ministry of Industry
Ministry of Trade
Fiscal Policy Agency, Ministry of Finance
Ministry of Communication and Informatics
Bank of Indonesia
BKPM
Ministry of Tourism and Creative Economy
Partners
Didie Soewondho, Vice Chairman of Telecommunication, Information
Technology and Broadcasting, KADIN
Eddy Thoyib, Executive Director, MASTEL
Andrew White, Managing Director, AmCham Indonesia
Sri Lakkundi, ICT Committee Co-Chair, AmCham Indonesia
Jim Caruso, Economic Counselor, US Embassy
Phil Nervig, Economic Officer, US Embassy
USABC Members
Nazrya Octora, Associate Consultant, APCO Worldwide
Seow Hiong Goh, Executive Director, Global Policy & Government Affairs,
Cisco Systems
Satria Gunayoman, Consultant, Cisco Systems - HD Asia Advisory

Shinto Nugroho, Head of Public Policy and Government Relations, Google
Indonesia
Agung Yudhawiranata, Analyst - Public Policy & Government Relations, Google
Indonesia
Suren Velappu , Director of Corporate Affairs, South East Asia, Hewlett-Packard
Elizabeth Hernandez, Vice President of Corporate Affairs, Asia Pacific Japan,
Hewlett-Packard
Ananta Gondomono, Governmental Programs Lead Indonesia, IBM
Darryn Lim, Director, Trade and Innovation Policy, Microsoft
Nies Purwati, Director of Government Affairs Indonesia, QUALCOMM
Claudia Chan, Head of Government Relations, Asia Pacific and Japan, Seagate
Ruben Hattari, Director of Corporate Affairs-Indonesia, Microsoft
Tony Seno, National Technology Officer, Microsoft
Deva Rachman, Corporate Affairs Director, Intel Indonesia Corporation
Arnold Djiwatampu, Motorola Solutions
Alexander Feldman, President, US-ASEAN Business Council
Kathy Santillo, Regional Managing Director, US-ASEAN Business Council
Desi Indrimayutri, Senior Country Representative, US-ASEAN Business Council
Shay Wester, Manager, US-ASEAN Business Council
Caroline Tanjaya, Country Representative, US-ASEAN Business Council
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Third Indonesia ICT Consultative Forum (IICF) Minutes

Thursday, October 2, 2014
JW Marriott, JW Meeting Center (Level 2)
Co-Chaired by:
Surrendren Velappu, Director of Corporate Affairs for ASEAN, HP (on behalf of Elizabeth
Hernandez)
Welcoming Remarks. By Eddy Satriya (CMEA) and Surendren Velappu (HP)
Eddy Satriya (CMEA)
The first meeting set the discussion priorities and direction for IICF. The second meeting discussed
ICT-related regulations. Today, we will be discussing more specific issues of e-commerce and the
ICT investment climate in Indonesia.
Hopefully, in the next meeting, we can discuss specific applications that will support social
development in Indonesia. This will be in line with the eHealth and eEducation priorities set out
by the new government.
Surendren Velappu (HP)
The IICF is an important platform for government and industry to develop a mutual understanding
in the areas of innovation, investment, and regulation; which is critical in achieving the shared
objective of building an innovative, knowledge-based economy in Indonesia.
This is the third out of four forums to be held this year. The previous sessions have been valuable
to our ICT committee members, and we believe, for the Government of Indonesia as well. We look
forward to coming back in December for the final forum for this year.
Our last session addressed the governments cyber security concerns and several private sector
experts shared existing solutions for data protection, cloud security, securing online banking
transactions, and fraud prevention. The government officials sharing of regulatory measures
intended to safeguard cyber security furthered private sectors understanding of certain
regulations.
In todays third IICF meeting, we hope to continue this constructive discussion about the
development of future ICT policy in Indonesia, particularly in areas of e-commerce and promoting
trade and investment.
In todays forum, we hope to accomplish the following outcomes:
i)
Sharing of best practices and identifying current barriers and opportunities to promote
ICT development
ii)
Identify opportunities for public-private partnerships to address gaps and challenges in
the industry
iii) Determine future areas of work and research that will be useful in developing policy
inputs for the incoming new administration
Vision of Indonesias ICT Ecosystem. By Alexander Rusli (Indosat)
Driven by technology, the ICT arena is dynamic and changes rapidly. This necessitates constant
dialogue between government stakeholders and private sector representatives; and more platforms
for discussion, such as the IICF, are needed.
A robust ICT Ecosystem comprises of three key pillars:
i)
Infrastructure
Broadband is a key enabler of the ICT industry. Currently, Indonesia only has 50MHz of
spectrum allocated for wireless broadband. With 9 operators in Indonesia and limited
bandwidth available, more spectrum needs to be allocated for broadband to
accommodate the forecasted increase in demand.
Having a regulatory platform that allows the acceleration of ICT infrastructure
development is essential.
ii) Payment Systems
Payment systems go beyond mobile services and even offer vouchers. An operator such
as Indosat has 250,000 payment outlets that provide entry and exit points for money,
thus making people more bankable.
In terms of mobile money, Indosats view is that it should be a transition to bank
payment. A limit of USD 500 should be imposed on mobile money, and beyond that sum,
people need to visit a bank. However, challenges remain in maintaining control.
With Indonesians already utilizing mobile and online banking, there is an opportunity to
extend this trend to the growing e-commerce industry. Currently, three large operators
have mobile products and we do not understand why we should be competing with
banks that have other service offerings, which are also awarded with mobile licenses.
iii) Content and Investment
Developers are a key aspect of the ecosystem and their skills are already being exported
by Indonesia.
Investment is also crucial and having angel investors and incubators are necessary to
develop ICT startups. In a collaboration with Mountain Partners AG, Indosat has an
incubator program called ideaBox that cultivates new applications and increases their
visibility and valuation by exposing them to the market. In our first initiative, we selected
3 out of 50 candidates. In the subsequent round, out of 150 registrants, we selected 7.
We realized that many startups have poor business skills and through the incubator, we
can help them market their ideas to the international market quickly. We are limiting
our selected candidates to 10 due to the resource-intensive nature of incubation.
Indosat and Softbank have also collaborated to set up a fund that provides companies
with capital. However, we found it difficult to find startups that are ready for investment.
Q&A
Chan Kok Long (idEA/iPay88): One of the key drivers of e-commerce growth in ASEAN countries are
SMEs. However, in Indonesia, there is no formalized link between SMEs and big companies like
Apple and Google, which provide essential support in terms of infrastructure and
telecommunications. How does Indosat link with SMEs to support them?
Indostat has two lines of service: cellular and fixed. Fixed services are usually offered to corporates
and larger SMEs. To my knowledge, Indosat is the only operator that is pushing for the SME
segment. However, there are challenges in providing services to smaller SMEs due to the fine line
between them and the high end consumer market.
While Indonesias high smart phone penetration (25%) offers opportunity, it is difficult to
demonstrate its value to SMEs. The government and private sector see the opportunity for SMEs
in providing useful applications such as banking services. Even though the current rate of SME
growth is not ideal (6-7%), it is still higher than consumer growth (4%). Currently, there are many
applications being offered, however the education process is time-consuming and we need to
achieve a critical mass. In this area, the government and banks have been helping by offering
smaller sized loans.
We totally disagree with the governments proposal to use IMEI. When a phone is delivered,
theoretically, it should be assigned to a unique IMEI number. However, because operators seldom
Surendren Velappu (HP): An important issue to address is the proliferation of illegal devices in
Indonesia. Is it that easy for illegal devices to get into Indonesia? Is there an opportunity for the
private sector and the government to collaborate to solve this problem?
use the IMEI number, except for the occasional high-level tracing, it ends up being stored as latent
data. Handset manufacturers need access to these IMEI numbers, and smaller handset
manufacturers do not have this access. This results in a duplication of IMEI numbers or no IMEI
numbers at all. This makes it very tough for the government to enforce a regulation that mandates
an IMEI number for every phone. Furthermore, there are about 500 million active phones, and
this is discounting phones that are duplicated or have no IMEI numbers.
Instead, the act should ensure that defective phones do not come in at all. You are right in saying
that there are more regulations put in place for imports and the process now takes 3 to 4 months.
In our experience, we were trying to import Xiaomi, whose phones are limited in supply. By the
time Xiaomi was awarded a permit, the supply was redirected to other countries and the launch
was cancelled. In this time-sensitive industry, which has a short life cycle, having unpredictable
permits make life difficult for handset manufacturers.
Furthermore, the creation of a single ASEAN market extends to mobile devices and a provision for
every phone to have an IMEI number is not practical. Moreover, it is very time consuming for the
telco to consistently check against the database.
Hotman Simbolon (Citi): The question is related to customer protection in the telephone industry.
When fake SMSes are reported, the police will attempt to track the sender through IMEI numbers.
However, often times, this IMEI number is duplicated or does not exist. It feels like the telecom
industry does not care for customer protection even though it is important in this environment.
What are your thoughts on this?
Using the IMEI number for tracking purposes is ineffective. This is because illegal phones that
pass through the border without meeting the standards typically do not have IMEI numbers. This
is especially for low-end Chinese phones that are used widely in Indonesia. A better approach is
to put in place a better border control mechanism that ensure that imported phones comply
with the standards.
Hotman Simbolon (Citi): The limits imposed on mobile phones in Indonesia are not applicable
overseas and this sometimes results in excessive payments. Is it possible to develop a network like
MasterCard where all the ICA industry members operate in a single regulated network that can be
used directly overseas?
Your phone has two balances, reload and mobile money. In Indonesia, the central bank explicitly
states that your reload balance is not allowed to be used as mobile money and that profits
cannot be made from mobile money. Your question on roaming fees refers to reload money. In
November, Indostat is planning for all our products to have only 1 roaming partner overseas.
While this is a gamble, it provides leverage for us to negotiate a fixed maximum amount and
have greater control over customer experience and to avoid bill shocks. Currently, a lot of
roaming occurs between operators here and in other countries, and typically, we can only
achieve one good deal with the partners and have to pay full rates for the remaining. While the
difference is substantial, the customer sometimes choose the expensive roaming partner based
on recommendations by their friends.
Eddy Thoyib (Mastel): As the chairman of ATSI how do you see the trend of the Over-the-top
content (OTT) business and the decline of the telcos core business? Is there any plan from ATSI on
how to protect you and other telcos from this declining trend?
Given that members all have different positions on this issue, it is difficult for me to provide a
statement that is representative of ATSI. But there is consensus in that, as owners of the
infrastructure, telcos should be given a share of the revenue from OTT ads and that the
government should be a facilitator of giving telcos an equitable position on OTTs and their space.
Since four months ago, all the operators in ATSI have been approached by content owners who
say that operators should not push ads at the top and bottom of the mobile device since they
are already making revenue by selling ad spaces.
At Indostat, we believe that traditional voice and SMS mechanisms have disappeared as an
internet IP-based voice like Skype theoretically can have better quality than a circuit switch
connection that is technologically limited. Indostats fund and incubator ensures we are part of
this trend. One of the more successful companies who is also our partner, Softbank, does not
receive their valuation and revenue from the telco business and instead, rely on other income
streams. This mindset shift is important for Indostat, but unlike Softbank which started off as a
software company that bought over a telco, Indosat is a telco company with telco people that is
owning that space.
Dhenu (idEA): Currently, we see that telcos provision of mobile wallets is facing resistance from the
bank. How do you think the telcos model helps Bank Indonesias national movement on using noncash?
Although the banks seem to be in disagreement to push for this, to achieve the cashless society
vision, the different stakeholders need to be open to discussing the use of mobile money to drive
GDP. Instead of transferring funds through the post office, it is now transferred through smart
devices. In response, banks are now saying that as long that it is only used as a delivery mechanism
and the money sits within the bank it is fine. We all know that central banks around the world are
conservative institutions and rightly so as they manage the core activity in every country, which is
money. Which is why in these kind of activities, I push the idea of banks being more open.
Kathy Santillo (USABC): This year, as a result of our annual discussion with the ASEAN Economic
Ministers, we signed on a SME Business Alliance. In collaboration with USAID we have done
workshops throughout ASEAN countries. In 2015, we are looking at putting together an SME Online
Academy and HP is one of the leaders of that initiative.
Discussion 1: Supporting Indonesias e-Commerce Market

Speakers: Irni Palar (MasterCard Indonesia)
Moderated by: Shinto Nugroho (Google)
E-commerce in Indonesia is growing fast (reach 8 billion in three years; 40 percent growth), but
the industry is still young and more coordination and engagement with the government is needed.
MasterCard has engaged with merchants, bank partners, and consumers directly in driving the ecommerce business
The use of card payment in e-commerce is still very low: 75% of transactions in e-commerce is
paid in cash upon delivery and only 20% is by bank transfer. This is because the penetration of
credit card in Indonesia is very low (15.6 million cards or 6 percent of the population). Given that
people typically hold multiple cards, there are only approximately 7-8 million of credit card holders
in Indonesia.
In terms of security, the government is set on providing a means for safe transactions. For
examples, credit cards now use the One Time Password (OTP) to increase security. The challenge
is that Indonesians like to change their phone numbers. While debit cards have a higher
penetration rate, it is less secure and often used for ATM only. Similar to credit cards, debit cards
are also linked to outdated phone numbers. Another means by MasterCard to ensure safety and
security is through a virtual card number (VCN) which you can request from the bank. This is being
developed by BNI and the user can get a separate 16 digit credit card number that makes
transactions more secure.
All players have to be prepared to realize the targets set by the ASEAN Economic Community. In
terms of technology, banks should start exploring ways to build partnerships with industry players.
MasterCard is part of the e-commerce association and are trying to educate the market, introduce
new programs, developing new technologies and payment solutions, and connecting with more
merchants. Growing the e-commerce industry has to be a joint effort.
Discussion: What is on your policy wish list to grow the e-commerce industry?
Irni Palar (MasterCard Indonesia)
Government and the public sector need to work together to create policy that works, especially in the
implementation phase.There has to be more discussions on payment between BI, OJK and the private
sector to give more room for card transactions to grow.
Nurul Ichwan (BKPM)
The e-commerce industry is growing in Indonesia but we need more distributed growth between
big companies and the SMEs. This is because during times of crisis, SMEs play a key role in keeping
the economy afloat.
Collaboration between government and the private sector, especially SMEs, to seek for more
opportunities in AEC. SMEs, particularly those looking to expand overseas, need help from big
companies to provide education and training, and also for companies like MasterCard and Google
to provide more efficient payment and delivery platforms.
Enzelin Sariah (Ministry of Trade)

The Ministry of Trade wants to build a conducive ecosystem for the e-commerce industry so that
all players in the sector can operate in a safe environment and allow for the industry to improve
in terms of quantity and quality. We also found repeat purchases on e-commerce sites to be the
norm and this facilitates Indonesians purchase of locally manufactured products.
The Ministry of Trade supports SME development as 90 percent of business in Indonesia is SMEs.
In the future, SMEs can also benefit from the growing e-commerce industry in Indonesia.
Discussion: What are some challenges that you face in Indonesias e-commerce industry?
Fredrik Thomassen (Zalora)
In general, it is good to do e-commerce business in Indonesia as the market is growing rapidly.
The infrastructure is also adequate. Compared to a delivery time of 4 days in Oslo, delivery time
in Jakarta is 3 hours and in more remote places like Papua, it is one week. Mobile speed also
acceptable (5 percent of transaction is mobile) and in terms of logistics, Zaloras IT infrastructure
is partly in Indonesia where good personnel is not difficult to find. Facebook ad specialists are also
cheaper in Indonesia as compared to Singapore.
However, payment remains a roadblock. 50 percent of customers continue to pay by cash upon
delivery. This is because the banking regulations are not yet mature. Having more rules and
regulations that guarantee customer safety will benefit this industry. Another concern is the
regulatory environment that keeps changing.
There is a demand for Indonesian manufactured products, however, the law disallows Zalora from
exporting locally manufactured products.
Chan Kok Long (idEA/ipay88)
Banks are the missing key component in the e-commerce ecosystem. There is a strong correlation
between bank operations in e-commerce and e-commerce growth. For example, Malaysia has
much higher growth in e-commerce than Indonesia because banks in Malaysia are more open.
My wish as a payment provider gateway is to have a forum where all banks, payment companies
and IT companies convene to solve issues on payment. The payment companies in Indonesias ecommerce sector should organize education sessions with the banks. If banks were less worried
about risk, security, fraud, the e-commerce industry will grow even more rapidly.
Irni Palar (MasterCard)
When I met with one of the big PTs he mentioned that it is difficult to connect e-commerce
merchants to banks due to the banks rigid standards in areas such as merchant underwriting.
Education and communication with banks must increase and MasterCard will talk to other
payment players to conduct these sessions.
Discussion: The ICT sector grows so fast that sometimes regulations cannot catch up. What do you
think of this?
Irni Palar (Mastercard)
Technology is rapidly developing. On the other hand, regulations are trying to catch up with the
growth of technology and the industry itself. For Indonesia, e-commerce is still in its infancy. This
makes the involvement of all stakeholders important in helping the government develop the
appropriate regulations. The government must involve industry players in the policy making
process because they know exactly what the problems are and what kind of regulations are
needed to solve those problems.
Hotman Simbolon (Citi)
Suggestion: there should be modules for SME education on e-commerce.

Shinto Nugroho (Google)
Possible collaboration on SME education on e-commerce with the SME Business Alliance initiated
by the US-ABC and USAID.
Discussion 2: Encouraging Trade & Investment in Indonesias ICT Industry

Moderated by: Eddy Thoyib (Mastel)
Investment Updates in ICT Sectors (2009 to 2014) by Nurul Ichwan (BKPM)
Foreign Direct Investment in the global ICT sector slowed down but started to grow again in 2013.
Much of this investment did not go to ASEAN. ASEAN only received 5% of USD388 billion invested
globally in 2009-2013 in the ICT sector.
USD18 billion of investment went to the ICT sector of ASEAN in 2009-2013 but Indonesia only
received 5%. USD888 million or 85% of FDI realization since 2010 in Indonesias ICT sector came from
Singapore.
Both FDI plan and FDI realization in Indonesias ICT sector have been slowing down since 2010. BKPM
is worried that the FDI plan and FDI realization in Indonesias ICT sector will not improve in the near
future. Since 2010, 99.6% of total FDI in the ICT sector have been located in Java.
The domestic investment plan and realization in Indonesias ICT sector have been slowing down
since 2011. Since 2010, almost 100% of total domestic investment have been located in Java.
McKinsey predicts that Indonesia will become the 7th largest economy offering an additional USD1.3
trillion market opportunity from the growing middle class. There will be 90 million additional
consumers in 2030. Indonesian consumers also have the highest consumer confidence index among
the G20 countries. Indonesia is the most promising country for overseas business according to the
Japan Bank for International Cooperation Survey 2013.
Poor infrastructure remains a challenge but there has been progress through programs like MP3EI,
Palapa Ring, etc. Another challenge is the increasing labor cost. The Government has issued
Presidential Instruction No.9/2013 that sets a minimum wage based on productivity. This is in addition
to the criteria of decent living (KHL) and economic growth.
The government provides investment incentives such as the 5-10 years tax relief facility and 50% for
a further 2 years reduction of income tax. These are applied only to 5 pioneer industries including the
communication devices industry.
Mobile Phone Taxes: Implications for Encouraging Investment by Chris Zull (GSMA)
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220
countries, the GSMA unites nearly 800 of the worlds mobile operators with 250 companies in the
broader mobile ecosystem, including handset and device makers, software companies, equipment
providers and Internet companies, as well as organizations in industry sectors such as financial services,
healthcare, media, transport and utilities. The GSMA also organizes industry-leading events such as
Mobile World Congress and Mobile Asia Expo. GSMA leads the global conversation on mobile taxation
as part of our Digital Inclusion programme. Over the last decade, weve produced numerous studies
that describe and measure the mobile taxation barrier.
There are a number of consumer taxes applied to mobile ownership: Value Added Tax (VAT) or
General Sales Tax (GST), customs duty and excise taxes on imported goods, special taxes on handsets,
special communication taxes on mobile usage, other telecoms specific taxes, such as SIM activation
taxes or other taxes on connection, other special taxes, for example tax on mobile operators gross
revenues.
In 2011, a study in 111 countries showed that the proportion of Total Cost of Mobile Ownership
(TCMO) accounted for by tax had increased to an average of 18.11% (Deloitte/GSMA 2011, Global
Mobile Tax Review). Handset costs act as a barrier to the benefits of mobile usage and taxes
constituted 23% of this cost on average. In eleven countries, tax constituted over 40% of the handset
cost.
Indonesia currently has 317 million mobile connections, 29.3% of which are mobile broadband. With
the right regulations in place, we expect mobile broadband to account for 70.3% of a total of 436
million connections (GSMA Intelligence, Indonesia data Q2 2014). However, the governments plan to
introduce a 20% luxury tax on mobile devices will increase the cost of device acquisition and will hurt
the lower income consumers. It is also a barrier to access to mobile services.
Lowering handset taxation will increase mobile penetration and mobile broadband adoption. The
Kenyan government demonstrated this when they removed the 16% VAT on mobile phone handsets
in 2009. After the removal of the VAT, handset purchases have increased by more than 200% while
mobile connection penetration has increased from 50% to 70% of the population in Kenya since the
beginning of 2009.
Airtime taxes also hamper usage and mobile operators investment. In 2009, the Croatian
government imposed a 6% tax on mobile gross revenues related to voice and text messages. This
increased the consumer taxation as a proportion of total cost of mobile ownership to 28%. The next
year after that, Croatia suffered the first ever fall in voice and text message volumes. Falling revenues
and reduced demand led to a reduction in investment in network expansion.
Reduced access to mobile phones as a result of higher luxury tax may have negative impacts on
economic growth. A study showed that a 10% increase in mobile penetration can increase the GDP of
a country by 1.38%.
A 2014 study showed that when mobile taxes were reduced, the short-term loss in government
revenues was quickly recovered in the medium term due to growth of the tax base (GSMA/Deloitte
2014, Mobile taxes and fees A toolkit of principles and evidence).
Government should align tax policies to these key principles:
o
o
o
o
o
Taxation should be broad-based

Taxes should account for sector and product externalities, such as the positive benefits of
mobile
The tax and regulatory system should be simple, easily understandable and enforced
Dynamic incentives should be unaffected
Taxes should be equitable, and the burden of taxation should not fall disproportionately
on the poor
Product Compliance in International Markets by David Siow (Cisco)

Product compliance is an important concern for regulators worldwide to ensure that safe products
are delivered to consumers. There are best practices in simplifying and expediting product compliance
that we will discuss.
In the EU, once a company compiles with the EU regulations, it is very easy to place a product in its
countries. In the EU, all products are regulated by the EU Directives. The EU Directives are adopted by
28 EU member states + 4 EFTA countries. Once a product bearing the CE marking is placed in the EU
market, member states shall not prohibit, restrict or impede the placement of this product or service
in their market or territory. Products bearing CE mark cannot be stopped at customs and can freely
travel into the EU and within the EU. In the EU, market surveillance and market enforcement is the
responsibility of each member state. Market Surveillance Authorities do random compliance checks
AFTER products are already placed on the market. This is opposite to a typical approval regime where
product compliance is verified BEFORE entering the market.
In the US, most of the products enter the market based on the Declaration of Conformity. Non-radio
and non-computer peripheral products will go through a verification process while radio-based
products will go through certification process. In the certification process, test reports are sent for
reviews and then grants are provided by the regulator. Telecom products with a declaration of
conformance do not need to be further reviewed by the regulator. Test reports from any accredited
test labs are based on ISO 17025. As part of the importing process, the importer completes a FCC 740
Form. In the US, importers are responsible for the products. The FCC Enforcement Bureau as well as
the Authorization lab investigate reports of non-compliant products being imported, as well as
reported cases of interference.
In Singapore, there are products are approved through different registration schemes depending on
the type of product and their likelihood to cause interference. For post market surveillance in
Singapore, IDA may require the supplier to submit the test results or evidence of equipment
certification as proof of conformity with the applicable IDA Technical Specifications.
Many companies operating in Indonesia today face challenges in complying with regulatory
requirements. The examples provided from the EU, US and Singapore illustrate how improved policies
and procedures have been adopted internationally to enhance the ease of doing business while
ensuring that safety and compliance concerns are still adequately addressed. These are examples that
regulators in Indonesia can study and model after so that it can improve the overall business climate
in the country, and thus help attract more investments into Indonesia. Improved processes can also
allow consumers in the market to have faster access to state-of-the-art technology rather than be held
up by backlog of regulatory approvals
Q&A
Nies Purwati (Qualcomm): When investors come to Indonesia and find problems in realizing their
investment, is there any way for them to communicate these problems to BKPM? In order to
accelerate the problem-solving process, can BKPM establish a forum to facilitate discussion
between investors and related ministries/agencies?
Nurul Ichwan (BKPM)
In the investment realization period, investors might face some problems. As long as they submit the
information and seek the assistance of BKPM, BKPM will provide support in solving those problems.
There are two approaches in providing the support:
i)
BKPM will try to understand the real problem. This is important as a reference for other
investors who might face similar problems during the implementing stage of investment.
ii)
BKPM will communicate the problem to the related ministries to find solutions. For this,
the Deputy Chairman of Investment Controlling & Realization will invite investors and
relevant ministries.
Agung Yudhawiranata (Google Indonesia): FDI are focused in Java. Is there any program or plan
from BKPM to help spread the FDI?
Nurul Ichwan (BKPM )

Investment follows the market. As long as a market can be created in any part of Indonesia,
investment will come. The problem is that most of the market in Indonesia is located in Java island.
Even though other islands like Sumatera, Papua, or Kalimantan have natural resources, these
resources mean nothing without buyers.
This situation encourages BKPM to do more investment promotion on downstream industry to
process the natural resources spread in Sumatera, Kalimantan and Papua.
Building processing industries outside Java will also attract the market there as processing industries
will need human resources and suppliers. Another positive impact will be the interaction between the
industry and the local communities.
Connectivity is not only an inter-island issue but also a problem even in Java. An example is the
automotive industries concentrated in greater Jakarta. Therefore BKPM is now focusing also on
promoting investment in infrastructure to build better connectivity.
Phil Nervig (US Embassy): This morning we talked about developing the e-commerce industry.
Developing the e-commerce industry requires more venture capital. The problem is, in the new
Negative Investment List, e-commerce is closed for foreign investors.
Nurul Ichwan (BKPM)

The closing of certain sectors from Foreign Direct Investment in the Negative Investment List is
proposed by technical institutions with their own considerations. Personally I dont know why the
Ministry of Communication and Information proposed e-commerce to be closed. I think it is because
the e-commerce business is closely related to the SMEs and we want our SMEs to have collaboration
with domestic direct investors in the e-commerce business. At the moment the government is still
building the readiness of Indonesian e-commerce business players.
Another example is the animation sector. It is closed until Indonesia has the expertise and the talents
in animation to make sure that local players still have the opportunity to develop the sector.
Chris Zull (GSMA)
Clearly the impact of closing sector like e-commerce in the Negative Investment List is negative.
Surendren Velappu (HP): It is a fact that ICT investment in Indonesia is going down. In general,
Indonesia is not of interest in the global ICT supply chain. If Indonesia wants to attract the global
ICT supply chain to invest in the country, there must be some fundamental prerequisites. The most
important is having a stable regulatory environment.
Right now it is difficult to find a way to market Indonesia. There is no clear regulatory environment.
ICT investment is not like multi-billion dollars oil and gas investment, they are generally small but
of high value. How can BKPM influence the regulatory ministries to differentiate the ICT
investment against other investment in the natural resources processing industry?
Nurul Ichwan (BKPM)
BKPM is under the Coordinating Ministry for Economic Affairs. There are inter-ministerial meetings
to discuss business sectors to be opened or closed for foreign investment and the impacts to the
economy of Indonesia.
Telecom tower is an example. It has been closed for years but still there is no domestic investment
coming to the sector. But it is still closed until today because it is a sensitive area.
As technology is moving very fast, a country like Indonesia which is not yet advanced in technology
needs to protect the interest of the country while at the same time develop the readiness of
Indonesian players. We need the development of ICT but at the same time we dont know what we
are going to do to protect our people in the fast-moving sector.
The closing of certain business sectors should not always be seen from the economic equation but
also from the perspective of readiness.
Ilham Habibie (DeTIKNas)
In the coming six months, DeTIKNas and other stakeholders will start the implementation of the
Indonesia Broadband Plan (IBP) in 5 selected regencies as pilot projects.
Detiknas welcomes companies that want to take part in the discussion on the implementation of the
Indonesia Broadband Plan.

IICFReport AppendixA-D-Final 10dec Web

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