Top 5 Issues of ICT Ecosystem Association of

Indonesia Chief Information Officers

Indonesia to address to maintain economic growth

www.ciocommunity.org/

https://www.linkedin.com/groups/6662272

iCIO Community

Agus WicaksonoChairman

Executive Summary

Talent Gap

Data Residency

The identified Top 5 (Five) Issues are considered to having relatively profound impactsto the overall business and commercial transactions to support economic developmentand growth. The implications to the business are clearly outlined with a significant lost ofopportunities.

Focused Group Discussions (FGD) were conducted among CIOs facilitated by Universityof Indonesia (Dept. Electrical Engineering) to come up with a set of recommendations.

These should be adequately addressed to and resolved within the next 3-5 years time forIndonesia to lay out a solid foundational strength toward becoming a digitallyempowered nation.

Technology Readiness ‘I’ Before ‘e’

The Global Competitiveness Report 2016-2017

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108Fixed-broadband internet subscriptions / 100 pop.

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#1 ICT Infrastructure Gap

Overall access to computers and internet connections remains low at 20% and 21% respectively.*Fixed broadband connections accounted for just 2.2% of total internet usage in light of relatively poorbroadband internet infrastructure.** Connectivity Index is low at the category of starters, with 4Gcoverage under 10%, International bandwidth less than 100 kbps, and download speeds don’t reach10 Mbps.*** Palapa Ring project is promising to wire eastern part of Indonesia, yet much need to bedone to go to the last mile.

* http://www.gbgindonesia.com/en/services/article/2012/the_outlook_for_indonesia_s_ict_sector.php** http://www.gbgindonesia.com/en/services/article/2012/improving_internet_access_in_indonesia.php*** Huawei’s Global Connectivity Index

Loss of Opportunities

Implications

Commercial business, public services, and government administration are at relatively modest to slowspeed in embracing digital transformation to achieve optimum business efficiency. Branch offices andtransaction points outside Java and Sumatra, not to mention remote places and offshore operations,face a high cost of doing business to overcome reliability, relatively costly of connectivity, and a realitycheck for maximum commercial expansion.

New business investments to potential growth areas and digital commerce, especially outside Java(and Sumatra), could be at a slower rate than they should be. A large number of SMB (small, mediumbusiness) spreading across the archipelago could not optimally reap the digital dividend to grow thebusiness and expand the market that would induce local economic activities.

#2 Data Residency

Physical location(s) of business entities’ data is bound to the regulations of the country where theyoperate. It relates to data sovereignty that a country need to have access assurance and exercisesome controls as required. PP 82/2012 mandates data center(s) to be in country, and PP 35/2004regulates oil and gas data shall also reside in country. Cloud technology, offering cost efficiency andreduced complexity, is in contrast to the regulations. Likewise, data transfer across country boundariesis happening at high speed as part of business necessity in email and various information exchanges.

Loss of Opportunities

Implications

Data residency laws have a huge impact on existing and future users of cloud and other hostedtechnologies, losing the opportunity to enjoy an efficient cost of operations By dictating wherecertain data is to be held and processed, the requirements fundamentally counteract many of thebenefits of cloud technologies which inherently involve the sharing, processing and centralizing ofdata across borders. Building infrastructure and deploying applications on their owns take muchlonger time and costly as compared to utilizing the cloud. In-country clouds might not exist and areyet to mature to have a complete offering.

Data Residency consequently mandates business entities to store all data, and to some degrees tohave data centers, in the country. To some companies, it incurs an additional high cost burden tobuild their data centers as opposed to using the existing ones at their centers or head quarters outsidethe country. It also limits or hinder the free and fast exchange and flow of information that could becritical to sustain the business.

#3 Data Privacy

Implications

The advance of digital technology entails a collection and dissemination of data at large volumes andat high speed. It includes data that describes details about individuals and personal relatedinformation. Data Privacy addresses this relationship and determines what data in a computer systemcan be shared with third parties. Awareness of data privacy in the society at large and serviceproviders are relatively significantly low. It is becoming great concerns as data, especially personalrelated ones, is floating around without prior consent or authorized to do so,. This is used forcommercial purposes and has potentials for abuse leading to further cyber security aspects. There arealso concerns for having the right to be forgotten to remove one’s digital footprint when not required.

Without respect and legal enforcement on data privacy, trust would be low for people conductingcommercial digital transactions. Potentials for misuse are high, leading eventually to disputes andprobable legal lawsuit. Compounded to a large volume of data, it could slow down the rise of digital

businesses to drive economic growth.

Loss of Opportunities

Business and moreover e-commerce transactions are proceeding with trust and underlying legalbasis to thrive and grow. With lack of clear regulation and low respect on data privacy, there couldbe a reduction in potential investments coming in to the country.

#4 Standard Information Exchange

Loss of Opportunities

Implications

Within particular industries (eg. insurance, health care, financial services), there are clear necessitiesfor information exchanges with growing volumes of transactions. It has been creating costlyadministrative burden. Information exchanges for cross industries, including involving consumers andpublic, are not efficient. For start-ups and new businesses, it could become a kind of another entrybarrier.

The electronic exchange of transaction documents has had a significant impact on businesspractices, particularly in the sales and purchase/merchandising functions of organizations. itbrings in many benefits to the organization such as reduced costs, faster turnaround. bettercustomer service, and in some firms strategic advantage over their competitors. As Indonesianeconomy is growing expansively and digitally, there are surging needs for a sort of standardinformation exchange to ease and smooth out e-commerce, digital transaction, and overall publicservices. It encompasses technical standards at the low level to the business application layer forautomated information sharing.

The absence of information exchange framework would make business transactions harder andcollaborative environment not well-established. It could be either business-to-business, generalpublic services, or consumers to service providers. It turns out to be quite costly for participatingdomains and parties to interact and transact under various formats and multiple platforms ofinformation exchanges.

#5 Talent Gap

Implications

By 2030 Indonesia is expected be the world’s seventh-largest economy, according to the McKinseyGlobal Institute. Its huge source of youthful human capital has the potential to be one of the country’smost powerful economic levers. In 2012 almost 47% of the Indonesian workforce was categorized aslow-skilled labor, according to World Bank data.* As the Indonesian economy returns to highergrowth and intends unto becoming a digitally empowered nation, there are potential of skillsmismatches. Growth areas to support higher productivity and long-term ability to innovate are in-depth technical programming-developments, executive e-leadership, digital marketers, and big dataanalytics. The widest gaps across professional profiles are for English and computer skills.**

Technopreneurs, digital start-up, technology-driven companies, and big firms undergoing digitaltransformation would be relatively slower than expected, on the rise and growth when face withrequired skills shortage. All is expected to fuel digital economy and drive significant growth. On theother hand, as Indonesia enters ASEAN Economic Community, there would be skilled labor in-flowfrom ASEAN countries, potentially displacing Indonesian workforce that could create social tensions.

Loss of OpportunitiesWithout a re-skill on digital space, workforce participation to join the growing digital economy isless, burdening unemployment rate due to skill mismatch. On the other hand, out-flow of highlyskilled technical workforce to highly-paying countries would leave a big gap for companies to fill in,slowing business opportunities and growth.

• https://www.oxfordbusinessgroup.com/overview/addressing-indonesias-skills-gap** World Bank, 2010: Indonesia Skills Report, Trends in Skills Demand, Gaps, and Supply in Indonesia