INDONESIA, INFORMATION TECHNOLOGY
AND
THE PROSPECTS OF INFORMATION TECHNOLOGY INDUSTRY
BACKGROUND.
Geographically Indonesia consists of more than 13,000 islands stretching 5,000 km long from West to East, and is located at a range of 1,900 km on both sides of the equator. It occupies 2.04 million square kms of land and 3,16 millions square kms of water. The present population is approximately 182 millions.
The country's development program is a continuing investment program centered around the task to provide the people's basic need, improve quality of life and of the people, and at the same time to strengthen the economic structure to support further growth in the future. With this lasting objective consecutively phased development plan, with the economy on the highest priority, are laid down and executed, starting with the First Five Year Development Plan in 1969.
Over those phases different economic sectors are developed and promoted. Our economy was predominantly agriculture based, and it is still projected as a major economic segment in the future, due to the very nature of Indonesian geographic and demographic characteristics.
And yet, it must be balanced with industry and services, in order to obtain a robust and resilient economy, and to safeguard further development. After achieving a comfortable self sufficiency of basic human needs, growing emphasis has been put into strengthening the share of industry and related services. As a result, private and government investment in new industries can be observed all over the country.
Primary industries were the immediate development object. This is where natural resources and agricultural product are processed into goods ready for trade or consumption. Petroleum, mining, and process industries are features of this phase. And they provide a substantial foreign exchange earning capability to the economy.
A heavy dependence on natural resources is obviously undesirable, and this has been illustrated by the unpredictable price and supply balance of oil, minerals, and forestry products. Moreover, despite the high capital investment and the high technology application in the process industry, production is a repetitive process with little requirements for personnel innovation. As users of technology these industries provide a very limited ground for enhancement of human intelligence.
Today, the next stage of industrialisation is taking place in Indonesia. It is the kind of industry that both produce economic goods and at the same time be a facilitator of human resources development. In the manufacturing and engineering industry, both the product and the production process are in constant improvement and adaptation. Here the technology content is the prime creator of added value, and consequently technology knowhow itself is the backbone of the industry.
With the evergrowing globalisation of economy, it is necessary to develop ways and strategies to participate in the world economy with diversified and competitive product and services. Technology based industries are our strategic asset in entering the twentyfirst century. Technology is the lifeblood of future economy, and we can never ignore its important role in the country's industrialisation. Indeed, mastering the technology itself is a long and expensive process. And this is why the Government of Indonesia takes the responsibility to stimulate through a favorable industrial environment.
Procedure realignment for export, import, investment and finance has been made. To complement them regulatory and institutional support to promote application and development of technologies has been set-up. A number of important actions illustrate this determination. The investment procedures has been simplified, import taxes has been reduced for some commodities, tax reimbursement facilities for components used in exported products, the infrastructure development, and abundant local labors are some of the advantages that can be found. Besides of that, there are bonded area zones available. In addition, recently the Minister of Finance has issued a decree in which Training and R&D is regarded as tax deductible expenses.
Regulation and implementation procedures for the protection of intellectual property were set up, including the amendment of
Copyright Law in 1987, and creation of Patent Law in 1989. Among the major changes in the Copyright Law are the inc1usion of computer software, and designation of copyright breach as a criminal offense. The Patent Law was passed by the Parliament in 1989 and have come into effective force in August 1991. It is worth mentioning that Patent Applications registered in the Ministry of Justice now reaches 14.000, from which 13.400 are application from foreign countries. It shows that the protection of Patents is also in the interest of foreign industries and all industrialized countries.
INFORMATION TECHNOLOGY.
A particular technology which deserves a special attention is Information Technology, that is the technology used to process data into a more meaningful~ and usable form. Information Technology is an indispensable part of modern information system.
The information system more or less is a compound of procedures, data, and data processing system which bound together in such a way that all of those can be presented effectively to be used as a tool for the decision making process, routine every day office works, and other purposes such as marketing, experiment, and production.
Before the advent of the computer system, the data processing system are carried out by the human being accommodated with rules and procedures to handle such inputs. Since more procedures, more data are to be found, then a huge data processing is needed to take care all of these inputs as an alternate of the human being which is no longer capable to afford the job. These tools should be powerful and fast enough to crunch the huge inputs available. Since the introduction of the computer system, all the rules and the procedures used in the system can be tailored in the software systems to be introduced into the computer system for even better efficiency and results.
The development of the information technology has accelerated since then. The major catalisator of the innovations and
X development is the innovation of the revolutionary semiconductor circuits to build the system. This wonderful little device is the state of the art of the most advance technology and becoming the most important and beneficial commodities now and in the future. The development of the information technology is proportional to the development of semiconductors which can be specifically represented by development of memory chips.
Yet, the advancements in lnformation technology are closely related to the innovation of the semiconductor devices.
Especially the development of the semiconductor memories. The mile stone of the development of the semiconductor memories shows that every four years the capacity of the semiconductor memories is quadruple. Recently, a company has announced its latest innovation which gives a breakthrough in the density of semiconductor memories and a record of 64 Mbit memories. In these days, the race of the semiconductor memory innovations for densest memory capacity are being accelerated.
The most important progresses in the semiconductor technology has been marked by the innovation of large-capacity memories and super high speed logic circuits of ultra small physical size because of the digitalization and integration methods. These electronic circuits have made it very easy to build and to increase a system intelligence and capacity.
The vital element of information technology is software. In effect, software provides the computers with intelligence that makes the inanimate machine receptive to human use. Softwares or programs used to account for most of the computer work. The production of the software are becoming predominant. The volume of the software created are expanding at the rate of 20 to 30 percent.
The information system has a most essential factor that should become the major consideration in its development stage. Human being, by their complex individual make-ups, can have various impact on the development of the information technology. Those individual complexity can range from philosophical, ideology, emotions, behavioral mannerism, cultural or ethnic tradition, and the last but not the least, biological identity. It is, in fact, the human factor that has over the years led to the development of information technology and is contributing to the ever new uses for the new system. As in facts, it is people who have influenced the software of the information system and expanded its scope. Even people from currently un-industrialized countries may well be in the position to contribute positively to the development of solution oriented information system.
THE FUTURE OF INFORMATION TECHNOLOGY IN INDONESIA.
Indonesia, being part of the international society will undoubtedly be affected directly or indirectly by the extensive use of the information technology. There are various ways in which people in Indonesia are influenced directly, in the position of technology developers, sponsors, owners and on the other hand as users, operators, or maintenance personnel, or the other. Then there are people who do not have direct access to the systems but who will in some way be affected by them just by being a member of a society that has adopted the systems.
Financial organizations are the other important user of information technology . Banking, Insurance, Leasing, Stock and Capital trading find information technology essential for an efficient and successful operation. As a result, almost every financial organizations in Indonesia today is a user of information technology . The size of business has promoted also the birth and growth of software support and system integration industry.
In the process industry, including chemicals, fertilizers, oil and gas industry, the requirements for real time process control are so tight and uncompromised. It is not surprising therefore that ever since the beginning of Indonesian process industries computerized process control have been predominant.
In the Indonesian manufacturing industry, Computerized Data Processing take the form of Management Information System, Production Planning, and Capacity Planning. And particularly for engineering products, design and design evaluation is carried out through Computer Aided Design tools. Not only to achieve a reliable design, but also to increase design productivity. CAD allows difficult simulation and design alteration be performed within a short period. Aerospace, Ship, Land vehicle, plant construction, platform construction are notable example of CAD users, and most have integrated their design system with manufacturing system. For manufacturing, various customer
tailored installations are in operation. - : Many examples can be withdrawn from various applications being used. Some of the application softwares for management applications, CAD/CAM applications, software development currently in use mainly come from name software houses of the world with various popular trade name as CATIA, MRP II, ARTEMIS, EE Design, Mentor Graphics, NASTRAN, and also standard language
software development like FORTRAN, PASCAL, C, and others. Other applications software for standard office uses has been using countlessly. The names as LOTUS, BORLAND, MICROSOFT, DIGITAL RESEARCH, MICROPRO, ASHTON-TATE are some names among the names of the software houses or the names of the software itself being the most popular and has found many countless application in the area. These last names are very popular due to the wide dissemination of the personal computer application in the offices and also for personal use. This type of computer and application softwares which run on it has become undoubtfully de facto standard of personal computing system nation wide. The tailor made application softwares are also becoming more dominant needs especially in data base management system for the use of personal, offices and corporates every day activities.
An important fact seen in the spreading of information technology is that every application has a company specific tailoring. Or in other words, application of information technology can only be done through the solution approach, and not through selling approach for Hardware and Software. Needless to say that such approach is applicable to every case in the world wide.
As a consequence, apart from the information technology industry in the form of research and manufacturing of hardware and standard application software, additional solution seeking function is necessary and value added generation in this area is
significant. In the business world of information technology we can now see the growing importance of Software Houses, and System remarketer companies.
Because of these specific solution features, the software, system integration and system remarketer industry can find a good place to grow in Indonesia. At a smaller scale they have been counterpart of foreign Technology sources. However, a larger participation would only be justified within an international marketing scheme. This fact brings the opportunity for cooperation between Indonesian and foreign entities, to promote the use and
development of Information Technology in Indonesia.
The development of information technology in Indonesia has been started but obviously still in the early stage eventhough there are many user has been developing their own application system.
The aggressive users mostly come from the financial, banking, and trading groups. The intelligent building here in Jakarta is operated by a national bank (Bank BNI).
Since the semiconductor is the most important factor in the development of the information technology, the government of Indonesia intends to foster domestic seminductor component industry. The plan is in rigorous discussion within a national team for Semiconductor Industries and Technology Development which reports to Minister of Research and Technology, and it is intended to build a new industry that has a capability to produce semiconductor which can supply local and international market windows. This industry should have close cooperation with research institutions, and universities, and the industry should be capable to produce semicustom and custom semiconductor components. It also has been in process the implementation of MEPPO project. This is a laboratory and production of fine production equipments, production techniques, and production automation. This entity is intended to support semiconductor industry and other industries as well to meet the demand especially for fine production equipments, application of new
production techniques and implementing production automation in the future development phase of industrialization. Therefore, the industry should be a catalisator to foster the future development of the information technology in Indonesia. The presence of Information Technology vendors in Indonesia is also positive to the widespread use of Information Technology. Indeed, with the recent restructuring of many Information Technology industries in the world a new penetration strategy may be on the way for this region. We would like however to suggest inclusion of local service industries as partner to develop
customer specific solutions.
To contribute significantly and to stimulate the growth of information services in Indonesia. It is well accepted that within the globalised economy, the network of information nodes must have a global coverage also. For information service entities like those emerging in Indonesia, it is only logical to begin as part of an established international network. This will also contribute significantly to domestic and regional development in the future since the domestic market and domestic resources have many potentials unrevealed. This means that the information technology and services will foster the development of all sectors of development domestically and regionally.
As a matter of fact, countries in the Asia especially countries in East and South East Asia are countries with highest real growth rate in the world in the last ten years. As an illustration, the highest real growth rate GNP per capita of the G7 countries is Japan with record of 3.5 %. Yet this country is an East Asia country. While the minimum real growth rate of the Four Little Dragon countries are Hong Kong and Singapore with record of 5.7 %. These last countries now has been named as Newly Industrialized Economies have achieved economic miracles and will soon become the top rank richest industrialized countries in the world. Behind these famous four little dragons are four other ASEAN countries, Indonesia, Malaysia, Philippines, and Thailand. All of these countries record positive real growth rate except Philippines. The table of their real growth rate in the last ten years are presented as follows.
GNP per Capita
USD(1989) Real Growth Rate (%)
Indonesia 490 3.6
Malaysia 2,130 1.9
Philippines 700 -1.8
Thailand 1,170 4.5
Table 1 : GNP per Capita and Real Growth Rate
Thailand apparently is in the turning point to become new dragon. But the resource rich Indonesia and Malaysia also have a great potential.
The countries of the four little dragons are currently engaged in their economic restructurization and improving their competitiveness for the challenges in the next century. The rising labor cost and the shortage of the labor means that they have to move on the more added value industries. In the other words, they can not rely anymore on the labor intensive manufacturing as their prime mover of the economic growth. Hence, the relocation of the manufacturing activities to lower cost economies as China or ASEAN has been taking place in varying degrees. All of them are going towards more skill intensive and technology intensive industries with higher value added.
Yet, the relocation of the industries will also need careful study whether the supporting market is available. Specifically, in the sector of information technology, a huge potential market is unrevealed yet. The cooperation in the manufacturing of the hardware and software in Indonesia will later prove to be very effective in marketing those products. A lot of specific market are to be revealed and huge potential of the market. Because the fast development of semiconductor technology, the hardware of information technology are becoming cheaper and even more cheaper if manufactured next to the market and in turn will become a snow ball effect to be introduced in the domestic market. Moreover, the specific needs will be revealed and specific solution oriented will take a major part in the market of information technology. Yet, the potential for the local market are huge especially in Information Technology.
Indonesia apparently in the position to move forward in collaboration and cooperation with those nation with restructuring economies to meet the challenges in the 20th century. All of the infrastructures and facilities are being rehabilited, developed and new facilities are emerging. As a conclusion, we see Indonesia as a promising area for the manufacturing, application and joint-development of Information Technology and systems. Even the industrial environment is to be improved further by various policy and support from the government. By application of Information Technology in a well prepared organization we can expect higher quality, higher efficiency, and a smoother entrance of industries collaboration, joint ventures, cooperation together to meet challenges in the local and world economy.