Introduction

Electronic Commerce is one of the most explosive sectors of business today. As more people gain access to the Internet, small and medium enterprises (SME) along with large corporations are looking toward e–commerce as a way to increase sales and profits. Indonesian companies are slowly beginning to work toward incorporating e-commerce into their business, however there are many barriers hindering their progression.

Internet Usage

World wide, 544.2 million people use the Internet on a regular basis (CIA). In Indonesia, Internet penetration is at a low 1.9% reaching only 16 million people (Kluver). Internet subscribers make up less than 1% of Indonesian Internet users, totaling 38,300 annually (Nation Master). Those that do subscribe spend an average of $17.26 a month (based on 20 hours per week, using an annual average exchange rate and the cheapest available access rate) to access the Internet (Nation Master). Low annual subscription’s are due to heavy use of Warnets, or Cyber Cafés (Kluver) because less than 1% of households in Indonesia own a computer (Kurnia). Indonesia currently has only 24 Internet Service Providers with a combined 559,359 hosts to support the country’s Internet activity (Nation Master). Primarily, those who access the Internet do so for alternative news outlets and civic spaces (Kluver).

Internet Access Issues

Internet in Indonesia still mostly operates using copper wires (Kurnia) and 93% of users still use dial-up (Asia). Telkom, a prominent Telephone Service Provider in Indonesia, has used this to their advantage and has begun building a monopoly in the ISP industry. When the Indonesian Rupiah began to drop in value during the mid 1990’s, telephone service fee’s failed to fluctuate in unison with the currency. This caused the telephone industry to hinder phone line improvements and advancements. Currently there are no new landline investments or expansion programs taking place, and it is believed to remain this way until telephone rates increase enough to support such projects. Lacking proper phone lines, Internet bandwidth across the country is incredibly low, reaching only 10-28 kbps outside of Java, Bali, and Sumatra. Telkom is now combining telephone and internet bills to entice more customers to use their ISP rather than others. They could begin to push out other ISPs by offering much lower prices for access and can do so because they control the quality of the phone lines available to access the Internet. If this happens, advancements in Internet access would reach the same stopping point Indonesian phone lines are currently at (Asia). Constantly fluctuating currency rates are also causing problems related to Internet access in Indonesia. While ISPs are paid monthly fees in Rupiah, they have to then pay for access to the Internet backbone in US Dollars, holding the already low quality and high costs for bandwidth at a standstill (Kurnia).

E-Commerce

The majority of businesses in Indonesia began to use the Internet within the past 3-5 years and are having difficulties finding capable IT companies to develop and maintain their websites. Currently only two types of E-commerce websites operate in Indonesia:− International or domestic sites promoting products manufactured in Indonesia, generally only listing where to go to buy the products shown on the site.− International or domestic sites promoting hotels and travel packages for the tourism sector (Asia).Less than 10% of all Indonesian SMEs have websites that are equipped for online transactions (learn link). Those businesses that have tried to integrate E-commerce into their business have had little success due to high online payment and delivery costs (Asia). Internet users in Indonesia are skeptical to use an online payment option due to a lack of cyber laws and regulations (Kurnia). In a survey conducted for the Asia Foundation, one bank reported a 50% online payment fraud rate.

Conclusion

E-Commerce in Indonesia will be stifled until Internet access, bandwidth speeds, cyber laws, and social penetration is improved. Businesses using E-commerce regularly will not be seen in Indonesia until more people use the internet, are able to receive better Internet quality and stable prices, and feel safe conducting business online.

References

CastleAsia, SMEs and E-Commerce, Prepared for the Asia Foundation, January 2002. http://www.asiafoundation.org/pdf/IDSME-ecommerce-study-6-02.pdf (E-Commerce in Indonesia).

CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/geos/id.html

Kluver, Randolph and Banerjee, Indrajit(2005)'The Internet in nine Asian nations',Information, Communication & Society,8:1,30 — 46

Kurnia, Sherah. E-Commerce Adoption in Developing Countries: an Indonesian Study. Melbourne: The University of Melbourne, 2005.

Learn Link, http://learnlink.aed.org/Publications/Sourcebook/chapter5/Foundations_ecommerce_modelofuse.pdf

Nation Master, http://www.nationmaster.com/country/id-indonesia

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