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First, a Safety Net
In Indonesia, survival is the pressing priority
By WARREN CARAGATA Jakarta
The 1000 Biggest Companies


It is hardly surprising that the Internet-spawned stampede to electronic commerce remains more of a dawdle in Indonesia. With the country still reeling from the effects of the regional Crisis and recent political turmoil, most companies prefer to concentrate their energies on more pressing problems. "The first concern is whether a company can survive," says Kees Poelman, a senior technology consultant at PriceWaterhouseCoopers in Jakarta. Yet once the immediate hurdles are overcome, companies face another dilemma: For Indonesians, the Internet is still more a future promise than a current reality.

Only about 250,000 of the country's 210 million people have Internet accounts. Even enthusiastic estimates put the total number of users at no more than 1.5 million. That makes the economics of using the Internet to reach customers extremely challenging, says Scott Desmarais, a vice-president at Boston Consulting Group in Jakarta. Internet use by companies is higher, making business-to-business applications a better bet. Again, however, the market is small and fragmented. "It is going to take a long time for the Internet to really take hold and start dividends in a place like Indonesia," adds Desmarais. Poelman notes that the existing network is relatively congested. Connections to the global network remain the monopoly of state-owned Indosat, putting a premium on bandwidth. As well, charges for local calls make Internet use expensive. But, says Poelman: "It's no longer a choice companies can make. They just have to do it."

Two already moving into cyberspace are PT Telkom, the state-owned telephone monopoly, and Garuda Indonesia, the state-owned national airline — both of which are profitable and slated for privatization. Like most Indonesian companies, blue-chip Telkom is still working its way through financial tangles. It needs to streamline a portfolio of businesses built up when foreign companies entering Indonesia's telecommunications market gave it pieces of the action. It is also in dispute with partners brought in before the Crisis.

Telkom, however, began using the Internet and its predecessors for internal communications in the late 1980s. One benefit is that at least 80% of its workforce has an Internet connection and a PC, says Kristiono, Telkom's senior executive vice-president for planning and engineering. Now the company is moving to a so-called paperless office: all financials and company policies are already available through the corporate intranet. When someone calls to order a telephone line, the information is recorded online and the front office can track progress. Everything but the application form itself, which requires a signature, is done electronically.

The company also is running a trial in which Jakarta customers can access their phone bills online. Online procurement will not be ready until next year, Kristiono says. But requests to potential partners for proposals to help Telkom speed up a range of high-tech ventures, including broadband access and improvements to the Internet backbone, have been made online. Though the cost of setting up an e-procurement system has not been finalized, Telkom has struck a deal with Samsung as its technology partner. First it wants to bring major suppliers online — not a huge challenge, since most are large companies and 70% of Telkom's purchases come from 30 strategic vendors, Kristiono says. For telephone switches, Telkom deals only with Lucent, Siemens and NEC. As it moves to bring the system to its smaller suppliers, it plans to offer help to companies without Internet connections and automated systems.

Garuda was slower off the Internet mark — and hit much harder by the Crisis. It used a state bank to restructure a $1.8-billion debt and is still rebuilding routes abandoned when the rupiah plummeted. Yet the company also has begun to integrate its various information systems and link them to the Internet, says Hadinoto, an executive vice-president and member of its I.T. committee. "We don't want to be left behind," he says. Already competing with other airlines domestically and internationally, Garuda should be able to sidestep some typical Indonesian obstacles. First, its customers are well-heeled and more likely than most to use the Internet. Second, its suppliers include Boeing and General Electric — companies at the head of the technology revolution. Hadinoto says Garuda is automating its back and front offices, and software for financial, human resources and inventory management has been installed. Now financial information from domestic and international offices, which used to trickle in over a month or more, is available immediately.

Yet Garuda is still lagging behind many other regional airlines. Plans for e-business are still being developed. The company hopes to begin online ticketing from its website early next year and plans to make available details on points accumulated from its frequent-flyer program. But Hadinoto admits online procurement will come more slowly, with a trial planned for next year involving key vendors. One way to speed things up: joining a global airline e-business portal. "We would like to use this technology to improve our efficiency," Hadinoto says. Rousing Indonesian business to the call of the new economy may take some time. But for companies able to see beyond their current woes, it's no longer a case of if, but when.

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