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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

AsiaweekTimeAsia NowAsiaweek technology

MARCH 10, 2000 VOL. 26 NO. 9

Bricks Before Clicks
Building a new Silicon Valley in Java

Cover: Internet money goes shopping in Hong Kong and what PCCW-HKT means for old-economy firms in Asia
• Players: The deal, the winners and the losers
• Interview: Richard Li on bagging the region's biggest buy
• SingTel: What now for Singapore Telecom?
• Chart: Comparing PCCW and Cable & Wireless HKT
• No. 1: The Lis are definitely Asia's top business family

Editorial: Taiwan should respond to China's peace feeler - hidden in a war threat
Editorial: India's RSS must curb its chauvinism

Philippines: Amid terrorist attacks in Mindanao, President Joseph Estrada plays tough with MILF insurgents
Brunei: The sultanate sues Prince Jefri
Singapore: Behind Ong Teng Cheong's maverick presidency
• Extended Interview: Ong does not regret riling his former colleagues
Nepal: Why the Maoists are resurgent

Green Stakes: Why Asia has to clean up - fast
• Snapshots: Where countries stand on the environment
• Eco-warriors: Fighting to save the planet
• By Design: Ideas that can make a difference

Exhibitions: The art world - a proxy cross-straits battlefield
Newsmakers: India's pointman for defense

Real Estate: Building up Indonesia's multimedia dreams
MyWeb: As this Malaysian Internet company proves, a U.S. listing is not an automatic road to riches
Investing: Don't use yesterday's rules to value tomorrow's hottest telecommunications companies
Business Buzz: CLOB gets resolved

Viewpoint: Political reform is inevitable in China

Kemal Jufri for Asiaweek
Edward Soeryadjaya hopes his CyberCity will help Indonesia join the Net-set.

Once the gateway to Sukarno's Jakarta, the now-abandoned Kemayoran airport is a large expanse of empty fields not far from the city center. Two airliners of forgotten vintage stand there, barely visible in tall grass. Past some corn fields is an amusement park, the Jakarta trade fair and a few other buildings, some finished, some not, detritus from a previous attempt at redevelopment.

The decaying airstrip is an unlikely take-off point for Indonesia's entry into the 21st century. But where others see atrophy, Edward Soeryadjaya sees tomorrow. Soeryadjaya, scion of one of Indonesia's best-known business families, has the government's backing to turn Kemayoran into a high-tech campus called (what else?) CyberCity, where New Economy workers will live, think, sweat and play. "I have coined this idea to be in line with current needs and trends," says Soeryadjaya. Chief among the needs is his country's imperative to shed its info-era backwardness. Chief among the trends is Asia's Internet mania.

CyberCity is, by cyber-standards, modest. Occupying 44 hectares of the Kemayoran site, it will include office and manufacturing space for technology companies and will offer reliable communications links and electricity - a real attraction in a country prone to power blackouts. "It should not be perceived as hype," Soeryadjaya says. There are some who perceive it as such, and tardy hype at that. Many Asian countries have made similar efforts to recreate the dynamics of Silicon Valley by pouring concrete. Malaysia has its Multimedia Supercorridor, Hong Kong its proposed Cyber-Port, even impoverished Vietnam has set up a software development park. For the most part, "these cyber-cities aren't an outstanding success," says one Jakarta investor. "It's a question of people and skills, not real estate."

Indeed, Silicon Valley's success hinged on modern infrastructure, proximity to world-class research universities, a skilled and educated workforce, well-formed capital markets, as well as serendipity and time. Indonesia has none of these. Political and economic upheaval has kept the world's fourth most-populous country drifting in a technological backwater. Only about 260,000 people have Internet accounts, owing largely to poverty, a decrepit national phone network and high calling costs. AC Nielsen estimates that only about 1.2 million people use the Net regularly. For Indonesians with disposable income, "your first choice is a hand- phone" rather than a computer and modem, says Padji Choesin, secretary general of the Indonesian Association of Internet Service Providers.

Nevertheless, there is a surge in websites in Indonesia, driven in part by the extravagant valuations stock-market investors are giving dot-com companies. Plans are being laid for broadband networks and another of Indonesia's prominent business families, the Riadys, are turning a part of their corporate empire, Lippo Group, into an Internet play.

The Indonesian government has in the past tried to develop a technology sector through efforts like the creation of aircraft manufacturer PT Industri Pesawat Terbang Nasional. The ventures largely failed. This time, Soeryadjaya argues, entrepreneurs, not bureaucrats, are leading. CyberCity has government help through the Jakarta International Trade Fair Corp., which awarded development rights to the Kemayoran site. Soeryadjaya bought ten of the 44 hectares from the government for $30 million (four times market value, he says). The Japanese government and a consortium of Japanese firms also back the deal.

For Soeryadjaya, 51, it's a redevelopment project in more ways than one. In the late 1980s, he was involved in a government plan to turn the abandoned airport into the home of the Jakarta fair. He got the fairgrounds, but other project aspects, such as a bid to build the world's tallest antenna tower, faltered. When Soeryadjaya's Bank Summa went under in 1992 - a business failure that subsequently cost the family its stake in automaker Astra International - he was pushed aside. Soeryadjaya now says Bank Summa was the victim of a power play: his friendship with then-dissident politicians Abdurrahman Wahid and Megawati Sukarnoputri angered former president Suharto, he says, and his enemies arranged for the bank's demise. Now, with Wahid and Megawati in power, Soeryadjaya is back. He expects to release detailed plans for CyberCity, along with an estimated price tag, in coming months.

Meanwhile, a few companies have set up shop on the site in existing offices - early adopters are an Internet service provider, a computer systems integrator and the Jakarta Multimedia Academy. Most people in the Internet business in Jakarta say bringing the New Economy to Indonesia requires more than construction. "All [CyberCity] is, is a way to resurrect a dead real-estate deal," says one businessman. They see telecommunications deregulation as key. Outside of Jakarta, the phone network often cannot handle the speeds of ordinary 56-kbps modems. Telkom, the state-owned, state-regulated telecoms company, charges for local calls, increasing the price of Net connections. ISPs must pay dearly to Indosat, another state monopoly, to hook into the Internet backbone beyond Indonesia and hand 1% of their revenue to the government, whether or not they are profitable.

Soeryadjaya acknowledges that many changes are needed, but obviously thinks CyberCity is part of the solution. "It's a realistic initiative," he insists, one necessary if the country is to become a meaningful participant in the New Economy. "This is the reality Indonesia has to face," he says. In a country with so many harsh realities, it may be some time before e-commerce becomes a top priority.

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