Indonesia Digital Market

Digital Market Overview: Indonesia
A Frost & Sullivan White Paper
www.frost.com
50 Years of Growth, Innovation and Leadership

Overview & Methodology

To understand and help inform UK companies about emerging digital market opportunities
in a number of key countries under the UK’s Prosperity Fund, the FCO (Foreign and
Commonwealth Office) commissioned Frost & Sullivan to provide summary digital market
research and analysis across three growing digital markets; telecommunications, digital services
and cybersecurity.
The UK Prosperity Fund is an innovative instrument directing £1.2 billion of UK ODA and non-
ODA investment to tackle barriers to economic growth, targeting middle-income developing
countries. The Fund aims to remove barriers to economic growth in order to reduce
poverty – the Fund’s primary purpose. It supports delivery of the United Nations’ Sustainable
Development Goals (SDG), particularly SDG 8, to “Promote inclusive and sustainable growth,
employment and decent work for all.” Removing barriers and helping harness the potential of
developing markets, will also boost global and UK prosperity through increased investment and
trade. It is in achieving this latter objective that Non-Official Development Assistance funding is
used alongside Prosperity Fund ODA programmes, and in support of the government’s post-
EU trade policy ambition and wider government policies.
. Frost & Sullivan Methodology

To complete the project, Frost & Sullivan engaged analysts from its ICT group based in offices in Indonesia,
Brazil and South Africa. Four main activities were completed during the process. These were:
• Internal Data Audit: Frost & Sullivan leveraged information from its ongoing research programme of the ICT
sector and digital markets in the target countries.
• In-depth Secondary Research: Frost & Sullivan searched all open sources and published documents, including
company information, official government-released information and statistics, international organisations,
industry-recognised associations, as well as national and international press.
• Conducting Primary Research: Frost & Sullivan leveraged its existing networks to speak with the major
stakeholders and industry participants within the country.
• Forecasting the Market Size: Frost & Sullivan constructed a propriety and bespoke data model that captured
all of the research and analysis to forecast the market size across sectors. The methodology followed a
simple and transparent approach and used statistics from government-published sources as well as internal
Frost & Sullivan data.
3 All rights reserved © 2018 Frost & Sullivan

Frost & Sullivan
Executive Summary........................................................................................ 5
Key Findings...................................................................................................... 5
Market Forecast................................................................................................. 6
PESTLE Analysis............................................................................................... 9
Drivers & Restraints.......................................................................................... 10
SWOT Analysis................................................................................................. 13
Base of the Pyramid........................................................................................... 14
Telecommunications....................................................................................... 15
Market Overview............................................................................................... 15
Market Size........................................................................................................ 17
Opportunities for UK Firms.............................................................................. 20
Digital Services............................................................................................... 21
Market Overview............................................................................................... 21
Market Size and Forecast................................................................................... 23
Opportunities for UK Firms.............................................................................. 28
Cybersecurity Services.................................................................................... 30
Market Overview............................................................................................... 30
Market Size and Forecast................................................................................... 32
Opportunities for UK Firms ............................................................................. 35
TA B L E O F C O N T E N T S
EXECUTIVE SUMMARY
Key Findings
Chart 1: Top 7 Key findings from report
Notable trends in the Indonesian digital services market include exponential

growth in eCommerce, the fintech market and digital content.
In terms of the competitive landscape, the Indonesian telecommunications

market is fiercely contested, predominantly by global investors (Singapore,
Qatar, Malaysia) and local players.
The growth in mobile consumption and increasing demand for

disaster recovery services have been key in driving the cloud
market in Indonesia, while concerns over cloud security continue
to serve as a key restraint.
The nation is still in the early stages of evolution in terms

of its digital and financial services. Mobile and internet
banking platforms continue to grow in popularity.
Indonesia’s size and geographic complexity is favourable for

mobile connectivity as opposed to fixed connectivity. There were
78 million mobile broadband subscribers but less than 5 million
fixed-broadband subscribers in the region by 2017.
Indonesia is becoming a key location for regional offices of multinational

companies looking to move into the South East Asian market. The
Indonesian government actively supports inward foreign investment since
this helps stimulate the local economy.
Indonesia is experiencing urbanisation. In 2016, 54% of the population lived in

urban areas, but this is set to change to 65% by 2025. Investors will need to
anticipate this change since it will lead to a changing pattern of consumption.

Market Forecast
Chart 2: Total ICT Market Forecast, Indonesia, 2016-2022 ($US Millions)
$35,000
$30,000
$25,000
$20,000
$ Millions
$15,000
$10,000
$5,000
0 2017 2018 2019 2020 2021 2022

Cyber Security $321.7 $349.7 $380.0 $413.0 $448.9 $487.9
Digital Services $1,811.5 $2,952.0 $4,237.2 $5,749.6 $7,506.0 $9,528.4
Telecoms $22,129.6 $22,739.9 $22,850.1 $22,692.2 $22,611.2 $22,537.3
Source: Frost & Sullivan Indonesia Market Tracker, Statista
Telecommunications Digital Services Cyber Security
• The Indonesian telecoms market is • Digital services are disrupting traditional • The Indonesian cybersecurity market
competitive, facing reduced profit business models, with the majority comprises network security and
margins and saturated voice and SMS coming from eCommerce, digital network advanced malware analysis.
markets. However, data and finance, and cloud services. Both will account for an estimated
value-added services are set to grow to • Investment in local SMEs by angel 68% of the total market by 2022.
an estimated USD 22.5 billion by 2022. investors and venture capitalists has • Government organisations and
• Fixed-line broadband penetration is grown since 2013 due to adoption of financial institutions are becoming
low compared to its mobile digital technologies. more vulnerable to cyber-attacks as
counterpart at 1.7% and 30%, • Digital finance is the fastest growing they produce, accumulate, and
respectively. digital service, set to total USD 1.25 exchange data for administrative
• The majority of mobile subscriptions billion by 2022, followed by cloud purposes and online services.
use 2.5G technology, but both 3G and services at USD 1.2 billion by 2022.
4G uptake is increasing. Prepaid
subscribers represent 98.3% of the total.
Key Focus Areas for Digital Opportunities in Indonesia

Telecommunications Digital Services Cybersecurity
• Pay-TV • Consulting and Advi-sory
• 4G connectivity Services
• Fintech
• Fixed-wireless access connectivity
• Cloud • Network Security
All rights reserved © 2018 Frost & Sullivan 6

Country Overview
Chart 3 – Indonesia Demographics and Country Metrics
Key Country Metrics (2016)
Population (2016) 258.7 million
GDP USD $941 billion
GDP Growth
5.0%
Jakarta
(2017-2022)
Foreign Direct
USD $2.1 billion
Indonesia Investment
Currency IDR (Rp)
(March 2018) 1 USD = (Rp)13,761
The Indonesian telecoms market is forecast to grow from USD 22.13 billion in 2017 to USD 22.54 billion in 2022 at a
CAGR of 0.37%. The digital services market is expected to grow at a CAGR of 38.33% from USD 1.88 billion to 9.53 billion
over the same period, and cybersecurity is expected to grow at a CAGR of 5.53% from USD 573.5 million to 750.5 million.
The information and communication (ICT) sector experienced year-over-year growth of 9.81% from USD 34.0 billion
in 2016 to USD 37.3 billion in 20171. Government backing will be very important for the future growth of ICT services
going forward. The government has proactively supported the ICT sector through a number of initiatives focusing on
infrastructure development, policy enabling and legislation.
Economic Perspective
Globally, Indonesia has the 16th highest GDP ahead of equivalent neighbouring countries such as the Philippines (35th),
Singapore(37th), Malaysia (38th), Vietnam (45th) and Papua New Guinea (106th)2. The economic outlook is positive due to
strong domestic growth. However, Indonesian foreign direct investment still represents a lower share of GDP compared to
other countries in the region like Singapore.
There are several restrictions that potential investors need to consider before deciding to invest in Indonesia. These
include the fact that foreign investors are allowed a maximum stake up to 67% in any Indonesian ISP, and security consulting
services need an operational licence from the National Police Headquarters3.
Moreover, a process of regulatory reform is underway, but policies and laws at local and national levels can create
unnecessary bureaucracy.

Demographic Overview
Indonesia’s population was 258.7 million in 2016 and is expected to grow 4.8% to 271 million in 20204. Indonesia is the
fourth most populated nation in the world after China, India and the United States, and is home to the world’s largest
Muslim nation.
Being the largest economy in ASEAN5, with a 40% contribution to the region’s GDP, Indonesia is expected to lead the
development of the AEC6. The country has abundant human and natural resources and a strategic geographic position.
Chart 4: Population Structure, Indonesia, 2016
Age Pyramid Indonesian Population

280
60+
50-59
271.0
40-49 270
MILLIONS
268.1
30-39 265.0
25-29 261.9
260 258.7
20-24
15-19
- 20.0 40.0 60.0

Indonesia copulation - 261.1 million 250
2016 2017 2018 2019 2020
Residence by Region 49.75% 50.25% Key Metrics

Female Male Break down of Average Monthly Per
Capital Expenditure 2016 - 2022
Kallmantan
Papua 6%
2%
Sulawesi 2016 Average Monthly Per 2020
8% Capita Expenditure,
2016
258.7 Million 271 Million
Java, Bali, 48.38% 48.81%

and Nusa 20% (125.2m) Above USD $112 (125.2m)
Sumatera
21% Tenggara
63%
40% 34.41% USD $37- USD $112 34.12%
(89m) (92.4m)
17.35% Under USD $112 17.25%

40% (44.9m) (46.75m)
Source: Central Statistical Agency, Frost & Sullivan
From an ICT perspective, five islands in Indonesia contain the most inhabitants. The island with the largest population
is Java, with about 150 million people and home to the capital city, Jakarta. Sumatra is next with an estimated 54
million people and situated close to Malaysia and Singapore. Sulawesi has about 20 million inhabitants, while Kalimantan
(Borneo) has about 17 million people. The two smallest main islands are Irian Jaya (New Guinea) and Bali, with 4.5
million people each.
About 40% of the population is aged 39 or younger7. The middle-class population is set to fall slightly in percentage terms
from 34.4% in 2016 to 34.1% in 2020. The expected growth in population will, however, see the number of people in
the middle class rise from 89 million in 2016 to 92.4 million in 2020. While the absolute number will increase due to the
increasing population over this time, there is also a lower, more impoverished socioeconomic class that will increase during
this period.According to the World Bank, an estimated 165 million Indonesians live on less than USD 5.5 per day8.
The number of internet users has grown from more than 89 million in 2015 to 104.96 million in 20179. This is an indication
that more than 40% of Indonesians were internet-savvy in 2017, but it also means that 60% of Indonesians could not use
the internet in the same year. About 65% of all internet users are based in Java, with 15% living in Sumatera and just under
6% living in Kalimantan10. The digital divide is prevalent in Indonesia, mostly because of the uneven distribution of sufficient
telecommunications infrastructure. Increasing awareness of the benefits of internet access and raising the level of digital
literacy would help reduce the digital divide.
Conversely, Indonesia’s huge population and domestic consumption base make this country a favourable platform for
economic growth and investment potential. This makes Indonesia attractive to investors and is one advantage of operating a
business in the country.

PESTLE Analysis
Chart 5: Drivers ICT Industry: Pestle Trend Analysis, Indonesia, 2017
Factors PESTLE Trends Implications for ICT Industry

As part of the Nawacita program introduced Enabled a wide variety of new entrants and new
in 2014, the government provides one-stop business practices to emerge in all sectors, including
services for the processing of investments and finance, transport, logistics, retail and tourism.
Political
business licenses with a 15-day completion target. For example, peer-to-peer lending organizations
Nawacita also makes provision for technology which connect borrowers and investors via online
development.11 platforms.
Strong economic growth is fueled by high Business expansion via Big Data analytics to
domestic consumption. Furthermore, in 2015, support data flow transactions both domestically
Economic
approximately 75% of online purchases were and internationally. This will increase eCommerce
made via mobile devices12. growth to USD 130 billion by 2020.
Growing acceptance of the internet as an efficient Will result in increasing market access, innovation,
Social and convenient channel to connect with the end productivity and development in omnichannel
user engagement.
Digital technologies are in the process of
disrupting and transforming traditional Transforming business models in a variety of
Technological markets by enabling online platforms, reducing industries and expanding across different sectors to
service delivery times and improving end-user cater to market demand
experience.
The Indonesian government has stipulated that Backup and disaster recovery continue to drive
data localization, cloud computing, and disaster demand, especially from companies that store
Legal
recovery centres operating in the country must personal data. In certain circumstances, such
have a base in Indonesia. companies will need to be based in Indonesia.
The Palapa Ring Project is a government-led
Opportunities exist to expand mobile broadband
project set for completion in 201913. It involves
coverage beyond the greater Jakarta area, increasing
Environmental the installation of an undersea and terrestrial
coverage in Western and Central Indonesia and
cable network that covers the five main
expanding into Eastern Indonesia.
Indonesian islands.
Chart 6: ICT Industry: ICT Readiness Index, Indonesia, 2014–2016
2016* 2016 Change in Rank

Readiness Measure
Score Rank (2014-2016)
Political and Regulatory Environment 3.78 65 3
Economic Climate 3.05 85 1
Business and Innovation Environment 4.35 64 -2 
Infrastructure 2.86 105 -20 
Affordability 5.94 38 -1 
Skills 5.13 65 -4 
ICT Usage 4.17 78 -9 
Network Readiness Rank 4.00 73 -9 
*The scores for indicators are measured on a 1-to-7 scale that captures four main subindexes: Readiness, Environment, Usage, and Impact.
Source:World Economic Forum

According to the overall ICT Readiness indicators, Indonesia is ranked 73rd out of 139 countries. Conforming to the
Ministry of Communication and Information Technology tasks has helped Indonesia maintain its ranking within the top 100.
Such tasks include the allocation of ICT resources, the allocation of spectrum and telephone numbers, the enhancement of
service coverage, and the regulation of service price rates.
There has been some degree of upheaval with respect to telecoms infrastructure. Code Division Multiple Access (CDMA)
operators were given until December 2016 to close down their networks due to falling subscriber numbers. CDMA
had also fallen out of favour with hardware manufacturers and end users. One reason was that there was no longer any
competitive advantage in using CDMA over Global System for Mobile (GSM). However, future network readiness rankings
are set to show an improvement in terms of infrastructure. The spectrum made available by the CDMA shutdown will be
auctioned off for use in the development of 3G services, and the Palapa Ring Project will launch in 2019, resulting in the
availability of more high-speed services in the region.
Despite an overall decline in the Network Readiness Rank, digitisation is growing across several sectors, including financial
services, driven by the fintech boom. Moreover, deployment of digital technologies in this sector, such as Big Data and real-
time communications, increases efficiency. In addition, the retail sector is enjoying the advantages of digitisation. Adoption
in this sector will lead to improved customer interactions, the simplification of business processes, and the beginning of a
cashless society.
Drivers & Restraints

Chart 7: Drivers
INDUSTRY DRIVERS
1-2 Years 3-5 Years 6-7 Years

Start-ups and small-medium businesses are expected to fuel digital
adoption in Indonesia; hence, it will increase the use of technology H M H
services such as cloud and cybersecurity solutions
Growing accessibility of the mobile internet, as well as the increasing
H M M
availability of inexpensive phones
Growing eCommerce has increased the need for financial technology
H M M
and payment gateway
Growing focus on digital transformation across sectors has seen an
H H M
increase in expenditure on automated services
Impact Ratings: H = High, M = Medium, L = Low
Chart 8: Restraints
INDUSTRY RESTRAINTS
1-2 Years 3-5 Years 6-7 Years

Indonesia’s size and geographic complexity make it a challenging market
H M M
to enter and the digital divide is apparent throughout the country.
Limited access to technology and the absence of telecommunications
H M M
infrastructure leads to low internet penetration in several regions
No single source of legal reference for investment restrictions in
M M L
government body
Impact Ratings: H = High, M = Medium, L = Low

The vast number of SMEs in Indonesia will play a major role in the growth of digital services over the next few years. In
addition, the expansion of LTE coverage will allow more existing mobile subscribers to use mobile broadband for more
complex tasks such as online purchases, money transferral and communication with government organisations.
Alternatively, Indonesia’s geographic make-up means that hardware installation will always be a challenge. Government
initiatives that draw on the points defined by the Nawacita Program14 may help bridge the digital divide.
Host Government Structures and Policies

The Ministry of Communications and Information Technology (MCIT) comprises seven units and five experts. The units are
in the chart below. The experts are special advisors to the minister on Law; Social, Economics and Culture; Communication
and Mass Media; Technology; and Politics & Security.
Chart 9: Indonesia Government Structures, Ministry of Communication and IT
Ministry of Communications
and Information Technology
(Rudiantara S.Stat. MBA) Advisor
(Vacant)
Secretariat Director General Directorate General of Directorate General

General of Resources and Post & Information for Informatics
(Dra. Farida Dwi Information (Dr. Ir. Technology* (Prof. DR. Application* (Samuel
Cahyarini, MM) Ismail, MT) Ahmad M. Ramli, SH, Abrijani, B.Sc)
MH, FCBARB)
Director General Public

Information and Head of R&D and Inspector General
Communication HR (DR. Ir. Yusuf (Elly Fariani, S. Ak,
(Dra, Rosarita Niken Basuki, MA) MSc)
Widyastuti, MSc.)
* Post involved in telecommunication, infrastructure, and service provider
Source: Ministry of Communications and IT
The MCIT is responsible for policies on digital government and telecommunications infrastructure. In addition, it
is responsible for overseeing infrastructure projects such as the Palapa Ring Project. The ministry established the
Indonesian Telecommunications Regulatory Body (BRTI) to which it delegates authority to regulate, supervise and control
telecommunications networks and services15. The regulator also organizes telecommunications spectrum auctions which
are sanctioned by the ministry.
There are a number of government authorities responsible for establishing digital law and policy. They include the ministry,
the Secretariat of the Cabinet, the House of Representatives and other related departments. In addition, other ministries
need to be involved if the law being proposed comes under their authority. For example, in 2015, the government launched
the 2020 Go Digital Vision campaign in an attempt to help boost the digital economy by targeting SMEs and helping them go
digital. This scheme was implemented by the MCIT but in collaboration with the Ministry of SMEs16.
The Indonesian government recently set up a new organisation tasked with providing cybersecurity for government
institutions, some private companies and the public. The organisation is known as the National Cyber and Encryption
Agency (BSSN). It is headed by Djoko Setiadi, who was appointed in January 201817. Setiadi will report to President Joko
Widodo. As such, some decisions have yet to be made regarding how this agency will interact with related government
ministries, but the MCIT will remain responsible for drafting legislation and regulations regarding domestic cybersecurity
and network security. Prior to the existence of the BSSN, the monitoring of cybersecurity was under the authority of the
Indonesia-Security Incident Responses Team on Internet Infrastructure (ID-SIRTII). All staff and responsibilities previously
under the authority of the ID-SIRTTI are currently being transferred to the BSSN.

The state-owned telecommunications company is PT Telekomunikasi Indonesia TBK (PT Telkom). It currently has
a monopoly to operate local and long-distance telephone services in Indonesia. However, this will soon end as the
government has begun deregulating the telecommunications market.
In 2014, President Joko Widodo devised a nine-point program of priorities that should be addressed for the advancement
of the country (known as the Nawacita Program). As part of the program, the government will reform bureaucracy and
provide one-stop services for the processing of investments of business licenses. The government will also provide funding
for technology development, including the construction of science and technological parks.
Some of the key targets include the increase and development of fixed-broadband infrastructure and mobile broadband
access by prioritising eGovernment, eEducation, eHealth, eLogistics, and eProcurement.
Indonesia ICT Roadmap

The ICT roadmap is part of the National Development Plan 2005-2025, which is a general plan that incorporates a cross-
departmental approach across government for the improvement of countrywide systems such as transportation and utilities
as well as national connectivity and digital services. Within the ICT roadmap, there are four main pillars which serve as the
bedrock upon which the objectives of the Roadmap are achieved:
Chart 10: National ICT Roadmap, Indonesia, 2005–2025
Indonesia ICT Strategic Roadmap 2005-2025

Vision Indonesia 2025
Strengthen National Connectivity to Balance Economy
and Infrastructure Development
Adoption &
Infrastructure Regulation &
Creative Funding
& Security Legislation
Utilisation
Foundation & Pre-requisite of National Broadband Development
Users
Infrastructure & Security

• The Palapa Ring project is the major infrastructure project that is a central part of the Indonesia Broadband
Development plan (IBP) 2014–2019. The project involves the construction of a fibre-optic network comprising 35,000
Km of undersea cable. The network will be operational by the end of 2018 but fully completed by 2019.
• The National Cyber and Encryption Agency (BSSN) launched in early 2018. Decisions regarding its specific roles and
responsibilities are currently taking place.
Adoption and Creative Utilisation

• Adoption of digital services in the creative industry helped develop economic competitive advantage in this industry by
leveraging natural resources and skillful human resources.
• The Indonesian government is planning to support the digitisation of 8 million SMEs by 2020. This is part of the
government’s aim to increase the value of SMEs by USD 10 billion by 202018.

Regulation and Legislation

• Regulations regarding the sharing of passive infrastructure and open access have been reassessed.
• Spectrum management is an ongoing process, especially with respect to the recent shutdown of CDMA networks and
the development of 3G and 4G services.
Funding
• In terms of the IBP, investment is set to total USD 23.3 billion, and in 2017 alone, the Indonesian government spent
USD 1.5 billion to improve connectivity.
• The Palapa Ring Project was funded via public/private partnership. Private operators are responsible for network
construction but will recover capital costs via the availability of infrastructure services.
Main Targets:
Adoption and Creative

Infrastructure and Security Regulation and Legislation Funding
Utilization
• Increased coverage • The successful launch of • Finalisation of passive • Completion of Palapa
of fixed-broadband campaigns such as Go network sharing Ring project and the
from 15% at the end of Digital Vision, such that agreements such that creation of a sufficient
2013 to 71% of urban they increase awareness operators can launch revenue stream to
households and 49% of of the benefits of digital affordable services but ensure recovery of
rural households services for SMEs still make a profit capital costs
by 2019 • The successful • Successful spectrum
• Increased fixed- digitisation of 8 million refarming after the
broadband speeds from SMEs by 2020 CDMA shutdown in
1Mbps at the end of • Connecting the December 2016 and the
2013 to 20 Mbps in government network analogue switch off in
urban areas and 10Mbps (e-government) early 2018
in rural areas by 201919
SWOT Analysis
Chart 11: SWOT Analysis Indonesia
SWOT ANALYSIS – Indonesia
• ICT infrastructure is weak and digital access is

• Indonesia has a vibrant start-up ecosystem; limited in rural areas.
SMEs are proliferating and thriving across the
• The country is still considered in a nascent stage of
nation.
digitisation compared to other ASEAN countries.
• It is one of the most highly connected
• Connectivity is only focused on social media use,
economies in ASEAN and will readily adopt
with far less use directed towards economic,
new technologies
trade, or social development activities.
• Security risks such as data leaks and

unauthorised network access are major
concerns among internet users. • There is high demand for constant connectivity,
• The country has a relatively weak ICT instant information, and a growing appetite for
regulatory framework that covers consumer digital content among citizens.
protection, cybersecurity, and human • eCommerce and online transactions are expected
resources development in digital literacy. to continue to be a growth opportunity.
• Indonesia has an average connection speed and • Enterprise solutions, such as cloud, IoT, and Big
internet bandwidth compared to neighboring Data analytics, are gaining further traction.
countries. This may not be sufficient in the
medium to long term.

Base of the Pyramid

BOP Industry Statistics
• Internet penetration is on the rise in Indonesia. In 2000, fewer than 5 million Indonesians used the internet. By 2016,
there were over 97 million users20. The mobile network is more widespread compared to the fixed network and as
such the majority of internet users gain access via the mobile network.
• While smartphones are contributing to increased internet penetration, smartphone penetration remains low at 23.7%
in 2017 and is heavily concentrated in Jakarta and the country’s secondary cities of Java and Sumatra. Fixed-broadband
penetration was less than 1% in 2016. Poor fixed infrastructure is due to a lack of investment and Indonesia’s geography
as an archipelago, but it is hoped that the Palapa Ring project will help to increase fixed-broadband usage beyond
201921.
• A more immediate problem is that the heavy reliance on mobile networks for internet access is straining capacity and
is adversely affecting internet and telephony quality. Indonesia’s youth is leading its telecommunications revolution. The
average age in Indonesia is 24 years, and 60% of the population is under 39 years of age22.
• Young Indonesians, especially those in the rapidly growing urban middle-class areas, are early adopters of mobile
technology and internet technology.
BOP Industry Initiatives

As a developing country, Indonesia is working to advance the country’s economy by increasing investment in the
information technology sector. Based on Frost & Sullivan data, Indonesia’s expenditure on IT has become the largest in
Southeast Asia.
• IT spending in the country is predicted to reach USD 3.8 billion in 2019, up from USD 1.6 billion in 2014. Cloud and
data centre services are the growth engines when it comes to enterprise IT spending in Indonesia.
• Banking, financial services, and insurance will continue to be the biggest spenders on IT services, while manufacturing
and transportation will show steady growth with respect to adoption.
• Managed services, especially managed network services, are expected to drive government spending, while cloud-based
services, enterprise software, and connectivity services could be extensively used in public infrastructure projects and
the education sector.
• More accessible and affordable broadband services will create scope for deploying new disruptive technologies,
including mobile internet, IoT, work automation, Big Data, and mobile applications.
• Accessible broadband will create new possibilities for peer-to-peer banking and use of mobile money. In this area,
eCommerce and eBanking will increase in popularity, and the fintech market will have a transaction value of USD 38.5
billion by 202223.
Indonesia’s rapid mobile communications growth, lack of fixed-broadband infrastructure and large number of operators are
stretching the capacity of its wireless networks. Indonesians are increasingly reliant on mobile technology in their daily lives
and will readily use bandwidth-heavy applications, such as the downloading and viewing of video content.
With such high technology penetration, Indonesia is quickly becoming a major target market for technology players and
spending on IT is starting to show healthy year-over-year growth. In 2015, total IT expenditure in Indonesia was USD 18.4
billion, having increased at a CAGR of 12.4% during 2011-2015. The key factors that contributed to this market growth
were the increasing support from the Indonesian government and rising adoption of eCommerce. However, increasing
piracy in the software segment could pose a challenge to market growth.

TELECOMMUNICATIONS
Market Overview
Chart 12: Telecommunications Industry Overview, Indonesia, 2016
Telecommunications Industry Overview, Indonesia, 2016
Mobile Subscriptions 388.04 million

Mobile Penetration Rate 150%
Fixed Line Penetration 1.7%
Internet Penetration 31%
Mobile Broadband Penetration 30%
2G :49.8%,
Mobile Coverage 3G : 38.9%
LTE: 11.4%
Number of MNOs 6
Source: Frost & Sullivan Wireless Tracker
There are six mobile operators in Indonesia, namely state-owned Telkomsel, Indosat Ooredoo, Hutchison 3 Indonesia, XL
Axiata, Smartfren and Net1.
Four of the operators, Telkomsel, Indosat Ooredoo, Hutchison 3, and XL Axiata, operate GSM networks, and until
December 2016, four of the seven MNOs also operated CDMA networks.
Mobile penetration is high, amounting to 150% or 388.04 million mobile subscribers. This shows that many Indonesians have
more than one mobile phone. Since fixed-line broadband penetration is less than 1%, the majority of people rely on mobile
broadband to access the internet, hence the similarity between mobile broadband penetration and internet penetration.
Almost 50% of cellular users are still on 2G, while 34% use 3G and the rest are on 4G. The government plans to restrict
the use of 2G-based mobile services in an attempt to increase the use of services supported by 3G and 4G networks. The
regulation is basically intended to increase the growth of 3G/4G network subscribers by encouraging churn away from
2G networks. In addition, operators backed up this regulation by encouraging the take-up of 3G and 4G services and
incentivising smartphone use.

Chart 13: Telecoms Industry Structure, Indonesia, 2017
Communications CSPs
Regulator
• Ministry of Communication and IT

• Biggest market share in telecommunication
• Indonesian Telecommunication Regulatory is Telkomsel, owned by Telkom Group and
Authority (Badan Regulasi Telekomunikasi Singapore Telecom
Indonesia-BRTI)
• Followed by Indosat, owned by Ooredoo
• National ICT Society (Masyarakat Group, Qatar company
Telematika Indonesia-Mastel)
Telecoms Sector
Ecosystem
• Most telecommunication
equipment is imported from
China-based companies, such as • Consumer
ZTE and Huawei. Several • Enterprise (large account)
European players still have market
shares in Indonesia, such as Nokia • Micro Small-Medium Enterprise
and Alcatel
Equipment Providers Customers

and Manufacturers
Recent Developments
The CDMA operators were given until December 2016 to migrate their customers away from their CDMA networks
and onto GSM alternatives. The operators are Telkomsel (Flexi), Indosat Ooredoo (StarOne), Net1 (Ceria), Mobile-8
(Smartfren) and Bakrie Telecom (Esia). The move was part of the government’s plan to sell off the newly available 2100MHz
radio frequencies for use with next-generation services.
The installation of undersea cables has helped operators build on their fixed-market presence from 2012 to 2017. Mobile
operators largely target consumers and SMEs who are driving the demand for bandwidth-heavy digital content and social
media. Large enterprises are looking to fixed-broadband using FTTH to support the uptake of IP-based communications and
cloud applications. However, the fixed-line business is not a top priority for most service providers due to the requirement
for a high level of investment for network deployment, especially in rural areas.
Chart 14: Telecommunications Market, Indonesia, 2017
WIRED TELECOMS WIRELESS TELECOMS SATELLITE
• Telkom is to launch a new Satellite 3S in anticipation

• Telkom is the only player offering PSTN services, and • Based on Frost & Sullivan data, the smartphone
of the increasing demand and support for the
most customers are based in the business sector. penetration rate in Indonesia is expected to grow
achievement of Telecommunications, Information,
• Larger companies are looking to install FTTH via exponentially from 67.1 million users in 2017 to an
Media, Entertainment, and Services (TIMES)
the upgrading of legacy ADSL networks. estimated 133.2 million in 2019.
strategic objectives.

Market Size
Wired Telecommunications Activities
Chart 15: Wired Telecommunications Market Revenue 2017–2022, ($US Millions)
$400
$300
$200
$100
$0
2017 2018 2019 2020 2021 2022
Indonesia| Fixed | Voice $335 $335 $335 $341 $315 $296
Indonesia| Fixed | Data $52 $54 $59 $61 $64 $66
State-owned Telkom has maintained its monopoly in the fixed-line market segment, while Indosat is the other major
player in this segment. In both cases, their subscribers are located mainly in urban areas. Due to a requirement for high
up-front investment, there is little interest in fixed-line deployments. Telkom used only 3.7% of its CAPEX on fixed-line
infrastructure in 2016.
Revenue from fixed voice services will plateau and start to fall after 2020. There will be a fall from £335 million in 2017 to
£296 million in 2022 (CAGR = -2.45%). The main reason for this is growth of mobile services, which are more accessible,
affordable and can be obtained on a prepaid basis (do not require a contract or a line of credit). Fixed data will continue
to increase, but this will be minimal, up from USD 52 million in 2017 to USD 66 million in 2022 (CAGR = 4.88%). Fixed
services will not increase by any significant amount without heavy investment in infrastructure. The completion of the
Palapa Ring project will change this.
The low penetration and low demand are significant constraints when considering increasing fixed-broadband services using
upgraded fixed-line networks. In addition, broadband access using the existing ADSL technology is attractive for micro
SMEs compared to more expensive fibre-optic or leased-line options.
The government has acted by charging operators and service providers a 0.75% levy on their gross revenue via the
Universal Service Obligation program. The funds are used for emergency facilities and to provide basic telephony services,
including fax and internet in remote areas24.
Chart 16: Wired Network Operators Analysis, Indonesia, 2016
Network Operators Subscribers Market Share
Telkom 10,911,109 85.7%

Indosat Phone 1,820,640 14.3%
Total 12,731,750 100.0%

Wireless Telecommunications Activities

Chart 17: Wireless Telecommunications Market Revenue 2017–2022, ($US Millions)
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2017 2018 2019 2020 2021 2022
Indonesia| Wireless $22,742 $22,350 $22,457 $22,290 $22,233 $22,175
The wireless telecommunications market in Indonesia has experienced exceptional growth because mobile operators have
been busily positioning themselves as growth rates start to moderate and competition becomes more intense. Market
leader Telkomsel, the mobile subsidiary owned by Telkom group, continues to maintain a huge presence despite increased
pressure from the competition.
The shape of the market has changed since several newer operators, with foreign partners, have entered. With 4G services
launched following a somewhat controversial licensing phase, there has been much interest in how the operators manage
the next-generation challenge.
We envisage that the wireless market will experience a period of stagnation in terms of revenue growth. With penetration
at more than 100%, the market is completely saturated, and the migration of mobile subscribers from cheaper 2G and 3G
(GSM) services to more lucrative 4G services will take time.
In October 2017, Telkomsel was announced as the winner of a 30MHz block of 2.3GHz spectrum in a bidding process
organised by the MCIT. Telkom paid USD 75 million for the block, outbidding rivals, including Hutchinson 3, Indosat
Ooredoo, XL Axiata and Smart Telekom. Telkomsel used the additional frequency to realign its existing services25. This
includes deploying LTE technology in all the frequencies it owns simultaneously, which will enable it to develop its 4G
business more rapidly26.
Chart 18: Mobile Subscriber Market Share, Indonesia, 2017
Net1
Smartfren (Sampoerna)
2.87% 0.24%
H3I
17.63%
45.03%
12.03%
XL-Axis
22.19%
Telkomsel
Indosat

Satellite Telecommunications Activities

Satellite services have been available in Indonesia since the launch of its own domestic satellite system in the mid-1970s.
Since then, Asia’s satellite market has grown and expanded to uses other than television.
Currently, the largest segment of the market involves mobile connectivity and backhaul, but providers also offer satellite
communication services to the corporate sector, video services and consumer broadband.
Indonesian-based satellite service provider BigNet signed a USD 78 million long-term deal with Singapore-based Kacific
Broadband Satellites27. Both parties are working together to formulate a new high-speed broadband service which will be
available to Indonesians via a satellite dish.
Competitive Analysis
Further details regarding the main telecommunications companies active in Indonesia are shown in the following table:
Company Details
Part state-owned and part owned by Singapore Telecom. In H2 17, Telkomsel recorded net profit of USD 1.1
Telkomsel
billion, with digital business contributing 39.3% of the revenue28.
Owned by Qatar-based Oredoo (65%), the Indonesia government (14.29%) and Skagen AS (5.51%). Lost some
Indosat market share due to in-creased interest in data at the expense of SMS and voice. Indosat is the first company to
undertake frequency realignment, resetting its holdings to 2100MHz.
Owned by Hutchison Whampoa Group (65%) and Indonesian tycoon Gari-baldi Thohir (35%). H3I launched mobile
H3I services in 2007 and within 10 years gained its 17.6% market share. H3I also won a bid at the 2100MHz frequency
auction and will use this to enhance its network.
A subsidiary of Malaysia’s Axiata Group, which acquired Axis Telecom in 2014. XL will be adopting a dual-brand
XL-Axis strategy, whereby XL will be the premium brand and Axis will be the budget brand. XL spent USD 500 mil-lion on
capital expenditure projects in 2017, including pay-TV, broadband internet and voice telephony.
Owned by Sinar Mas Group (60%), Public (31%) and Dubai-based Jerash Investment Ltd (9%). Launched services in
Smartfren 2010 offering fixed-wireless access and CDMA. Following the shutdown, Smartfren switched from CDMA to LTE
and has offered 4G services since 2014.
The brand is owned by PT Sampoerna Telekomunikasi Indonesia (STI), a subsidiary of Sampoerna Strategic Group.
Formerly known as Ceria, it used to operate a CDMA network, but since the shutdown has offered 4G services
Net1
using the 450MHz frequency. STI formed an alliance with the ICE group in December 2015 as part of its plan to
expand and improve its wireless network.
Chart 19: Subscriber Growth by Operator, Indonesia, 2013–2017
200,000
180,000
Subscribers Numbers
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2013 2014 2015 2016 2017
Telkomsel Net1 (Sampoerna) Smartfren
Indosat XL-Axis Hutchinson (H3I)

Major Market Initiatives

Further infrastructure details of the Indonesian Broadband plan are shown below. This is part of the country’s
ICT roadmap.
Chart 20: Telecoms Services Industry Initiatives, Indonesia, 2017
Project Name Description Stakeholder Cost Timeframe

Nationwide Backbone IDR 14 Trillion (USD
Flagship 1 Ongoing
FO Palapa Ring 1.1 Billion)
Shared Duct/Passive
Flagship 2
Infrastructure
Rural Terrestrial
Flagship 3 Broadband Piloting
within USO Area
Government Network
Ministry of
Flagship 4 and Consolidated
Communication
Data Centre Under Indonesia
And Information Long-term plan to
USO Fund Reform to Broadband Plan (USD
Technology 2012-2025
Support Broadband 27 Billion)
Flagship 5
Ecosystem (not only
for infrastructure)
National Digital
Literacy Programme
Flagship 6 to Fasten Broadband
Adoption and
Utilisation
Areas of Technology-specific Growth

Almost 70% of cellular users are on 2G, 25% on 3G and 5% on 4G29. The government’s plan to restrict the use of 2G-based
mobile services, in tandem with the closing down of CDMA networks, has made 4G technology an area of specific growth
in this region.
Opportunities for UK Firms

Major Buyers and Decision Makers
Following the launch of the National Development Plan in 2005 and the Indonesia Broadband Development Plan in 2014,
the major buyer and decision maker at the moment is the Indonesian government. In terms of ICT and/or digital services,
the best ministry to contact would be the MICT.
Areas Where the UK has a Specific Strength in the Country

The UK is Indonesia’s fourth-largest trading partner, worth USD 2.48 billion in 2016. In terms of investment, the UK is
ranked as the second-largest European investor, valued at USD 306 million in 2016. The UK’s main exports to Indonesia are
machinery and transport equipment, chemical and related products, and crude materials30. Currently, the UK has a minimal
presence in the country with respect to the ICT sector.
The Indonesian government has various programs providing support to bring internet and communications access to all
parts of the country. One of the largest programs is The Indonesia Broadband Plan (2014–2019), described in the ICT
roadmap plan, and aimed at providing internet access to users in rural areas. As part of the plan, local and international
communities and service providers have to submit plans and proposals tailored to the varying needs of different parts of the
country. Service providers would be allowed to retain a portion of the universal service payment that they would then use
for rural access projects.

The plan also involves using some of the proceeds of the universal service fund for part of the government’s infrastructure
development of the Indonesia Broadband Plan. Indonesia plans to construct about 35,280 km of undersea fibre optics and
21,708 km of underground fibre optics to deliver nationwide telecommunications services by 2025. Based on this current
development, this is an area where the UK can bring its expertise and capital to enable Indonesia to achieve its goals.
Route to Market and Challenges to Entry

Due to the changes to the regulatory landscape and strong competition among telecommunications players catering
to a price-conscious market, UK firms will need a deep knowledge of the Indonesian market before committing.
Telecommunications are particularly important as an enabler or catalyst for other sectors and as a means of promoting
greater transparency in all aspects, including access to government services.
The government will be a critical partner because infrastructure, such as fibre-optic ducts, uses public rights of way along
streets and utility towers. Municipalities should facilitate access for using public rights of way. A good example is Jakarta,
where the local government gave access to a network provider to lay ducting throughout the city for operators to use at a
cost-based price. Operators can now use the ducting to install services in public areas, like free Wi-Fi at bus stops.
DIGITAL SERVICES
Market Overview
Digital services are disrupting and transforming traditional markets and business models in Indonesia. Using digital
services to collect and analyze Big Data and leverage cloud computing will boost productivity in many sectors of the
Indonesian economy. Linking small businesses to eCommerce opportunities could provide access to markets, technology,
and business partners.
Chart 21: Digital Services Market Overview Indonesia
CLOUD COMPUTING DIGITAL FINANCIAL SERVICES
SaaS, IaaS, PaaS Peer-to-Peer (P2P),

Lending
The major verticals driving the cloud computing
P2P lending provides a strong indirect boost to the
market in Indonesia are manufacturing, banking and
Indonesian economy by supplying much-needed credit to
financial services (BFS), and telecommunications or
underserved markets.
the IT sector.
eCOMMERCE
Payment, Facilitation,
Online Marketing
The Indonesian eCommerce market is projected to

increase from USD 1.90 billion in 2015 to USD 4.59
billion in 2020. This makes Indonesia one of the
fastest-growing eCommerce markets in the ASEAN
region, after Vietnam and the Philippines.
Recent Developments
Cloud Services
Indonesia’s cloud services market is set for rapid growth due to growth in online media consumption and the demand for
cloud-based disaster recovery solutions. Indonesian cloud computing spend was approximately USD 172 million in 2016 and
is expected to reach USD 1.2 billion in 2022 with CAGR of 38.6%31.

Private clouds are favoured by large enterprises and multinationals such as banks and telecommunications providers.
These companies are prepared to pay a premium for cloud services due to concerns over data security. Public clouds
tend to be favoured by micro-SMEs, and there were 57 million SMEs in Indonesia in 201432, which contributed 60%
to Indonesia’s GDP. Due to their vast number, public clouds are expected to lead the growth of the Indonesian cloud
market in terms of adoption.
Digital Financial Services

Peer-to-peer lending is becoming increasingly popular in Indonesia, with the total value of transactions set to reach USD
150 million by 202133. Growth is partly driven by the increasing financial gap, increased internet access, increased use of Big
Data technology analytics to create product differentiation, and government support for micro-finance companies capable
of offering alternative financial solutions.
P2P lending services offer the greatest opportunity to leverage existing financial services since they can be marketed as a
new service for untapped markets such as the unbankable society. Private banks distributed financing totalling approximately
USD 8.6 billion while loans were within the range of USD 74,000–1.5 million34. The largest share of the financing comes
from state-owned banks and government agencies, totalling USD 16.2 billion (more than 65% of the total)35.
eCommerce
The Indonesian government aims to increase the value of the eCommerce market to USD 130 billion by 202036. In the IT
segment, the eCommerce industry is the most highlighted and attractive industry for investors compared to other similar
industries or service markets.
The Indonesian government plans to support the digitisation of 8 million SMEs by 2020. This is part of the government’s aim
to increase the value of SMEs by USD 10 billion by 202037.

Several legislative bodies have shaped the development of Indonesia’s digital services. The government agency stakeholders
in charge of policymaking are The Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan
Usaha or KPPUU), the Ministry of Trade, the Ministry of ICT, Bank of Indonesia and the Financial Services Authority (OJK).
Other government ministries and agencies, the private sector and associations are also involved38.
Chart 22: Government Regulation on Digital Services Indonesia
»» Government Regulation No. 82 comprises the following key points:
i. A limitation on the ability of organizations to use technologies requiring cross-border data flow to
1 gain unfair advantage.
ii. That data centres with information on Indonesian public services have disaster recovery centers
in Indonesia.
»» An exception to the rule ii) is applied to banks, which can host specific infor-mation outside of Indonesia
2 subject to OJK approval. However, the information cannot contain customer identifiable information.
»» According to the OJK, digital financial services providers are responsible for consumer protection,
3 liability and integration of three main organizational types: banking, capital markets and non-banking
financial institutes.

Market Size and Forecast

Chart 22: Digital Services (Consumer) Market Revenue Forecast, 2017–2022, ($US Millions)
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2017 2018 2019 2020 2021 2022
Indonesia | PayTV $758.9 $1,368.8 $2,090.8 $2,927.7 $3,881.8 $4,955.5
Indonesia | mHealth $63.5 $158.0 $271.0 $403.2 $554.8 $726.2
Indonesia | mEducation $6.4 $12.9 $20.7 $29.7 $40.0 $51.6
Indonesia | Insurance $3.1 $22.1 $45.0 $72.0 $103.2 $138.5
Indonesia | Fintech $237.7 $387.7 $564.0 $767.4 $998.4 $1,257.4
Of the digital services, pay-TV predominates, and revenues are set to increase from USD 758.9 million in 2017 to USD
4.9 billion in 2022 (CAGR = 45.54%). The Indonesian pay-TV market is small in relation to the mobile market, with
subscriptions at 18% of TV households, representing 7.5 million subscribers in 201739. Reasons for this include the
prevalence of piracy, competition with free-to-air TV and price.
Despite this, Netflix signed an agreement with Telkom in 2017 and now offers services in Indonesia. The agreement
followed a dispute between Netflix and Telkom whereby Telkom argued that Netflix did not have the correct permit
and voiced concerns about the content Netflix was offering40. The dispute illustrates the importance of having local
support when entering the Indonesian market, especially if the entrants are offering content or services which will be
seen by the masses.
The use of IT in the Indonesian healthcare sector is still in the early stages, but revenues are set to increase from USD 63.5
million in 2017 to USD 726 million in 2022 (CAGR = 62.8%). The Indonesian government is in the process of rolling out
its national health insurance system which will be available to all by 2019. Citizens will be able to access healthcare via their
card, which will facilitate the future use of mobile health systems.
The mEducation market in Indonesia is small, with revenues at USD 6.4 million in 2017. Despite this, it is set to rise to
USD 51.6 million in 2022 (CAGR = 51.81%). One of the most popular applications of mEducation is for learning English.
Indonesians recognise English as being important for international relations, and English-learning mobile applications such as
Duolingo are popular.
Fintech revenues in Indonesia are set to increase from USD 237.7 million in 2017 to USD 1.25 billion in 2022 (CAGR =
39.54%) while mInsurance will increase from USD 3.1 million in 2017 to USD 138.5 million in 2022 (CAGR = 113.8%). The
increasing financial gap has driven the growth of fintech companies offering digital financial services in Indonesia. Based on
data from the International Finance Corporation, the total micro-SME financing gap has reached almost USD 28 billion.
Only 12% have access to credit and manage to grow to a sustainable size, while the rest have limited capacity to scale their
business41. In addition, 45% of micro-SMEs are unfunded from any formal financial institution (bank), and only 4% received
financing from a bank in 2014.

Cloud Services Market

Chart 23: Digital Services (Business) Market Revenue Forecast, 2017–2022, ($US Millions)
$2,500
$2,000
$1,500
$1,000
$500
$0
2016 2017 2018 2019 2020 2021 2022
Indonesia | Data Centres $58.2 $80.4 $110.6 $150.9 $205.1 $275.3 $368.0
Indonesia | Cloud $172.1 $246.4 $348.1 $484.0 $663.1 $901.6 $1,218.2
Indonesia | BPO $431.6 $485.0 $543.9 $610.7 $681.5 $751.0 $813
The Indonesian cloud market is projected to lead the growth of the Southeast Asia cloud ecosystem. It is expected to grow
at a CAGR of 38.6% from 2016 to 2022 to reach an overall market size of more than USD 1.218 billion in 2022 from more
than USD 170 million in 2016. Micro-SMEs have driven much of the public cloud market growth, utilising public cloud for
web hosting, email, and office productivity tools.
Chart 24: Cloud Services Market: Service Revenue Forecast, Indonesia, 2016–2019
$500 $484m
PaaS
2016: $2.9 million
$400
2019: $11.1 million
Revenue ($ Million)
CAGR: 56.4%
$300
SaaS
2016: $158.2 million
$200 $172.1m 2019: $436.7 million
CAGR: 40.3%
$100
IaaS
$0 2016: $11.0 million
2016 2019 2019: $36.2 million
Year CAGR: 48.7%
Iaas Saas Paas
Source: Frost & Sullivan
In 2016, SaaS acquired the largest revenue share in 2016 at 92%, followed by IaaS with a 6.39% share and PaaS with a 1.69%
share. PaaS and IaaS services are expected to be the fastest-growing segments of the three with estimated CAGRs at 56.4%
and 48.7%, respectively. Growth in mobile consumption and increasing demand for disaster recovery services have been
key in driving the cloud infrastructure market in Indonesia.

The opportunity for UK companies to expand their footprint exists in Indonesia. There are significant monetisation
opportunities in Java, the most populated region. UK companies can serve the market by deploying data services and
upselling data centre and cloud services as part of their ICT offerings to Indonesian customers. Furthermore, UK companies
can leverage Big Data analytics by using cloud services and introducing this capability to Indonesian enterprises.
Competitive Overview
Given its large and growing addressable market in Southeast Asia, the Indonesian cloud market is fiercely contested by
global cloud vendors and local telecommunication participants.
Chart 25: Cloud Services Market: Service Revenue Share, Indonesia, 2016
NTT Biznet
Others
12% 11% (CBN, Omdata,
and Elitery)
Indosat
10%
15%
19% Telkom
16% Sigma
XL-Axiata
17%
Indonesia Cloud
Telcos dominate the public clouds, and the top four companies (Telkom Sigma, Indonesia Cloud, XL Axiata and Indosat)
had similar market shares in 2016. Local telecommunication providers are best placed to offer cloud services because they
can leverage their established networks and data centre infrastructures.
Many cloud service providers are increasingly offering bespoke solutions to cater to the burgeoning Indonesian micro-SME
segment. For instance, in April 2015, Telkom Sigma launched its STAR Cloud service specifically aimed at start-up firms
and SMEs. One of the highlights of STAR Cloud is a cloud-based eCommerce web platform. Other smaller cloud providers
are establishing their footing in the Indonesian cloud market by offering niche, but important, cloud services. For instance,
Biznet achieved a 300-customer milestone within four months of its partnership with Internet Initiative Japan (IIJ) by rolling
out a Big Data analytics solution.
With the Indonesian cloud market still on its growth trajectory, many key cloud participants continue to emerge, thus
proving that Indonesia has potential for UK companies to establish business in the country. For instance, UK companies can
merge and partner with local cloud service providers that focus on the SME segment, one of the largest segment groups in
the cloud service market.
Digital Financial Services

In 2016, Indonesia had more than 61 million micro-SMEs that contributed GDP totalling more than USD 637 million.
This total contribution by micro-SMEs to the national GDP is an accumulation of all sectors (e.g., agriculture, mining,
transportation, communication, financial services, etc.).

Chart 26: Number of Small, Medium and Large Enterprises, Indonesia, 2016 -2020
1,000
900
800
700
Number of Businesses
600
500
400
300
200
100
0
2016 2017 2018 2019 2020
Small Enterprise 734.0 761.0 788.0 814.0 841.0
Medium Enterprise 62.0 66.0 69.0 73.0 76.0
Large Enterprise 5.0 5.0 5.0 5.0 5.0
Chart 27: Number of Micro-SMEs, Indonesia, 2016–2020
67,000
66,100
65,200
Number of Businesses
64,300
63,400
62,500
61,600
60,700
59,800
58,900
58,000
2016 2017 2018 2019 2020
Micro Enterprise 61,157.0 62,477.0 63,798.0 65,123.0 66,443.0
The micro-SME segment faces certain challenges when trying to meet banks’ expectations and terms, such as the
requirement for collateral, credit history and short-term bridging capital, which is usually not offered by banks.
Digital financial services providers are the best place to take advantage of this gap. In addition, P2P lending can play a major
role in bridging financing by improving access to credit for a broader range of consumers and businesses.
Chart 28: Amount of GDP Financing in USD Billions, Indonesia, 2016-2020
2016 2017 2018 2019 2020 2021

GDP Financing 26.40 27.24 28.11 29.00 29.92 30.88
Other Financial Institution 0.49 0.51 0.53 0.54 0.56 0.58
P2P Lending 0.010 0.015 0.027 0.049 0.088 0.159
Source: Bank Indonesia; Frost & Sullivan

By 2016, more than USD 26 billion in loans had been disbursed to support GDP financing. One of the resources originated
from the Other Financial Institution category. P2P lending from this category represented 1.2% of the total, amounting to
USD 10 million. This makes P2P lending a significant source of financing.
With estimated values at approximately USD 15 million and a growth rate of 80% over the next five years, UK companies
can proactively grow the P2P lending sector and reach a sizeable target.
Existing players are primarily focused on funding for micro-SMEs and personal loans. The P2P lending business is relatively
new in the Indonesian financing market. Most of the participants have been start-up businesses since 2015, and the number
of players is expected to grow 35% in 2019.
Most personal loan companies (such as Uang Teman, Doctor Rupiah, and Julo) offer loans using balance sheets and
engagement with their customers via mobile applications. Only Pinjam stands out by using a pawning scheme.
eCommerce lenders have a unique way of serving their customers. It is an alternative payment solution for non-credit card
users. The top players serving this market segment are Kredivo and Akulaku. They target young consumers in need of
short-term loans to purchase goods (mostly electronic items) via an eCommerce platform.
Chart 29: P2P Lending Market, Indonesia, 2016
Job
Finance Other
1% 2%
Akulaku
2% Uang
13% Teman
18% 46%
Pinjam
20%
Kredivo
With total disbursement of USD 5.6 million, Uang Teman has the largest market share in the P2P market, reaching almost
46% of the market with total loan disbursement of IDR 35 billion since first launching in 2015. Uang Teman competes
against unauthorized money lenders and traditional banks that offer short-term micro-lending options, as well as other P2P
players that share the same business model, such as Julo Finance.
Due to rising competition in the eCommerce lending sector, companies such as Kredivo and Akulaku now offer new
product differentiation in the P2P lending segment. Both participants offer a product which caters to consumers in the
medium and higher classes in need of short-term loans for the purchase of items via eCommerce.
Other than Pinjam, most of the players are offering unsecured loans with short-term periods. Pinjam replicates the pawn
lending business model in which the debt is secured by a personal asset of the borrower and in which valuable items, such
as gold and electronic goods, are usually pledged as collateral.
eCommerce
The Indonesian eCommerce market is projected to increase from $2.02 billion in 2016 to $4.59 billion in 2022. This
makes Indonesia one of the fastest-growing eCommerce markets in the ASEAN region, after Vietnam and the Philippines.
The growth in eCommerce is likely to prompt a shift towards more cloud-based eCommerce web hosting and website
applications, allowing companies to tap into the cost savings and scalability that a cloud model provides.

The Presidential Regulation on the Roadmap for the National eCommerce System 2017-2019, released in August 2017, has
become one of the key drivers for the growth of the eCommerce market in Indonesia42. The roadmap provides guidelines
for Indonesia’s digital economy sector and prioritises the development of the National Payment Gateway (NPG).
Chart 30: eCommerce Market: Service Revenue Forecast, Indonesia, 2016–2022
In 2016, 70% of customers accessed

eCommerce platforms on their
$5 mobile devices.
$4.59b
$4
Revenue ($ Billion)
The share of web page views for

$3 eCommerce platforms only
reaches 28%.
$2.02b
$2
A majority of transactions are

$1 immediate, in which payment is
due at the time of delivery.
$0
2016 2022
Year Common types of payment methods
include bank transfer, cash on
eCommerce
delivery, and credit cards.
The Indonesian eCommerce market is highly competitive. The top five companies are:
Company/Brand Visitors in February 2018 (millions)

Lazada (general) 111.8
Blibli (general) 43.88
Shopee (general) 32.63
JD (general) 12.76
Bhinneka (electronic equipment) 7.32
This may change in the near future following the launch of Amazon’s Prime Now service in Singapore in December 2017.
The launch is seen as part of a larger expansion into the Southeast Asia region, and with its sizable consumer market,
Indonesia will be part of this expansion.
Areas of Technology-specific Strength

Indonesia is the largest economy in ASEAN and a member of G-20 major economies. The country’s GDP is projected to
reach more than USD 1.5 trillion by 202243. Such strong economic prospects make Indonesia one of the top investment
destinations for inward investment in eCommerce. The eCommerce segment has attracted many joint ventures between
local and foreign investors, raising almost USD 158.7 million in investment in 2016.

Cloud – The increasing use of Big Data analytics and IoT are fuelling the demand for cloud-based storage solutions.
Spending on IoT in Indonesia is expected to increase from USD 28.8 million in 2013 to USD 1.35 billion in 202044.
Fintech – Improved broadband services will create new possibilities for P2P lending and use of mobile money, which will
help increase financial inclusion.

eCommerce – eCommerce and Indonesian-language net-based services should take off in 2019. Indonesian firms
partnering with UK firms that focus on global eCommerce and internet applications could bring these innovations
to Indonesia.
Major Buyers and Decision Makers

Chart 31: Cloud Services Adoption Trends, Indonesia, 2016
Sector Adoption Scale Notes

Manufacturing High Ministry of Trade
Telecommunication/Information Technology Medium Telkom Sigma, Indosat, XL Axiata
Banking and Financial Medium Bank Indonesia, Bank Mandiri, Bank Central Asia
Government High Ministry of Trade, ICT and Finance, Defence
Education Low Ministry of Education
Chart 32: Digital Financial Services Adoption Trends, Indonesia, 2016
Sector Adoption Scale Notes

Banking and Financial High Bank Central Asia, Bank Mandiri
Retail Medium Tokopedia, Bhinneka.com
Public Sector Low Finance Authority, Ministry of Trade
IT & Telecoms High Elevenia, XL Axiata
Small Enterprise Medium Micro-Finance

Due to heavy competition, most of the foreign players have built a footprint via joint venture partnerships with local
players. The opportunities for UK firms lie in collaborative and joint venture projects. Such projects include the creation
of business incubators and start-up coaching programs. UK firms are best placed to expand the Indonesian economy
because of the established relationship between the UK and Indonesia. This is especially the case in education through the
scholarship scheme, whereby about 4,700 Indonesian students study at various universities in the UK.

Digital services are still relatively new in Indonesia, and there is a shortage of skilled people with IT expertise in data
analytics, cloud management and cybersecurity.
Cloud security remains a concern for many companies in Indonesia. Enterprises have reason to be concerned about
security risks, which include unauthorized access to applications and data leaks, particularly in a shared cloud environment.
The Indonesian retail and eCommerce companies are looking to adopt Big Data analytics. Enterprises are beginning to
understand that analytics can be useful in understanding consumer behaviour and predicting trends. To use analytics,
enterprises will be required to use Big Data software, which will require high-processing power.
P2P lending providers and small-medium finance institutions need to improve management information and reporting
systems because of the adaptation of new ICT technology and the necessity to integrate with the government’s financial
supervision system. In addition, the geographically dispersed markets in Indonesia could create lack of awareness and
understanding of consumer products in digital financial services.

CYBERSECURITY SERVICES
Market Overview
Chart 33: Security Market Landscape, Indonesia, 2016
Market Evolution
• Indonesia has identified cybersecurity as a primary area • The Indonesian cybersecurity market con-tinued
of importance to ensure stable future development. to grow in 2016 and reached USD 297 million as
government and large organisations and businesses
• Cyber-attacks in Indonesia are rapidly increasing. across verticals decided to spend big on network
Each quarter, Indonesia’s cyber hacker traffic security solutions and secure content management.
doubles, with an estimated cost to Indonesia at
• Distributed Denial of Services Solution (DDoS)
USD 10.7 billion each year.
attacks became more prevalent in Indonesia in 2016,
• By 2013, cyber-attacks infiltrated over a dozen stimulating the adoption of DDoS solutions.
government web-sites, with 36 million incidents of
• The increased penetration of high-speed broadband
hacking in total.
and mobile internet services is also making it easier for
hackers to launch volumetric DDoS attacks.
Source: Akamai, DAKA Advisory and Frost & Sullivan analysis45
Addressable Market
• Government bodies, banks and other financial institutions are now offering their services online, which makes them
vulnerable to cyber-attacks.
• In addition, concerns over infrastructure protection, data security, network availability, resilience, and performance
drove greater interests in cybersecurity solutions to mitigate the attacks and maintain service continuity.
• Adoption of on-premises solutions remained mainstream in the country due to ownership and legacy infrastructure.
However, due to lack of skills and lower costs, managed security services that are based and delivered in-country are
expected to increase.
Competitive Environment
• Most ICT components are mainly dominated by foreign products (60%), and only 30% of joint assembly is conducted
for software design in-house.
• There are no cybersecurity technologies produced domestically. Though the marketplace for cybersecurity products
in Indonesia currently uses indigenous cryptographic programmes for ministry efforts (which are mandatory for
government programmes), they do not produce technology products.
• The restrictions on foreign investment as mandated by the government lead to difficulties for foreign firms wanting to
invest in the market.

The major recent development in the governance of cybersecurity in the country is the creation of the new National Cyber
Encryption Agency, Badan Siber dan Sandi Negara (BSSN). The Indonesian president officially swore in the chief of the
agency, Major General Djoko Setiad. The main responsibilities for this agency are to establish regulations and policy and
develop better protection while coordinating Indonesia’s existing cybersecurity capabilities.
Indonesia’s cybersecurity regulatory frameworks are undeveloped and loosely enforced. The weak regulatory system raises
concerns for foreign firms and also exacerbates problems of data security and protection. Although there is no standalone
cybersecurity law in Indonesia, there are some Indonesian laws subject to development in cybersecurity:

»» Law No. 11 of 2008 on Electronic Information and Transactions (ITE) is the first cyber law in Indonesia
and the main instrument for the regulation of online content and electronic transactions. The ITE Law
contains provisions, such as (1) provisions on electronic information, records, and signature; (2) provision
of electronic certification and electronic systems, and electronic transactions; (3) domain names, intellectual
property rights, and protection of privacy rights; (4) prohibited acts; and (6) investigation.
»» Law No. 14 of 2008 on Public Information Disclosure. This law regulates information that is produced,
stored, managed, sent, and/or received by a public agency. The law states that every public agency is obligated
to allow access to public information, except classified information. This law identifies the classification of
classified information.
»» Law No. 17 of 2011 on National Intelligence identifies the classification of government secrets.
»» Law No. 25 of 2009 on Public Service identified critical or strategic sectors for public services, such as
education, health, energy, banking, transportation, natural resources, ICT, and tourism.
»» Law No. 23 of 2006 on Citizen Administration. This law contains provision of protection of citizens’ personal
data, such as date of birth, citizen number, and family certificate number.
»» Government Regulation No. 82 of 2012 on the Electronic System and Transactions. It regulates seven
matters from the total nine matters that need to be regulated by the government. These are Provision of
Electronic Systems, Electronic Agent Operator, Provision of Electronic Transactions, Electronic Signature,
Provision of Electronic Certification, Trust Mark Certification Body, and Domain Name Administration.
Aside from these foundational laws, the 2008 Information and Electronic Transaction Law was the most meaningful addition
to Indonesia’s legislative landscape. The Information and Electronic Transaction Law adheres to the United Nation (UN)
Commission’s standards for international trade law and addresses issues of cybersecurity.
Stakeholder Structure
Chart 34: Cybersecurity Market Structure, Indonesia, 2017
Resellers and
Distributors
Systems Integrators
• All the distributors of cybersecurity in Indonesia
are local trading companies, acting for and on
behalf of their own name based on agreement
• Digital secu-rity players deal with
with the principal. Partnerships with these are in-tegrators in the security industry that
key to market entry. act as re-sellers, providing training and
supporting management operations.
• In Indonesia, Metrodata Indonesia is one of the
prominent players and is appointed as a • Most of the digital security players provide
Symantec distributor. por-tal manage-ment for their resellers to
• Other cybersecurity products and services such access sales support and aids, as well as
as Check Point, Cisco, McAfee, Symantec, other sales man-agement processes.
Juniper, Fortinet, FireEye and Forcepoint will
partner with local distributor to deliver the
service to the market.
Cybersecurity
Market
Ecosystem
• The cyberse-curity market in Indonesia
has become highly com-petitive with a
strong presence of both local and global • BFS was the largest adopter of
providers. cybersecurity in Indonesia due to growing
• Key players in the market are Telkom threats of cyberattack in this sector.
Telstra, Binariworks, and Xynesis. • The government was the second-largest
• The market mostly uses strategic adopter due to the need for security asset
partnerships with local distributors to management and optimisation.
deliver the products and solutions to the
market.
Security Vendors Customers

Market Size and Forecast

The commercial cybersecurity market in Indonesia grew by 25.8% on a year-over-year (YOY) basis and was valued at
approximately $93 million in 201646. The market size and forecast is as follows:
• Network solutions remained the largest revenue contributor in 2016, making up 66.2% of the cybersecurity market share.
The segment grew by 19.6% on a YOY basis due to massive investment by service providers and the target market47.
• Network solution providers have catered to the market by providing firewalls, intrusion defense systems (IDS),
intrusion prevention systems (IPS), and secure socket layer virtual private networks (SSL VPN). Moreover, the largest
market for this solution comes from banks and government organisations.
• The cybersecurity market is expected to maintain its significant growth at a CAGR of 24.7% in the next five years48.
Investment is likely to take place among service providers, large banks, and government authorities that have a large
budget for security and need to comply with strict compliance requirements, such as data sovereignty, data protection,
and privacy.
• The second-largest contributor to the cybersecurity market is secure content management with 19.5% of the total
market. The segment is set to grow at 21.2% YOY with a CAGR of 13.4% during the forecast period, 2016-202249.
• Investment in cybersecurity services is expected across industries, particularly banking, eCommerce, media, and
government. Thus, SMEs will be the key adopters of cloud-based services in the next five years.
• BFS and government organisations may prefer hardware appliance-based solutions and only outsource the DDoS
mitigation operation to vendors to protect some parts of their network or service infrastructure due to compliance
requirements. A small number of them may opt for hybrid mitigation models to enhance mitigation capacity against
DDoS attacks at both application and network layers.
Chart 35: Cybersecurity Market Revenue Forecast ($Millions), Indonesia, 2016–2022
$500
$400
$300
$200
$100
$0
2016 2017 2018 2019 2020 2021 2022
Government $204 $221 $240 $261 $284 $309 $335
Commercial $93 $101 $109 $119 $129 $140 $152
• The rest of the key solutions include network-based advanced malware analysis (NAMA) and web application firewall,
with shares of 6% and 3%, respectively. Sandboxing is also growing in Indonesia since the government is encouraging all
industries to have this capability50.
• Moreover, the sandboxing enterprise is able to analyze threats by using security analytics and code emulation, as well as
various other methods, such as correlating contextual information and reputation or drilling down to the binaries and
looking for suspicious codes.

Chart 36: Cybersecurity Segment in Indonesia
Level of
Segment Discussion
Demand
Managed Security Growing requirement of managed security services to address challenges in resources
Growth
Services and costs to implement good cybersecurity practices
Intrusion Detection Advanced authentication has been applicable largely to government systems and financial
and Prevention institutions. Social media, eCommerce and other businesses introduced multifactor Growth
System authentication transaction systems, which are well accepted and growing in demand.
As the Central Bureau of Statistics reports, Indonesia has the sixth most internet users
Identity
(over 80 million) in the globe. Protecting these users and their information is crucial for Stable
Management
the country’s national security plan.
Secure Networks, Growing phishing attacks and adoption of cloud networks in Indonesia pushed many
Email, and Web organisations to stop seeing cybersecurity as an IT cost but rather consider it a solution Growth
Security to facilitate business growth or trust, and are investing more to secure their networks.
APT groups have successfully breached financial institutions in Indonesia in the past,
Advanced
driving organisations to invest in security. Several APT-based trainings and workshops
Persistent Threat Stable
are being conducted in the country in collaboration with Japan’s JICA, showing a
(APT)
growing awareness of the threat.
Threat Intelligence, In 2017, Indonesia established the new National Cyber and Encryption Agency with an
Detection and aim to protect the cyber domains of government and private firms by tracking cyber Stable
Remediation crimes and identifying perpetrators.
Advanced Endpoint Indonesian Ministry of Communications and Information Technology released
Detection and Regulation No. 20/2016 concerning privacy protection and data security in electronic Stable
Response systems, which is expected to help boost advanced endpoint protection solutions.
Threat intelligence, threat monitoring, and detection will be the key services that
Internet of Things
organisations are focusing on due to the increasing attack surface caused by the Growth
(IoT) Security
emergence of IoT and the converged digital environment.
Supervisory One of the identified issues by the Indonesian national cyber agency is creating ways
Control and to identify and protect digital assets and infrastructures, including critical services
Stable
Data Acquisition driving adoption of SCADA security in the future. More basic systems are required
(SCADA) Security in the short term.
Indonesia is poised for fast growth in the cybersecurity segment, and it is expected to become the fourth-largest market in
Southeast Asia. It is estimated to generate total revenue of USD 349 million in 201851. The key drivers for market growth
include investment by local telecommunications and internet service providers to upgrade infrastructure and expand
cybersecurity offerings.
Adoption of on-premise solutions remained mainstream in the country due to ownership and legacy infrastructure. In the
next five years, the adoption trend will remain similar with the strong adoption of on-premises mainly taking place in service
provider and government organizations.

Competitive Analysis
Chart 37: Assessment of the Key Players, Indonesia, 2017
Local Service
Key Differentiating Features Growth Strategy Key Sectors
Provider
Serving customers with end-to-end
The provider designed a cybersecurity managed solutions portfolios offers • Financial Services
solution for organisations by adopting unparalleled infrastructure reach and • Public Sector
TelkomTelstra recommendations from consultancy quality by leveraging Telkom’s broad
services and delivering the customised and rich domestic and global network • Manufacturing
services based on requirement. (Telkom International) capability and • Service Provider
infrastructure.
• Healthcare
Binaryworks offers information security
services that focus on improving Creating its own products that are • Financial Services
Binaryworks
network and system security by offering ready to use on multiple platforms • Transportation
customized systems
• Manufacture
Xynexis methodology on delivering Xynexis delivered a new line of

information assurance is based managed security services through • Public Sector
on in-depth business and industry another subsidiary—Noosc. The
knowledge, hands-on technology skills, services enable the organisations to • Financial Services
Xynexis
and customer-specific plans of action. fully manage the SOC, continuously • Retail
Cater to the customer using in-house monitor within the internal operational
frameworks, customised tools, and security risk profiles, and pro-actively • Manufacturing
standardised business processes. respond to any incidents.
Areas of Technology-specific Strength

The take-up of security services is set to increase over the next few years with local service providers (telecommunication
providers and security specialists) starting to build their security operation centres (SOCs) and promote cybersecurity
to their customers. In addition, both of the main players are expected to expand their security services by working with
international cybersecurity providers to offer customer premises, equipment-based management or monitoring services.
Moreover, the cybersecurity partnership model is getting greater traction among local businesses as some of the security
service providers and telecommunication operators started to offer cybersecurity solutions as a result of partnerships with
foreign players that have experience and capabilities in building and running a commercial SOC. Furthermore, local players,
such as TelcomTelstra, Binaryworks, and Xynexis, are gaining fast return on investment by providing outsourcing services
and SOC.


Chart 38: Revenue Breakdown of Cybersecurity by Vertical, Indonesia
• The financial services sector has become one of the

main spenders on cybersecurity, as it is the biggest
Banking
Other Financial target for hackers.
Service
24% • Financial services account for ~40% of market spend on
Education cybersecurity products, followed by the public sector,
39%
3% service provider, manufacturing, and education.
7% • Due to growing digitisation, the public sector
Service Provider
7% experienced one of the highest growth rates in
20%
Manufacturer security spending.
Public Sector
• Other verticals include healthcare, retail, logistics,
oil and gas, energy, mining, agriculture, utilities,
eCommerce, and business process outsourcing.
Source: Frost & Sullivan Analysis52
Financial Services
The financial services sector was the largest spender on cybersecurity. The market is expected to grow at a CAGR of
27.5% from 2015–2020 with strong potential for DDoS mitigation, hosted web application firewall, and security asset
management or monitoring services.
Though many banks and finance organisations have spent heavily on security solutions, the shortage of expertise, domain
knowledge, and skilled security resources drives them to outsource their requirements for cybersecurity to take care of
online security risks. In addition, most of their internal resources are unable to keep up with the changing threat landscape
and are therefore unable to optimise their deployed security infrastructure or even SOC.
Government and Public Sector

The government and public sector became the second-largest revenue contributor at 20% due to the strong demand for
key infrastructure protection services within government bodies. The adoption of cybersecurity in this sector is growing
in recent years because the government proactively campaigns for increased security awareness, especially the Ministry of
Finance, Ministry of Defense, Ministry of ICT, and Ministry of Trade.
Service Provider and Manufacture

Service provider and manufacturing verticals also add significant market share to the overall market. These industries are
expected to see greater adoption of cybersecurity in the future due to the increasing demand for hosted security services,
compliance, and security for the operational technology environment. There will be a growing requirement for managed
security services to fill the capability and skills gap.
As one of the top economies in ASEAN and one of the emerging market economies of the region, Indonesia’s economy has
experienced strong growth and has maintained macroeconomic stability53. The country’s democratic regime is still relatively
young but continues to make strides towards establishing a market economy supported by legal frameworks. Historically
negative attitudes towards the defense system, embedded nationalism, and the weak legal system make the business climate
challenging to navigate for UK firms.

Although technological access is limited in Indonesia, the online environment is quickly expanding and faces increasingly
hostile cybersecurity threats. In response, Indonesia has recognized the importance of cybersecurity but implemented
patchwork solutions.
At preset expenditure on cyber security is relatively low. However, as engagement grows across government and
greater collaboration with industry continues, this is expected to increase in the future. UK firms could capitalise on the
considerable resources allocated to the information technology sector. Furthermore, given the underdevelopment of
Indonesia’s cybersecurity, there is an opportunity to construct Indonesia’s infrastructure from scratch.

There are UK cyber companies operating in the cyber market but only on a limited basis. The government and
end users rely on local telcos and cyber companies in the region. Due to the size and strong investment in ICT
infrastructure over the coming years, there is likely to be growing requirement for reliable and proven cyber
technologies that UK companies can provide.

The import burdens in Indonesia are relatively modest, and the costs are low. This is particularly relevant to UK firms
seeking to export goods and services to the private sector in Indonesia. Indonesia’s general importing parameters, at a
minimum, show that it takes 23 days to complete the documentation preparation, receive customs clearance and technical
controls, and process ports and terminal handling and inland transportation. It costs USD 660 if using the most-favoured
nation tariff of 7%54 . Furthermore, the Indonesian customs process is rather nuanced; however, Indonesia has tried to
implement uniform importation requirements. The standardisation of certain aspects of the customs process should make it
easier for UK firms to export to Indonesia.
Components of the customs process may pose technical barriers to trade. Notably, personal-use import goods
such as computers and cell phones are prohibited. Other electronic products are restricted for import, including
telecommunications devices, electronic parts, and photocopiers. Consumer IT devices are also subject to new labelling
regulations that were implemented in 2010, which require Indonesian language translations for documentation and
packaging55. UK firms should take all of these importing restrictions into account when considering whether to enter the
Indonesian market.

E N D N OT E S
1. Bank of Indonesia
2. World Economic Outlook Database
3. Presidential Rule regulating DNI
4. Central Statistical Agency (BPS)
5. Association of Southeast Asian Nations
6. ASEAN Economic Community
7. Ibid.
8. World Bank Poverty and Equity Data Portal, http://povertydata.worldbank.org/poverty/country/IDN
9. Statista
10. Penetration and Behavior of Internet Users in Indonesia in 2017, Association of Internet Service Providers in Indonesia (APJII)
11. www.undp.org
12. Google & Temasek, e-conomy SEA: Unlocking the $200 billion digital opportunity in Southeast Asia (September 2016)
13. https://www.opengovasia.com
14. Walizahid.com
15. Gettingthedealthrough.com
16. www.thejakartapost.com
17. The Diplomat
18. www.techinasia.com
19. MCIT
20. Statista
21. www.opengovasia.com
22. http://www4.bkpm.go.id/contents/general/8/demographics#.VI58qKb5Lu0
23. Statista Data, Fintech and eCommerce in Indonesia
24. Presentation: Implementation of USO in Indonesia (www.lirneasia.net)
25. Telegeography
26. Huawei press release March 2018
27. Kacific Press Release: http://kacific.com/kacific-and-bignet-bring-fast-affordable-broadband-to-all-indonesians/
28. Info Memo PT Telkom First Half Report 2017

E N D N OT E S
29. Dailysocial.id
30. www.gov.uk
31. Indonesia Cloud Computing Services Market (2017), Frost & Sullivan
32. Cooperatives and SME Ministry
33. Market Assessment P2P Lending in Indonesia (2017), Frost & Sullivan
34. 2015 International Finance Corporation and Bank of Indonesia
35. Ibid.
36. Google & Temasek, e-conomy SEA: Unlocking the $200 billion digital opportunity in Southeast Asia
37. www.techinasia.com
38. Government Investment Unit of Indonesia (PIP), Central Provider and Financing Manager of Telecom-munication and Informatics (BP3TI), Ministry
of Resources and Equipment of Post and Informatics (SDPPI).
39. Contentasia.tv, Statista
40. BBC News
41. International Finance Corporation, World Bank Group, 2014-2015
42. Presidential Regulation No. 74 of 2017 on Roadmap for the National Electronic Commerce System for 2017-2019
43. Statista
44. Frost & Sullivan
45. Akamai. (2013). Releases Second Quarter 2013 “State of the Internet Report” DAKA Advisory (2013). Meeting the cybersecurity challenge in
Indonesia
46. Frost & Sullivan, ASEAN Managed Security Services Market
47. Frost & Sullivan, Asia-Pacific NAMA Solutions Market
48. Ibid.
49. Ibid.
50. Frost & Sullivan, Asia-Pacific NAMA Solutions Market
51. Frost & Sullivan
52. Frost & Sullivan, ASEAN Managed Security Services Market
53. World Development Indicators database (2017)
54. World Bank, Ease to Doing Business (2013)
55. FedEx (2013)

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Digital Market Overview: Indonesia

A Frost & Sullivan White Paper

50 Years of Growth, Innovation and Leadership

Overview & Methodology

. Frost & Sullivan Methodology

3 All rights reserved © 2018 Frost & Sullivan

Drivers & Restraints.......................................................................................... 10

Base of the Pyramid........................................................................................... 14

Opportunities for UK Firms.............................................................................. 20

Market Size and Forecast................................................................................... 23

Opportunities for UK Firms.............................................................................. 28

Market Size and Forecast................................................................................... 32

Opportunities for UK Firms ............................................................................. 35

Notable trends in the Indonesian digital services market include exponential

In terms of the competitive landscape, the Indonesian telecommunications

The growth in mobile consumption and increasing demand for

The nation is still in the early stages of evolution in terms

Indonesia’s size and geographic complexity is favourable for

Indonesia is becoming a key location for regional offices of multinational

Indonesia is experiencing urbanisation. In 2016, 54% of the population lived in

5 All rights reserved © 2018 Frost & Sullivan

0 2017 2018 2019 2020 2021 2022

Telecommunications Digital Services Cyber Security

Key Focus Areas for Digital Opportunities in Indonesia

All rights reserved © 2018 Frost & Sullivan 6

Key Country Metrics (2016)

Population (2016) 258.7 million

GDP USD $941 billion

7 All rights reserved © 2018 Frost & Sullivan

Chart 4: Population Structure, Indonesia, 2016

Age Pyramid Indonesian Population

- 20.0 40.0 60.0

Residence by Region 49.75% 50.25% Key Metrics

Java, Bali, 48.38% 48.81%

17.35% Under USD $112 17.25%

Source: Central Statistical Agency, Frost & Sullivan

All rights reserved © 2018 Frost & Sullivan 8

Factors PESTLE Trends Implications for ICT Industry

Chart 6: ICT Industry: ICT Readiness Index, Indonesia, 2014–2016

2016* 2016 Change in Rank

9 All rights reserved © 2018 Frost & Sullivan

Drivers & Restraints

1-2 Years 3-5 Years 6-7 Years

Impact Ratings: H = High, M = Medium, L = Low

1-2 Years 3-5 Years 6-7 Years

Impact Ratings: H = High, M = Medium, L = Low

All rights reserved © 2018 Frost & Sullivan 10

Host Government Structures and Policies

Chart 9: Indonesia Government Structures, Ministry of Communication and IT

Secretariat Director General Directorate General of Directorate General

Director General Public

11 All rights reserved © 2018 Frost & Sullivan

Indonesia ICT Roadmap

Chart 10: National ICT Roadmap, Indonesia, 2005–2025

Indonesia ICT Strategic Roadmap 2005-2025

Foundation & Pre-requisite of National Broadband Development

Infrastructure & Security

Adoption and Creative Utilisation

All rights reserved © 2018 Frost & Sullivan 12