Q1 2015 www.businessmonitor.com INDONESIA INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1750-5070 Published by:Business Monitor International Indonesia Information Technology Report Q1 2015 INCLUDES 5-YEAR FORECASTS TO 2018 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: October 2014 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2014 Business Monitor International All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Indonesia Information Technology Report Q1 2015 CONTENTS BMI Industry View . SWOT IT . Wireline SWOT . 11 Political . 13 Economic . 15 Industry Forecast 17 Table: IT Industry - Historical Data And Forecasts (Indonesia 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Macroeconomic Forecasts . 24 Economic Analysis . 24 Trade Account Improving 25 Risks To 2015 Growth Forecast On The Rise . 26 Table: Economic Activity (Indonesia 2009-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Industry Risk Reward Ratings 28 Asia Pacific Risk/Reward Index 28 Table: Asia Pacific IT Risk/Reward Index - Q1 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Market Overview . 32 Hardware . 32 Software . 41 IT Services 48 Industry Trends And Developments 52 Regulatory Development 57 Table: Key Ministers And Departments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Competitive Landscape 60 International Companies . 60 Table: Lenovo Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Table: Intel Indonesia Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Table: Microsoft Indonesia PT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Table: IBM Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Table: Foxconn Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Local Companies . 65 Table: Performance PT Multipolar Technology Tbk (MLPT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Walden Global Services (WGS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: Aprisma Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: ALTiUS ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 © Business Monitor International Page Indonesia Information Technology Report Q1 2015 Company Profile 68 Sigma 68 Regional Overview 71 Demographic Forecast . 75 Table: Indonesia's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Table: Indonesia's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Table: Indonesia's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Table: Indonesia's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Methodology 79 Industry Forecast Methodology 79 Sources 80 Risk/Reward Index Methodology . 81 Table: It Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 © Business Monitor International Page Indonesia Information Technology Report Q1 2015 BMI Industry View BMI View: After minor disruption to market growth in 2014 as a result of the depreciation of the rupiah against the US dollar, we expect the market to remain on a positive growth trajectory over the medium term. We expect IT market growth will be supported by strong economic growth, a low PC penetration rate, enterprise and public service modernisation and an emerging middle class. Retail hardware, enterprise software and cloud computing are identified as medium-term growth opportunities. However, there is shortto-medium term downside if the Indonesian growth story is derailed by regional or global economic headwinds. In the short-term, IT spending is forecast to increase to IDR170.2trn in 2015, up 11.1% from 2014, with the IT market accounting for around 1.5% of GDP. Headline Expenditure Projections Computer Hardware Sales: IDR97.0rn in 2015 to IDR122.1trn in 2018, at a compound annual growth rate (CAGR) of 8% in local currency terms. Growth boosted by deepening of the market as Android tablet vendors and Microsoft notebook vendors compete aggressively on price, as they look to tap the low penetration opportunity in Indonesia. Software sales: IDR28.2trn in 2015 to almost IDR45trn in 2018, at a CAGR of 17.0% in local currency terms. Piracy is a major drag on software market growth, but despite this there is a robust medium term outlook, particularly in terms of enterprise software sales to SMEs. IT Services Sales: IDR45.0trn in 2015 to IDR72.3trn in 2018, at a CAGR of 17.2% in local currency terms. Cloud service adoption remains low, but as telecoms infrastructure improves and end-user education levels increase cloud services are expected to gain traction. Key Trends & Developments The SME opportunity is vast in Indonesia - and it has begun to attract the serious attention of both local and global IT vendors. The most recent government data show 70% of the country's 56.5mn SMEs use no IT solutions - meaning low-hanging fruit for IT vendors that can reduce costs sufficiently to open up the SME opportunity. One contributory factor to the increased attention from XL, Microsoft and IBM is the fact that most enterprise software and services products and solutions can now be made available through cloud delivery models - meaning costs are more favourable to SMEs, for which on-premises deployments remain costly and unnecessary in terms of requirements for complex deployments. There has been widespread © Business Monitor International Page Indonesia Information Technology Report Q1 2015 investment in datacentres in Indonesia in recent years, for instance, by the end of 2015 PT Telkom group, Indonesia's incumbent telecoms operator, expects to be operating the fourth-largest data centre business in the world. Meanwhile, IBM plans to offer cloud server, processor, RAM, and storage (IaaS) services using its SoftLayer datacentres for as little as USD100 per month. The tablet boom continued in Indonesia in 2014, with volumes up markedly, making tablets the largest device, with around 1.1mn more tablets sold than notebooks. BMI expects growth in the notebook segment will rebound, but nonetheless consider Microsoft's more aggressive tablet push positively as a hedge against the shift to mobile. In October 2014 it was announced that local smart devices manufacturer Speedup had partnered with Microsoft and Intel and planned to release an 8-inch Windows tablet in December 2014 or January 2015 aimed at the consumer and commercial segments. It also plans to release a 10-inch version of the tablet aimed at the education segment. The partnership means the devices will come with an attractive package of software and services including Microsoft Office 365, 1TB of One Drive cloud storage and 60 minutes of free Skype calls per month for a year. There are yet to be details on pricing revealed, but BMI expects the device will be price competitive against mid-range Android rivals as Microsoft's primary goal is to gain traction in emerging markets, rather than short-term profitability. © Business Monitor International Page Indonesia Information Technology Report Q1 2015 SWOT IT SWOT Analysis Strengths ■ Large potential market with population of almost 250mn at the end of 2013, and forecast to reach 264mn in 2018. ■ The market may be entering a faster growth stage. It is forecast to grow quicker than most other Association of South East Asian Nations (ASEAN) markets over the forecast period. ■ Local presence of major global vendors in terms of sales and production, providing linkages for local start-ups and entrepreneurs. Weaknesses ■ Underdeveloped telecommunications infrastructure, due to years of government control and slow progress in deregulation. ■ History of recent political instability. ■ High piracy rate continues to be a drag on the software market, with the highest piracy rate in the region and slow progress in reducing incidence of unlicensed software. ■ Indonesia overtook China as the largest source of cyber attack traffic in 2013, with cyber threats becoming an increasingly important issue for domestic users as well. Opportunities ■ Investment in telecoms and datacentre infrastructure 2011-2014 has laid the foundations for rapid growth of cloud computing services, with SMEs considering a particularly attractive target group. ■ Computer ownership is low, but rising incomes and wider internet access will enable period of rapid 'catch-up growth'. ■ Government is showing signs of taking intellectual property more seriously. ■ Strong demand for tablets and low-cost laptops from a youthful population and booming economic performance. © Business Monitor International Page Indonesia Information Technology Report Q1 2015 SWOT Analysis - Continued ■ Per capita IT spending to increase rapidly as the middle class increases in size. ■ IT services, with local telcos investing heavily in data centres, networks, machine-tomachine communication and cloud computing services. Threats ■ Continuing lack of government action to support increased PC penetration and internet access, or drive ICT sector development. ■ Regional economic instability could derail economic growth. © Business Monitor International Page 10 Indonesia Information Technology Report Q1 2015 Pratama provides systems integration solutions for business-to-business networking and internet. Sigma Metrasys Solution maintains SAP licences and project implementation. Strategy Sigma management has said that the company will be strengthening its core role as an IT provider for the whole banking sector. As an innovator in the Islamic banking sector, Sigma is well placed to take advantage of the growing trend in the country. While the company has a strong background in banking and financial IT, it is looking to expand into new sectors, such as autos and manufacturing. The acquisition by PT Telkom was part of the incumbent's strategy to expand its communications services into the IT sector. The merger offers opportunities for Sigma to offer a wider range of services. Following its acquisition by PT Telkom, Sigma expanded its operations and spent USD7mn on a new IT disaster recovery centre in Surabaya. It has signed an agreement with Oracle to provide outsourcing services focusing on large companies, particularly in banking and telecoms. The arrangement centres on helping large companies to focus on core businesses, while the IT partners optimise and maintain IT units. Among the recent wins for the partnership is a tender from Bussan Auto Finance, one of the leading multi-finance companies in Indonesia, to implement various Oracle applications. Products And Partnerships In September 2014, TelkomSigma joined the EMC business partner program for service providers of Cloud And High Availability Data Center Services. The partnership enables Sigma to target companies from a range of verticals doing business in Indonesia and across the region. Sigma's latest cloud infrastructure combines the EMC VMware virtualization solution with VIPR data services from EMC that transform applications, infrastructure and ability backups to provide agility and high cost efficiency in managing the infrastructure. Sigma's flagship product is AlphaBITS, the software initially developed in 1989. It is a core banking system for day-to-day operations, connecting aspects such as delivery channels (teller and customer services) and back-office activities (accounting and general affairs). Developed as an industry-standard banking application, AlphaBITS offers integrated functionality with six main modules (kernel and security, CIF, retail, deposit, loan and general ledger). Using integrated design architecture, AlphaBITS can be incorporated with third-party applications. In August 2014 the AlphaBITS2:03 was implemented by Bank Victoria International in Jakarta, along with the ITM 4.3 solution. Sigma has been an innovator in the Islamic banking sector, as an increasing number of Indonesian individuals and companies choose to business with banking institutions that comply with shari'a principles. Sigma has capitalised on this, with its shari'a core banking system designed to follow the principles of Islamic banking. The company's services include consulting, managing IT services, software development services and integrated datacentre operations in the banking © Business Monitor International Page 69 Indonesia Information Technology Report Q1 2015 (conventional and sharia-based), financial, telecommunications, manufacturing, distribution and other sectors. Among the products offered, Sigma offers cloud computing, datacentre, telecoms managed services, software development services and systems integration. Sigma is a local partner for international IT companies including Oracle, QNX Solutions, IBM and Microsoft. In March 2013, Sigma announced a partnership with US computer technology firm IBM to improve data services. The companies will build an energy-efficient datacentre to meet the requirements of local businesses in Sentul. The project will benefit from IBM and Telkom Indonesia's previous research into resisting natural disasters, such as earthquakes, and their effects on telecoms infrastructure. In January 2014, Sigma announced it would prepare its fourth and fifth data centres in Indonesia in 2014. The data centres will be located in Balikpapan and West Java, and will be tier and centres respectively. The construction will take place through Sigma's partnership with IBM. Sigma reported that the tier data centre could enable it to introduce Disaster Recovery Services, which could be a lucrative market given Indonesia is earthquake prone. In March 2014, Sigma signed a Memorandum of Understanding (MOU) with Huawei Tech Investment for the collaboration in the creation of a wholesale data centre to serve Indonesia and its expansion efforts across Southeast Asia. In July 2014, Sigma formed a new strategic partnership with Dimension Data for the development and provision of end-to-end data centre services to local and global enterprises. Specifically, they will pool their resources and capabilities to enable them to reach out to the Japanese business community in Indonesia, a market that Telkomsigma has yet to penetrate. Dimension Data is owned by Japan's NTT and can leverage its parent's global high-capacity fibre backbone and points of presence as well as its proprietary remote networking technology and solutions. Company Details ■ ■ PT Sigma Citra Caraka DEA I Tower, 8th Floor Kawasan Mega Kuningan JI. Mega Kuningan Barat IX Kav. E43 No. Indonesia ■ Tel: +62 21 576 2150 ■ Fax: +62 21 576 2155 ■ Web: www.sigma.co.id © Business Monitor International Page 70 Indonesia Information Technology Report Q1 2015 Regional Overview Asia-Pacific (APAC) has been the outperforming region in the global IT market over recent years, with IT market growth considerably faster than developed regions, as well as other emerging markets. BMI expects APAC will continue to exhibit strong growth in a global context over the medium term as favourable economic trends, and policy initiatives drive market expansion. However, we also point to potential spill over to the IT market from regional and global data security trends that could yet stymie growth. APAC Outperformance Set To Continue The APAC region has become a major global engine of IT market expansion in the past decade, as is the case for the wider global economy. BMI data show APAC registered the fastest IT market value growth of any region 2011-2014, and our outlook going into 2015 is for APAC to again be the fastest growing region in every year except 2018 when we expect to be narrowly outperformed by Latin America. The booming APAC IT market is driven by a range of factors including the clustering of hardware production in the region, the contribution of China as the outperforming global economy of the past decade, and rapid economic development across the region. Furthermore, APAC governments have as a whole shown a high capacity to skilfully deploy IT market promoting policy aimed at increasing domestic demand and expanding the base of local enterprises and expertise. BMI believes the economic environment will remain supportive of IT market expansion in the majority of markets across the region, but there is significant downside risk to this outlook in the event of a hardlanding in China. This is not however our core scenario, but the event would have such far reaching regional impact that it must be considered as part of the medium term outlook. © Business Monitor International Page 71 Indonesia Information Technology Report Q1 2015 Regional IT Market Growth (USD, y-o-y % Change) 2011-2018 e/f = estimate/forecast. Source: BMI Under our core scenario of strong economic growth, of greater significance is the increasing maturity of regional IT markets. Emerging markets in APAC have undergone a period of rapid catch-up growth, where IT adoption is spurred by declining device and solution prices at the global level after vendors gain scale through demand from early adopters in the US, Western Europe and developed markets in APAC. However, for the more advanced, but still emerging APAC markets such as China and Malaysia, BMI believes growth will slow as a result of diminished opportunities for relatively cheap and easy adoptions of IT products and solutions in the public and private sector. This is expected to result in growth slowing to, the admittedly still robust levels, observed in recent years in regional leaders such as South Korea, Singapore, Australia and Hong Kong. We believe China is demonstrating strong credentials for transition from emerging market catch-up growth to technological leadership, with it by 2014 being home to world leading firms in the PC (Lenovo), server (Lenovo, Inspur, Huawei), and network equipment (Huawei) industries. However it is expected to face © Business Monitor International Page 72 Indonesia Information Technology Report Q1 2015 more significant challenges in the development of a vibrant software and IT services ecosystem owing to the trust issues from end-users with respect to the relationship between vendors and the Chinese state. Meanwhile, the late developing markets in the region remain in a strong position for rapid IT market development going into 2015. Not only is strong economic progress deepening the market for retail hardware as incomes rise, but there is potential for countries such as Vietnam, Philippines and Indonesia to benefit from a restructuring of regional supply chain networks as upward pressure on labour costs continues in China. There were already several major regional investments in 2014, primarily in the handset production industry, but we see similar medium term potential for a diversification of computer hardware manufacture and assembly. AEC: Adding To The Positive Outlook With a few notable exceptions, namely India and Sri Lanka, the majority of the fast growth emerging markets in APAC are clustered in South East Asia - and we consider the push for the creation of the ASEAN Economic Community (AEC) as a welcome boost to market development. The deadline of December 31 2015 for the official creation of the AEC is unlikely to be met; however, there has been strong progress towards achieving this goal in a variety of different sectors. For the ICT space, we have seen tariffs on hardware and software products reduced to 0% across virtually all ASEAN countries. ASEAN is also working towards the elimination of non-tariff barriers by 2015. The elimination of tariffs and free flow of products and investment makes the South East Asian market more attractive for vendors with a target market of around 600mn people. As noted already, the region has attracted significant investment for relocation of production from global giants, including Foxconn Technology Group, Samsung Electronics, Intel, Nokia and LG. Another important trend arising from increased IT market integration in South East Asia has been the rapid expansion of e-commerce vendors across the region - and BMI expects it will become a battleground for global e-commerce brands. For example, Chinese e-commerce superpower Alibaba, Japanese retailer Rakuten as well as Lazada, the Southeast Asia e-commerce unit of Rocket Internet, are among those already staking a claim in the region where internet penetration is rising rapidly. © Business Monitor International Page 73 Indonesia Information Technology Report Q1 2015 Top Markets For Internet Growth Internet User Net Additions ('000), 2013-2018 Source: BMI. E-commerce vendors will however face a range of challenges, for instanceand anticipate that it will become a battleground for global e-commerce brands. For example, Chinese e-commerce superpower Alibaba, Japanese retailer Rakuten as well as Lazada, the Southeast Asia e-commerce unit of Rocket Internet, are among those already staking a claim in the region. They will face different challenges in ASEAN countries than in their domestic markets, however, with logistics and supply chain problems, such as unreliable postal services. Furthermore, payments are largely made in cash upon delivery, rather than the credit/debit cards common in the US and Japan. The region still has a long way to go in terms of development but ecommerce will not be put off by these risks, as the opportunities are far too enticing. © Business Monitor International Page 74 Indonesia Information Technology Report Q1 2015 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Indonesia's population pyramid for 2013, the change in the structure of the population between 2013 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key data points from these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Population Pyramid 2013 (LHS) And 2013 Versus 2050 (RHS) Source: World Bank, UN, BMI © Business Monitor International Page 75 Indonesia Information Technology Report Q1 2015 Population Indicators Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050 Source: World Bank, UN, BMI Table: Indonesia's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2013e 2015f 2020f 178,633 194,113 208,939 224,481 240,676 249,866 255,709 269,413 0-4 years 21,905 21,572 21,029 22,729 25,074 23,869 22,804 22,101 5-9 years 22,098 21,680 21,398 22,410 24,067 24,920 24,936 22,695 10-14 years 21,051 22,064 21,633 22,212 22,651 23,394 23,988 24,864 15-19 years 19,614 20,914 21,976 21,454 20,780 21,697 22,506 23,848 20-24 years 17,770 19,329 20,708 20,276 19,750 20,062 20,541 22,271 25-29 years 15,424 17,489 19,076 20,214 21,225 20,156 19,500 20,301 30-34 years 12,983 15,169 17,250 18,546 19,763 20,769 20,982 19,286 35-39 years 9,960 12,734 14,940 16,737 18,456 19,084 19,527 20,757 40-44 years 7,789 9,715 12,489 14,536 16,502 17,585 18,194 19,278 45-49 years 7,216 7,529 9,446 11,782 14,035 15,356 16,178 17,871 50-54 years 6,535 6,878 7,222 9,355 11,557 12,797 13,626 15,746 55-59 years 5,369 6,095 6,467 7,491 8,606 10,024 11,041 13,063 60-64 years 4,130 4,846 5,557 5,809 6,155 7,136 8,010 10,328 65-69 years 2,850 3,543 4,210 4,467 4,683 5,068 5,496 7,193 70-74 years 1,921 2,251 2,841 3,168 3,469 3,698 3,888 4,609 Total © Business Monitor International Page 76 Indonesia Information Technology Report Q1 2015 Indonesia's Population By Age Group, 1990-2020 ('000) - Continued 1990 1995 2000 2005 2010 2013e 2015f 2020f 75-79 years 1,221 1,330 1,585 1,791 1,987 2,328 2,556 2,900 80-84 years 579 687 761 1,100 1,349 1,235 1,196 1,569 85-89 years 179 233 282 319 470 564 592 540 90-94 years 35 46 61 75 87 112 132 171 95-99 years 12 12 14 22 100+ years e/f = BMI estimate/forecast. Source: BMI, World Bank, UN Table: Indonesia's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2013e 2015f 2020f 0-4 years 12.26 11.11 10.06 10.13 10.42 9.55 8.92 8.20 5-9 years 12.37 11.17 10.24 9.98 10.00 9.97 9.75 8.42 10-14 years 11.78 11.37 10.35 9.89 9.41 9.36 9.38 9.23 15-19 years 10.98 10.77 10.52 9.56 8.63 8.68 8.80 8.85 20-24 years 9.95 9.96 9.91 9.03 8.21 8.03 8.03 8.27 25-29 years 8.63 9.01 9.13 9.00 8.82 8.07 7.63 7.54 30-34 years 7.27 7.81 8.26 8.26 8.21 8.31 8.21 7.16 35-39 years 5.58 6.56 7.15 7.46 7.67 7.64 7.64 7.70 40-44 years 4.36 5.00 5.98 6.48 6.86 7.04 7.12 7.16 45-49 years 4.04 3.88 4.52 5.25 5.83 6.15 6.33 6.63 50-54 years 3.66 3.54 3.46 4.17 4.80 5.12 5.33 5.84 55-59 years 3.01 3.14 3.10 3.34 3.58 4.01 4.32 4.85 60-64 years 2.31 2.50 2.66 2.59 2.56 2.86 3.13 3.83 65-69 years 1.60 1.83 2.01 1.99 1.95 2.03 2.15 2.67 70-74 years 1.08 1.16 1.36 1.41 1.44 1.48 1.52 1.71 75-79 years 0.68 0.69 0.76 0.80 0.83 0.93 1.00 1.08 80-84 years 0.32 0.35 0.36 0.49 0.56 0.49 0.47 0.58 85-89 years 0.10 0.12 0.14 0.14 0.20 0.23 0.23 0.20 90-94 years 0.02 0.02 0.03 0.03 0.04 0.04 0.05 0.06 95-99 years 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01 © Business Monitor International Page 77 Indonesia Information Technology Report Q1 2015 Indonesia's Population By Age Group, 1990-2020 (% of total) - Continued 100+ years 1990 1995 2000 2005 2010 2013e 2015f 2020f 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 e/f = BMI estimate/forecast. Source: BMI, World Bank, UN Table: Indonesia's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 1990 1995 2000 2005 2010 2013e 2015f 2020f 67.3 60.8 54.6 53.5 53.5 51.7 50.3 47.4 71,844 73,413 73,807 78,280 83,848 85,201 85,603 86,665 59.8 62.2 64.7 65.1 65.2 65.9 66.5 67.8 106,790 120,700 135,132 146,201 156,828 164,665 170,106 182,749 Youth population, % of total working age 60.9 54.1 47.4 46.1 45.8 43.8 42.2 38.1 65,054 65,316 64,060 67,351 71,792 72,183 71,728 69,660 Pensionable population, % of total working age 6.4 6.7 7.2 7.5 7.7 7.9 8.2 9.3 Pensionable population, total, '000 6,789 8,097 9,747 10,929 12,057 13,018 13,875 17,005 Youth population, total, '000 e/f = BMI estimate/forecast. Source: BMI, World Bank, UN Table: Indonesia's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2013e 2015f 2020f Urban population, % of total 30.6 35.6 42.0 45.9 49.9 52.2 53.7 57.2 Rural population, % of total 69.4 64.4 58.0 54.1 50.1 47.8 46.3 42.8 Urban population, total, '000 54,633 69,015 87,758 103,120 120,155 130,453 137,400 154,123 Rural population, total, '000 124,000 125,098 121,180 121,361 120,521 119,412 118,309 115,290 e/f = BMI estimate/forecast. Source: BMI, World Bank, UN © Business Monitor International Page 78 Indonesia Information Technology Report Q1 2015 Methodology Industry Forecast Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. Common to our analysis of every industry is the use of vector autoregressions. They allow us to forecast a variable using more than its own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact. Effective forecasting depends on appropriately selected regression models. BMI selects the best model according to various different criteria and tests, including but not exclusive to: ■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account; ■ Testing the directional movement and magnitude of coefficients; ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); ■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity;. © Business Monitor International Page 79 Indonesia Information Technology Report Q1 2015 BMI uses the selected best model to perform forecasting. Human intervention plays a necessary and desirable role in all of BMI's industry forecasting. Experience, expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Sector-Specific Methodology A number of criteria drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base and methodology. In addition, forecasts are affected by consideration of a variety of internal and external political and economic factors. Within best-practice techniques of time-series modelling, our quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: ■ Overall economic context, and GDP and demographic trends; ■ Underlying 'information society' trends; ■ Projected GDP share of industry; ■ Maturity of market structure; ■ Regulatory developments and government policies; ■ Developments in key client sectors such as telecommunications, banking and e-government; ■ Technological developments and diffusion rates; ■ Exogenous events. Estimates are calculated using our own macroeconomic and demographic forecasts. Sources Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and international industry organisations such as the International Telecommunication © Business Monitor International Page 80 Indonesia Information Technology Report Q1 2015 Union (ITU), officially released company results and figures, and international and national industry news agencies. Risk/Reward Index Methodology BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market. The RRI system divides into two distinct areas: Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. This is further broken down into two sub categories: ■ Industry Rewards (an industry-specific category taking into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors). • Country Rewards (a country-specific category, factoring in favourable political and economic conditions for the industry). Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. This is broken down into two sub categories: ■ Industry Risks (an industry-specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry and the relative maturity of a market). • Country Risks (a country-specific category in which political and economic instability, unfavourable legislation and a poor overall business environment are evaluated to provide an overall score). We take a weighted average, combining industry and country risks, or industry and country rewards. These two results in turn provide an overall Risk/Reward Score, which is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular country. For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall Risk/Reward Score a weighted average of the total score. As most of the countries and territories evaluated are considered by BMI to be 'emerging markets', our score is revised on a quarterly basis. This ensures the score draws on the latest information and data across our broad range of sources, and the expertise of our analysts. © Business Monitor International Page 81 Indonesia Information Technology Report Q1 2015 Sector-Specific Methodology In constructing these indices, the following indicators have been used. Almost all indicators are objectively based. Table: It Risk/Reward Index Indicators Rationale Rewards Industry IT market value, US$bn Denotes breadth of IT market. Large markets score higher than smaller ones. Sector value growth, % year-on-year (y-o-y) Denotes sector dynamism. Scores based on annual average growth over five-year forecast period. Government initiatives and spending Denotes spending boost provided by public sector, which can be a crucial determinant of sector development. Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales, compared to services/ software, indicates that the overall IT market is immature. Country Urban-rural split Urbanisation is used as a proxy for development. Mainly rural states score lower. GDP per capita, USD A high GDP per capita supports long-term industry prospects. Overall score for Country Rewards is also affected by the coverage of the power transmission network across the state. Risks Industry Intellectual property (IP) laws Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting. ICT policy Subjective evaluation of official policy towards IT development, as enshrined in statute and tax code. Country Short-term external risk Score from BMI's Country Risk Index (CRI). It evaluates the vulnerability to external shock, which is the principal cause of economic crises. Such a crisis would cut investment. Short-term financial risk Score from CRI, to denote risk of currency crisis and stability of banking sector. The former would hit revenues in hard currency, while the latter would curtail investment funding. Trade bureaucracy Score from CRI to denote ease of trading with the state. Legal framework Score from CRI denotes the strength of legal institutions in each state - security of investment can be a key risk in some emerging markets. Bureaucracy Score from CRI denotes ease of conducting business in the state. Corruption Score from CRI denotes the risk of additional illegal costs/possibility of opacity in tendering/ business operations affecting companies' ability to compete. Source: BMI © Business Monitor International Page 82 Indonesia Information Technology Report Q1 2015 Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components equal weight. The following weighting has been adopted: Table: Weighting Of Components Component Rewards Weighting, % 70, of which - Industry 65 - Country 35 Risks to 30, of which - Industry 40 - Country 60 Source: BMI © Business Monitor International Page 83 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Indonesia Information Technology Report Q1 2015 On The Mend Indonesia - Exports & Imports, USDmn (LHS) & Balance Source: BMI, Statistik Indonesia Trade Account Improving While Indonesia has yet to return to the consistent trade surplus that it registered in 2012, the country's trade account has registered an improvement thus far in 2014 versus 2013 We believe that this is largely a result of Bank Indonesia. .. pressure Indonesia' s current account, where it typically runs a healthy surplus The resumption of the Cepu field, which occurred in late 2009, may help to alleviate Indonesia' s dependence on foreign oil given its small boost to production output, but we expect this bounce to be short-lived © Business Monitor International Page 15 Indonesia Information Technology Report Q1 2015 SWOT Analysis - Continued ■ Indonesia. .. opens software deployments to a wider market by putting downward pressure on prices © Business Monitor International Page 17 Indonesia Information Technology Report Q1 2015 2015 Outlook BMI forecasts growth of 11.1% in 2015, with total market value expects to reach IDR170.2trn Indonesian consumers remain optimistic about job, finance and spending prospects, which translates into spending growth in the... Page 21 Indonesia Information Technology Report Q1 2015 Indonesia GVA By Sector (%) 2015f f = forecast Source: BMI, National Statistics, World Bank, UN In terms of enterprise demand, BMI identifies the large manufacturing, mining and tourism sectors as potentially fruitful verticals for vendors of enterprise products and solutions These are expected to be the largest three segments of the Indonesian... unrest, or at least a political backlash Additionally, Indonesia' s population is extremely young, with more than 50% of Indonesians younger than 30 Younger populations have historically been a predictor of political instability © Business Monitor International Page 14 Indonesia Information Technology Report Q1 2015 Economic SWOT Analysis Strengths ■ Indonesia' s strategic location between the Indian and... Monitor International Page 25 Indonesia Information Technology Report Q1 2015 FDI Still On The Rise Indonesia - Foreign Direct Investment, USDmn Source: BMI, BI Along with the potential for greater policy continuity once incoming president Joko 'Jokowi' Widodo consolidates his leadership, Indonesia' s trade stabilisation should lead to increased investor confidence in Indonesia, which will bode well... centres) will provide new avenues for revenue growth Indonesia' s IT score increased faster than any other market in the region q-o-q in Q11 5, as it overtook India and moved up to seventh in the table We have restated historical data for the Indonesian IT market better to © Business Monitor International Page 29 Indonesia Information Technology Report Q1 2015 reflect the boom in consumer and enterprise... International Page 31 Indonesia Information Technology Report Q1 2015 Market Overview Hardware BMI forecasts the Indonesian hardware market to grow by 7.4% in local currency terms in 2015 to reach a value of IDR97.0trn This is a slight slowdown from 2014, when the withdrawal of official Microsoft support for the XP operating system (OS) provided a boost to enterprise/public sector upgrades In 2015, the primary... times of risk aversion, which can lead to sharp swings in the currency © Business Monitor International Page 16 Indonesia Information Technology Report Q1 2015 Industry Forecast Table: IT Industry - Historical Data And Forecasts (Indonesia 2011-2018) 2011 IT market value, IDRmn 2012 2013 2014f 2015f 2016f 2017f 2018f 83,506,673 104,241,202 136,390,387 153,180,044 170,213,665 190,298,877 213,134,743 239,350,316... PCs and tariffs could place internet and broadband services out of the reach for the majority of Indonesians ■ Growing preference in the consumer segment for mobile broadband solutions © Business Monitor International Page 12 Indonesia Information Technology Report Q1 2015 Political SWOT Analysis Strengths ■ Indonesia managed a successful transition to democracy in 2004 In addition, the 2009 parliamentary . Q1 2015 www.businessmonitor.com INDONESIA INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1750-5070 Published by:Business Monitor International Indonesia Information Technology Report. widespread Indonesia Information Technology Report Q1 2015 © Business Monitor International Page 7 investment in datacentres in Indonesia in recent years, for instance, by the end of 2015 PT Telkom. downward pressure on prices. Indonesia Information Technology Report Q1 2015 © Business Monitor International Page 17 2015 Outlook BMI forecasts growth of 11.1% in 2015, with total market value