IICFReport AppendixA-E-Final 10dec Web

Coordinating Ministry for Economic Affairs
THE INDONESIA ICT CONSULTATIVE FORUM:

2014 REVIEW AND 2015 PRIORITIES
December 2014
CONTENTS'
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WELCOME'MESSAGE'.................................................................................................'2'
ACKNOWLEDGEMENTS'..............................................................................................'4'
EXECUTIVE'SUMMARY'...............................................................................................'6'
BACKGROUND'OF'IICF'................................................................................................'8'
OBJECTIVES'.............................................................................................................'10'
STRUCTURE'.............................................................................................................'11'
KEY'MILESTONES'.....................................................................................................'13'
KEY'THEMES'............................................................................................................'15'
Enabling(The(Benefits(Of(Cloud(Computing(In(Indonesia(......................................................................(15(
Securing(Indonesias(Digital(Environment(............................................................................................(17(
EBCommerce(In(Indonesia(.....................................................................................................................(22(
Best(Practices(In(Encouraging(Trade(And(Investment(In(Indonesias(ICT(Industry(................................(28(
CONCLUSION'AND'NEXT'STEPS'................................................................................'33'
APPENDIX'................................................................................................................'35'
Appendix(A:((Decree(Regarding(The(Establishment(Of(Indonesia(ICT(Consultative(Forum((IICF)(Team(
Appendix(B:(Minutes(From(1st(Executive(Meeting((IICF((April(1,(2014)((
Appendix(C:(Minutes(From(2nd(Executive(Meeting((IICF((June(24,(2014)(
Appendix(D:(Minutes(From(3rd(Executive(Meeting((IICF((October(2,(2014)(
Appendix(E:(Supplementary(Materials(
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WELCOME'MESSAGE''
'
Indonesia'has'enjoyed'remarkable'economic'growth'in'recent'years.'New'technologies'
have'played'a'powerful'role'in'connecting'and'empowering'Indonesias'citizens.'As'an'
example,'mobile'phone'ownership'in'Indonesia'is'estimated'at'300'million'active'
mobile'telephone'numbers'with'over'120'percent'penetration'rate.'However,'in'terms'
of'using'Information'and'Communication'Technology'(ICT)'for'more'productive'
economic'activities,'Indonesia'still'lags'behind'peer'countries'due'to'limitations'in'
connection'speed'and'local'content.'
'
As'Indonesia'begins'a'new'chapter,'there'are'tremendous'opportunities'to'use'
advances'in'technology'to'develop'a'knowledgeRbased'economy.'The'impact'reaches'
far'beyond'the'ICT'industry.'Technology'can'help'improve'government'services,'
education,'and'healthcare.'To'realize'these'benefits,'it'is'critical'to'develop'a'robust'
ICT'ecosystem'where'innovation'and'entrepreneurship'can'thrive.'Collaborative'
platforms'such'as'the'Indonesia'ICT'Consultative'Forum'(IICF)'enable'government'and'
industry'to'improve'mutual'understanding'in'the'areas'of'innovation,'investment,'and'
regulation.'Together,'we'can'develop'progressive'ICT'policies'that'will'help'Indonesia'
grow.'
'
In'2014,'the'IICF'focused'on'a'dialogue'about'the'issues.'We'deepened'our'mutual'
understanding'of'regulatory'developments,'learned'together'about'emerging'global'
ICT'issues,'and'identified'opportunities'to'grow'the'local'ICT'industry.''The'publication'
of'this'report'highlights'this'work,'outlines'related'policy'considerations,'and'lays'out'
next'steps'for'the'IICF'in'2015.'In'the'coming'year,'we'look'forward'to'delivering'policy'
results'based'on'our'mutual'learning'this'past'year.''
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The(Indonesia(ICT(Consultative(Forum:(2014(Review(and(2015(Priorities(
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We'look'forward'to'working'together'to'ensure'our'collective'vision'of'an'innovative,'
prosperous,'and'dynamic'ICT'ecosystem'in'Indonesia'becomes'a'reality.'
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Eddy'Satriya'
CoRChair,'IICF'Executive'Committee'
Deputy'Assistant'for'ICT'and'Utility,'Coordinating'Ministry'for'
Economic'Affairs'
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Elizabeth'Hernandez'
CoRChair,'IICF'Executive'Committee'
ICT'Committee'Chair,'USRASEAN'Business'Council'
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December(2014(
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ACKNOWLEDGEMENTS''
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This'report'has'been'a'collaborative'effort'between'the'Coordinating'Ministry'for'
Economic'Affairs'(CMEA)'and'the'USRASEAN'Business'Council'(USABC).'We'would'like'
to'thank'the'CMEA'and'USABC'staff'for'their'strong'support'of'this'project'throughout'
the'process.'In'addition,'we'would'also'like'thank'the'many'individuals'and'
organizations'involved'for'their'contributions'to'this'publication,'in'particular:'Cisco,'
Google,'HP,'Intel,'Microsoft,'Qualcomm,'and'Seagate.''
'
We'are'grateful'for'all'those'who'contributed'their'expertise'to'make'this'years'
activities'rich'and'informative,'including'Luky'Eko'Wuryanto,'Deputy'Minister'for'
Infrastructure'and'Regional'Planning,'CMEA;'C.'Triharso,'Director'of'Electronics'and'
Telematics'Industry,'Ministry'of'Industry;'Fetnayeti,'Director'of'Domestic'Business'
Development'and'Enterprise'Registration,'Ministry'of'Trade;'Ismail,'Director'of'Special'
Telecommunication,'Broadcasting'and'USO,'Ministry'of'Communication'and'
Information'Technology;'Prakoso,'Deputy'Assistant'for'Coordination'of'
Telecommunication'and'Informatics,'Coordinating'Ministry'for'Political,'Legal'and'
Security'Affairs;'Erma'Dewi'Pujawati,'Director'of'International'Business'Cooperation,'
BKPM;'Lolly'Amalia'Abdullah,'Director'of'Cooperation'and'Facilitation,'Ministry'of'
Tourism'and'Creative'Economy;'Didi'Sumedi,'Director'of'Import,'Ministry'of'Trade;'
Tony'Seno'Hartono,'National'Technology'Officer,'Microsoft;'Zainuddin'H.'Nasution,'
Section'Head,'Department'of'Banking'Research'and'Regulation'(DPNP),'Financial'
Service'Authority'(OJK);'Hasyim'Gautama,'Section'Head'of'Security'Management,'
Director'General'of'Informatics'Applications,'Ministry'of'Communication'and'
Informatics;'Jonathan'Selvasegaram,'Corporate'Attorney,'Digital'Crime'Unit,'Microsoft;'
Marco'Ogliengo,'Managing'Director,'Zalora;'Budi'Gandasoebrata,'Director'and'VP,'
Veritrans'Indonesia;'Bert'Verschelde'and'Erik'van'der'Mare,'European'Center'of'
International'Political'Economy,'Brussels'(ECIPE);'Alexander'Rusli,'President'Director'
and'CEO,'Indosat;'Irni'Palar,'Director'&'Country'Manager,'MasterCard'Indonesia;'
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Shinto'Nugroho,'Head'of'Public'Policy'and'Government'Relations,'Google'Indonesia;'
Eddy'Thoyib,'Executive'Director,'Indonesian'ICT'Society'(MASTEL);'Nurul'Ichwan,'
Deputy'Director'for'Manufacturing'Industry'Promotion,'Indonesia'Investment'
Coordinating'Board'(BKPM);'Chris'Zull,'Spectrum'Director,'Asia'Pacific,'GSMA;'and'
David'Siow,'Regional'Manager,'Products'Compliance'and'Certification,'Cisco.'
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EXECUTIVE'SUMMARY''
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The'advancement'of'ICT'is'one'of'the'key'pillars'of'the'Indonesian'governments'
efforts'to'accelerate'and'expand'the'Indonesias'economic'development.'To'help'drive'
towards'this'goal,'the'Indonesia'ICT'Consultative'Forum'(IICF)'was'conceived'as'a'joint'
initiative'between'Indonesias'Coordinating'Ministry'for'Economic'Affairs'(CMEA)'and'
the'USRASEAN'Business'Council'(USABC).'The'aim'of'the'IICF'is'to'serve'as'a'
collaborative'platform'between'government'and'industry'to'develop'Indonesias'ICT'
industry'and'to'support'the'creation'of'a'knowledgeRbased'economy'in'Indonesia.'In'
the'IICFs'quarterly'Executive'Committee'meetings'in'2014,'main'discussion'topics'
included'cloud'computing,'cyber'security,'eRCommerce,'and'encouraging'trade'and'
investment'in'Indonesias'ICT'industry.''
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The'focus'of'the'discussion'on'cloud'computing'in'Indonesia'was'managing'the'tension'
between'data'localisation'requirements'and'their'downstream'effects'on'economic'
competitiveness.'Cyber'security'was'also'a'major'consideration,'with'fraud'identified'
as'the'most'prevalent'cyber'threat'to'the'country.'The'private'sector'shared'existing'
fraud'prevention'solutions'while'the'Ministry'of'Communication'and'Information'
Technologys'(MCIT)'Directorate'of'Information'Security'presented'on'existing'
government'measures'to'combat'cyber'threats.'In'order'to'enhance'cyber'security,'
recommendations'were'made'to'strengthen'legal'frameworks,'technical'and'
procedural'measures,'organizational'structures,'capacity'building'initiatives,'and'
international'cooperation.''
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The'potential'for'eRCommerce'growth'is'limited'in'Indonesia'by'fraud'concerns,'lack'of'
secure'infrastructure'for'online'payments,'and'low'credit'card'penetration'rates.'To'
exploit'the'benefits'of'ICT'and'mobileR'and'webRbased'retail'applications,'
recommendations'were'made'to'secure'online'transactions,'utilize'innovative'
payment'solutions'such'as'mobile'money,'and'use'education'campaigns'to'address'the'
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fraudRrelated'concerns'of'consumers,'merchants,'and'banks.'Extending'eRCommerce'
support'to'SMEs,'who'typically'face'greater'constraints'in'adopting'ICT,'was'also'a'key'
discussion'point.'
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Lastly,'in'order'to'encourage'IT'investment'in'Indonesia,'the'industry'shared'best'
practices'in'simplifying'and'expediting'product'certification'and'compliance'while'
maintaining'consumer'safety.'Other'topics'of'discussion'related'to'supporting'
broadband'development'in'Indonesia'and'taxation'policies.'The'IICF'recognized'the'
need'for'shaping'the'regulatory'framework'to'create'a'businessRfriendly'environment'
in'Indonesia'that'would'attract'greater'investments'to'the'country,'and'facilitate'
greater'certainty,'predictability,'and'ease'of'doing'business'in'the'country.''
'
In'its'inaugural'year,'the'IICFs'quarterly'meetings'centered'on'building'a'strong'
foundation'for'ICT'to'thrive'in'Indonesia.'As'the'IICF'enters'its'second'year,'we'propose'
for'the'focus'to'be'on'understanding'the'impact'of'ICT'across'key'sectors,'in'particular,'
eRGovernment,'eRHealth,'eREducation,'eRbanking,'and'big'data'applications,'as'well'as'
streamlining'government'and'regulatory'processes'impacting'business'operations'in'
Indonesia.'''
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BACKGROUND'OF'IICF'
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Rapid'developments'in'Information'and'Communication'Technology'(ICT)'present'
substantial'growth'opportunities'for'multiple'sectors'across'Indonesia.'With'a'highly'
competitive'telecommunications'market'and'high'mobile'penetration'rates,'disruptive'
technologies'such'as'the'mobile'Internet,'cloud'technology,'and'big'data'present'
leapfrogging'opportunities'for'the'rapidly'growing'country.''Beyond'increasing'the'
competitiveness'of'the'local'economy,'these'ICT'applications'create'more'inclusive'
growth'by'extending'the'reach'of'formal'banking'services,'education,'and'health'care,'
as'well'as'by'lowering'the'barriers'to'entry'for'SMEs.'
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Given'that'the'advancement'of'ICT'is'one'of'
the'main'economic'activities'that'supports'
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the'Master'Plan'for'the'Acceleration'and'
Development'of'ICT'should'
continue'to'be'accelerated'in'
order'to'improve'the'nations'
competitiveness'to'create'a'
knowledgeRbased'economy'
Expansion'of'Indonesian'Economic'
Development'2011R2025'(MP3EI),'the'
government'of'Indonesia'(GOI)'saw'the'
forum'between'the'government'of'
B(Master(Plan(for(the(Acceleration(&(
Expansion(of(Indonesian(Economic(
Development(2011B2025(
'
Indonesia'and'the'ICT'industry'to'encourage'
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need'for'an'integrated'and'coordinated'
innovation'and'growth'in'the'ICT'ecosystem.'
'
In'accordance'with'national'priorities,'the'Indonesia'ICT'Consultative'Forum'(IICF)'was'
conceived'as'a'joint'initiative'between'the'USRASEAN'Business'Council'(USABC)'and'
Indonesias'Coordinating'Ministry'for'Economic'Affairs'(CMEA).'This'forum'serves'as'a'
collaborative'platform'between'government'and'industry'to'develop'Indonesias'ICT'
industry'and'support'the'implementation'of'MP3EI.'''
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The'purpose'of'this'report'is'to'highlight'key'findings'from'the'quarterly'IICF'meetings'
held'in'2014.'It'includes'the'key'themes'discussed,'policy'design'considerations'for'the'
incoming'administration,'and'recommendations'for'the'2015'IICF'agenda.''
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OBJECTIVES '
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Develop'a'common'understanding'on'ICTRrelated'regulatory'developments,'
schemes,'and'investment'policies'in'Indonesia.'Understand'the'underlying'
principles'behind'government'policies'allows'the'business'community'to'offer'
solutions'that'are'suited'to'the'Indonesian'context.'
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Facilitate'the'sharing'of'trends'and'best'practices'in'the'ICT'industry'at'the'local,'
regional,'and'global'level'to'achieve'the'shared'goal'of'creating'a'knowledgeRbased'
economy'in'Indonesia.'
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CoXCreate'winXwin'policies'through'industry'consultation'in'the'development'of'
ICT'policy'and'regulation'in'Indonesia,'offering'government'incentives,'and'
leveraging'on'private'sectors'expertise'and'innovation'to'promote'growth'and'
solve'challenges'faced'in'ICTRadoption.'
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STRUCTURE'
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The'IICF'consists'of'a'Steering'Committee,'an'Executive'Committee,'and'Work'Streams'
(Figure'1).'
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Figure!1:!IICF!Structure!
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Steering!Committee!
The'Steering'Committee'is'chaired'by'the'Deputy'Minister'for'Infrastructure'and'
Regional'Planning'in'the'Coordinating'Ministry'for'Economic'Affairs'(CMEA)'and'
comprises'government'officials'at'the'Deputy'Minister,'Director'General,'and'Deputy'
Chairman'level'(Echelon'1).''
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The'Steering'Committee'is'tasked'to'provide'direction'to'the'Executive'Committee'in'
terms'of'determining'and'formulating'recommendations'for'ICT'activities'and'to'assess'
the'execution'of'activities'carried'out'by'the'Executive'Committee.''
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Executive!Committee''
The'Executive'Committee'is'coRchaired'by'Eddy'Satriya,'Deputy'Assistant'for'ICT'and'
Utility'in'CMEA,'and'Elizabeth'Hernandez,'the'ICT'Committee'Chair'of'USABC.'The'
committee'comprises'government'officials'at'the'Deputy'Assistant'and'Director'level'
(Echelon'2),'and'private'companies'from'USABCs'ICT'Committee,'the'American'
Chamber'of'Commerce'(AmCham)'Indonesias'IT'&'Teleconnectivity'Committee,'
MASTEL,'and'KADIN.'
'
The'Executive'Committee'is'tasked'to'develop'and'execute'IICF'work'plans'and'
determine'activities'for'the'work'stream'leaders.'In'the'Executive'Committee'
Quarterly'Forums,'committee'members'and'ICT'associations'meet'to'discuss'new'
initiatives'and'policy'and'regulatory'issues.'
'
The'results'of'the'quarterly'forums'will'be'reported'to'the'Coordinating'Minister'for'
Economic'Affairs,'as'well'as'Ministers'from'relevant'Ministries,'through'the'Chairman'
of'the'Steering'Committee.'
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Work!Streams!
The'work'streams'are'directed'by'the'Executive'Committee'and'provide'an'avenue'to'
discuss'issues'in'depth.'Each'work'stream'is'led'by'a'member'from'USABCs'ICT'
Committee'and'will'provide'detailed'inputs'and'timely'updates.'Given'that'this'is'a'
consultative'forum,'the'scope'of'each'work'stream'is'open'and'subject'to'change.'In'
2014,'the'identified'work'streams'were:'
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Regulatory'Insights'
Leaders:(Google,(Cisco(
Incentivizing'Localization'
Leader:(Intel(
Emerging'Digital'Trends'
Leaders:(Microsoft,(Qualcomm(
Examining'local'and'global'
regulations'and'best'practices'
that'advance'sustainable,'longR
term'growth'in'the'ICT'sector'
Identifying'opportunities'to'grow'
the'local'ICT'industry'
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Updates'on'global'industry'trends'
and'relevance'to'the'ICT'
ecosystem'in'Indonesia.'
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KEY'MILESTONES''
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1st'Executive'Committee'Forum,'April'1st'2014''
Introduction'of'the'IICF'concept,'goals,'and'structure'
Work'stream'leaders'introduced'their'2014'focus'areas'and'plans''
o Regulatory'Insights:'The'importance'of'industry'consultation'to'develop'
robust'and'timely'regulations'that'will'increase'the'competitiveness'of'
Indonesias'ICT'sector.''
o Incentivizing'Localization:'The'need'for'government'leadership'in'
stimulating'investment'interest.''
o Emerging'Digital'Trends:'Trends'in'Indonesias'digital'landscape'and'the'
impact'of'cloud'computing'on'the'Indonesian'government'and'
businesses.'
Discussion'of'IICF'next'steps'
o Inclusion'of'the'financial'services'committee'due'to'the'inherent'
overlap'between'ensuring'access'to'financial'services'and'realizing'
Indonesias'ICT'potential'
o Consideration'for'infrastructure'requirements'(hard'and'soft)'and'SMEs'
access'to'them'
o Consideration'for'security'and'privacy'in'a'changing'digital'landscape''
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2nd'Executive'Committee'Forum,'June'24th'2014''
Ministries'shared'their'top'ICTRrelated'issues'
o Rise'of'cybercrime'and'existing'government'initiatives'to'safeguard'
Indonesias'digital'landscape''
o Financial'institutions'usage'of'ICT'in'risk'management'and'eRbanking'
services'and'the'cyber'threats'they'face'
o The'Indonesian'Broadband'Plan'2014R2019'and'its'infrastructure'and'
security'needs''
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Industry'shared'existing'solutions'to'combat'cybercrime'and'safeguarding'online'
transactions'''
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3rd'Executive'Committee'Forum,'October'2nd,'2014'
Vision'for'Indonesias'ICT'ecosystem:'The'three'key'pillars'are'infrastructure,'
payment'systems,'and'building'content'and'investment.''
Supporting'Indonesias'eRCommerce'Market''
o Developing'a'robust'and'secure'payment'infrastructure''
o Adopting'innovative'payment'solutions'
o Formalizing'SME'support'in'eRCommerce'
Encouraging'trade'and'investment'in'Indonesias'ICT'industry'
o Product'compliance'and'consumer'safety''
o Fiscal'policies'and'the'proposed'luxury'tax'on'imported'mobile'phones''
o Supporting'broadband'development'in'Indonesia:'Developing'standards'
and'infrastructure'
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KEY'THEMES'
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Enabling(the(Benefits(of(Cloud(
Computing(in(Indonesia((
'
Benefits'of'Cloud'Computing'in'
Indonesia'
Job'Creation:'CloudRrelated'
jobs'expected'to'grow'by'
102%'between'2012'and'2015.'''
SME'Growth:'High'levels'of'
computing'power'and'lower'
costs'of'production''
Rural'Access:'Improved'
remote'access'to'healthcare,'
education,'and'eRGovernment'
services'
Emergency'Preparedness'&'
Disaster'Relief:'Improved'
communication'and'data'
sharing'
Indonesias'escalating'online'population'and'
high'mobile'phone'penetration'rates'
positions'it'to'well'reap'the'benefits'of'
cloud'computing.'This'revolutionary'
development'has'been'identified'by'the'
Emerging'Digital'Trends'work'stream'as'an'
area'that'will'create'significant'new'
opportunities'for'consumers,'governments,'
and'businesses'in'Indonesia.''
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To'realize'the'full'potential'of'cloud'
computing,'it'is'crucial'for'the'regulatory'
regime'to'keep'pace'with'rapid'
developments'in'the'industry'and'to'
implement'positive'policies.'
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Consequences'of'EconomyX
wide'Data'Localisation'
Measures'on'Competitiveness''
GDP:'R'0.8%'
Domestic'Investments:'R'2.3%'
Exports:'R'1.7%''
Source:(ECIPE((2014).(The(Costs(of(Data(
Localisation:(The(Friendly(Fire(on(Economic(
Recovery.(
C'
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A'key'issue'in'policy'design'is'balancing'law'enforcement'and'security'with'industry'
growth.'Managing'this'tension'influences'the'extent'to'which'economies'of'scale'can'
be'reaped'in'the'provision'of'scalable'services'through'a'relatively'small'number'of'
strategically'located'data'centres.'''
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The'industry'is'mindful'that'the'Ministry'of'Communications'and'Information'
Technologys'(MCIT)'Regulation'No.82'of'2012'regarding'the'Implementation'of'
Electronic'Transactions'and'Systems'requirement'for'electronic'systems'operators'of'
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public'services'to'set'up'a'local'data'and'disaster'recovery'centre'is'for'the'purpose'of'
law'enforcement'and'data'protection.'However,'policymakers'should'consider'the'
economic'consequences'of'data'localization'requirements'and'related'data'privacy'
and'security'laws'that'exclude'foreign'suppliers'of'data'and'downstream'goods'and'
service'providers.''
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Data'localization'and'processing'requirements'face'a'complex'interRrelationship'
between'crossRborder'data'flows,'supplyRchain'fragmentation,'and'domestic'prices.'It'
is'not'just'internet'companies'that'are'affected,'companies'in'the'financial,'retail,'
logistics,'manufacturing,'and'communications'sectors'all'use'personal'data'across'their'
supply'chains'and'are'similarly'impacted.'''
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Indonesian'businesses'rely'on'access'to'personal'data'to'efficiently'design,'produce,'
sell,'and'deliver'goods'and'services,'making'global'and'domestic'data'a'new'form'of'
currency'that'SMEs'can'leverage'on'to'become'global'players.'Furthermore,'it'is'likely'
that'SMEs'will'be'the'first'to'be'displaced'from'the'market'as'they'lack'the'resources'
to'adapt'to'the'regulatory'changes.''
'
Policy'Consideration:'In'order'to'maximize'the'benefits'of'cloud'computing,'it'is'
important'to'strike'a'balance'between'data'protection'measures'and'the'
downstream'effects'of'data'localization'requirements'of'GDP,'investments,'and'
welfare.'There'also'needs'to'be'a'clearer'legal'standing'on'data'centres'in'
Indonesia'and'more'coordination'between'the'Ministry'of'Communication'and'
Information'Technology'(MCIT),'the'Financial'Services'Authority'(OJK),'and'other'
related'government'institutions.'
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Securing(Indonesias(Digital(Environment(((
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Indonesias'rapid'development'has'been'accompanied'by'the'widespread'adoption'of'
ICT'by'the'domestic'economy'and'civil'society'at'large.'This'naturally'leads'to'increased'
cyber'threats'to'all'aspects'of'society,'including'the'free'and'accurate'flow'of'
information,'trust,'and'socioReconomies.''
'
Boosting'the'countrys'resilience'to'cyber'threats'necessitates'the'involvement'of'
multiple'stakeholders'from'government'regulation'and'industry'interest'to'user'
awareness'and'the'educational'system.''
'
According'to'research'by'DAKA'Advisory,'
Indonesia'is'currently'more'susceptible'to'
less'sophisticated'cybercrimes'like'fraud'
Cyber'Crime'in'Indonesia'
and'other'contentRrelated'challenges.'The'
MCITs'Directorate'of'Information'Security'
identified'the'five'top'areas'of'vulnerability'
in'Indonesia'today'as'malware,'phishing,'
mobile'threats,'social'media,'and'
hacktivism.''
'
During'the'Executive'Committee'Meeting'in'
Ranked'tenth'in'Symantecs'
global'list'as'country'
accounted'for'2.4%'of'worlds'
cybercrimes'in'2011.''
Of'the'39'million'attacks'in'
2012,'35%'originated'from'
outside'the'country,'while'65%'
came'from'within.'
86%'of'Internet'users'in'
Indonesia'reported'being'
victims'of'cybercrime'in'2010.''
'
Source:(DAKA(Advisory(Report((
'
June'2014,'there'was'consensus'among'participants'that'cybercrimes'stem'mainly'
from'a'lack'of'awareness.'An'MCIT'representative'shared'that'unlike'private'sector'
companies'who'typically'abide'by'ISO'27001'Standards'for'Information'Security'
Management,'many'ministries'and'public'agencies'remain'unaware'of'such'standards'
and'fail'to'adopt'the'appropriate'security'measures.'In'addition,'users'insufficient'
knowledge'on'IT'security'makes'them'especially'vulnerable'to'deceptive'websites'and'
SMSR'and'emailRphishing.'Many'are'unaware'of'the'existence'of'security'solutions'for'
their'mobile'devices'and'the'risks'associated'with'having'a'social'media'account.'
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Indonesias'largest'fashion'eRcommerce'site,'Zalora,'highlighted'that'the'prevalence'of'
fraud'(and'the'resulting'dearth'of'consumer'trust)'limits'eRCommerces'growth'
potential.'Regulators'should'go'beyond'protecting'banks'and'consumers,'and'protect'
merchants'as'well.'For'example,'in'the'case'of'a'friendly'fraud,'the'perpetrators'are'
usually'consumers'against'merchants.'
'
Existing'Private'Sector'Solutions''
Online'payment'gateway,'Veritrans'Indonesia,'presented'on'existing'fraud'prevention'
techniques'to'secure'online'transactions.'From'a'payment'gateways'point'of'view,'out'
of'the'three'categories'of'fraud,'internal'fraud'(compared'to'consumer'and'merchant'
fraud)'has'the'potential'to'cause'the'most'damage.'Internal'fraud'occurs'when'there'is'
a'breach'of'data,'which'can'be'used'for'fraud'transaction.'Current'fraud'prevention'
solutions'include:'a'manual'review,'CVV/Security'Code,'3DRsecure,'BIN'check,'velocity'
of'change,'velocity'of'use,'and'fraud'rules.''
'
Besides'fraud'prevention'techniques,'maintaining'a'secure'digital'environment'
involves'addressing'issues'such'as'weak/default'passwords,'lack'of'employee'
education,'security'deficiencies,'and'slow'selfRdetection.'Indicators'of'an'insecure'
environment'are'the'lack'of'awareness,'little'incentive'to'reRengineer'processes,'
merging'different'people'and'processes,'slow'adoption'of'evolving'technology,'and'
unnecessary'exposure'to'sensitive'data.'In'this'case,'prevention'techniques'include'
identifying'and'isolating'privileged'users,'auditing'user'end'password,'alert'and'
monitoring,'and'reviewing'access'rules.'Best'practices'include'devaluating'data'
whenever'possible,'continuous'improvement,'and'stop'thinking'scope,'start'thinking'
risk.''
'
Microsoft'also'gave'an'introduction'of'their'new'Digital'Crimes'Unit'that'focuses'on'
cyber'security'in'three'main'areas:'malicious'software'crimes,'particularly'botnetR
driven'Internet'attacks;'piracy'and'intellectual'property'crimes;'and'technologyR
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facilitated'towards'exploitation'of'children'and'the'elderly.'The'Digital'Crimes'Unit'
protects'consumers'by'adopting'an'offensive'approach'that'uses'stronger'programs'
like'information'protection,'access'control,'antiRmalware,'policy'management,'
research'and'response,'and'secure'development.'Microsoft'emphasized'the'following'
best'practices'in'protecting'Indonesians'against'cybercrime:'investment'in'the'latest'
tools'and'technologies;'proRactive'disruption;'strong'and'secure'products'and'cloud'
services;'secure'banking'IT'infrastructure;'education'on'safe'online'banking'practices;'
and'the'use'of'genuine'software.'
'
Current'Government'Initiatives''
MCITs'Directorate'of'Information'Security'pointed'out'that'in'order'to'safeguard'
Indonesias'cyber'space,'the'Global'Cybersecurity'Agenda'(IDRGCA)'needs'to'be'
addressed'within'all'pillars'in'Indonesia:'legal'framework,'technical'and'procedural'
measures,'organizational'structures,'capacity'building,'and'international'cooperation.'
After'the'representative'shared'existing'government'initiatives'in'these'areas'(Figure'
2),'the'forum'participants'made'the'following'recommendations'in'strengthening'
these'pillars.''
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Figure!2:!Pillars!of!Cyber!Security!in!Indonesia!
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'
Legal'Framework:'The'Telecommunications'Act'No.'36/1999'only'mentions'
telecommunications'infrastructure'security'briefly'and'does'not'discuss'it'in'the'
specific'context'of'the'Internet.'While'the'more'recent'Information'Transaction'
Electronic'Act'No.'11/2008'provides'the'basis'for'law'enforcement,'in'order'to'
prosecute'criminals,'it'often'needs'to'be'supplemented'by'other'Acts,'such'as'the'
Copyright'Law,'No.'28/2014.'Currently'a'regulation'on'Data'Privacy'Protection'is'being'
completed.'However,'there'needs'to'be'a'common'understanding'on'the'definition'
and'semantics'of'cyber'law.'
'
Technical'and'Procedural'Measures:'While'Indonesia'has'developed'technical'and'
procedural'measures'to'address'vulnerabilities,'more'investment'is'needed'to'enhance'
efforts'and'resources.'There'are'debates'regarding'whether'information'on'
vulnerabilities'should'be'disclosed'and'policymakers'are'torn'in'deciding'if'it'is'
worthwhile'to'invest'in'developing'security'standards'which'go'beyond'basic'legal'
compliance.''
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Organizational'Structures:'While'the'Coordinating'Ministry'for'Politics,'Law,'and'
Security's'Desk'for'National'Cyber'Information'Resilience'and'Security'has'been'begun'
operating'and'is'constructing'a'convergent'regulation'to'be'implemented'by'the'
incoming'administration,'a'legal'source'is'still'needed.'In'addition,'cyberRrelated'issues'
in'Indonesia'are'not'well'coordinated'among'government'agencies.'While'the'Desk'is'
under'coordination'of'the'Ministry'of'Defence,'which'focuses'on'cyber'defence,'it'also'
addresses'other'cyberrelated'matters'such'as'cybercrimes.''
'
Capacity'Building:'More'investment'is'needed'to'enhance'cyber'security'expertise,'
particularly'in'the'public'sector.'SMEs'under'the'coordination'of'MCIT'also'require'
assistance'for'training'and'education,'and'need'additional'help'to'comply'with'new'
legislative'measures.''
'
International'Cooperation:'While'maintaining'Indonesias'sovereignty'in'the'cyber'
world'is'important,'cyber'criminals'exploitation'of'the'blurred'legal'jurisdictions'
between'countries'makes'interRstate'relations'a'top'priority.'Building'an'international'
framework'for'cybersecurity'with'highRlevel'principles'is'vital'in'conducting'cybercrime'
investigation.'This'makes'it'vital'to'hold'discussions'leading'to'Memorandums'of'
Understanding'towards'agreement'to'collaborate'on'specific'areas'of'cyber'security'
through'ASEAN'Network'Security'Action'Council'Working'Group,'International'
Telecommunication'Union'(ITU),'bilateral'cooperation,'Asia'Pacific'Computer'
Emergency'Response'Team'(APCERT),'Forum'of'Incident'Response'and'Security'Teams'
(FIRST)'and'other'related'forums.''
'
Policy'Considerations:''
There'should'be'a'synergetic'effort'between'regulators,'practitioners,'and'
customers'in'constructing'better'cyber'security'measures.'This'involves'
managing'the'tension'between'leveraging'on'new'technology'trends'and'
strict'regulations.'For'example,'rather'than'imposing'overly'strict'and'
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cumbersome'regulations,'little'things'such'as'posting'education'material'and'
warnings'of'cybercrime'on'banks'homepages'can'go'a'long'way'in'improving'
cyber'security.'
'
A'key'enabler'of'eRgovernment'initiatives'is'to'enhance'the'public'sectors'
cyber'security'expertise'and'mandate'public'agencies'adherence'to'
standards'such'as'ISO'27001'for'Information'Security'Management.'More'
coordination'is'also'needed'between'agencies'to'facilitate'information'
sharing,'avoid'duplicate'efforts,'and'prevent'regulatory'gaps.''
'
The'transRboundary'nature'of'cybercrimes'makes'it'crucial'for'international'
coordination'in'the'development'of'an'international'framework'for'
cybersecurity'with'highRlevel'principles.'
'
'
EBCommerce(in(Indonesia(
'
While'B2C'eRCommerce'in'Indonesia'currently'accounts'for'a'mere'0.1%'of'all'retail'
expenditures1,'the'industry'is'set'for'substantial'growth'owing'to'factors'such'as'a'
rising'youth'population,'rising'disposable'incomes,'rapid'urbanization,'and'the'
increasing'adoption'and'penetration'of'technology'such'as'the'internet'and'mobile'
phones.'To'fully'realize'the'potential'of'this'nascent'industry,'providing'regulatory'
certainty,'developing'the'necessary'infrastructure,'and'facilitating'the'inclusion'of'
SMEs'are'key.''
'
'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
'
1
'ASEAN(eCommerce:(Is(ASEAN(at(an(inflection(point(for(eCommerce?,'UBS'Global'Research,'June'13,'
2014.''
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According'to'Zalora,'Indonesia'performs'relatively'well'in'terms'of'logistical'
infrastructure'to'enable'timely'delivery.'Even'though'the'proportion'of'fixed'
broadband'subscribers'in'Indonesia'is'low'compared'to'large'developing'countries,'the'
countrys'high'penetration'rates'for'mobile'broadband'makes'eRCommerce'accessible'
even'in'remote'areas'(Figure'3).'Instead,'the'major'roadblock'to'eRCommerce'growth'
in'Indonesia'is'the'combination'of'poor'payment'infrastructure'and'a'lack'of'consumer'
trust'in'making'online'payments.'This'concern'was'echoed'by'many'forum'
participants.'
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Figure!3:!Fixed!broadband!and!mobile!phone!penetration!
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Developing'a'robust'payment'infrastructure''
Indonesia'is'a'largely'cashRbased'economy'with'low'credit'and'debit'card'penetration.'
According'to'Euromonitors'2013'international'data,'92'million'bank'accounts'in'
Indonesia'have'linked'bank'cards'out'of'a'population'of'240'million.'This'has'prompted'
many'retail'merchants'to'offer'cashRuponRdelivery'services.'According'to'MasterCard,'
cash'payments'account'for'37.9%'of'eRCommerce'transactions,'followed'by'bank'
transfers'(27.5%)'and'lastly,'credit'card'payments'(10%)2.'While'cash'upon'delivery'is'a'
practical'solution'in'the'short'run,'it'imposes'significant'financial'costs'on'companies'in'
the'form'of'labour,'cash'handling,'and'higher'returns'of'purchased'items.'These'
additional'costs'will'have'the'most'significant'impact'on'resourceRconstrained'SMEs.''
'
In'order'to'increase'credit'card'penetration,'MasterCard'and'other'industry'players'
emphasized'the'need'for'merchants,'bank'partners,'OJK,'and'IT'and'payment'
companies'to'convene'to'address'payment'issues.'For'example,'reducing'fraudRrelated'
concerns'through'a'concerted'effort'to'educate'consumers'and'banks,'increased'
openness'in'awarding'licenses'to'foreign'payment'processors,'and'tightening'security'
through'the'use'of'One'Time'Passwords'(OTPs)'as'a'fraud'prevention'tool.'
'
Adopting'innovative'payment'solutions'
In'line'with'Indonesias'National'Movement'of'NonRCash'(GNNT),'mobile'payments'are'
an'increasingly'feasible'payment'platform'for'online'goods'and'services.'Given'the'
high'mobile'phone'penetration'rate'in'Indonesia'and'rural'populations'limited'
physical'access'to'banks'and'other'financial'institutions,'the'provision'of'mobile'
wallets'by'telecommunication'operators'extends'eRcommerce'and'financial'services'to'
previously'unbanked'Indonesians.''
'
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'
2
'MasterCard'Accelerates'ERcommerce'Industry'Development'in'Indonesia,'MasterCard'press'release,'
August'14,'2014.''
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While'Indonesias'three'major'telecommunication'operators''Indosat,'Telkomsel,'and'
XL'Axiata''investments'in'making'mobile'money'interoperable'to'enable'realRtime'
transfers'across'independent'networks'is'a'big'step'in'eRcommerce,'customer'adoption'
of'mobile'money'remains'low'due'to'low'awareness'and'the'fear'of'sending'money'to'
the'wrong'number3.'Operators'should'work'together'to'raise'awareness'of'the'
benefits'of'electronic'transactions'and'educate'consumers'on'the'safeguards'that'have'
been'put'in'place,'for'example,'the'ceiling'on'mobile'money'usage'and'the'reassurance'
that'the'mobile'device'is'merely'a'delivery'mechanism'(cash'remains'in'the'bank).''
'
Given'that'the'eRCommerce'and'mobile'money'industry'is'still'in'its'infancy,'the'
regulatory'environment'is'still'being'formed.'As'online'services'grow'in'popularity,'it'is'
necessary'to'harmonize'regulatory'licenses'across'districts,'implement'a'common'
solution'for'merchant'payments,'and'develop'processes'for'issues'like'dispute'
resolution.'Panelists'also'highlighted'the'need'for'large'private'companies'to'provide'
more'efficient'and'delivery'systems'for'eRCommerce.''
'
Extending'eXCommerce'support'to'SMEs'
The'SME'segment'in'Indonesia'is'growing'rapidly'and'makes'a'significant'contribution'
to'the'countrys'Gross'Domestic'Product'(GDP).'In'2011,'SME's'contribution'to'national'
GDP'was'about'57.94%'(or'equal'to'IDR'4.303.571,5'Trillion)'and'this'increased'to'
59.08%'(or'equal'to'IDR'4.869.568,1'Trillion)'in'20124.'These'contributions'have'made'
SMEs'one'of'the'key'sectors'to'enhance'Indonesias'economy.'''
'
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'
3
4
'Visa(MultiBCountry(Research(Study:(Mobile(Money(Insights,'TNS'Research,'January'2013.''
'Promoting(the(SMEs(Exports(in(the(OIC(Member(States,'COMCEC'Coordination'Office,'June'2013.''''
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USXASEAN'Business'Alliance'for'Competitive'SMEs'Activities'for'2014X2015'
2014!activities!
!
Goal:'Improve'SMEs'access'to'technology'and'assist'in'capacity'building'
Smart'technology'for'smarter'business''workshop''
In'collaboration'with'Indonesias'annual'SMEs'Co.'Festival,'conducted'SMEs'in'a'Digital,'
Borderless,'Competitive,'and'Greener'World:'Development'Trends'and'Tools'workshop'
In'collaboration'with'the'ASEAN'Foundation'and'Microsoft,'developed'two'basic'training'
courses'for'young'entrepreneurs'on'using'ICT'tools'for'business'development'and'
management.'
'
Upcoming!activities!in!2015!
!
Goal:'Increase'domestic'competitiveness'of'ASEAN'SMEs'and'better'integrate'them'into'regional'
and'global'value'chains''
ASEAN'Online'SME'Academy:'Provides'SMEs'with'free,'centralized,'online'access'to'relevant'
and'countryRspecific'information'for'business'startRups,'training'resources,'networking'
platform,'trade'and'market'linkage'resources,'and'finance'information.'
ERCommerce'offers'a'significant'opportunity'for'SMEs'through'enabling'access'to'new'
markets,'expanding'the'scope'of'marketing,'reducing'the'cost'of'operations,'and'
developing'new'partnerships'with'suppliers'and'other'collaborators.'However,'SMEs'
face'significant'and'unique'challenges'in'eRCommerce'adoption.'First,'SMEs'are'slow'
adopters'of'eRCommerce'and'ICT'in'general.'This'is'due'to'low'computer'literacy,'
limited'knowledge'of'eRcommerce'models,'low'awareness'of'the'benefits'of'ICT,'and'
uncertainty'about'the'returns'on'investments.''
'
Second,'SMEs'need'for'broadband'services'are'not'always'served'by'
telecommunication'service'providers.'Indosat'shared'that'fixed'services'are'offered'
typically'to'corporate'and'larger'SMEs,'and'while'the'company'is'pushing'for'strategies'
to'offer'cellular'services'to'smaller'SMEs,'they'face'challenges'is'addressing'the'fine'
line'between'smaller'SMEs'and'the'highRend'consumer'market.''
'
Third,'Indonesian'banks'rigid'standards'in'areas'such'as'merchant'underwriting'limits'
linkages'between'SME'eRCommerce'activities'and'banks.'This'is'exacerbated'by'SMEs'
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low'capital'base'and'lack'of'collateral'property'to'secure'loans.'While'banks'are'
beginning'to'offer'smallerRsized'loans'to'SMEs,'more'needs'to'be'done'in'developing'a'
national'lending'infrastructure'that'improves'the'environment'for'SMEs'to'gain'greater'
access'to'trade'finance,'reduce'the'cost'of'finance,'and'encourage'lending/extension'
of'credit'to'SMEs.''
'
The'provision'of'wholesale'infrastructure'through'angel'and'venture'capital'financing'
is'another'way'to'catalyze'SME'growth.'One'example'is'Indosats'collaborations'with'
Mountain'Partners'AG'and'Softbank'which'helps'to'develop'ICT'startRups'and'increase'
their'visibility'and'valuation'by'exposing'them'to'international'markets.'However,'the'
outcomes'of'such'initiatives'are'eroded'by'existing'regulations'such'as'the'new'
Negative'Investment'List'that'closes'eRCommerce'to'foreign'investors'and'the'new'
Trade'Law'that'mandates'for'exports'to'be'carried'out'only'by'registered'exporters.'
This'hampers'domesticallyRproduced'exports'by'SMEs,'thus'hampering'the'scalability'
of'their'services'(Figure'4).'
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Figure!4:!Share!of!SMEs!contribution!to!total!exports,!1990J2006!
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Policy!Design!Considerations!
As'eRCommerce'in'Indonesia'is'at'its'infancy,'involving'all'stakeholders'in'
developing'regulations'is'crucial'to'realizing'its'full'growth'potential.''
Having'a'developed'payment'industry'is'a'key'enabler'to'eRCommerce'growth'
and'there'should'be'a'platform'for'stakeholders'such'as'Bank'Indonesia,'OJK,'
and'IT'and'payment'companies'to'convene'to'address'payment'issues.''
SMEs'make'up'90%'of'businesses'in'Indonesia'and'eRCommerce'presents'a'
significant'growth'opportunity'for'them.'More'initiatives'are'needed'to'
ensure'inclusion'of'SMEs'in'this'opportunity'such'as'facilitating'their'access'to'
related'financial'services'and'infrastructure.'
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(
Best(Practices(in(Encouraging(Trade(and(Investment(in(
Indonesias(ICT(Industry(
'
Indonesias'fiscal,'regulatory,'and'licensing'policies,'as'well'as'government'support'for'
infrastructure,'R&D,'and'human'capital'development,'all'have'a'profound'influence'on'
ICT'investment'and'adoption.''
'
Product'Compliance'and'Consumer'Safety'
The'key'issue'regulators'face'in'product'compliance'is'managing'the'tension'between'
consumer'safety'and'overly'complex'certification'and'enforcement'procedures'that'
increase'the'burden'of'doing'business'in'Indonesia.'Given'the'short'lifeRcycle'of'the'
timeRsensitive'handset'industry,'the'timeRconsuming'certification'process'has'resulted'
in'handset'manufacturers'rechanneling'their'investments'elsewhere,'thus'limiting'
access'to'a'range'of'innovative'products.''
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The'following'are'international'best'practices'in'simplifying'and'expediting'product'
compliance'to'enhance'the'ease'of'doing'business'while'ensuring'that'safety'and'
compliance'concerns'are'adequately'addressed.''
'
Best(Practice(1:(A(tiered(approach,(or(different(levels(of(adherence(to(standards,(for(
different(product(types(can(expedite(the(certification(process(((
In'Singapore,'the'Infocomm'Development'Authority'(IDA)'approves'products'through'
different'registration'schemes'that'differ'based'on'productRtype'and'the'likelihood'of'
it'causing'interference.'Similarly,'under'the'US'Federal'Communications'Commission'
(FCC)'Approval'Scheme,'Class'A'devices,'which'are'marketed'for'commercial'and'
industrial'use,'undergo'a'less'stringent'verification'process'where'the'manufacturer'
takes'the'necessary'steps'to'ensure'compliance'and'the'submission'of'representative'
data'is'not'required.'On'the'other'hand,'Class'B'devices,'which'are'marketed'for'use'in'
a'residential'environment,'are'subject'to'stricter'requirements'and'gain'market'entry'
via'a'Declaration'of'Conformity'where'products'must'be'tested'in'an'accredited'lab'
that'is'based'on'ISO'17025'standards.'Strict'requirements'are'also'imposed'on'radioR
based'products'that'must'undergo'a'certification'process'which'is'authorized'by'the'
FCC,'based'on'the'submitted'representative'and'test'data.'
'
Best(Practice(2:(Recognition(of(other(certifications(to(avoid(duplicate(processes(
In'the'EU,'all'products'are'regulated'by'EU'directives'which'mandate'that'once'a'
product'bearing'the'CE'marking'is'placed'in'the'EU'market,'member'states'shall'
presume'compliance'with'the'EU'Directives'and'shall'not'prohibit,'restrict,'or'impede'
the'placement'of'this'product'or'service'in'their'market,'unless'they'have'evidence'to'
the'contrary.'In'the'US,'telecommunication'products'with'a'Declaration'of'Conformity'
are'exempted'from'further'review'by'the'regulator.'
(
Best(Practice(3:(PostBmarket(surveillance(to(enforce(compliance((
As'opposed'to'the'typical'approval'regime'where'product'compliance'is'verified'before'
entering'the'market,'the'EU'market'surveillance'authorities'only'conduct'random'
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compliance'checks'after'the'products'are'on'the'market.'This'allows'consumers'to'
have'faster'access'to'stateRofRtheRart'technology'rather'than'being'held'up'by'a'
backlog'of'regulatory'approvals.'Similarly'in'the'US,'the'FCC'Enforcement'Bureau'as'
well'as'the'Authorization'lab'only'investigate'reports'of'nonRcompliant'products'being'
imported,'as'well'as'reported'cases'of'interference.'In'Singapore,'as'a'postRsurveillance'
measure,'IDA'may'require'the'supplier'to'submit'the'test'results'or'evidence'of'
equipment'certification'as'proof'of'conformity'with'the'applicable'IDA'Technical'
specifications.'
'
Fiscal'Policies''
Tariff'and'taxation'policies'impact'the'
affordability'of'ICT'products'and'services'
Best'Practices'in'Supporting'
an'Effective'Tax'System''
and'can'be'a'significant'barrier'to'its'
adoption.'The'proposed'luxury'tax'on'
imported'mobile'phones'by'the'Ministry'of'
Industry'and'the'Ministry'of'Trade'is'
intended'to'spur'growth'in'the'domestic'
mobile'phone'industry'and'to'address'
Indonesias'trade'deficit'by'slowing'imports.'
However,'there'are'concerns'surrounding'
the'negative'unintended'consequences'of'
ICTRsector'specific'taxes.''
'
In'general,'taxation'should'be'
broadRbased'
Taxes'should'account'for'
sector'and'product'
externalities,'such'as'the'
positive'benefits'of'mobile'
The'tax'and'regulatory'system'
should'be'simple,'easily'
understandable'and'enforced'
Dynamic'incentives'should'be'
unaffected'
Taxes'should'be'equitable,'and'
the'burden'of'taxation''
should'not'fall'
disproportionately'on'the'poor'
Source:(GSMA/Deloitte(Report(
'
According'to'a'2011'Deloitte'and'GSMA'study,'mobile'telephony'is'more'extensive'
than'fixed'access'telephony'due'to'underdeveloped'networks.'Given'that'mobile'
telephony'represents'the'universal'access'to'telephony'and'broadband,'handset'taxes'
will'increase'the'cost'of'mobile'ownership'and'exacerbate'the'existing'digital'divide.''
'
In'addition,'current'decreases'in'handset'and'smartphone'prices'offer'significant'
opportunities'in'terms'of'a'positive'contribution'to'GDP'and'jobs,'increased'innovation'
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and'productivity,'and'more'inclusive'socioReconomic'outcomes'through'increased'
access'to'mobileRhealth,'Rgovernment,'and'Reducation.'The'Indonesia'Cellphone'
Association'has'indicated'that'the'proposed'20%'luxury'tax'could'lead'to'a'drop'in'
smartphone'sales'by'50%,'and'erode'the'benefits'of'current'price'reductions.''
'
Conversely,'lowering'handset'taxation'has'been'shown'to'increase'mobile'penetration'
and'mobile'broadband'penetration.'In'August'2009,'the'Kenyan'government'removed'
the'16%'VAT'on'mobile'phone'handsets.'Since'then'handset'purchases'have'increased'
by'more'than'200%'and'mobile'connection'penetration'has'increased'from'50%'to'
70%'of'the'Kenyan'population.''A'2014'GSMA/Deloitte'study'also'showed'that'when'
mobile'taxes'were'reduced,'the'shortRterm'loss'in'government'revenues'was'quickly'
recovered'in'the'mediumRterm'due'to'the'growth'in'the'tax'base'(Figure'5).''
'
Figure!5:!Ability!of!market!to!recover!lost!tax!in!years!following!an!adJvalorem!tax!reduction!
'
Supporting'broadband'development'in'Indonesia''
While'broadband'is'a'key'enabler'of'the'ICT'industry,'it'faces'current'challenges'in'
terms'of'limited'bandwidth'and'lack'of'broadband'infrastructure'in'rural'areas.''
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Currently,'Indonesia'only'has'50MHz'of'spectrum'allocated'for'wireless'broadband.'
With'9'operators'in'Indonesia'and'limited'bandwidth'available,'more'spectrum'needs'
to'be'allocated'for'broadband'to'accommodate'the'forecasted'increase'in'demand.'
Besides'having'a'regulatory'platform'that'will'also'allow'the'acceleration'of'ICT'
infrastructure'development,'ICT'standards'must'be'constantly'updated'to'remain'
relevant'to'the'rapidly'changing'technological'environment'and'to'support'the'
emergence'of'bandwidthRintensive'applications.''
'
In'Indonesia,'the'current'WiRFi'bandwidth'is'limited'to'20'MHz'despite'the'availability'
of'latest'WiRFi'technologies'that'support'bandwidths'of'40'MHz'and'80'MHz'and'
private'users'access'to'expanded'frequency'bands'of'5150R5350'MHz'and'5470''5725'
MHz.'In'order'for'Indonesian'consumers'and'businesses'to'fully'exploit'the'benefits'of'
cloud'computing'technologies,'faster'data'transfer,'and'the'other'benefits'of'new'
bandwidthRintensive'applications,'the'industry'and'policymakers'must'convene'to'
develop'broadband'networks'and'services'that'meet'industry'standards.'
'
Policy!Design!Consideration:!A'wellRdesigned'framework'for'certification'and'
licensing'that'balances'regulatory'certainty,'flexibility,'and'consumer'protection'
is'important.'ForwardRlooking'fiscal'and'customs'policy'will'help'facilitate'the'
growth'of'the'ICT'industry.'Industry'partners'should'be'involved'in'the'
development'of'national'standards'for'IT'products'that'have'clear'requirements,'
specifications'and'guidelines,'and'enables'the'adoption'of'the'latest'technology'
that'will'bring'benefits'to'businesses'and'consumers'in'Indonesia.'
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CONCLUSION'AND'NEXT'STEPS'
'
Emerging'Information'and'Communication'Technologies'(ICT)'are'powerful'catalysts'
for'improving'a'nations'competitiveness'and'creating'a'knowledgeRbased'economy.'
This'makes'the'IICF'a'critical'platform'for'government'and'industry'leaders'to'convene'
and'develop'a'common'understanding'on'regulations'and'policies,'share'digital'trends'
and'best'practices,'and'identify'opportunities'for'publicRprivate'partnerships'to'
achieve'the'shared'goal'of'growth'in'the'ICT'industry'and'solving'challenges'in'ICT'
adoption.'
'
In'IICFs'trailblazing'inaugural'year,'the'quarterly'forums'centered'on'developing'a'
strong'foundation'for'ICT'development'in'Indonesia.'Underpinning'a'thriving'ICT'
ecosystem'is'the'need'for'wellRdeveloped'broadband,'mobile,'and'cloud'
infrastructures'that'are'supported'by'strong'cyber'security'measures.'As'IICF'enters'its'
second'year,'we'recommend'the'priority'be'on'understanding'the'impact'of'ICT'across'
Indonesias'key'sectors'while'also'reviewing'existing'government'and'regulatory'
processes'to'streamline'them'for'greater'business'efficiency'and'enabling'the'rapid'
deployment'of'ICT'to'support'the'broader'Indonesia'economy.'
'
A'recent'McKinsey'Global'Institute'report5'identifies'five'digital'technologies'most'
likely'to'have'a'significant'impact'on'Southeast'Asia'across'a'number'of'important'
sectors:'the'mobile'Internet,'big'data,'the'Internet'of'Things,'the'automation'of'
knowledge'work,'and'cloud'technology.'The'report'forecasts'the'potential'economic'
impact'of'these'disruptive'technologies'across'key'sectors6'in'ASEAN'to'be'between'
$220'billion'and'$625'billion'annually'by'2030'(Figure'6).'In'2015,'we'propose'the'IICF'
'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
'
5
'Southeast(Asia(at(the(crossroads:(Three(paths(to(prosperity,'McKinsey'Global'Institute,'November'
2014.'
6
'Key'sectors:'infrastructure,'financial'services,'education,'manufacturing,'agriculture,'health'care,'
government'services,'and'consumer'and'retail.'
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considerbased'on'stakeholder'needsan'agenda'that'addresses'challenges'and'
opportunities'to'realizing'technologyRdriven'growth'across'these'sectors.''
'
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Figure!6:!Impact!of!disruptive!technologies!across!key!sectors!in!ASEAN!economies!
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APPENDIX'
'
APPENDIX'A'
Decree(regarding(the(establishment(of(
Indonesia(ICT(Consultative(Forum((IICF)(Team(
APPENDIX'B'
Minutes(from(1st(Executive(Meeting((IICF(
(April(1,(2014)(
APPENDIX'C'
Minutes(from(2nd(Executive(Meeting((IICF((
(June(24,(2014)(
APPENDIX'D'
Minutes(from(3rd(Executive(Meeting((IICF((
(October(2,(2014)(
APPENDIX'E'
Supplementary(Materials(
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!
!
!
!
APPENDIX!A!
Decree%regarding%the%establishment%of%
Indonesia%ICT%Consultative%Forum%(IICF)%Team%
!
!
!
!
!
!
APPENDIX!B!
Minutes%from%1st%Executive%Meeting%%IICF%
(April%1,%2014)%
!
%
%
1st Executive Meeting Indonesia ICT Consultative Forum

April 1st, 2014
Welcoming Remarks
Luky Eko Wuryanto, Deputy Minister for Infrastructure and Regional Planning,
Coordinating Ministry for Economic Affairs (CMEA)
o Opened the forum, encouraging the sharing of perspectives, the involvement of
higher officials and focused on outcomes that will result in concrete
improvements
Alex Feldman, President, US-ASEAN Business Council (USABC)
USABC looks forward to an ongoing and long-term programme. Indonesia is one of the
top five countries when it comes to tech use, including mobile technology, Facebook, and
Twitter. The Indonesia ICT Consultative Forum aims to spur ICT in industry in
Indonesia, as well as connect Indonesia to opportunities outside the country.
2014 is a big year:
o The Councils 30th anniversary
o Indonesias Parliamentary Elections
o USABC is launching ASEAN Matters for America and American Matters
for ASEAN
o USABCs CEO Mission to Vietnam and the Philippines, where CEOs will
meet with the President and members of cabinet and leaders of business
community. This follows a CEO Mission in 2013 to Indonesia and
Malaysia.
Indonesia is half the population of SE Asia and more than half of its economic
activity. As economic activity continues, ICT will play a critical role in growth
and Indonesias success. Getting policies right is critical to ensuring people
benefit and growth continues across the world. There are opportunities in the
region, as demonstrated through entrepreneurs in the region making headlines
through development of apps and games that are becoming some of the most
popular in the world. Indonesia has a lot to gain in this sector, and there is great
excitement for this new collaborative platform.
Presentation on IICF Concept & Plan
Eddy Satriya, Deputy Assistant for ICT and Utility, CMEA
Purpose
The Indonesia ICT Consultative Forum (IICF), an initiative started by the US-ASEAN
Business Councils ICT Committee and Coordinating Ministry of Economic Affairs aims
to create a collaborative platform between government and industry to support
Indonesias long-term policy of building a local ICT industry and toward fulfillment of a
shared goal of creating an innovation and knowledge-based economy in Indonesia.
Currently, every ministry has their own pilot projects involving ICT applications, thus
these experiences can be shared and learned from. The Forum will also serve to improve
mutual understanding in the areas of innovation, investment and regulation and will assist
in the development of future ICT policy in Indonesia.
He welcomes comments on the draft decree and proposes that the forum name IICF can
still change.
Implementation
Several objectives of the work streams include reducing coordination issues and
providing timely information before policies are made. In addition, they can be used to
promote local ICT industries.
Structure
The forum will be comprised of a Senior Official Committee including representatives
from the Government of Indonesia, as well as the USABC and local stakeholders.
The Senior Official Committee will report findings to the relevant Ministers on
current ICT issues as identified by the Executive Committee. Under the Senior
Official Committee is the Executive Committee which will be led by co-chairs from
USABCs ICT Committee and CMEA. The Executive Committee is responsible for
providing a fora for ICT policy discussion, annual work plans, and identifying new
initiatives, etc. Under the Executive Committee are the three work streams that will
organize regular activities and provide timely updates on the relevant issues.
Schedule
Key milestones have been identified including:
1)
2)
3)
4)
Mid/late April Executive Dialogue Launch and Panel Discussion

June Executive Committee workshop/meeting
September Executive Committee workshop/meeting
Nov 16/Dec 8 Senior Official/Ministerial Committee and Indonesia Business
Mission
Elizabeth Hernandez, ICT Committee Chair, US-ASEAN Business Council
Key purpose of the IICF is to ensure greater predictability, so that companies can
see where the government is coming from and how the business community can
help meet the common objective of a vibrant ICT sector in Indonesia.
Shared objectives Government and companies want the same thing a vibrant
ICT sector. IICF envisions working toward shared objectives, not as individual
companies or ministries, but as thought leaders toward development of an
innovative, knowledge based community with local ICT industry development as
an enabler to achieving this goal.
Workstreams Workstreams are tools to discuss relevant issues in depth and
serve as a starting pointing. Given that this is a consultative forum, the scope is
open and subject to change. Identified work streams are:
o Emerging Digital Trends The transformational nature of ICT is an
enabler for economic growth. This includes new areas like: cloud
computing and analytics, as well as others new styles of IT. These new
trends need to be understood and regulatory frameworks need to be
aligned with the new trends, thus providing an environment to expand
business and create a knowledge base. To be led by Microsoft and
Qualcomm.
o Incentivizing Localization This workstream looks at how to increase
investment interest. There is a need to level playing field and remove
barriers, but also incentives need to be in place encourage investments. In
turn, greater ICT investment leads to job creation. To be led by Intel.
o Regulatory Insights Initially, regulatory framework changes triggered
the need for forum. IICF wants to understand challenges and looking
forward to share best practices from other countries who are also creating
a domestic ICT industry. This information exchange helps address
Indonesias needs and allows companies to be more effective. To be led
by Google.
Outcomes - Today is an outcome. At a minimum, the outcome IICF hopes to
achieve are regular dialogues to minimize surprise. Such that if new
regulations come up, there is a chance for consultation to allow companies to
prepare operations to remain in compliance of the new policies. Beyond
sharing of information, there can be a sharing of best practices and
development of a roadmap toward the vision to create a knowledge base.
Response from Eddy Satriya, Deputy Assistant for ICT and Utility, CMEA
Last September during USABCs ICT Business Mission to Indonesia this Forum was
first conceived in order to create a robust ICT ecosystem.
Predictability A win-win can be established using the input of government
local incentives, timely regulation and using the expertise of companies.
Outcomes: In addition to reporting our findings from the work streams, we

should consider other measures of success including other metrics or media
involvement.
Participation: Attendees ideas and interaction are welcome. Questions to
consider: Which workstream is of most value? What topics would you like to
hear from experts about?
Work stream leaders presentation on objectives & plans
Emerging Digital Trends - Ruben Hattari (Microsoft) and Nies Purwati (Qualcomm)
Purpose: Provide updates to stakeholders on global industry trends;
international best practices; case studies; government policies for long term
growth in the ICT sector.
Cloud technology: how it can help government and businesses, like SMEs.
o Used in healthcare, politics and education to improve the sectors
o Important for SMEs in Indonesia given their desire for flexibility,
collaboration, mobility and low costs. Also, considering around 90%
of industries in Indonesia are SME, this amounts to a large number of
companies.
o Broadband connectivity is difficult given Indonesias large and
dispersed geography/size, particularly in Eastern Indonesia where
connectivity is needed.
Concerns: cyber security, online privacy
Potential technology, such as smart cities and smart phones, will be discussed
in this workstream, as well as policy challenges that new technology creates.
Incentivizing Localization, Deva Rachman (Intel)
Local demand - The education sector has the biggest need for ICT industry
Local government needs to add input but also the upcoming new government
[national election coming up] requires leadership in this area as localization
needs to be in line with Medium Term National Plan 2019.
Regulatory Insights, Shinto Nugroho (Google)
Regulatory insight Government needs to be in dialogue with private sector
as another source of information on how to make regulations that will
continue to create jobs and opportunities. Companies can share their good and
bad experiences in regards to the impact regulations had on the ICT sector.
Timeliness Government needs robust regulations to help Indonesia build
human resources to increase competitiveness.
Q&A
Suggestion that high-level meetings be moved forward to allow
recommendations for ICT industry to be put forward for the incoming
government and ask for chance to present to the new leadership.
Presentation: Cloud Computing and Its Impact on Our Lives

Speaker: Tony Seno Hartono, National Technology Officer, Microsoft
Key points
Cloud computing touches all aspects of our life social, economic, political,
healthcare
Cloud technology provides choices Private, Public, Hybrid (Public/Private)
and Community clouds exist. Each option provides a different level of
privacy.
o Clouds allow for automization, massive scalability and connectivity,
which is relevant given Indonesias size/population/dispersed islands.
Therefore, the Indonesia government should create positive policies for
cloud computing given these important benefits.
o Allow software developers to use the online market to download and get
revenue, or regional governments with no infrastructure to manage
infrastructure using eservices.
ISO 31,000 Risk Management framework can help make decisions about
public/private cloud and when to use each. Some require services on premise,
others off-premise or some in-between.
Need to have back-up/baskets depending on expected service level agreement
(SLA) and solutions need to be designed accordingly.
Digital trends in Indonesia
Young demographic in Indonesia - 54 million students = cloud computing
opportunity.
Population growth will increase internet use, particularly the 12-34 year olds
users who are often with a higher education.
Growth is primarily in mobile phones
High social media use.
Opportunities for cloud computing in education, healthcare, and politics
Shared responsibility - Government and citizens working together provide
highest ROI thus internet access should be shared responsibility between
government and citizens.
Challenge of internet connectivity
o TV Band White Spaces Use unused frequency spectrum of TV for
data
o Potential to provide all citizens with free internet access to equalize
access
The power of cloud computing to transform government services such as
healthcare and education. Thus, we should maximize benefits of cloud
computing.
Open Discussion
Regulatory environment
AmCham Indonesia Stresses the importance of getting the regulations right.
A study assessing US investment in Indonesia showed that over the last 9
years over 65 billion USD has been put into Indonesia. And projections over
the next 3-5 years expect an additional 61 billion. It showed that with every 1
job created, an additional 10 Indonesian jobs were created showing a
multiplier effect on investment and job creation.
The IT sector is particularly relevant as it creates jobs, forms the backbone of
other sectors investment (i.e. manufacturing) thus compels US investment.
This group is critical to getting this right which is a challenge given that
technology changes quickly. Companies look for: 1) Good regulatory
environment; and 2) Infrastructure. If the regulatory environment is wrong,
the problem is compounded by 10 (i.e. 10 Indonesian jobs not created because
investment doesnt come in).
Creating local demand
Ministry of Industry Focuses on start-up companies in ICT
Asks how to collaborate between the government and private sector on ICT
issues.
Proposes for next meetings:
o Look at how ICT has increased investment in Indonesia
o Look at how to grow the local ICT industry. The benefits of cloud
computing are known but the ministry struggles with how to support ICT
growth and grab the local market.
o Proposes looking at practices to grow local ICT industry in other countries
looking at bad practices and also incentives needed to support ICT.
Workstream on incentivizing localization will address the creation of local
demand and will bring best practices, case studies. (i.e. Vietnam). These case
studies will be from closer to Indonesia and other emerging economies.
Security
Concerns expressed regarding data security with cloud computing. Point of view
that certain data may be considered strategic thus making data security and
protection very important.
Security and privacy are important issues that must be addressed. However, this is
a period of transitioning from data in a physical way to where data is on the cloud.
There are different levels of data security and privacy such that government data
is different and private. Today, data doesnt have boundaries such that data is a
new form of currency. We need to think that data is accessible globally by banks
or enterprises and need to maximize this digital economy, particularly to the

benefit of SMEs to facilitate turning them into global players.
Financing / SMEs
Local industry needs to be supported, especially in ICT because it is hard for
start-ups to get funding from banking institutions. Start-ups usually get funding
from venture capital firms and telcos.
Investment is needed but also there are lots of SMEs who need coordination under
Ministry of Industry and Communication. In this context, the ministry is
concerned about security but cannot avoid new technologies so instead require
assistance for training and education. Ministry is challenged by all the new
concerns and balancing the need for technology with the need to comply to
legislative measures because this is the way forward.
Financial services
Bank of Indonesia Recommends inviting Indonesia Financial Authority (OJK) to join
IICF
Regulates non-banks and banks.
Given cross-over with financial services, Financial Services Committee should
also be included.
Infrastructure requirements
KOMINFO There is a need for a responsive regulatory environment and asks
what this new environment would look like. But also raises concern on what
infrastructure is needed and the funding required; what infrastructure is needed to
ensure is internet free and once it is built how to maintain good quality
infrastructure and continuity of infrastructure operators.
Need to collaborate with other systems like transport and logistics. However, its
also important to consider the soft infrastructure i.e. human capital. Hard and
soft infrastructure are both needed. There is currently US government support for
entrepreneurship support in Indonesia such that companies can help with
training, entrepreneurship, and promotion of hackathons in tech space.
Discussion of IICF Next Steps
Workstream leaders will make respective work plans. Companies are encouraged
to sign up, if they havent already. Also, there is a need to reach each out to
different agencies so these meetings can be taking place on a regular working
level.
There is a need for case studies, experts and guest speakers to share more
information on this ICT transition in Indonesia.
Appendix
Resources
Presentation: IICF Concept & Plan
Draft decree
Presentation: Cloud Computing and its Impact on Economy
ASEAN Matters for America report
Partners in Prosperity: US Investment in Indonesia
Attendees
GOI
Luky Eko Wuryanto, Deputy Minister for Infrastructure and Regional Planning,
CMEA
Coordinating Ministry for Politics, Law and Security
Ministry of Industry
Ministry of Trade
Fiscal Policy Agency, Ministry of Finance
Ministry of Communication and Informatics
Bank of Indonesia
BKPM
Ministry of Tourism and Creative Economy
Partners
Didie Soewondho, Vice Chairman of Telecommunication, Information
Technology and Broadcasting, KADIN
Eddy Thoyib, Executive Director, MASTEL
Andrew White, Managing Director, AmCham Indonesia
Sri Lakkundi, ICT Committee Co-Chair, AmCham Indonesia
Jim Caruso, Economic Counselor, US Embassy
Phil Nervig, Economic Officer, US Embassy
USABC Members
Nazrya Octora, Associate Consultant, APCO Worldwide
Seow Hiong Goh, Executive Director, Global Policy & Government Affairs,
Cisco Systems
Satria Gunayoman, Consultant, Cisco Systems - HD Asia Advisory

Shinto Nugroho, Head of Public Policy and Government Relations, Google
Indonesia
Agung Yudhawiranata, Analyst - Public Policy & Government Relations, Google
Indonesia
Suren Velappu , Director of Corporate Affairs, South East Asia, Hewlett-Packard
Elizabeth Hernandez, Vice President of Corporate Affairs, Asia Pacific Japan,
Hewlett-Packard
Ananta Gondomono, Governmental Programs Lead Indonesia, IBM
Darryn Lim, Director, Trade and Innovation Policy, Microsoft
Nies Purwati, Director of Government Affairs Indonesia, QUALCOMM
Claudia Chan, Head of Government Relations, Asia Pacific and Japan, Seagate
Ruben Hattari, Director of Corporate Affairs-Indonesia, Microsoft
Tony Seno, National Technology Officer, Microsoft
Deva Rachman, Corporate Affairs Director, Intel Indonesia Corporation
Arnold Djiwatampu, Motorola Solutions
Alexander Feldman, President, US-ASEAN Business Council
Kathy Santillo, Regional Managing Director, US-ASEAN Business Council
Desi Indrimayutri, Senior Country Representative, US-ASEAN Business Council
Shay Wester, Manager, US-ASEAN Business Council
Caroline Tanjaya, Country Representative, US-ASEAN Business Council
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Third Indonesia ICT Consultative Forum (IICF) Minutes

Thursday, October 2, 2014
JW Marriott, JW Meeting Center (Level 2)
Co-Chaired by:
Surrendren Velappu, Director of Corporate Affairs for ASEAN, HP (on behalf of Elizabeth
Hernandez)
Welcoming Remarks. By Eddy Satriya (CMEA) and Surendren Velappu (HP)
Eddy Satriya (CMEA)
The first meeting set the discussion priorities and direction for IICF. The second meeting discussed
ICT-related regulations. Today, we will be discussing more specific issues of e-commerce and the
ICT investment climate in Indonesia.
Hopefully, in the next meeting, we can discuss specific applications that will support social
development in Indonesia. This will be in line with the eHealth and eEducation priorities set out
by the new government.
Surendren Velappu (HP)
The IICF is an important platform for government and industry to develop a mutual understanding
in the areas of innovation, investment, and regulation; which is critical in achieving the shared
objective of building an innovative, knowledge-based economy in Indonesia.
This is the third out of four forums to be held this year. The previous sessions have been valuable
to our ICT committee members, and we believe, for the Government of Indonesia as well. We look
forward to coming back in December for the final forum for this year.
Our last session addressed the governments cyber security concerns and several private sector
experts shared existing solutions for data protection, cloud security, securing online banking
transactions, and fraud prevention. The government officials sharing of regulatory measures
intended to safeguard cyber security furthered private sectors understanding of certain
regulations.
In todays third IICF meeting, we hope to continue this constructive discussion about the
development of future ICT policy in Indonesia, particularly in areas of e-commerce and promoting
trade and investment.
In todays forum, we hope to accomplish the following outcomes:
i)
Sharing of best practices and identifying current barriers and opportunities to promote
ICT development
ii)
Identify opportunities for public-private partnerships to address gaps and challenges in
the industry
iii) Determine future areas of work and research that will be useful in developing policy
inputs for the incoming new administration
Vision of Indonesias ICT Ecosystem. By Alexander Rusli (Indosat)
Driven by technology, the ICT arena is dynamic and changes rapidly. This necessitates constant
dialogue between government stakeholders and private sector representatives; and more platforms
for discussion, such as the IICF, are needed.
A robust ICT Ecosystem comprises of three key pillars:
i)
Infrastructure
Broadband is a key enabler of the ICT industry. Currently, Indonesia only has 50MHz of
spectrum allocated for wireless broadband. With 9 operators in Indonesia and limited
bandwidth available, more spectrum needs to be allocated for broadband to
accommodate the forecasted increase in demand.
Having a regulatory platform that allows the acceleration of ICT infrastructure
development is essential.
ii) Payment Systems
Payment systems go beyond mobile services and even offer vouchers. An operator such
as Indosat has 250,000 payment outlets that provide entry and exit points for money,
thus making people more bankable.
In terms of mobile money, Indosats view is that it should be a transition to bank
payment. A limit of USD 500 should be imposed on mobile money, and beyond that sum,
people need to visit a bank. However, challenges remain in maintaining control.
With Indonesians already utilizing mobile and online banking, there is an opportunity to
extend this trend to the growing e-commerce industry. Currently, three large operators
have mobile products and we do not understand why we should be competing with
banks that have other service offerings, which are also awarded with mobile licenses.
iii) Content and Investment
Developers are a key aspect of the ecosystem and their skills are already being exported
by Indonesia.
Investment is also crucial and having angel investors and incubators are necessary to
develop ICT startups. In a collaboration with Mountain Partners AG, Indosat has an
incubator program called ideaBox that cultivates new applications and increases their
visibility and valuation by exposing them to the market. In our first initiative, we selected
3 out of 50 candidates. In the subsequent round, out of 150 registrants, we selected 7.
We realized that many startups have poor business skills and through the incubator, we
can help them market their ideas to the international market quickly. We are limiting
our selected candidates to 10 due to the resource-intensive nature of incubation.
Indosat and Softbank have also collaborated to set up a fund that provides companies
with capital. However, we found it difficult to find startups that are ready for investment.
Q&A
Chan Kok Long (idEA/iPay88): One of the key drivers of e-commerce growth in ASEAN countries are
SMEs. However, in Indonesia, there is no formalized link between SMEs and big companies like
Apple and Google, which provide essential support in terms of infrastructure and
telecommunications. How does Indosat link with SMEs to support them?
Indostat has two lines of service: cellular and fixed. Fixed services are usually offered to corporates
and larger SMEs. To my knowledge, Indosat is the only operator that is pushing for the SME
segment. However, there are challenges in providing services to smaller SMEs due to the fine line
between them and the high end consumer market.
While Indonesias high smart phone penetration (25%) offers opportunity, it is difficult to
demonstrate its value to SMEs. The government and private sector see the opportunity for SMEs
in providing useful applications such as banking services. Even though the current rate of SME
growth is not ideal (6-7%), it is still higher than consumer growth (4%). Currently, there are many
applications being offered, however the education process is time-consuming and we need to
achieve a critical mass. In this area, the government and banks have been helping by offering
smaller sized loans.
We totally disagree with the governments proposal to use IMEI. When a phone is delivered,
theoretically, it should be assigned to a unique IMEI number. However, because operators seldom
Surendren Velappu (HP): An important issue to address is the proliferation of illegal devices in
Indonesia. Is it that easy for illegal devices to get into Indonesia? Is there an opportunity for the
private sector and the government to collaborate to solve this problem?
use the IMEI number, except for the occasional high-level tracing, it ends up being stored as latent
data. Handset manufacturers need access to these IMEI numbers, and smaller handset
manufacturers do not have this access. This results in a duplication of IMEI numbers or no IMEI
numbers at all. This makes it very tough for the government to enforce a regulation that mandates
an IMEI number for every phone. Furthermore, there are about 500 million active phones, and
this is discounting phones that are duplicated or have no IMEI numbers.
Instead, the act should ensure that defective phones do not come in at all. You are right in saying
that there are more regulations put in place for imports and the process now takes 3 to 4 months.
In our experience, we were trying to import Xiaomi, whose phones are limited in supply. By the
time Xiaomi was awarded a permit, the supply was redirected to other countries and the launch
was cancelled. In this time-sensitive industry, which has a short life cycle, having unpredictable
permits make life difficult for handset manufacturers.
Furthermore, the creation of a single ASEAN market extends to mobile devices and a provision for
every phone to have an IMEI number is not practical. Moreover, it is very time consuming for the
telco to consistently check against the database.
Hotman Simbolon (Citi): The question is related to customer protection in the telephone industry.
When fake SMSes are reported, the police will attempt to track the sender through IMEI numbers.
However, often times, this IMEI number is duplicated or does not exist. It feels like the telecom
industry does not care for customer protection even though it is important in this environment.
What are your thoughts on this?
Using the IMEI number for tracking purposes is ineffective. This is because illegal phones that
pass through the border without meeting the standards typically do not have IMEI numbers. This
is especially for low-end Chinese phones that are used widely in Indonesia. A better approach is
to put in place a better border control mechanism that ensure that imported phones comply
with the standards.
Hotman Simbolon (Citi): The limits imposed on mobile phones in Indonesia are not applicable
overseas and this sometimes results in excessive payments. Is it possible to develop a network like
MasterCard where all the ICA industry members operate in a single regulated network that can be
used directly overseas?
Your phone has two balances, reload and mobile money. In Indonesia, the central bank explicitly
states that your reload balance is not allowed to be used as mobile money and that profits
cannot be made from mobile money. Your question on roaming fees refers to reload money. In
November, Indostat is planning for all our products to have only 1 roaming partner overseas.
While this is a gamble, it provides leverage for us to negotiate a fixed maximum amount and
have greater control over customer experience and to avoid bill shocks. Currently, a lot of
roaming occurs between operators here and in other countries, and typically, we can only
achieve one good deal with the partners and have to pay full rates for the remaining. While the
difference is substantial, the customer sometimes choose the expensive roaming partner based
on recommendations by their friends.
Eddy Thoyib (Mastel): As the chairman of ATSI how do you see the trend of the Over-the-top
content (OTT) business and the decline of the telcos core business? Is there any plan from ATSI on
how to protect you and other telcos from this declining trend?
Given that members all have different positions on this issue, it is difficult for me to provide a
statement that is representative of ATSI. But there is consensus in that, as owners of the
infrastructure, telcos should be given a share of the revenue from OTT ads and that the
government should be a facilitator of giving telcos an equitable position on OTTs and their space.
Since four months ago, all the operators in ATSI have been approached by content owners who
say that operators should not push ads at the top and bottom of the mobile device since they
are already making revenue by selling ad spaces.
At Indostat, we believe that traditional voice and SMS mechanisms have disappeared as an
internet IP-based voice like Skype theoretically can have better quality than a circuit switch
connection that is technologically limited. Indostats fund and incubator ensures we are part of
this trend. One of the more successful companies who is also our partner, Softbank, does not
receive their valuation and revenue from the telco business and instead, rely on other income
streams. This mindset shift is important for Indostat, but unlike Softbank which started off as a
software company that bought over a telco, Indosat is a telco company with telco people that is
owning that space.
Dhenu (idEA): Currently, we see that telcos provision of mobile wallets is facing resistance from the
bank. How do you think the telcos model helps Bank Indonesias national movement on using noncash?
Although the banks seem to be in disagreement to push for this, to achieve the cashless society
vision, the different stakeholders need to be open to discussing the use of mobile money to drive
GDP. Instead of transferring funds through the post office, it is now transferred through smart
devices. In response, banks are now saying that as long that it is only used as a delivery mechanism
and the money sits within the bank it is fine. We all know that central banks around the world are
conservative institutions and rightly so as they manage the core activity in every country, which is
money. Which is why in these kind of activities, I push the idea of banks being more open.
Kathy Santillo (USABC): This year, as a result of our annual discussion with the ASEAN Economic
Ministers, we signed on a SME Business Alliance. In collaboration with USAID we have done
workshops throughout ASEAN countries. In 2015, we are looking at putting together an SME Online
Academy and HP is one of the leaders of that initiative.
Discussion 1: Supporting Indonesias e-Commerce Market

Speakers: Irni Palar (MasterCard Indonesia)
Moderated by: Shinto Nugroho (Google)
E-commerce in Indonesia is growing fast (reach 8 billion in three years; 40 percent growth), but
the industry is still young and more coordination and engagement with the government is needed.
MasterCard has engaged with merchants, bank partners, and consumers directly in driving the ecommerce business
The use of card payment in e-commerce is still very low: 75% of transactions in e-commerce is
paid in cash upon delivery and only 20% is by bank transfer. This is because the penetration of
credit card in Indonesia is very low (15.6 million cards or 6 percent of the population). Given that
people typically hold multiple cards, there are only approximately 7-8 million of credit card holders
in Indonesia.
In terms of security, the government is set on providing a means for safe transactions. For
examples, credit cards now use the One Time Password (OTP) to increase security. The challenge
is that Indonesians like to change their phone numbers. While debit cards have a higher
penetration rate, it is less secure and often used for ATM only. Similar to credit cards, debit cards
are also linked to outdated phone numbers. Another means by MasterCard to ensure safety and
security is through a virtual card number (VCN) which you can request from the bank. This is being
developed by BNI and the user can get a separate 16 digit credit card number that makes
transactions more secure.
All players have to be prepared to realize the targets set by the ASEAN Economic Community. In
terms of technology, banks should start exploring ways to build partnerships with industry players.
MasterCard is part of the e-commerce association and are trying to educate the market, introduce
new programs, developing new technologies and payment solutions, and connecting with more
merchants. Growing the e-commerce industry has to be a joint effort.
Discussion: What is on your policy wish list to grow the e-commerce industry?
Irni Palar (MasterCard Indonesia)
Government and the public sector need to work together to create policy that works, especially in the
implementation phase.There has to be more discussions on payment between BI, OJK and the private
sector to give more room for card transactions to grow.
Nurul Ichwan (BKPM)
The e-commerce industry is growing in Indonesia but we need more distributed growth between
big companies and the SMEs. This is because during times of crisis, SMEs play a key role in keeping
the economy afloat.
Collaboration between government and the private sector, especially SMEs, to seek for more
opportunities in AEC. SMEs, particularly those looking to expand overseas, need help from big
companies to provide education and training, and also for companies like MasterCard and Google
to provide more efficient payment and delivery platforms.
Enzelin Sariah (Ministry of Trade)

The Ministry of Trade wants to build a conducive ecosystem for the e-commerce industry so that
all players in the sector can operate in a safe environment and allow for the industry to improve
in terms of quantity and quality. We also found repeat purchases on e-commerce sites to be the
norm and this facilitates Indonesians purchase of locally manufactured products.
The Ministry of Trade supports SME development as 90 percent of business in Indonesia is SMEs.
In the future, SMEs can also benefit from the growing e-commerce industry in Indonesia.
Discussion: What are some challenges that you face in Indonesias e-commerce industry?
Fredrik Thomassen (Zalora)
In general, it is good to do e-commerce business in Indonesia as the market is growing rapidly.
The infrastructure is also adequate. Compared to a delivery time of 4 days in Oslo, delivery time
in Jakarta is 3 hours and in more remote places like Papua, it is one week. Mobile speed also
acceptable (5 percent of transaction is mobile) and in terms of logistics, Zaloras IT infrastructure
is partly in Indonesia where good personnel is not difficult to find. Facebook ad specialists are also
cheaper in Indonesia as compared to Singapore.
However, payment remains a roadblock. 50 percent of customers continue to pay by cash upon
delivery. This is because the banking regulations are not yet mature. Having more rules and
regulations that guarantee customer safety will benefit this industry. Another concern is the
regulatory environment that keeps changing.
There is a demand for Indonesian manufactured products, however, the law disallows Zalora from
exporting locally manufactured products.
Chan Kok Long (idEA/ipay88)
Banks are the missing key component in the e-commerce ecosystem. There is a strong correlation
between bank operations in e-commerce and e-commerce growth. For example, Malaysia has
much higher growth in e-commerce than Indonesia because banks in Malaysia are more open.
My wish as a payment provider gateway is to have a forum where all banks, payment companies
and IT companies convene to solve issues on payment. The payment companies in Indonesias ecommerce sector should organize education sessions with the banks. If banks were less worried
about risk, security, fraud, the e-commerce industry will grow even more rapidly.
Irni Palar (MasterCard)
When I met with one of the big PTs he mentioned that it is difficult to connect e-commerce
merchants to banks due to the banks rigid standards in areas such as merchant underwriting.
Education and communication with banks must increase and MasterCard will talk to other
payment players to conduct these sessions.
Discussion: The ICT sector grows so fast that sometimes regulations cannot catch up. What do you
think of this?
Irni Palar (Mastercard)
Technology is rapidly developing. On the other hand, regulations are trying to catch up with the
growth of technology and the industry itself. For Indonesia, e-commerce is still in its infancy. This
makes the involvement of all stakeholders important in helping the government develop the
appropriate regulations. The government must involve industry players in the policy making
process because they know exactly what the problems are and what kind of regulations are
needed to solve those problems.
Hotman Simbolon (Citi)
Suggestion: there should be modules for SME education on e-commerce.

Shinto Nugroho (Google)
Possible collaboration on SME education on e-commerce with the SME Business Alliance initiated
by the US-ABC and USAID.
Discussion 2: Encouraging Trade & Investment in Indonesias ICT Industry

Moderated by: Eddy Thoyib (Mastel)
Investment Updates in ICT Sectors (2009 to 2014) by Nurul Ichwan (BKPM)
Foreign Direct Investment in the global ICT sector slowed down but started to grow again in 2013.
Much of this investment did not go to ASEAN. ASEAN only received 5% of USD388 billion invested
globally in 2009-2013 in the ICT sector.
USD18 billion of investment went to the ICT sector of ASEAN in 2009-2013 but Indonesia only
received 5%. USD888 million or 85% of FDI realization since 2010 in Indonesias ICT sector came from
Singapore.
Both FDI plan and FDI realization in Indonesias ICT sector have been slowing down since 2010. BKPM
is worried that the FDI plan and FDI realization in Indonesias ICT sector will not improve in the near
future. Since 2010, 99.6% of total FDI in the ICT sector have been located in Java.
The domestic investment plan and realization in Indonesias ICT sector have been slowing down
since 2011. Since 2010, almost 100% of total domestic investment have been located in Java.
McKinsey predicts that Indonesia will become the 7th largest economy offering an additional USD1.3
trillion market opportunity from the growing middle class. There will be 90 million additional
consumers in 2030. Indonesian consumers also have the highest consumer confidence index among
the G20 countries. Indonesia is the most promising country for overseas business according to the
Japan Bank for International Cooperation Survey 2013.
Poor infrastructure remains a challenge but there has been progress through programs like MP3EI,
Palapa Ring, etc. Another challenge is the increasing labor cost. The Government has issued
Presidential Instruction No.9/2013 that sets a minimum wage based on productivity. This is in addition
to the criteria of decent living (KHL) and economic growth.
The government provides investment incentives such as the 5-10 years tax relief facility and 50% for
a further 2 years reduction of income tax. These are applied only to 5 pioneer industries including the
communication devices industry.
Mobile Phone Taxes: Implications for Encouraging Investment by Chris Zull (GSMA)
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220
countries, the GSMA unites nearly 800 of the worlds mobile operators with 250 companies in the
broader mobile ecosystem, including handset and device makers, software companies, equipment
providers and Internet companies, as well as organizations in industry sectors such as financial services,
healthcare, media, transport and utilities. The GSMA also organizes industry-leading events such as
Mobile World Congress and Mobile Asia Expo. GSMA leads the global conversation on mobile taxation
as part of our Digital Inclusion programme. Over the last decade, weve produced numerous studies
that describe and measure the mobile taxation barrier.
There are a number of consumer taxes applied to mobile ownership: Value Added Tax (VAT) or
General Sales Tax (GST), customs duty and excise taxes on imported goods, special taxes on handsets,
special communication taxes on mobile usage, other telecoms specific taxes, such as SIM activation
taxes or other taxes on connection, other special taxes, for example tax on mobile operators gross
revenues.
In 2011, a study in 111 countries showed that the proportion of Total Cost of Mobile Ownership
(TCMO) accounted for by tax had increased to an average of 18.11% (Deloitte/GSMA 2011, Global
Mobile Tax Review). Handset costs act as a barrier to the benefits of mobile usage and taxes
constituted 23% of this cost on average. In eleven countries, tax constituted over 40% of the handset
cost.
Indonesia currently has 317 million mobile connections, 29.3% of which are mobile broadband. With
the right regulations in place, we expect mobile broadband to account for 70.3% of a total of 436
million connections (GSMA Intelligence, Indonesia data Q2 2014). However, the governments plan to
introduce a 20% luxury tax on mobile devices will increase the cost of device acquisition and will hurt
the lower income consumers. It is also a barrier to access to mobile services.
Lowering handset taxation will increase mobile penetration and mobile broadband adoption. The
Kenyan government demonstrated this when they removed the 16% VAT on mobile phone handsets
in 2009. After the removal of the VAT, handset purchases have increased by more than 200% while
mobile connection penetration has increased from 50% to 70% of the population in Kenya since the
beginning of 2009.
Airtime taxes also hamper usage and mobile operators investment. In 2009, the Croatian
government imposed a 6% tax on mobile gross revenues related to voice and text messages. This
increased the consumer taxation as a proportion of total cost of mobile ownership to 28%. The next
year after that, Croatia suffered the first ever fall in voice and text message volumes. Falling revenues
and reduced demand led to a reduction in investment in network expansion.
Reduced access to mobile phones as a result of higher luxury tax may have negative impacts on
economic growth. A study showed that a 10% increase in mobile penetration can increase the GDP of
a country by 1.38%.
A 2014 study showed that when mobile taxes were reduced, the short-term loss in government
revenues was quickly recovered in the medium term due to growth of the tax base (GSMA/Deloitte
2014, Mobile taxes and fees A toolkit of principles and evidence).
Government should align tax policies to these key principles:
o
o
o
o
o
Taxation should be broad-based

Taxes should account for sector and product externalities, such as the positive benefits of
mobile
The tax and regulatory system should be simple, easily understandable and enforced
Dynamic incentives should be unaffected
Taxes should be equitable, and the burden of taxation should not fall disproportionately
on the poor
Product Compliance in International Markets by David Siow (Cisco)

Product compliance is an important concern for regulators worldwide to ensure that safe products
are delivered to consumers. There are best practices in simplifying and expediting product compliance
that we will discuss.
In the EU, once a company compiles with the EU regulations, it is very easy to place a product in its
countries. In the EU, all products are regulated by the EU Directives. The EU Directives are adopted by
28 EU member states + 4 EFTA countries. Once a product bearing the CE marking is placed in the EU
market, member states shall not prohibit, restrict or impede the placement of this product or service
in their market or territory. Products bearing CE mark cannot be stopped at customs and can freely
travel into the EU and within the EU. In the EU, market surveillance and market enforcement is the
responsibility of each member state. Market Surveillance Authorities do random compliance checks
AFTER products are already placed on the market. This is opposite to a typical approval regime where
product compliance is verified BEFORE entering the market.
In the US, most of the products enter the market based on the Declaration of Conformity. Non-radio
and non-computer peripheral products will go through a verification process while radio-based
products will go through certification process. In the certification process, test reports are sent for
reviews and then grants are provided by the regulator. Telecom products with a declaration of
conformance do not need to be further reviewed by the regulator. Test reports from any accredited
test labs are based on ISO 17025. As part of the importing process, the importer completes a FCC 740
Form. In the US, importers are responsible for the products. The FCC Enforcement Bureau as well as
the Authorization lab investigate reports of non-compliant products being imported, as well as
reported cases of interference.
In Singapore, there are products are approved through different registration schemes depending on
the type of product and their likelihood to cause interference. For post market surveillance in
Singapore, IDA may require the supplier to submit the test results or evidence of equipment
certification as proof of conformity with the applicable IDA Technical Specifications.
Many companies operating in Indonesia today face challenges in complying with regulatory
requirements. The examples provided from the EU, US and Singapore illustrate how improved policies
and procedures have been adopted internationally to enhance the ease of doing business while
ensuring that safety and compliance concerns are still adequately addressed. These are examples that
regulators in Indonesia can study and model after so that it can improve the overall business climate
in the country, and thus help attract more investments into Indonesia. Improved processes can also
allow consumers in the market to have faster access to state-of-the-art technology rather than be held
up by backlog of regulatory approvals
Q&A
Nies Purwati (Qualcomm): When investors come to Indonesia and find problems in realizing their
investment, is there any way for them to communicate these problems to BKPM? In order to
accelerate the problem-solving process, can BKPM establish a forum to facilitate discussion
between investors and related ministries/agencies?
Nurul Ichwan (BKPM)
In the investment realization period, investors might face some problems. As long as they submit the
information and seek the assistance of BKPM, BKPM will provide support in solving those problems.
There are two approaches in providing the support:
i)
BKPM will try to understand the real problem. This is important as a reference for other
investors who might face similar problems during the implementing stage of investment.
ii)
BKPM will communicate the problem to the related ministries to find solutions. For this,
the Deputy Chairman of Investment Controlling & Realization will invite investors and
relevant ministries.
Agung Yudhawiranata (Google Indonesia): FDI are focused in Java. Is there any program or plan
from BKPM to help spread the FDI?
Nurul Ichwan (BKPM )

Investment follows the market. As long as a market can be created in any part of Indonesia,
investment will come. The problem is that most of the market in Indonesia is located in Java island.
Even though other islands like Sumatera, Papua, or Kalimantan have natural resources, these
resources mean nothing without buyers.
This situation encourages BKPM to do more investment promotion on downstream industry to
process the natural resources spread in Sumatera, Kalimantan and Papua.
Building processing industries outside Java will also attract the market there as processing industries
will need human resources and suppliers. Another positive impact will be the interaction between the
industry and the local communities.
Connectivity is not only an inter-island issue but also a problem even in Java. An example is the
automotive industries concentrated in greater Jakarta. Therefore BKPM is now focusing also on
promoting investment in infrastructure to build better connectivity.
Phil Nervig (US Embassy): This morning we talked about developing the e-commerce industry.
Developing the e-commerce industry requires more venture capital. The problem is, in the new
Negative Investment List, e-commerce is closed for foreign investors.
Nurul Ichwan (BKPM)

The closing of certain sectors from Foreign Direct Investment in the Negative Investment List is
proposed by technical institutions with their own considerations. Personally I dont know why the
Ministry of Communication and Information proposed e-commerce to be closed. I think it is because
the e-commerce business is closely related to the SMEs and we want our SMEs to have collaboration
with domestic direct investors in the e-commerce business. At the moment the government is still
building the readiness of Indonesian e-commerce business players.
Another example is the animation sector. It is closed until Indonesia has the expertise and the talents
in animation to make sure that local players still have the opportunity to develop the sector.
Chris Zull (GSMA)
Clearly the impact of closing sector like e-commerce in the Negative Investment List is negative.
Surendren Velappu (HP): It is a fact that ICT investment in Indonesia is going down. In general,
Indonesia is not of interest in the global ICT supply chain. If Indonesia wants to attract the global
ICT supply chain to invest in the country, there must be some fundamental prerequisites. The most
important is having a stable regulatory environment.
Right now it is difficult to find a way to market Indonesia. There is no clear regulatory environment.
ICT investment is not like multi-billion dollars oil and gas investment, they are generally small but
of high value. How can BKPM influence the regulatory ministries to differentiate the ICT
investment against other investment in the natural resources processing industry?
Nurul Ichwan (BKPM)
BKPM is under the Coordinating Ministry for Economic Affairs. There are inter-ministerial meetings
to discuss business sectors to be opened or closed for foreign investment and the impacts to the
economy of Indonesia.
Telecom tower is an example. It has been closed for years but still there is no domestic investment
coming to the sector. But it is still closed until today because it is a sensitive area.
As technology is moving very fast, a country like Indonesia which is not yet advanced in technology
needs to protect the interest of the country while at the same time develop the readiness of
Indonesian players. We need the development of ICT but at the same time we dont know what we
are going to do to protect our people in the fast-moving sector.
The closing of certain business sectors should not always be seen from the economic equation but
also from the perspective of readiness.
Ilham Habibie (DeTIKNas)
In the coming six months, DeTIKNas and other stakeholders will start the implementation of the
Indonesia Broadband Plan (IBP) in 5 selected regencies as pilot projects.
Detiknas welcomes companies that want to take part in the discussion on the implementation of the
Indonesia Broadband Plan.
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APPENDIX!E!
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%#)0%/##!3)/.!,0!0%2s.o. 3/2014
THE COSTS OF DATA LOCALISATION:

FRIENDLY FIRE ON ECONOMIC RECOVERY
Matthias Bauer
Hosuk Lee-Makiyama
Erik van der Marel
Bert Verschelde
www.ecipe.org
info@ecipe.org Rue Belliard 4-6, 1040 Brussels, Belgium Phone +32 (0)2 289 1350
ECIPE OCCASIONAL PAPER
When you can measure what you are speaking about, and express it in numbers,
you know something about it; but when you cannot express it in numbers, your
knowledge is of a meagre and unsatisfactory kind.
Lord Kelvin
SUMMARY
This paper aims to quantify the losses that result from data localisation requirements and related data privacy and security laws that discriminate against foreign
suppliers of data, and downstream goods and services providers, using GTAP8.
The study looks at the effects of recently proposed or enacted legislation in seven
jurisdictions, namely Brazil, China, the European Union (EU), India, Indonesia,
South Korea and Vietnam.
Access to foreign markets and globalised supply chains are the major sources of
growth, jobs and new investments in particular for developing economies. Manufacturing and exports are also dependent on having access to a broad range of services at competitive prices, which depend on secure and efficient access to data.
Data localisation potentially affects any business that uses the internet to produce,
deliver, and receive payments for their work, or to pay their salaries and taxes.
The impact of recently proposed or enacted legislation on GDP is substantial in all

seven countries: Brazil (-0.2%), China (-1.1%), EU (-0.4%), India (-0.1%), Indonesia (-0.5%), Korea (-0.4%) and Vietnam (-1.7%). These changes significantly affect
post-crisis economic recovery and can undo the productivity increases from major
trade agreements, while economic growth is often instrumental to social stability.
If these countries would also introduce economy-wide data localisation requirements that apply across all sectors of the economy, GDP losses would be even higher: Brazil (-0.8%), the EU (-1.1%), India (-0.8%), Indonesia (-0.7%), Korea (-1.1%).
The impact on overall domestic investments is also considerable: Brazil (-4.2%),

China (-1.8%), the EU (-3.9%), India (-1.4%), Indonesia (-2.3%), Korea (-0.5%) and
Vietnam (-3.1). Exports of China and Indonesia also decrease by -1.7% as a consequence of direct loss of competitiveness.
Welfare losses (expressed as actual economic losses by the citizens) amount to

up to $63 bn for China and $193 bn for the EU. For India, the loss per worker is
equivalent to 11% of the average month salary, and almost 13 percent in China and
around 20% in Korea and Brazil.
The findings show that the negative impact of disrupting cross-border data flows
should not be ignored. The globalised economy has made unilateral trade restrictions a counterproductive strategy that puts the country at a relative loss to others,
with no possibilities to mitigate the negative impact in the long run. Forced localisation is often the product of poor or one-sided economic analysis, with the surreptitious objective of keeping foreign competitors out. Any gains stemming from
data localisation are too small to outweigh losses in terms of welfare and output in
the general economy.
No. 3/2014
INTRODUCTION
Over the past few years, there has been a widespread proliferation of regulatory restrictions of the internet, in particular for commercial use. Whereas governments earlier endeavours to increase control over the internet had the implicit aim of keeping information
outside state borders, this new breed of regulation aims at keeping data in. With the pretext
of increasing online security and privacy, some governments are requiring mandatory storage of critical data on servers physically located inside the country, i.e. data localisation. Also,
some data protection and security laws create barriers to cross-border data transfers to such
an extent that they are effectively data localisation requirements.
The belief that forcing personal information, emails and other forms of data from leaving
the country would prevent foreign surveillance or protect citizens online privacy is flawed
in several ways. First, many of the recent legislative proposals pre-date the surveillance revelations, and are not designed for addressing these issues. Second, information security is
not a function of where data is physically stored or processed. Threats are often domestic,
while storing information in one physical location could increase vulnerability. Thirdly, data
localisation is not only ineffective against foreign surveillance, it enables governments to
surveil on their own citizens. Moreover, users and business do not access data across borders
with the purpose of evading domestic laws, while legal obligations do not always depend on
where a server is physically placed.
As a result, data localisation, or discriminatory privacy and security laws to similar effect,
has spawned severe protest from advocates for open internet and the global trading system.
Forced localisation is often the product of poor or one-sided economic analysis, with the
surreptitious objective of keeping foreign competitors out, or creating a handful of new jobs
in e-commerce, data centres or consultancies. However, any job gains as a result of data
localisation are minuscule compared to losses in terms of jobs and output in other parts of
the economy.
Access to foreign markets through trade liberalisation and globalised supply chains are major
sources of growth, jobs and new investments in particular for developing economies. Given
the nature of todays globally interconnected economy, poorly designed national policies
that increase data processing costs have a severe economic impact as many sectors of the
economy rely on digitally supplied services and goods. Manufacturing and exports sectors
are also dependent on having access to a broad range of services at competitive prices such
as logistics, retail distribution, finance or professional services which in turn are heavily dependent on secure, cost-efficient and realtime access to data across borders. When data must
be confined within a country, it does not merely affect social networks and email services,
but potentially any business that uses the internet to produce, deliver, and receive payments
for their work, or to pay their salaries and taxes.
This paper aims to quantify the economic losses that result from data localisation requirements and related data privacy and security laws that discriminate against foreign suppliers
of data. It does so by using a computable general equilibrium model (CGE) called GTAP8
(see Annex II), which is a well-acknowledged methodology that is frequently used for trade
and economic impact analyses by academia and policymakers worldwide. The study looks
at the effects of the recently proposed or enacted legislation in seven jurisdictions, namely
Brazil, China, the European Union (EU), India, Indonesia, South Korea and Vietnam. Some
of these countries have conducted quantitative impact studies (notably the EU) measuring
institutional or firm-level costs.1 Yet, no public study by a market regulator has investigated
No. 3/2014
the effects on exports, gross domestic product (GDP) and consumer welfare as a result from
proposed data localisation requirements or privacy laws.
OVERVIEW OF RELEVANT INTERNET AND PRIVACY REGULATIONS

The analysis looks at a number of recently introduced or proposed measures with respect
to data localisation by conducting a survey in each of the aforementioned countries jurisdictions. The measures are assumed to alter the costs of engaging in commercial activities
in the selected countries (a brief description of all measures in each country can be found in
Annex I). The way in which these primarily privacy and security related measures operate is
of principal importance for accurate data modelling. For instance, data localisation requirements are effectively disruptive bans of data processing and hence the foreign provision
of that service into the domestic territory. The ban can be introduced economy-wide (e.g.
China, Vietnam), or selectively to a particular sector (e.g. only financial services in Korea).
Besides data localisation, a number of administrative regulatory barriers could be introduced
through additional legal obligations that increase compliance costs, such as stricter consent requirements, a right to review personal information held by firms, the requirement to
notify a market regulator and/or data subjects in case of potential security breaches. Some
measures are institutional such as the requirement to appoint a data privacy officer (DPO)
within the organisation; while others increase business risks by introducing sanctions for
non-compliance (in many cases with ambiguous laws), or a governments right to access a
business proprietors or its clients data.
Overall, compliance with these measures increases the operational expenditure of firms
which raises domestic prices and non-tariff barriers (NTB) on imports. Therefore, in order
to measure the actual or potential costs of introducing these measures, for this paper we have
estimated the costs of all data localisation measures using two different scenarios:
Scenario 1, which is based on the actual proposed regulations as defined in Table 1,

including data localisation in each country as per today.
Scenario 2, which is based on the actual proposed regulations, but with the addition of a data localisation requirement applied to all sectors in each country.
TABLE 1: OVERVIEW OF REQUIREMENTS IN LEGISLATIVE PACKAGES

Brazil
China
EU28
India
Indonesia
Korea
Vietnam
Data localisation requirement
No
Yes
No
Partial
Yes
Partial
Yes
Consent required for data

collection
Yes
Yes
Yes
Yes
Yes
Yes
No
Consent required for transfer

to third parties
Yes
Yes
No
Yes
No
Yes
No
Right to review
No
No
Yes
Yes
Yes
Yes
No
Yes
Right to be forgotten
Yes
Yes
Yes
No
No
Yes
Breach notification
No
Yes
Yes
No
Yes
Yes
No
Impact assessment
No
Yes
Yes
No
No
No
No
Data privacy officers
No
No
Yes
No
No
Yes
No
Sanctions for non-compliance
Yes
Yes
Yes
Yes
Yes
Yes
No
Government access required
Yes
No
No
Yes
No
No
Yes
Data retention requirement
Yes
No
No
Yes
No
No
Yes
No. 3/2014
CONCEPTUAL MODELLING
The scenarios are calculated using several economic shocks caused by data restrictions.
If new regulations restrict businesses and individuals from using data in a reasonable manner prices of any good or service that uses data in its production would also increase. For
example, the input costs for a logistics company would increase as they can no longer process
data on its customers or shipments using their existing IT suppliers or infrastructure, or are
faced with some compliance costs for doing so. This new cost is passed on to its customers
who may be manufacturers, exporters and consumers. Thus, increased regulation leads
firstly to domestic productivity losses for various sectors of the economy. Secondly, it creates
an additional trade barrier against data processing and internet services, or any service (to a
lesser extent also goods) that depends on the use of data for delivery. Thirdly, as the competitiveness of the economy changes, investments (both domestic and foreign) will be affected.
Finally, the effectiveness of R&D is affected to the extent that product development depend
on customer and market data to compete in the market place.
The first shock, which measures the effect on productivity, is created using a so-called augmented product market regulatory (PMR) index for all regulatory barriers on data, including
data localisation, to calculate domestic price increases or total factor productivity (TFP) losses.2 It sets out what domestic companies will have to pay additionally for sourcing domestic
data services by first estimating the general effect of administrative burdens in data processing services on prices and TFP in each sector of the economy. Data processing services is an
important input for production and by using existing indexes from the OECD measuring
administrative barriers in services over time, we evaluate the extent to which these administrative barriers in data services affect other parts of the economy through the use of data
services. For example, the telecommunications sector is very data intensive (with 31% of its
inputs being data-related) and should be more heavily affected by regulation; similarly, data
processing is 5 to 7% of the total inputs used by business/ICT and financial services.3
The index is then raised based on the regulatory barriers as given in Table 1 for each country. Not all of these measures are equally restrictive, and their relative importance is therefore weighted according to their relative cost impact.4 By benchmarking the resulting index
against the estimate prior to the legislation and data processing intensities for all sectors, we
compute the price and TFP changes for all sectors in each country as a result of data localisation and administrative barriers.
The second methodology computes cost differences between countries as a result of data
localisation requirements in each of the countries. Two types of data are primarily used
namely the Data Centre Risk Index,5 and an empiric observation of cost differences.6 The
first source ranks countries according to a number of risk factors that affect the costs of operating a data centre a ranking that closely follows the general cost structure across countries
of setting up a centre as a consequence of data localisation measures. The observations of
actual costs are broadly in line and thereby confirm the Risk Index.
These costs are up-front trade costs each firm will need to incur when investing in and exporting to one of our selected countries (see Annex II). These trade costs are allocated across
all sectors in each economy based on the intensity with which each sector uses data services.
The final numbers are interpreted as the additional costs a firm will need to pay for using data
services when entering one of the countries in which data localisation laws are implemented.
The third shock occurs on investment, which forms a major driver for economic growth for
developing countries in particular. However, as the regulatory environment imposes more
No. 3/2014
market limitations, investments made by both domestic and foreign entities will decrease.
In GTAP8 this is introduced as a change in rate of return on investments (see Annex II).
Furthermore, a final shock occurs as an additional effect on the return on investment, which
is derived from research and development. A survey by Xu, Zhu, Gibbs (2004) provides the
share of firms in developed and developing countries respectively that uses online sales,
advertising or electronic data interchanges (EDI).7 These numbers are also consistent with
industry reports on the share of firms that uses CRM (customer relationship management)
applications for data mining of their customers.8 The relation between R&D expenditure
and return is given by several studies (notably Hall, Foray, Mairesse, 2009; Ortega, Argils,
2009, Rogers, 2009), based on empirical evidence.
THE OUTCOME OF THE SIMULATIONS

The outcome of the simulations shows that the impact on economic activity in all economies is considerable. Figure 1 summarizes the results of the two scenarios outlined above.
The realistic Scenario 1 naturally gives lower overall outcomes than Scenario 2 except for
China, Indonesia and Vietnam where economy-wide data localisation has already been introduced or is being considered (and is hence included already in Scenario 1).
India suffers the lowest GDP effects as a result of our simulations in the realistic scenario
1. However, this would increase drastically if India were to implement a data localisation
requirement. Brazil also has relatively low GDP losses (0.2%) based on Scenario 1 but this effect quadruples if data localisation is applied. Both the EU and Korea also report substantial
differences between the two scenarios as a result of economy-wide data localisation.
FIGURE 1: GTAP SIMULATIONS ON GROSS DOMESTIC PRODUCT (GDP) FOR SELECTED COUNTRIES.
CHANGES IN %
No. 3/2014
Overall, for some countries these losses are rather sizable. In many cases, the effects on GDP
are sufficient to eradicate the economic gains produced by most trade agreements they have
negotiated or are currently negotiating, e.g. Transatlantic Trade and Investment Partnership
(TTIP) or Trans-Pacific Partnership (TPP) for instance, in the case of Brazil, Vietnam and
Korea current growth projections would be dented by at least one-third (figure 2).
The GDP loss in Scenario 1 is sufficient to put the EU back into decline (figure 3) also, the
European Commission projects a GDP growth of one percent in seven years (approx. 0.14%
year-on-year) from its European Cloud strategy, whereas data localisation leads to at least
1% decline in just one year for the EU.
FIGURE 2: PROJECTED GDP GROWTH (2014); ADJUSTED FOR SCENARIO 2

CHANGES IN %
No. 3/2014
FIGURE 3: PROJECTED GDP GROWTH FOR THE EURO ZONE

ACCUMULATED CHANGES IN % SINCE 2013
As explained above, the GTAP model also allows for an outcome analysis on investment for
each country. Figure 2 sets out the results which show that considerable changes in domestic
and foreign investments can be expected as a result of the deteriorated regulatory environment. The figure shows that Brazil and the EU would suffer most from lower investments under both scenarios. One potential reason is that both economies are very investment intensive
in those services (and goods) sectors which rely on data services the most. Other countries
such as China, India and Indonesia would experience an equal loss in investment under both
scenarios albeit still substantial. Korea reports a large difference between both scenarios.
FIGURE 4: GTAP SIMULATIONS ON INVESTMENTS FOR SELECTED COUNTRIES.

CHANGES IN %
No. 3/2014
Figure 5 finally sets out the changes for trade, both in terms of total exports, goods exports
and services exports. First we note that the exports effects are lower than the investment
changes reported in Figure 2. A second interesting issue with regards to the trade effects is
that for some countries such as Brazil, China and Indonesia, but also Korea and Vietnam the
negative effects on goods exports are greater than for services. This is most likely due to the
fact that none of the selected countries are services-driven economies, with the exception
of the EU where the services exports losses are greater.
FIGURE 5: GTAP SIMULATIONS ON EXPORTS FOR SELECTED COUNTRIES.
CHANGES IN %
Overall, the welfare losses that are incurred are mostly derived from higher prices and displaced domestic demand that cannot be met by supply. Table 2 finally sets out the total and
per capita nominal costs for each scenario based on our GTAP calculations. One can see
that the welfare losses in China (61.6-63.8 bn US$) and the EU (80-193 bn US$) are greatest,
followed by Korea (5.3-15.9 bn US$), Brazil (4.7-15 bn US$) and India (3.1-14.5 bn US$)) Both
Vietnam and Indonesia are least affected in nominal terms, although this does not mean that
their economies would not suffer significantly, in particular noting the changes in GDP and
variance in median incomes of some of the countries.
TABLE 2: WELFARE EFFECTS FROM DATA LOCALISATION AND PRIVACY BARRIERS
IN CURRENT US$
Brazil
China
EU28
India
Indonesia
Korea
Vietnam
Scenario 1
-4.7 bn.
-61.6 bn.
-80 bn.
-3.1 bn.
-2.7 bn.
-5.3 bn.
-1.5 bn.
Scenario 2
-15 bn.
-63.8 bn.
-193 bn.
-14.5 bn.
-3.7 bn.
-15.9 bn.
-1.5 bn.
Scenario 1
(per worker)
-48.9
-80.7
-333.9
-6.7
-24.9
-218.6
-31.5
Scenario 2
(per worker)
-156.1
-83.6
-805.6
-31.5
-34.1
-655.7
-31.5
Table 2 also gives numbers on the welfare costs of data regulation per worker. This negative
effect also varies substantially. Nominal figures for the EU and Korea seem large whereas
No. 3/2014
those for Vietnam, India and Indonesia seem low. Yet, it should be taken into account that
the average workers salary is much lower in the latter countries. To give an example, using
comparable average workers salaries across countries the negative welfare effect would still
cost the Indian worker almost 11 percent of one average month salary. Similarly, for China,
this impact would come down to almost 13 percent, and even much higher for Korea and
Brazil around 20 percent for both economies.
CONCLUSION
Industry and internet advocates have warned against an Internet which is fragmented
along national borderlines. Some of them are going as far as calling balkanisation the greatest threat to the Internet today, even greater than censorship.9 One comprehensive study by
Chander and L (2014) from the California International Law Centre established that data
localisation threatens the major new advances in information technology not only cloud
computing, but also the promise of big data and the Internet of things.10 It is not unlikely
that future trade agreements will include disciplines against data localisation requirements,
as there are often less trade-restrictive measures available to address privacy and security.
However, the more immediate effect of data localisation measures the impact on economic
recovery and growth is even more dangerous. As this study has shown, this impact is a
direct consequence of the complex relations between cross-border data flows, supply chain
fragmentation and domestic prices. These are complexities that are generally not understood
by policymakers, who are often in the field of security and privacy law, rather than international trade. The findings regarding the effects on GDP, investments and welfare from data
localisation requirements and discriminatory privacy and security laws are too considerable
to be ignored in policy design. It is also reasonable to assume that SMEs and new firms are
the first to be displaced from the market, as they lack resources to adapt to the regulatory
changes.
In the current security policy context, many regulators and privacy advocates stress the
importance of discretion to tackle problems at a national level (e.g. NetMundial 2014 draft
conclusions)11. The economic evidence however proves that unilateral trade restrictions are
counterproductive in the context of todays interdependent globalized economy. The selfincurred losses make data localisation a policy that unilaterally puts the country at a relative
loss to others while the possibilities for offsetting the negative impact through trade agreements or economic stimulus are relatively limited over the long term.
10
No. 3/2014
ANNEX I
Brief overview of proposed and enforced acts reviewed
Brazil
The Brazilian internet law Marco da Civil started out its life as a crowdsourced legislative
proposal in 2009. While it emphasised the fundamental principles of internet freedom and
net neutrality, following revelations that Brazilian entities had been subject to US surveillance, new privacy related amendments were made to the bill, including strict consent requirements for data collection, internet users right to be forgotten and a clear data localisation provision the controversial article 12, which was later withdrawn.
China
The existence of a plethora of overlapping data privacy laws has traditionally made compliance a very difficult issue in China. Driven by an increasing number of reports on identity
theft and illegal trade in personal data,12 rather than surveillance concerns, China has however taken steps towards privacy reforms the Resolution relating to Strengthening the Protection of Information on the Internet of December 2013 includes general rules for internet
service providers (ISPs) and other businesses prohibiting the collection of personal data
without consent and the illegal transfer or sale of personal information to third parties.13 In
the same year, the Standardisation Administration and the General Administration of Quality Supervision, Inspection, and Quarantine published new national standards that prohibit
overseas transfers of data to an entity absent express user consent, government permission,
or other explicit legal or regulatory permission. Despite the voluntary character of these
guidelines, they serve as regulatory baseline for law enforcement and are de facto data localisation laws for all business sectors.14 The Peoples Bank of China (PBOC) has also issued
a Notice to Urge Banking Financial Institutions to Protect Personal Financial Information,15
which explicitly prohibits off-shore storing, processing or analysis of any personal financial
information of Chinese citizens; meanwhile the Ministry of Industry and Information Technology (MIIT) has banned collection of personal data without consent or without specific
and clear purpose.16 The Telecommunications and Internet Personal User Data Protection
Regulation also requires regular risk impact assessments to be conducted by data processors.
The European Union

In January 2012, the European Commission proposed a reform of the EUs data protection
regime, which is currently based on the 1995 Data Protection Directive. The aim of the new
proposal, dubbed the General Data Protection Regulation (GDPR), is to establish a single
European-wide data protection law. Aside from simplifying administrative procedures and
centralizing supervisory authority, GDPR also introduces strict consent requirements, a
right to review, a right to be forgotten, and the obligation for businesses to appoint a data
protection officer (DPO) and perform an annual data protection impact assessment (DPIA).
If implemented, the GDPR reform could lead to a stoppage of cross-border data flows from
the EU to important data processing countries such as the US and India, which are deemed
to have adequate data privacy safeguards in place under the EUs current regime.
Aside from GDPR, the Commission has also adopted a strategy for Unleashing the Potential
of Cloud Computing in Europe. The strategy aims to unify rules and standards related to
cloud computing within Europe. If these standards will be designed in a way that decreases
11
No. 3/2014
the interoperability with other countries regulatory regimes, this could lead to a de facto
data localization.
India
In 2011, the Indian Ministry of Communications and Technology implemented certain provisions of the 2000 Information Technology Act by publishing privacy rules. These Reasonable Security Practices and Procedures and Sensitive Personal Data or Information Rules
introduced a strict consent requirement that only allows for sensitive personal data to be
transferred abroad when necessary or when the individuals consent has been obtained.17,18
These rules also introduced the right to access and review personal information that a company holds. The mercantilist intent of the law is clear, as the government of India issued a
clarification to emphasise that the rules do not apply to its expanding outsourcing business.19
The laws have also been amended with a data retention requirement (with duration at the
discretion of the government) for intermediaries that so far has not been implemented.
National media in India have reported that the National Security Council Secretariat (NSCS)
is considering proposals that incorporate strong elements of data localisation, mandating all
email providers to set up local servers, or that all data generated from within India should be
hosted in these India-based servers and this would make them subject to Indian laws. The
strategy also includes creating an Indian email service and ensuring Internet traffic data is
routed within India as much as possible, including precedents of forced data localisation for
selective cases and services, e.g. BlackBerry mail services in 2012.20
Indonesia
ata protection is covered by Law No. 11 of 2008 regarding Electronic Information and Transaction (the EIT Law) and Government Regulation No. 82 of 2012 regarding the Provision of
Electronic System and Transaction (Reg. 82), which went into force on 15 October 2012. In
order to collect and process data, the data controller needs a legitimate reason for collection
and the individuals consent.21 Regulation 82 further requires a broad and undefined group
of companies, electronic systems operators for public service to set up a data centre and
disaster recovery centre in Indonesian territory for the purpose of law enforcement and
data protection. The scope of this requirement is unclear however, as electronic systems operators for public service are not clearly defined. Draft Regulation Concerning Registration
Procedure of Electronic System Provider and January 2014 Draft Regulation with Technical
Guidelines for Data Centres contain same ambiguity, although a ministry spokesperson was
quoted saying: [the draft] covers any institution that provides information technologybased services.22
Korea
In the Republic of Korea, the Personal Information Protection Act (PIPA) has been in force
since 30 September 2011 and covers all sectors. In addition, the sector-specific Act on Promotion of Information and Communication Network Utilisation and Information Protection
(IT Network Act) regulates the collection and use of personal data by IT service providers.23
Under these acts, every data handler (including businesses, individuals and government
agencies) must appoint a data protection officer (DPO), and consent must be obtained both
12
No. 3/2014
for the initial collection and processing of personal data and prior to any transfer abroad or to
third parties. PIPA gives individuals the right to review and delete personal data that pertain
to them and obliges data handlers to notify the data subjects without delay in case of a data
breach. If the number of individuals affected exceeds 10,000, the data handler must also notify the relevant authorities. In addition, Korea prohibits the outsourcing of data-processing
activities to third parties in the financial services industry. Banks can therefore only process
financial information related to Korean customers in-house, either in Korea or abroad.
Vietnam
In 2013, the Vietnamese government issued Decree 72, on Management, Provision, and Use
of Internet Services and Information Content Online, which came into effect on September
1st.24 The Decrees main aim seems to have been to tighten the governments grip on the
Internet and limit free expression,25 with a broad range of prohibitions under article 5 including opposing the state. The Decree requires ISPs to obtain a license and to register with
the Ministry of Information and Communications before providing online services, and all
organisations establishing general websites, social networks and companies providing services across mobile networks are required to establish at least one server inside the country
containing the entire history of information posting activities on general information websites () and sharing on social networks.
13
No. 3/2014
ANNEX II
Description of the GTAP8 model
1. The Model
The model applied in this study is GTAP 8, a computable general equilibrium (CGE) model.26 The most recent model setting accounts for inter-sectoral linkages between 129 regions
while capturing inter-regional trade flows of 57 commodities. The framework thus allows
for a general equilibrium analysis of the economic effects (e.g. GDP effects and changes in
trade flows) resulting from the regulation of cross-border data flows. In this model, regional
production is characterized by constant returns to scale and perfect competition. Private demand is represented by non-homothetic consumer demands. The structure of foreign trade
is based on the so-called Armington assumption, which implies imperfect substitutability
between domestic and foreign goods.
The most recent GTAP 8 dataset includes national input-output data as well as trade, tariff
and demand structures. The models base data are primarily benchmarked to 2007. Trade
data are based on 2004 and 2007 values while the reference year of protection data is 2007
(see Narayanan et al 2012).27 Like any applied economic model, this model is based on a
number of assumptions. In order to account for recent changes in regional macroeconomic
variables, the GTAP 8 dataset on the global economy is extrapolated to 2014.
The exogenous variables used for the extrapolation are macroeconomic variables, i.e. the
size of GDP, total population, labour force, total factor productivity and capital endowment
as provided by the well recognised database of the French research center in international
economics (CEPII), which is documented by Four et al (2012). We apply the estimates of
these macroeconomic data projections in order to calculate the best estimate of the global
economy in 2014. Preferences and production structures as described by the models structural parameters have been left unmodified.
The model we use in this study is comparative static. This model does not account for endogenous productivity growth and may thus under-predict welfare effects, economic growth and
increases in trade flows that result from the imposition of NTBs due to regulations of crossborder data flows.28 The interdependence between, on the one hand, productivity growth
and, on the other hand, exports, imports and investment is neglected in static CGE models.
2. Treatment of Investment
GTAP is a pure real goods model that does not account for financial instruments. Thus, the
standard GTAP model does not take into consideration supply-side impacts of capital market
conditions. In the model, investors are represented by a global bank allocating regional savings and investments around the world. Investment itself is represented by a stock of capital
goods (CGDS), which is treated as a commodity that is purchased by the global bank and allocated to regions following a return-equalising rule. The capital goods commodity does not
employ any primary factors of production. It rather absorbs a mix of intermediate goods such
as construction, machinery equipment, vehicles, and services etc. In addition, capital goods
cannot be traded across regions. Instead regional capital goods formation is determined be
regional savings, which are absorbed by the global bank and reallocated to regions thereafter.29 For a detailed description of the treatment of capital goods in GTAP see Malcom (1998).
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No. 3/2014
In order to estimate the economic impact of decreasing returns on capital due to data localisation barriers to trade, we follow an indirect expected rate of return approach. It is assumed
that the global bank allocates investment across regions in such a way that risk-adjusted rates
of returns are equalised across regions. Thus, in GTAP a change of the expected rate of return
in a given region results in corresponding changes in the amount of regional investment. The
underlying assumption is that equilibrium rates of returns on investment are equal across
regions and equal to a global rate of return. In addition, it is assumed that expected returns
in a specific region will fall as the amount of investment rises. Thus, a difference between the
global rate of return and a regions rate of return triggers a reallocation of investment across
regions until regional rates of investment are equalised again. The difference between riskadjusted regional rates of return can be read as a region-specific risk premium decreasing
the regions attractiveness to investors. In line with this assumption, an increase in regional
investment risk reduces capital goods formation and decreases demand for factor inputs to
investment in the region concerned. At the same time, investment would increase in regions
not affected by decreasing investor appetite.
The results of our experiment only have indicative character, meaning that we are not able
to forecast the precise investment effect due to data localisation barriers to trade mainly
for two reasons: 1) The shortcomings in the treatment of investment in GTAP and 2) the
transformation of expected returns on investment into investors risk appetite, which is an
empirical problem in general. Yet, the methodology we apply allows us to forecast and trace
the direction of investment flows.
15
No. 3/2014
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ENDNOTES
1. European Commission, Staff Working Paper, SEC (2012) 72 final
2. OECD (2013), Product Market Regulation Database, www.oecd.org/economy/pmr
3. Data on TFP and prices for each sector are taken from EUKLEMS, whereas intensities of data services for
each sector are based on US input/output use tables from the US Bureau of Economic Analysis (BEA).
4. Christensen, L., A. Colciago, F. Etro and G. Rafert , The Impact of the Data Protection Regulation in the EU,
Intertic Policy Paper, Intertic, 2013; UK Ministry of Justice, Impact Assessment for the Proposal for an EU Data
Protection Regulation, UK Government, 2012
5. Cushman & Wakefield, Data Centre Risk Index 2013, accessed at: http://www.cushmanwakefield.pt/en-gb/
research-and-insight/2013/data-centre-risk-index-2013
6. Frost & Sullivan, Insights into Big Data and Analytics in Brazil, 2014
7. Xu, Zhu, Gibbs, Global technology, local adoption: A cross-country investigation of Internet adoption by
companies in the United States and China, Electronic Markets, 2004
8. Computer Economics, 2011
9. L. Clark, Tim Berners-Lee: we need to re-decentralise the web, Wired, 06.02.2014, accessed at http://
www.wired.co.uk/news/archive/2014-02/06/tim-berners-lee-reclaim-the-web, 20.03.2014.
10. A. Chander, U. P. L, Breaking the Web: Data Localization vs. the Global Internet, Working Paper
2014-1, California International Law Center, 12.03.2014, accessed at http://ssrn.com/abstract=2407858,
20.03.2014.
11. Netmundial draft conclusions, section I, art 4
12. Hunton & Williams LLP, Recent Data Breach Events in China, Privacy and Information Security Law Blog,
31.12.2013, accessed at https://www.huntonprivacyblog.com/2013/12/articles/recent-data-breach-eventschina/, 20.01.2014.
13. China Copyright and Media, National Peoples Congress Standing Committee Decision concerning
Strengthening Network Information Protection, 28.12.2012, accessed at http://chinacopyrightandmedia.wordpress.com/2012/12/28/national-peoples-congress-standing-committee-decision-concerning-strengtheningnetwork-information-protection/, 20.01.2014.
14. Covington & Burling LLP, China Releases New National Standard For Personal Information Collected Over
Information Systems, E-alert Global Privacy & Data Security, 15.02.2013, accessed at http://www.cov.com/
files/Publication/.../China_Releases _New_National_Standard_for_Personal_Information_Collected_Over_Information_Systems.pdf, 12.04.2014.
15. G. Cheah, Protection of personal financial information in China, Norton Rose Fulbright, October 2011,
accessed at http://www.nortonrosefulbright.com/knowledge/publications/56148/protection-of-personal-financial-information-in-china, 12.04.2014.
16. China Copyright and Media, Telecommunications and Internet Personal User Data Protection Regulations,
16.07.2013, accessed at: http://chinacopyrightandmedia.wordpress.com/2013/07/16/telecommunicationsand-internet-user-individual-information-protection-regulations/, 20.01.2014.
18
No. 3/2014
17. A. Chander, U. P. L, Breaking the Web: Data Localization vs. the Global Internet, Working Paper
2014-1, California International Law Center, 12.03.2014, accessed at http://ssrn.com/abstract=2407858,
20.03.2014.
18. Sensitive personal data includes physical, physiological and mental health conditions, medical records and
history, and sexual orientation. The definition also includes biometric data, passwords and financial information
such as bank account details, credit and debit card details.
19. Hunton & Williams LLP, Outsourcers Exempt from Indias Privacy Regulations, Privacy and Information Security Law Blog, 24.08.2011, accessed at https://www.huntonprivacyblog.com/2011/08/articles/outsourcersexempt-from-indias-privacy-regulations/, 18.03.2014.
20. PTI, RIM finally sets up Blackberry server in Mumbai, 20.02.2012, accessed at http://timesofindia.indiatimes.com/tech/tech-news/RIM-finally-sets-up-BlackBerry-server-in-Mumbai/articleshow/11963492.cms,
20.03.2014.
21. DLA Piper, Data Protection Laws of the World, accessed at http://files.dlapiper.com/files/Uploads/Documents/Data_Protection_Laws_of_the_World_2013.pdf, 15.04.2014.
22. Asia Sentinel, Indonesia May Force Web Giants to Build Local Data Centers, 27.01.2014, accessed at
http://www.asiasentinel.com/econ-business/indonesia-web-giants-local-data-centers/, 12.04.2014.
23. DLA Piper, Data Protection Laws of the World, accessed at http://files.dlapiper.com/files/Uploads/Documents/Data_Protection_Laws_of_the_World_2013.pdf, 15.04.2014.
24. Library of Congress, Global Legal Monitor: Vietnam: Controversial Internet Decree in Effect, 06.09.2013,
accessed at http://www.loc.gov/lawweb/servlet/lloc_news?disp3_l205403690_text, 13.12.2013.
25. M. Palmedo, Vietnams Decree 72 on Internet Services Aims to Fight Piracy, Raises Human Rights Concerns, infojustice.org, 02.09.2013, accessed at http://infojustice.org/archives/30620, 27.03.2014.
26. Hertel, Tsiga, Structure of GTAP. In Global Trade Analysis : Modeling and Applications. Ed. Thomas W.
Hertel, Purdue University. Cambridge University Press. 1997
27. For further information on original data and model components see Hertel and Tsigas (1997).
28. The static GTAP 8 model does not account for the effects of trade liberalization on domestic industries
productivity growth. Trade liberalization, however, may cause productivity to rise. See, e.g., Thanguvalu and
Gulasekaran 2004 who study export and import led productivity growth in developing countries. The authors
find empirical evidence that increasing imports have a positive effect on long-term output growth.
29. See Malcolm (1998) and Rakotoarisoa (2011).
19
No. 3/2014
Meeting'the'cyber'security
challenge'in'Indonesia
An#analysis#of#threats#and#responses
A#report#from#DAKA#advisory
Commissioned#by
DAKA$advisory
Contents
Foreword'
About'the'project'
Executive'summary'
4
5
6
Part'1.'Introduction'
The#rise#in#cyber#dependence#
The#view#from#Indonesia#
8
8
10
Part'2.'Dependency'and'its'consequences'
Global#cyber#threats#
Cyber#threats#to#Indonesia#
The#cost#of#cyber#crime#in#the#world#and#in#Indonesia#
13
15
17
20
Part'3.'The'state'of'cyber'security'
Global#initiatives#
Regional#and#national#measures#
23
23
24
Part'4.'The'Indonesian'response'
Legislative#initiatives#
Key#stakeholders#
26
26
26
Part'5.'The'future'of'cyber'security'in'Indonesia'
Opportunities#and#threats#
Recent#cyber#security#initiatives#
Strengths#and#weaknesses#
Recommendations#
31
31
32
32
33
Cover&photo:&&iStockphoto.com/loops7
Meeting$the$cyber$security$challenge$in$Indonesia
DAKA$advisory
Foreword
I#have#been#fortunate#to#have#had#two#tours#of#duty#in#Jakarta#and#I#often#
When#I#left#Indonesia#in#1997,#contact#with#friends#and#family,#was#done#by#
Just#a#few#years#on,#its#impossible#to#imagine#our#daily#life#without#the#inS
ternet#and#the#opportunities#it#offers#for#immediate#connection#with#anyone,#
S
His&Excellency
Mark&Canning,
British&Ambassador
to&Indonesia.
over#55#million#internet#users#(many#of#whom#are#part#of#the#Facebook#and#
Twitter# community)# and# nearly# 50%# of# Jakartas# population# owns# a# smart#
internet#has#brought#us#S##reading#the#news#as#it#happens,#keeping#in#touch#
growth,#it#also#offers#the#potential#for#threats#and#fraud#that#could#not#have#
the#nature#of#cyber#security#means#we#cant#tackle#it#aloneW#and#the#response#
should#not#just#consist#of#state#involvement,##but#a#variety#of#interested#partS
ners,#from#industry,#civil#society#as#well#as#internet#experts#coming#together#
and# determines# how# we# will# tackle# these# threats# yet# ensure# a# balance# of#
cyber#security#agenda#is#the#belief#that#cyberspace#should#remain#an#open#
S
S
ers#and#representatives#of#the#internet#technical#community#and#civil#society#
This#was#followed#by#the#Budapest#Cyber#Conference#in#2012,#and#we#are#
together#on#cyber#security,#for#the#security#and#prosperity#of#the#citizens#of#
4
Meeting#the#cyber#security#challenge#in#Indonesia
DAKA$advisory
About#the#project
Meeting' the' cyber' security' challenge' in' Indonesia:' An' analysis' of'
threats' and' responses# is# a# report# from# DAKA# advisory# written# by# Kim#
S
S
The#aim#of#the#report#is#to#raise#awareness#of#cyber#security#and#the#potential#
S
the#report#does#not#use#a#consulting#framework#per#se,#a#SWOT#(strengths,#
weaknesses,# opportunities,# threats)# approach# was# used# in# deriving# the#
To#uncover#cyber#security#threats#and#responses#in#Indonesia,#and#those#that#
affect#it#from#a#global#perspective,#DAKA#advisory#conducted#extensive#desk#
would#like#to#thank#the#following#people#and#organisations#for#their#contribuS
tions#(listed#alphabetically#by#surname):
#
# Mohammad# Guntur,# Senior# Vice# President,# IT# Strategy,#Architecture# &#
Planning#Group,#Bank#Mandiri,#Indonesia
# Bambang#Heru,#Director,#Directorate#of#Information#Security,#Indonesia
# Benjamin#Keller,#Vice#President,#Service#Operations,#XL,#Indonesia
#
Indonesia
#
for#the#Digital#Agenda
# Rudi# Lumanto,#Chairman,# Indonesia# Security# Incident# Response#Team#
on#Internet#Infrastructure,#Indonesia
#
#
Security,#Standard#Chartered#Bank,#Singapore
#
Directorate#of#Information#Security,#Indonesia
# Marco#Obiso,#Cybersecurity#Coordinator,#International#Telecommunication#
# Jaziar# Radianti,# PostSDoctoral# Researcher,# Centre# for# Integrated#
#
Team,#Indonesia#
#
of#Indonesia,#Indonesia
# Daniel# TS# Simanjuntak,# Deputy# Director# for# WMD# and# Conventional#
Weapons,#Ministry#of#Foreign#Affairs,#Indonesia#
# Winston#Tommy#Watuliu,#Police#Colonel#and#Head#of#IT#&#Cyber#Crime#
Section,#Indonesian#Police,#Indonesia
DAKA$advisory
Governments,#businesses#and#civil#society#around#the#world#are#increasingly#
seizing# the# opportunities# associated# with# information# and# communications#
technologies#(ICTs)#to#gain#a#competitive#position#or#improve#on#their#socioS
ICTs# are# an# integral# part# of# a# modern# society# and# several# international#
such#as#Sweden,#illustrate#the#potential#of#going#digital#by#embracing#ICTs#
As# global# and# domestic# economies,# as# well# as# individual# businesses# and#
civil# society# at# large,# increasingly# look# to# ICTs# to# improve# their# wellSbeing,#
it#also#means#that#cyber#threats#can#affect#all#aspects#of#society,#including#
development# marches# on,# and# those# that# cannot# adapt# their# strategies# to#
encompass#cyber#security#are#increasingly#vulnerable#to#a#growing#number#
from#the#educational#system#and#user#awareness#to#government#regulation#
For# example,# its# recognition# of# using# ICTs# to# improve# future# growth# prosS
this# stimulated# a# rapid# uptake# of# mobile# devices# and# social# media# usage#
among#the#population,#from#which#the#country#now#has#a#broader#base#to#furS
at#the#national#level,#including#a#further#supply#of#services#and#the#demand#
To#uncover#cyber#security#threats#and#responses#in#Indonesia,#and#those#that#
affect#it#from#a#global#perspective,#this#report#is#based#on#a#combination#of#
extensive#desk#research#and#interviews#with#a#mix#of#international#and#local#
S
To#better#understand#the#current#cyber#security#situation#in#Indonesia,#parts#
3#through#5#provide#an#overview#of#current#initiatives#and#key#stakeholders#in#
the#country#before#evaluating#its#current#weaknesses#and#proposing#steps#in#
order#to#meet#the#cyber#security#challenge#and#seize#the#full#socioSeconomic#
Opportunities:#There#is#a#strong#link#between#the#adoption#of#ICTs#and#soS
DAKA$advisory
Threats:#Higher#cyber#dependency#naturally#leads#to#an#increase#in#risk#and#
there# are# a# wide# variety# of# threats# to# governments,# businesses# and# civil#
S
larly#vulnerable#to#certain#types#of#cyber#threats,#primarily#nonSpolitical#cyber#
S
Responses:# By# classifying# cyber# threats# as# either# politically# motivated# or#
nonSpolitical#in#nature,#it#appears#that#almost#all#crossSnational#agreements#
S
tally,# the# current# response# environment# within# Indonesia# also# emphasises#
Ways'forward:#As#Indonesia#continues#to#develop#rapidly#and#increase#its#
cyber#dependency#in#the#process,#the#country#will#become#more#vulnerable#
to#a#growing#number#of#sophisticated#threats,#some#of#which#may#be#politiS
Strengths'and'weaknesses:#When#assessing#Indonesias#current#environS
ment# for# cyber# security# preparedness,# strengths# include# recognition# of# its#
are#the#regulatory#framework,#capacity#building#in#terms#of#awareness,#and#a#
lack#of#coordination#among#the#multiple#agencies#involved#in#cyber#security,#
Recommendations:
six#suggested#steps#towards#achieving#greater#cyber#security#in#Indonesia:
Make#cyber#security#a#priority,#at#home#and#abroad
Assess#what#needs#to#be#done#
Strengthen#the#regulatory#environment
Coordinate#a#stronger#multiSstakeholder#approach
What#gets#measured#gets#done:#develop#a#cyber#security#strategy
DAKA$advisory
1 Introduction
The#international#dimensions#of#cyber#security,#therefore,#cannot#be#ignored#
with#an#assessment#of#global#trends#followed#by#an#evaluation#of#their#apS
The'rise'in'cyber'dependence
A#basic#framework#to#gauge#levels#of#cyber#dependence#across#the#world#or#
in#individual#countries#includes#an#assessment#of#three#distinct#areas:#comS
petitiveness#and#the#link#between#ICTs#and#socioSeconomic#factorsW#supplyS
side#initiatives,#such#as#the#organisational#move#towards#ICTW#and,#demandS
1
Competitiveness'and'the'rise'of'the'Internet'
Today,# ICTs# contribute# strongly# to# economic# growth# and# better# social# outS
S
mestic# economies,# therefore,# must# recognise# the# tie# between# competitiveS
ness# and# the# Internet,# including# in# their# education# and# user# engagement#
ICTs# are# at# the# core# of# our# economies# and# societies# and# we# need# to# be#
S
1# #Adapted#from#Kim#Andreasson,#editor,#Cybersecurity:#Public#Sector#Threats#and#Responses:#
DAKA$advisory
Opportunities'trump'threats:'
The# opportunities# associated# with# going# digital# are# vast# and# there# is#
mounting# evidence# around# the# world# of# their# potential# economic#
# According#to#the#McKinsey#Global#Institute,#a#consultancy#research#
across#the#G8#countries#plus#South#Korea,#Sweden,#Brazil,#China#
S
3
# Because#of#a#combination#of#cost#savings#and#productivity#gains,#
# In# Denmark,# the# government# estiS

S
5
#
Banks#2009#report#on#Information#and#Communication#for#DevelS
opment,#which#found#that#every#10%#increase#in#broadband#peneS
6
Demand:'Connectivity'and'the'rise'in'usage
Whether#it#is#online#banking#or#electronic#delivery#of#public#mandates#(eS
government),# people# are# jumping# at# the# opportunity# to# receive# information#
S
stituent#demand#is#driven#by#underlying#factors,#such#as#a#decreasing#cost#
of#access#and#the#increasing#availability#of#mobile#solutions#through#which#to#
the#price#of#access#globally#compared#with#the#previous#year#with#particularly#
3# #McKinsey#Global#Institute,#Internet#matters:#
6# #World#Bank,#Information#and#Communications#for#Development#2009:#
DAKA$advisory
Figure'1:'Growth'in'Internet'and'mobile'usage'in'Indonesia'and'the'world
Per 100 people
100
90
Global: Mobile-cellular telephone subscriptions
80
Global: Individuals using the Internet
70
Indonesia: Mobile-cellular telephone subscriptions
60
Indonesia: Individuals using the Internet

50
40
30
20
10
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Year
Source:&&ITU&World&Telecommunication&/&ICT&Indicators&database.
Supply:'The'move'towards'ICTs
To# meet# demand# and# improve# productivity,# businesses# and# governments#
are#moving#their#processes#online,#hence#also#increasing#their#dependency#
by# a# number# of# reports,# including# the# annual# Global# Information#TechnoloS
7
#In#2012,#Sweden#led#
which# 142# economies# take# advantage# of# ICT# and# other# new# technologies#
Survey,#which#in#2012#found#that#[p]rogress#in#online#service#delivery#conS
S
8
The'view'from'Indonesia
The#global#framework#can#also#be#used#to#illuminate#the#role#of#ICTs#in#IndoS
nesias#competitiveness#as#well#as#the#supplySside#and#demandSside#factors#
S
countries#around#the#world,#Indonesia#is#currently#rated#as#average#in#both#
10
DAKA$advisory
Country'data'for'Indonesia'
Population:#About#248m
Capital:#Jakarta,#with#about#9m#people
GDP#growth:#About#6%#in#2012
Sources:&CIA&World&FactbookI&Indonesian&Internet&Service&Provider&AssociaK
tionI&UNI&WEF
Indonesian'ICT'competitiveness
Indonesia# recognised# ICTs# as# an# industry# of# the# future# in# the# Presidential#
S
ICT#should#continue#to#be#accelerated#in#order#to#improve#the#nations#comS
9
Indonesian'demand'for'ICT
In#2012,#the#Internet#overtook#newspapers#to#become#the#second#largest#
10
#Although# the# number# of# Internet#
users,#on#average,#remains#low#by#global#standards,#they#are#also#estimated#
S
ciation#(APJII),#the#number#of#Internet#users#in#2012#reached#63m,#or#about#
82m#users#or#30%#of#the#population#and#continue#to#grow#to#139m#and#50%#
11
surge#towards#a#digital#society:12#The#economy#(which#is#forecast#to#grow#by#
10# #The#Jakarta#Post:#
11# #Indonesia#Internet#Service#Provider#Association:##
12# #Accenture,#Ready#for#Indonesias#digital#future?:#
S
11
DAKA$advisory
Indonesian'supply'of'ICT
S
S
vices#along#with#efforts#to#improve#user#access#to#them,#are#among#the#top#
# The# primary#
interest# for# local# government# institutions# in# particular# is# in# improving# their#
13
S
The#local#push#for#online#content#is#illustrated#in#a#recent#report#that#found#
several#examples#and#innovative#uses#of#social#media#in#the#supply#of#inforS
mation#by#local#stakeholders#throughout#Indonesia,#including#blogging#netS
S
14
13
14
12
DAKA$advisory
Dependency
S
fers#an#overview#of#cyber#threats,#both#globally#as#well#as#those#particularly#
S
As#the#country#moves#
towards# a# world# of#
electronic# payments#
and#eScommerce,#cyS
ber#attacks#can#have#
S
S
plex#task#and#despite#renewed#efforts#to#determine#the#costs#of#cyber#crime,#
SocioReconomic'implications'
Distributed#denial#of#service#(DDoS)#attacks,#a#threat#designed#to#overwhelm#
S
dent#generated#panSAsian#interest#as#many#came#to#see#the#potential#socioS
S
rea#particularly#alerted#Japan##where#many#aspects#of#economic#activities#
and#social#life#are#increasingly#dependent#upon#Information#and#CommunicaS
tion#Technology#(ICT)##to#the#fact#that#a#threat#to#information#security#could#
15
#
the#impact#of#cyber#threats#is#currently#unlikely#to#be#catastrophic,#argues#a#
16
#In#the#medium#to#longSterm,#
coSauthors# of# the# report,# and# an#Associate# Director# in# the# Cyber# Security#
15
16# #Ian#Brown#and#Peter#Sommer,#Reducing#Systemic#Cybersecurity#Risk:#
13
DAKA$advisory
S
Scale'of'the'problem
of#development,#and#the#type#and#size#of#the#organisation#involved,#among#
S
rity#company,#and#the#Ponemon#Institute,#a#consultancy,#indicate#that#about#
75%#of#organisations#suffer#from#some#sort#of#cyber#attack#or#breach#every#
17
#More#recently,#Symantecs#2012#State#of#Information#Survey,#which#
surveyed#4,506#business#executives#across#38#countries,#found#that#69%#of#
organisations#had#experienced#an#information#loss#in#the#past#year#and#had#
18
S
ple# take# a# broader# perspective# to# account# for# trends# such# as# the# inS
creasingly#blurring#line#of#what#constitutes#crime#vs#crime#that#is#comS
19
Cybersecurity#is#the#collection#of#tools,#policies,#security#concepts,#seS
curity#safeguards,#guidelines,#risk#management#approaches,#actions,#
training,#best#practices,#assurance#and#technologies#that#can#be#used#
Organisation#and#user's#assets#include#connected#computing#devices,#
personnel,# infrastructure,# applications,# services,# telecommunications#
maintenance#of#the#security#properties#of#the#organisation#and#users#
general#security#objectives#comprise#the#following
# Availability
# Integrity,#which#may#include#authenticity#and#nonSrepudiation
#
S
S
portanceW#it#also#accounts#for#both#hardware#and#software#across#the#
17
18# #Symantec,#2012#State#of#Information#Survey:#
19
14
DAKA$advisory
Global'cyber'threats
ICTs# have# given# rise# to# new# opportunities# but# digital# tools# have# simulS
Following# is# an# overview# of# various# global# cyber# threats# across# two# broad#
Politically'motivated'threats
A# common# objective# for# politically# motivated# cyber# threats# is# generally# to#
compromise#the#integrity#and#availability#of#information#for#political#purposes,#
S
out# using# a# botnet,# which# is# a# collection# of# computers# controlled# remotely#
such#attacks#from#more#serious#ones,#cyber#warfare#often#indicates#a#cyber#
S
ample,#Stuxnet,#a#malicious#software,#or#malware#as#it#is#commonly#known,#
but# increasingly# likely# as# countries# invest# in# cyber# attack# capabilities# and#
consider#disruption#through#cyber#means#as#a#potential#alternative#to#diploS
S
beled#corporate#espionage#and#considered#a#cyber#crime#(see#next#section)#
but# when# countries# or# individuals# are# targeted,# the# motivation# is# primarily#
consultancy,#uncovered#a#malware#which#was#remotely#controlled#to#send#inS
About#oneSthird#of#the#infected#computers#are#said#to#be#high#value#targets#
S
curity#company,#uncovered#an#espionage#program,#termed#Operation#Shady#
RAT,#which#was#designed#to#steal#information#from#corporations#and#governS
other#types#of#politically#motivated#threats#because#the#attackers#often#seek#
done#by#deSfacing#a#website,#meaning#it#is#given#a#new#appearance#by#the#
perpetrators#such#as#providing#a#simple#message#taking#credit#for#the#attack,#
commonly# cited# examples# of# this# type# of# attack# come# from#Anonymous,# a#
group#which#supports#free#speech#and#have#been#vocal#in#their#support#of#
15
DAKA$advisory
down# websites# that# supported# censorship# of# WikiLeaks,# such# as# those# of#
#
As#organisations,#their#customers,#and#society#at#large,#went#online,#so#too#
S
are#other#nonSpolitically#motivated#cyber#threats,#such#as#disruptive#beS
havior#from#employees,#most#threats#within#this#category#would#fall#under#the#
general# header# of# cyber# crime# and# an# important# distinction# from# politically#
motivated#threats#is#that#nationSstates#are#unlikely#to#be#behind#them#and#the#
of# computer# data# and# systemsW# computerSrelated# offencesW# contentSrelated#

offencesW# and,# offences# related# to# infringements# of# copyright# and# related#
20
#
S
S
#
Although# regional# differences# are# small,# there# is# one# discernable# trend:# In#
lesser#developed#countries,#law#enforcement#encounter#acts#against#the#CIA#
21
S
ticular#for#countries#and#corporations#that#are#heavily#cyber#dependent#(for#
informed#its#77m#online#users#that#their#personal#information#and#credit#card#
20
21
16
DAKA$advisory
Table'1:'A'summary'of'threats
Politically#motivated#
threats
Description
Cyber#warfare#and#
cyber#terrorism
Attacks#by#nationSstates#
or#highly#sophisticated#
groups#that#target#the#
availability#and#integrity#
of#data,#potentially#with#
Cyber#espionage
Theft#of#information#that#
S
tiality
Hacktivism
Defacing#websites#or#
blocking#access#to#them#
through#DDoS#attacks#to#
send#a#political#mesS
sage#
Anonymous
Description
threats
Cyber#crime,#such#as#
corporate#espionage,#inS
tellectual#property#theft,#
identity#theft,#fraud
motivated#crimes#based#
on#data#that#is#often#
stolen#through#malware#
in#which#users#click#on#
unknown#linksW#methods#
also#include#hacking#for#
information#or#collecting#
it#on#commonly#used#
platforms,#such#as#soS
cial#media#websites##
Source:&Author&compilation&based&on&an&adaptation&from&Kim&Andreasson,&editor,&
Cybersecurity:&Public&Sector&Threats&and&Responses.
Cyber'threats'to'Indonesia
of#the#countrys#Internet#usage#make#it#more#vulnerable#to#certain#types#of#
The#country#is#currently#in#the#information#awareness#stage#and#has#yet#to#
develop#offensive#or#defensive#military#cyber#capabilities#(although#it#appears#
S
ber#warfare,#terrorism#or#espionage#activities#in#the#near#future#as#attackers#
increasingly# cyber# dependent,# it# is# likely# these# threats# will# increase# in# the#
Politically#motivated#attacks#currently#appear#limited#to#hacktivism,#including#
most#recently#in#early#2013#when#prominent#government#websites#were#deS
17
DAKA$advisory
Cyber'crime'in'Indonesia
Indonesia#appears#more#susceptible#than#many#other#countries#to#cyber#crimes#
such#as#fraud#and#contentSrelated#challenges,#which#is#indicative#of#the#level#
Rahardjo,#who#also#teaches#at#the#Bandung#Institute#of#Technology#and#is#the#
corporate#espionage#is#on#the#rise,#foreign#attacks#on#the#Indonesian#private#
sector#is#currently#of#limited#value#compared#to#more#developed#nations,#which#
Instead,# Indonesia# today# is# primarily# a# target# for# less# sophisticated# cyber#
crimes#in#which#the#attackers#prey#on#the#lack#of#awareness#among#people#
S
#According#to#Rudi#Lumanto,#Chairman#of#the#Indonesia#Security#
Incident# Response# Team# on# Internet# Infrastructure# (IDSSIRTII),# data# show#
22
S
ability#in#Indonesia#todayW#they#are#(in#no#particular#order):#
Malware
percentage# of# PCs# that# experienced# a# malware# attack# in# the# world# over# a#
23
There# is# a# lack# of#
S
Because# of# this,# malware# is# a# particular# problem# in# Indonesia# along# with#
vary#depending#on#the#type#of#organisation#or#person#targeted,#Mr#Rahardjo#
agrees#that#malware#and#phishing#are#generally#the#biggest#concerns#in#InS
Phishing
Although# phishing# overlaps# somewhat# with# malware,# several# interviewees#
S
people#actually#tend#to#provide#their#personal#information#in#response#to#such#
S
pecially#IT#security,#which#makes#them#vulnerable#to#cyber#crime#using#social#
22# #The#Jakarta#Post:##
23# #Sophos,#Security#Threat#Report#2013:#
18
DAKA$advisory
these#novices#are#deceived#by#fake#website,#phishing#email,#smsSphishing#
Mobile'threats
S
S
Perhaps# the# probS

the#sheer#number#is#
browses#the#Internet#via#mobile#phones,#which#is#the#highest#mobile#Internet#
24
S
crime#report#say#the#rise#of#mobile#access#is#a#particular#problem#as#people#
dont#use#a#security#solution#for#their#devicesW#in#fact,#almost#half#(44%)#of#
25
#
Social'media
Due#to#the#popularity#of#social#media#platforms,#users#in#Indonesia#may#be#
particularly# targeted# by# criminals# looking# to# collect# information# in# order# to#
#FaS
cebook#is#very#popular#but#there#is#little#mentioning#of#the#kinds#of#security#
26
as#she#compares#security#awareness#in#her#native#Indonesia#to#her#adopted#
Facebook# is# very#

popular# but# there# is#
little# mentioning# of#
the#kinds#of#security#
risks#that#come#with#
it#and#people#are#not#
cybercrime#report#shows#that#4#in#10#social#network#users#globally#have#been#
Compounding#the#problem,#Mr#Lumanto#points#out#that#87%#of#Indonesias#
Hacktivism
Cyber#crimes#dominate#current#concernsW#the#lone#exception#is#the#defaceS
political#motifs#(although#it#can#also#be#seen#as#a#crime#from#a#law#enforceS
S
25
S
19
DAKA$advisory
2013,#60%#of#attacks#on#government#domains#were#web#defacements#(folS
lowed#by#malware#attacks#at#36%),#according#to#a#Government#CSIRT#(GovS
27
#
Although#hacktivism#is#more#of#a#nuisance#than#a#threat#per#se,#it#still#causes#
#After# the# arrest# of# the#
28
29
The'cost'of'cyber'crime'in'the'world'and'in'Indonesia
The# cost# of# cyber#
security#can#vary#deS
pending#on#the#size#of#
the#organisation#and#
the# risks# it# faces,#
which#in#turn#depend#
on# a# number# of# facS
of#cyber#security#can#vary#depending#on#the#size#of#the#organisation#and#the#
future#business#opportunities#due#to#cyber#crime#headlines#in#newspapers?#
S
nancial#loss#from#cyber#crime#and#their#inherent#limitations#before#applying#
Questions'linger
online#adults#aged#18S64#across#24#countries,#it#estimates#the#global#cost#of#
30
#It#also#notes#that#almost#half#
(46%)#of#the#adult#online#population#surveyed#have#been#victims#to#some#sort#
31
# A# report# by# Detica,# a#

S
32
recognised#as#the#best#available#estimate#as#of#this#writing,#although#it#deS
33
27
28
29# #Jakarta#Globe:#
S
30
S
31
32
33# #Ross#Anderson,#et#al,#Measuring#the#Cost#of#Cybercrime:#
20
DAKA$advisory
A'lack'of'numbers'in'Indonesia'too
this#grey#area,#the#Threat#and#Vulnerability#report#from#IDSSIRTII#states#that#in#
34
such#as#banks,#cyber#security#must#be#carried#out#at#any#cost#because#bankS
S
total#budget#for#the#Ministry#of#Communication#and#Information#Technology#in#
S
tions#such#as#banks,#
cyber# security# must#
be#carried#out#at#any#
cost# because# bankS
S
Estimating'the'cost'of'cyber'crime'in'Indonesia
Despite#the#fact#that#they#are#often#criticised,#estimates#of#the#cost#of#cyber#
S
need#to#be#interpreted#with#great#care#as#they#can#vary#massively#depending#
This#report#takes#a#similar#view#and#uses#the#same#methodologies#in#order#to#
The'cost,'using'the'Norton'survey
according#to#an#estimate#of#556m#victims,#which#means#the#average#global#
35
#Because#there#does#not#appear#to#be#any#reliS
able#sources#for#the#average#cost#of#cyber#crime#per#victim#in#Indonesia,#the#
reports#in#2010,#approximately#86%#of#Internet#users#in#Indonesia#are#victims#
36
#Taking#
of#Internet#users#in#Indonesia,#63m,#the#estimate#for#the#annual#cost#of#cyber#
34
35
S
36# #VIVAnews:#
21
DAKA$advisory
S
tial#cost#depending#on#the#rate#of#victimisation:
Table'2:'Victimisation'rates'and'estimates'of'cyber'crime'cost'in'Indonesia
Victimisation#
rate:
25%
50%
75%
S
Sources:&*Based&on&usage&estimates&from&APJII.&**Based&on&Norton&estimates.
The'cost,'using'the'Anderson,'et'al,'model
Anderson,#et#al,#do#not#add#up#the#total#cost#of#cyber#crimeW#instead,#it#uses#
categories:#genuine#cyber#crimeW#transitional#cyber#crimeW#cyber#criminal#inS
S
particular#line#item,#costs#are#estimated#here#by#using#Indonesias#GDP#as#a#
Table'3:'Estimates'of'cyber'crime'cost'in'the'world'and'Indonesia
Global
Indonesia
1,20%
Genuine#cybercrime:
Transitional#cybercrime:
Cybercriminal#infrastrucS
ture:
Traditional#crimes#beS
coming#cyber:
Sources:&*CIA&World&Factbook.&**Based&on&Anderson,&et&al,&model.
As#elsewhere#in#the#world,#the#estimates#derived#here#come#with#a#number#
of#assumptions#and#should#be#interpreted#with#great#cautionW#however,#if#they#
are#anywhere#near#the#true#cost#of#cyber#crime#in#Indonesia,#they#do#indicate#
22
DAKA$advisory
The#state#of
cyber#security
S
tance# of# global# coordination,# cyber# security# remains# a# nationSstate# issue#
illustrates#current#international#responses#as#well#as#the#state#of#cyber#secuS
Global'initiatives
criminal#and#nonSpolitical#in#nature,#one#can#see#that#crossSnational#initiatives#
norms#for#behavior#when#it#comes#to#political#attacks,#such#as#cyber#warfare,#
S
ternational#cooperation#in#regards#to#hacktivism#as#many#countries#share#the#
view#that#they#are#also#criminal#acts#as#seen#during#crackdowns#on#WikiLeaks#
UN'resolutions
S
use#of#Information#Technology,#which#together#with#other#relevant#resolutions,#
urges#member#states#to#consider#the#multiSlateral#dimensions#of#threats#in#
ITU'and'UNODC
S
#Of#particular#note#is#the#agencys#development#of#the#Global#Cybersecurity#
Agenda#(GCA),#a#framework#to#help#countries#take#national#measures#and#also#
37
measuresW#technical#and#procedural#measuresW#organisational#structuresW#caS
37
23
DAKA$advisory
International'Multilateral'Partnership'Against'Cyber'Threats'(IMPACT)
the# Global# Response# Centre# (GRC)# which# helps# realise# the# GCA# through#
S
38
Budapest'Convention
39
#As#of#SepS
Computer'Emergency'Response'Team'(CERT)'and'Computer'Security'
Incident'Response'Team'(CSIRT)
S
Forum'for'Incident'Response'and'Security'Teams'(FIRST)
Founded#in#1990,#FIRST#provides#a#platform#for#members#to#deal#more#efS
fectively#with#security#incidents#by#offering#information#on#best#practices#and#
40
# The# organisation# consists# of# incident# response#
teams# across# the# world# from# a# wide# variety# of# actors,# including# the# public#
Regional'and'national'measures
(above),#as#well#as#the#Arab#League#model#law,#Commonwealth#model#law41,#
42
,#and#
43
#
Plan#for#2010S2015#includes,#as#a#priority#area,#the#development#of#ICT#to#
enhance#socioSeconomic#growth#while#providing#a#safe#digital#environment#
44
#
38
39
40
41# #Commonwealth#model#law:#
42
43
44
24
DAKA$advisory
Individual# countries# have# taken# different# approaches# to# cyber# security,# alS
though#one#can#argue#that#development#generally#occurs#across#three#broad#
and#socioSeconomic#growth#and#made#that#explicit#as#part#of#the#countrys#
leads#to#a#second#effort#to#secure#the#civilian#cyberspace#to#sustain#those#
cyber#attack#by#other#states,#terrorists#or#organised#crime#groups#as#one#of#
45
#Although#there#is#some#overlap,#the#
third#category#consists#of#those#that#have#expressly#established#military#caS
46
#
45
46
25
DAKA$advisory
The#Indonesian
response
to#the#three#broad#categories#of#nationalSlevel#responses,#Indonesia#has#recS
ognised#the#tie#between#ICT#and#socioSeconomic#growth#but#it#has#yet#to#deS
velop#a#civilian#cyber#security#strategy#or#a#military#doctrine,#although#initial#
Legislative'initiatives
S
S
vides#the#basis#for#law#enforcement#in#regards#to#cyber#crimeW#however,#it#is#
limited#in#scope#and#other#Acts#are#often#used#to#supplement#it#in#order#to#
S
Key'stakeholders
sector#entities#to#the#private#sector#and#civil#society,#this#section#introduces#
the#local#context#as#each#institution#or#group#of#institutions#are#encouraged#
47
#Based#on#such#recommendation,#acaS
demic#institutions#have#formed#an#Academic#CSIRT,#and#other#groups#are#in#
S
the#lead#organisation#regarding#civil#cyber#security#while#threats#that#concern#
47
S
26
DAKA$advisory
Ministry'of'Communication'and'Information'Technology'(KOMINFO)
(DG)#of#Post#and#Information#Technology#Implementation,#DG#of#Information#
and#Public#Communication,#Human#Resources#Research#and#Development#
Agency,#DG#of#Post#and#Information#Technologys#Resources#and#Tools,#and#
the#DG#of#Information#Technologys#Application,#the#latter#of#which#is#particuS
larly#relevant#to#cyber#security#as#it#is#home#to#the#Directorate#of#Information#
implies,#deals#with#such#issues#as#how#to#implement#secure#information#secuS
S
We# are# now# startS
ing# the# socialisation#
of#information#secuS
There#is#a#direct#line#between#Mr#Heru#and#IDSSIRTII,#which#has#two#distinct#
48
#First,#it#monitors#and#provides#an#early#warning#system#of#threats#
According#to#Mr#Lumanto,#its#Chairman,#it#is#currently#supporting#the#Ministry#
was#initially#less#than#10bn#Rupiah#when#it#was#established#in#2007W#howS
ever,#in#the#last#three#years#the#annual#budget#has#averaged#around#19bn#
CERTs/CSIRTs
Based#on#overall#strategy,#IDSSIRTII#is#helping#institutions#or#group#of#instituS
web# servers# as# well# as# to# provide# awareness# to# the# students# about# cyber#
The#objective#of#the#GovSCSIRT#is#similarly#to#work#with#a#range#of#stakeS
holders#to#improve#information#security#for#its#government#members#by#proS
#
Organisationally,# it# falls# under# the# Directorate# of# Information# Security# and#
logistically#it#consists#of#a#general#manager#with#teams#for#monitoring,#evaluation#
49
48
49
27
DAKA$advisory
is# currently# composed# of# 161# central# government# agencies,# 33# provincial#
50
S
#
IDSSIRTII#is#also#a#Full#Member#of#the#Organisation#of#the#Islamic#ConferS
S
52
#
51
Since# we# [IndoneS

sia]#have#other#agenS
cies# handling# the#
technical#aspects,#we#
Ministry'of'Foreign'Affairs
Since#we#[Indonesia]#have#other#agencies#handling#the#technical#aspects,#
so,#the#Ministry#of#Foreign#Affairs#work#with#domestic#institutions#to#outline#
to#support#them#from#
a# policy# perspective#
and#make#cyber#more#
The#second#broad#category#of#work,#given#its#obvious#remit,#entails#the#globS
international#dialogue#and#identify#the#relevant#platforms#in#which#to#address#
S
rums#to#see#how#Indonesia#can#play#an#active#part#in#developing#a#compreS
Ministry'of'Defence
As# elsewhere# in# the# world,# cyber# security# in# Indonesia# is# both# a# national#
civilian# concern# and# a# topic# of# interest# to# the# national# security# community,#
necessities,#there#is#in#effect#a#global#cyber#arms#race#at#the#moment#and#
#
S
rie#Sjamsoeddin,#announced#that#the#country#will#establish#a#cyber#defence#
unit,# which# will# be# dedicated# to# securing# military# systems# and# national# IT#
53
# The# cyber# defence# operations# centre# (CDOC)# is# meant# to#
work#closely#with#an#already#established#cyber#defence#task#force#operated#
Indonesian'Police
A#2010#presentation#entitled#Current#state#of#cybersecurity#readiness#and#
S
54
50
51
52
53
54# #Presentation#by#Ratno#Kuncoro#at#the#Cybercrime#Capacity#Building#Conference#in#the#State#of#
S
28
DAKA$advisory
As#the#Head#of#IT#&#Cyber#Crime#Section,#Police#Colonel#Winston#Tommy#
Watuliu#probably#knows#better#than#anyone#what#needs#to#be#done#to#imS
We#still#need#to#upS
Further,# although# Mr# Watuliu# calls# his# departments# relationship# with#

prosecutors,# and# private# sector# organisations,# such# as# ISPs# and# telecomS
S
tion#regarding#skills#development#and#establish#a#common#understanding#of#
of# Foreign#Affairs,# agrees# that# Indonesia# should# develop# capacity# building#
programmes#for#prosecutors#and#judges#regarding#the#criminal#proceeding#
The'private'sector
S
tors,#which#has#long#resulted#in#the#establishment#of#various#forms#of#publicS
because#there#is#a#gap#in#security#understanding# between#the#public#and#
Despite#some#issues,#however,#all#participants#agree#on#one#thing:#the#imS
S
nesian#government#realises#that#many#critical#infrastructures#are#owned#and#
operated#by#the#private#sector#while#local#companies#recognise#the#need#for#
great# advantages,# although# he# says# the# least# successful# strategy# towards#
cyber#security#is#one#that#relies#on#people#because#then#it#depends#on#their#
such# as# security# tokens,# bestSofSbreed# IT# infrastructure,# systems# and# apS
Academia'and'civil'society
awareness,# and# as# the# public# and# private# sectors# face# limitations,# others#
S
55
Academia# and# civil#

society# can# contribS
ute#to#cyber#security#
by# increasing# secuS
rity# awareness# and#
building# a# security#
55
29
DAKA$advisory
S
demic,#public#and#private#sector#members,#it#also#represents#a#broad#comS
munity# that# undertakes# research# and# promotes# security# awareness# to# the#
Another#successful#civil#society#initiative#is#the#Indonesian#ICT#Partnership#
S
56
PPPs'and'regulation'vs'selfRgovernance:'
A'global'debate
PPPs# havent# worked# because# they# [the# private# sector]# dont# selfS
although#he#admits#that#governments#should#work#with#the#private#secS
S
lustrate#the#limits#of#PPPs:#Without#improvements#in#meeting#private#
and#public#stakeholder#expectations,#the#partnership#will#remain#less#
than#optimal,#and#there#is#a#risk#that#owners#and#operators#of#critical#inS
frastructure#will#not#have#the#appropriate#information#and#mechanisms#
to#thwart#sophisticated#cyber#attacks#that#could#have#catastrophic#efS
57
S
S
rity#strategy#establishes#a#new#type#of#public#private#platform#through#
which#industry#can#voice#its#concerns,#which#will#allow#the#public#sector#
But#international#companies#also#encounter#yet#another#problem,#which#
is#in#keeping#up#with#multiple#regulatory#regimes#across#countries#and#
56
57
30
DAKA$advisory
The#future#of
cyber#security#in#Indonesia
S
puting# and# mobility,# government# and# businesses# around# the# world# are# inS
of#mobility,#and#hence#also#a#disproportionate#number#of#current#threats#in#
Opportunities'and'threats
High# socioSeconomic# growth# means# that# the# threats# will# change# and# new#
Based#on#the#experience#in#more#developed#countries,#it#is#likely#that#this#will#
lead#to#an#increase#in#sophisticated#threats,#including#politically#motivated#atS
tacks#and#various#forms#of#political#and#corporate#espionage#stemming#from#
Advanced#Persistent#Threats#(APTs),#which#is#a#highly#advanced#form#of#atS
If#we#don't#improve#(our#capabilities)#we#could#face#a#possible#public#and#
58
#
As#a#result,#Indonesia#must#do#more#to#promote#integration#of#cyber#security,#
effort#begin#by#identifying#the#countrys#current#strengths#and#weaknesses#in#
58# #Reuters:#
31
DAKA$advisory
Recent'cyber'security'initiatives'
The#past#12#months#has#seen#a#number#of#new#cyber#security#initiaS
Application#of#Technology#(BPPT),#calls#for#a#comprehensive#and#incluS
59
October#2012:#Ministry#of#Communication#and#Information#Technology#
60
61
62
S
63
January#2013:#Bandung#Institute#of#Technology#in#cooperation#with#KoS
64
Strengths'and'weaknesses
One# recent# scholarly# article,# which# assesses# Indonesias# strengths# and#
65
#Its#a#
good#approach#through#which#to#identify#weaknesses#and#develop#a#roadS
S
not#deemed#to#be#a#problem,#a#point#with#which#Mr#Lumanto#agrees:#We#
are# also# enhancing# our# international# cooperation# with# many# organisations,#
security#experts#and#forum#in#order#to#improve#our#understanding#of#global#
59
2012:#
60
61
62
63
64# #Institut#Teknologi#Bandung:#
65
32
DAKA$advisory
Indonesia# is# particularly# weak# in# legislative# measures,# says# Mr# Sucahyo,#
S
S
knowledged# it# is# vulnerable# to# cyber# threats# in# part# because# of# weak#
66
# Mr# Sucahyo# also# says# organisational# structure# is# a# particular#
about# a# particular# weakness,# because# the# weakest# link# is# people# and# we#
biggest#challenge#and#calls#on#the#government#to#better#prepare#society#for#
Fundamentally,#says#Mr#Brown,#effective#cyber#security#is#about#regulation,#
priority,# especially# in# developing# countries# that# are# not# as# reliant# on# online#
An'internal'assessment
To# raise# security# awareness# and# to# track# progress,# Indonesia# has# its# own#
framework#for#assessing#domestic#information#security#across#government#
But# the# topic# is# still#

realtively# new# and#
not# a# priority,# espeS
cially# in# developing#
countries# that# are#
not#as#reliant#on#onS
begins# with# a# selfSassessment,# followed# by# an# evaluation# of# the# answers#
S
S
curity:#governanceW#risk#managementW#frameworkW#asset#managementW#and,#
scores#were#in#the#technology#and#asset#management#areas#while#the#lowS
est#scores,#and#hence#the#greatest#weaknesses,#were#in#risk#management#
Recommendations
S
donesian#executives#and#policySmakers#should#consider#the#lessons#learned#
elsewhere# and# develop# appropriate# measures# to# meet# the# cyber# security#
S
1:'Make'cyber'security'a'priority,'at'home'and'abroad
S
33
DAKA$advisory
Mr#Simanjuntak#is#looking#for#a#platform#in#which#to#work#with#the#global#comS
munity:#For#cyber#crime,#there#is#a#good#international#frameworkW#we#are#not#
matter,#so#when#we#think#about#addressing#the#preparation#gap#its#no#use#
2:'Assess'what'needs'to'be'done
Once#cyber#security#has#been#made#a#top#policy#priority,#the#process#of#deS
S
standing#of#the#threat,#and#the#potential#business#impact#or#what#the#impact#
S
#In#addition,#suggests#Mr#Lumanto,#the#
government#should#ask#such#industries#to#develop#certain#security#standards#
67
3:'Strengthen'the'regulatory'environment
After# identifying# key# objectives,# regulatory# measures# should# be# taken# to#
glaring# weakness# in# meeting# the# cyber# security# challenge# by# interviewees#
It#is#also#important#to#note#that#a#stronger#regulatory#environment#does#not#
necessarily#mean#an#end#to#selfSregulation#or#additional#burden#to#individual#
S
global#viewpoint,#Mr#Mui#says#deterrence#is#also#an#essential#step#in#protectS
S
4:'Enhance'awareness'and'improve'skills
S
S
sia,#knowledge#is#low#despite#attempts#to#raise#it#and#many#people,#like#Mr#
Watuliu,#are#calling#for#an#improvement#in#both#public#awareness#and#public#
needed#to#improve#awareness,#particularly#as#governments#often#struggle#to#
67
damsW#defence#industrial#baseW#emergency#servicesW#energyW#government#facilitiesW#healthcare#and#public#
healthW#information#technologyW#national#monuments#and#iconsW#nuclear#reactors,#materials#and#wasteW#
postal#and#shippingW#transportation#systemsW#and#water:##
34
DAKA$advisory
S
tur#and#Mr#Watuliu,#representing#the#private#and#public#sectors,#both#agree#
that#there#is#a#lack#of#cyber#security#skills#when#it#comes#to#digital#forensics#
Bandung#should#help,#as#does#the#efforts#by#Mr#Heru#who#aims#to#train#and#
certify# 200# people# this# year,# despite# a# cost# of# about# 20m# Rupiah# or# about#
remain#limited#and#better#coordination#and#more#resources#appear#needed#
5:'Coordinate'a'stronger'multiRstakeholder'approach
Although#PPPs#may#not#work#optimally,#the#private#sector#and#civil#society#
with# the# education# system# and# that# there# are# important# roles# for# both#
appears#to#have#done#about#as#well#(or#as#poorly,#depending#on#your#view)#
S
S
S
6:'What'gets'measured'gets'done:'develop'a'cyber'security'strategy
priority,#Indonesia#needs#to#develop#a#strategy#that#recognises#the#socioSecoS
be#comprehensive#and#set#clear#targets#and#objectives#from#which#progress#
35
About'DAKA'advisory
We#provide#strategic#advisory#and#research#services#and#work#with#a#broad#range#of#clients#from#the#
focuses#on#cyber#security,#eSgovernment,#measurement#of#the#information#society#and#related#topics#
For#more#information,#please#contact#Kim#Andreasson,#Managing#Director,#at:
Visit#us#at:
Disclaimer
advisory,#nor#the#sponsor,#can#accept#any#responsibility#or#liability#for#the#data,#information#or#stateS
#DAKA#advisory#AB#2013
WHITE PAPER: POLICIES ON IMPORTED MOBILE PHONES IN INDONESIA

Background Information
The proposal to impose a luxury tax on all mobile phones in Indonesia dates back
to 2008 when the Ministry of Finance proposed a plan to impose the tax on all
electronic goods. In 2012, the Ministry of Finances Fiscal Policy Office (BKF)
revisited the proposal as a measure to increase state revenues.
In early 2014, both the Minister of Industry MS Hidayat and Minister of Trade
Muhammad Lutfi raised the topic, and pressured the Ministry of Finance to
finalize the plan. Hidayat argued that imposing a luxury tax on imported mobile
phones would serve as an incentive to spur growth in manufacturing. Lutfi,
tasked with controlling the trade balance, supported the proposal by arguing
that mobile phone consumption in Indonesia has reached an unhealthy level and
its import has become one of the major contributors to Indonesias trade deficit.
Therefore, the tax would slow imports and help to address the trade balance.
However, the decision on whether the regulation will be issued falls on the
Ministry of Finance. Through various interactions with external stakeholders,
including government and industry associations, the Ministry of Finance is
currently considering imposing the tax for mobile phones valued beyond a
particular price threshold. Recently, the Ministry of Finance stated that it is
conducting a study to determine that threshold.
I.
Indonesias Trade Balance
Indonesia faces a fluctuating trade balance, with month-to-month data showing a

surge in the deficit followed by a sporadic trade surplus. Addressing the trade
balance has become one of President Susilo Bambang Yudhoyonos priorities
towards the end of his presidency. The government has since implemented a
number of policies to fix the trade balance, yet the fluctuation still can be seen
today.
According to Indonesias Bureau of Statistics (BPS), a growing oil and gas import
bill is the biggest chunk of Indonesias trade imbalance. Furthermore, in the nonoil and gas import category, mobile phones are not included in the countrys ten
biggest imports in value. That category is dominated by manufacturing
machinery and raw materials for the manufacturing industry. According to the
latest BPS data for Fiscal Year 2013, the oil and gas import bill was valued at
$45.27 billion, a 6.3 percent increase from the previous year, while non-oil and
gas imports dropped by 5.2 percent. The biggest import in the non-oil and gas
category is heavy machinery, which was valued at $27.3 billion. In the same year,
mobile phone imports were valued at $1.8 billion.
Indonesias 10 Biggest Non-Oil and Gas Imports in Value1

Type of Goods
Machinery and Mechanical
Equipment
Machinery and Electrical
Equipment
Steel (Raw Material)
Vehicles and Spare Parts
Plastic Goods
Chemical Material
Steel (Finished Goods)
Grains (incl. Rice, Wheat and
Corn)
Food and Beverages
Cotton
II.
2013 Import Value

(in USD Billion)
27.3
% of Total Non-Oil
and Gas Import
19.3
18.2
12.9
9.5
7.9
7.6
7
4.7
3.6
6.8
5.6
5.4
4.9
3.4
2.6
3
2.5
2.1
1.8
Indonesias Manufacturing Sector
The government has also emphasized boosting exports as a solution to the

fluctuating trade balance. However, a strong manufacturing base is required in
order to support manufacturing-based exports. Indonesia hopes to become an
exporting hub for the region, hence the governments push for investors to build
manufacturing facilities in the country. In order to realize this goal,
improvements and reforms to the supporting ecosystem including
infrastructure, labor productivity, regulatory certainty, education and R&D are
critical to strengthen the competitiveness of the manufacturing sector.
Indonesia has acknowledged that innovation is an important aspect in
establishing a manufacturing industry and the government is progressing in its
R&D investment by doubling the R&D investment in five-year period from 2007
to 2012. In line with improving Indonesias innovation through R&D, the
government has also established National Innovation Committee (KIN) that
reports directly to the president. These initiatives have led to Unilever, RIM and
Nissan to build R&D hubs in Indonesia. The government has also made progress
in education and has improved enrollment rates, literacy rates and average years
of schooling in hopes that such improvement will lead to more skilled labor in
the country to supply the manufacturing industry.
However, the government needs to maintain the positive trends while also
reforming more supporting factors to be able to establish a strong
manufacturing industry. The World Bank has published several reports stating
that Indonesias infrastructure spending is insufficient and should be doubled to
cater to the growing nation, especially the middle class. The total investment in
infrastructure is currently less than 4 percent of GDP half of what the nation
needs. Beside the lack of infrastructure, investors are also faced with low labor
1
Indonesia Bureau of Statistics (2014), Indonesias Export and Import Data 2013.
productivity. According to the World Economic Forums 2014 Global

Competitiveness Index, Indonesia is ranked 103 out of 148 countries on labor
productivity. The same report ranked Indonesia on the low-end on the education
index. The American Chamber of Commerce Indonesia (AmCham Indonesia) has
also conducted a survey that shows the biggest challenge for investors in
Indonesia is regulatory uncertainty that makes it difficult for long-term and highvalue investment decisions, such as manufacturing.
Investors in the manufacturing sector also face a high cost of importing raw
materials as Indonesia still imposes high tariffs for them. Indonesia ICT Society
(Mastel) reported that the IT-specific manufacturing sector faces an additional
cost of 7.5 to 15 percent to import raw materials. A more balanced taxation
policy designed to support the manufacturing sector would make Indonesia a
more attractive investment destination and encouraging investors to locate
manufacturing facilities in the country.
III.
Access to Technology and Beyond
Indonesias e-commerce sector has enjoyed unprecedented growth. The

Association of Indonesias Internet Service Providers (APJII) predicts that
Indonesias e-commerce market will be valued at $25 billion in 2016 from the
current $12 billion. The contributing factor to this impressive growth is the
consumers access to technology, which leads to a more global market,
knowledge and people. The growth of Indonesias e-commerce has benefited
many due to its multiplier effect, including financial services (online payment
system), logistics sector (product delivery system), Internet service providers
(access to e-commerce market) and developers. Indonesias small and medium
businesses have also benefited from the growing e-commerce sector,
empowering these entrepreneurs with access to an otherwise unreachable
market.
In Indonesia, mobile phones have become the single most important tool to
provide access to technology. APJIIs report shows that Indonesia has 83.6
million Internet users; and nearly two thirds of them access the Internet through
mobile devices. However, only 8 percent of mobile phone users access the ecommerce market on their mobile, indicating a massive untapped growth
potential.
A Presidential Regulation on the countrys broadband plan has recently been
signed. Imposing a new tax on cellphones would raise the cost of mobile
ownership, undermining the goal of increasing broadband penetration and
developing online public services (e-health, e-education and so on).
IV.
Indonesias Growing Black Market
Mobile phones are now an integral part of Indonesians daily life. The demand for
mobile phones has grown around 20-25 percent annually in recent years.2
2
IDC (2014), IDC: Smartphone Market Share 2014.
Indonesia has strong consumer spending, but those consumers expect a stable
price. Dramatic price fluctuations can eventually lead to a growing demand in the
grey market, where consumers will find illegally imported goods at a fraction of
the price. Retailers often pass the increased tax cost to the consumer while the
same consumer in Indonesia can easily access grey and black market mobile
phones. Indonesia Mobile Phone Association (APSI) has reported that 40 percent
of all mobile phones in Indonesia are purchased in the black or grey market
while Indonesia Consumers Agency stated that black and grey market products
dominate 70 percent of the market share. The proposed tax on cellphones would
significantly increase the gap between the price of legal products and illegal
ones, encouraging illegal imports.
V.
International Best Practices
A GSMA and Deloitte study3 in 2012 analyzed how Brazil was able to increase its
long-term state revenue by reducing the tax burden on mobile broadband
services. Brazils mobile broadband services sector was one of the most heavily
taxed, increasing the cost of use of mobile broadband services by 40 percent and
the average price of mobile handset by 57 percent. The study demonstrated how
a one percentage point reduction in the tax burden could lead to expanded
penetration of mobile broadband services and a beneficial impact on economic
activity. Over five years, the one percent reduction in tax could lead to up to one
million more subscribers, which represent a two to four percent increase in the
overall tax base. Another GSMA study4 also analyzed how Uruguay in 2007
abolished an airtime tax that accounted for 30-50 percent of calling costs. After
being abolished, the countrys mobile phone service penetration doubled from
65 percent in 2006 to 141 percent in 2011.
VI.
Conclusion and Recommendations
Increased access to technology encourages growth in the broader economy. It

empowers entrepreneurs and small business, connecting them rapidly to a
global market. Benefits include enhanced information flows and improved access
to banking and other financial services. The governments proposal to impose a
luxury tax on mobile phones would have an insignificant impact towards the
governments fiscal pressure, unstable trade balance and the slow growth of the
IT manufacturing sector. If anything, it would encourage consumers to find
alternative markets for mobile phones, increasing the threat of a growing grey
and black market in Indonesia.
Representatives from the government, industry and consumers, should hold a
joint discussion to produce better alternative policies and initiatives that would
achieve the governments target while at the same time benefit the industry and
most importantly, the public as a whole. One possible avenue to consider is to
conduct a study of how access to technology could affect the overall Indonesian
economy. The study could also be used as a platform to find win-win solutions to
GSMA and Delloitte (2012), Brazil Mobile Observatory 2012,,
http://www.gsma.com/spectrum/wp-content/uploads/2012/10/gsma_brazil_obs_web_09_121.pdf
4 GSMA (2012), Mobile Telephony and Taxation in Latin America.
3
boost Indonesias access to technology while helping the nation in fixing the
trade balance and increase investment in the manufacturing sector. Such a study
could also be used as a basis and reference for any other future luxury tax
policies in Indonesia.
KEMENKO PEREKONOMIAN
REPUBLIK INDONESIA
Indonesia ICT Consultative Forum (IICF)

Coordinating Ministry for Economic Affairs | US-ASEAN Business Council
Project Description
The Indonesia ICT Consultative Forum or IICF is an initiative of the
Coordinating Ministry of Economic Affairs & US-ASEAN Business Councils
ICT Committee that organizes and promotes the exchange of views between
ICT industry representatives and appropriate government officials who are
involved in developing ICT policy within Indonesia.
Objective
The IICF aims to create a collaborative platform between government and
industry to support Indonesias long-term industrial policy of building a local
ICT industry and shared goal of creating an innovation and knowledge-based
economy in Indonesia.
Mandate for the Forum

To establish a joint consultative body (Indonesia ICT Consultative Forum) on
Indonesias ICT ecosystem comprising Government of Indonesia officials and
representatives of the international and domestic ICT private sector.
This Forum will serve to improve mutual understanding in the areas of
innovation, investment and regulation and will assist in the development of
future ICT policy in Indonesia.
Implementation Arrangement
The IICF is developing a work program according to priorities identified by industry and the
government.
The 2014 IICF Work Plan identifies three work streams that will guide efforts to address these
priorities.
The work streams are as follows:
Regulatory Insights
Examining local and global
regulations and best practices
that advance sustainable, longterm growth in the ICT sector
Incentivizing Localization
Emerging Digital Trends
Identifying opportunities to grow

the local ICT industry
Updates on global industry trends

and relevance to the ICT
ecosystem in Indonesia.
Ministers
Proposed
Structure of the
Forum
The IICF will consist of a Ministerial
Committee and an Executive
Committee
GOI
Senior Official Committee
Co-Chair
CMEA
Executive Committee
Regulatory Insights
Incentivizing Localization
Emerging Digital Trends
Activities
USABC
Co-Chair
USABC ICT
About the Structure

The IICF will consist of a Senior Official Committee and an Executive Committee.
The Senior Official Committee provides an opportunity to report findings of the Executive Committee and
propose recommendations to senior level officials.
The Executive Committee will comprise of government officials at the DG and Director level, private sector
representatives and ICT associations. The committee will meet quarterly or on an as needed basis. The
committee will identify possible new initiatives to support and address policies and regulatory issues that
may arise in the development of Indonesias ICT ecosystem and the growth of the local ICT industry. The
Executive Committee will prepare recommendations to be presented to Ministers or other senior
government officials for their consideration.
The Executive Committee will be Co-Chaired by a representative from the Coordinating Ministry for
Economic Affairs (CMEA) and a representative of the US-ASEAN Business Councils (USABC) ICT
Committee. The committee will define the agenda for the IICF and its annual work plan, determine the
schedule of meetings and facilitate the IICF.
The Executive Committee may create smaller focus groups, which may include officials from other
government ministries and agencies, experts from academia and think tanks, and prominent ICT leaders, to
review a particular policy or area in more detail and propose regulatory approaches that will assist
development of the ICT sector.
Executive Committee Forums will serve to provide fora for

discussing policies and regulatory issues that arise in the
development of Indonesias ICT ecosystem, knowledge-based
economy and the growth of the local ICT industry.
Senior Official Committee Dialogue with senior level officials and
business leaders to be determined mid-year or end year, followed
by reporting at Ministerial level.
Key elements for 2014 events/ activities include:

Frequency Quarterly, including a Ministerial level event
Committees &
Key Elements of
Activities
Format Half-day dialogue

Content Focus on a key topic that is supported by work streams
Participation Government officials at the DG and Director level,
private sector representatives and ICT associations
Outcomes Deliverables developed by the three work streams
Proposed Schedule and Milestones in 2014
Milestone 1
1st Week of March:
Small Team Meeting
CMEA & USABC ICT
Committee
Late March:
Inter ministerial
coordination and
team formation
Mid/late April
(executive committee
dialog & workshop)
Milestone 4
Milestone 2
Milestone 3
June
(executive committee)
September
(executive committee)
November 16/ December

8 (ministerial committee
Indonesia Business
Mission)
PROPOSED ACTIVITIES IN 2014

HOW ICT HELPS INCREASE INVESTMENT IN INDONESIA
Date
APRIL 2014
JUNE 2014
SEPTEMBER 2014
NOVEMBER 2014
Event
Dialogue Launch and Panel

Discussion
Workshop
Workshop
Presentation and Dialogue
Session Type
(Executive Committee)
(Senior Official Level)
Topic
(Note: all topics tentative)
Data Storage in a Changing

World
How the choice of data
storage affects trade,
investment and growth in
a country
Existing international
standards on cloud
computing
Cybersecurity and Data
Privacy
Cloud Computing Approaches

by Sector
Healthcare
Financial services
Other industries
ICT & Education

National Digital Literacy
and ICT human
development Addressing
the gap in IT human
capital building in the
national curriculum
Creative Industries developing entrepreneurs
and job creation
Presentations of findings and

the recommendations from
Executive Committee
events/activities
Report findings
Report findings
Report findings
Direction for next steps and

2015 Forum (IICF) plan
Outcomes
KEMENKO PEREKONOMIAN
REPUBLIK INDONESIA
THANK YOU
Cloud Computing and its

Impact in Our Live
Tony Seno Hartono
National Technology Officer
Microsoft
Cloud Computing Framework by

NIST
Hybrid Clouds
Deployment
Models
Service
Models
Community
Cloud
Private
Cloud
Software as a Service
(SaaS)
Public Cloud
Platform as a Service
(PaaS)
Infrastructure as a
Service (IaaS)
On Demand Self-Service
Essential
Characteristics
Common
Characteristics
Broad Network Access
Rapid Elasticity
Resource Pooling
Measured Service
Massive Scale
Resilient Computing
Homogeneity
Geographic Distribution
Virtualization
Service Orientation
Low Cost Software
Advanced Security
Based upon original chart created by Alex Dowbor - http://ornot.wordpress.com
Dalam Premis
Lokasi
Luar Premis
Heterogen
Infrastruktur
Homogen
CapEx
Model Bisnis
OpEx
Sendiri
Kepemilikan
Sewa
Sendiri
Manajemen
Pihak Ketiga
Pemrograman Aplikasi
Skalabilitas
Otomasi
Manajemen
Layanan
Ketersediaan
Layanan
Multi Sewa
Fundamental
Fundamental
Cloud Computing Provides Choices
Cloud Risk Decision

Framework
based on ISO 31000
Download Online here
Hybrid Cloud
Sistem off premise/Public Cloud

- Portal Publik
- Email
- Komunikasi
Sistem on premise/Private Cloud

- Data rahasia
- Aplikasi finansial dsb
Indonesia Digital
Landscape
Indonesia (2013)
17,508 islands, 33 provinces,

167 active volcanoes
Area 1,9M Km Square
3 time zone
Population
GDP
GDP Growth
GDP/ Capita
Global Finance
Urban
Population
Median Age
Teachers
Students
Digital Landscape
Overview
Demographics by Gender
Source: eMarketer, Indonesia Online, March 2013
Demographics by Age
Demographics by Education
Source: APJII, Profil Internet Indonesia, December 2012
Digital Landscape
Device Used
Location by Device Type
Reasons to go Online
Internet Spending per Month
Source: APJII, Profil Internet Indonesia, December 2012
Twitter & Facebook
http://semiocast.com/en/publications/2012_07_30_Twitter_reaches_half_a_billion_accounts_140m_in_the_US
http://en.wikipedia.org/wiki/Facebook_statistics
Total Indonesia Population
Data BPS 2010

http://sp2010.bps.go.id/index.php/site/tabel?tid=263
Politics
Jumlah pemilih di tahun 2014

Jumlah pemilih muda di 2014 (17-30)
153 juta jiwa

33 juta jiwa
Jumlah pengguna internet di Indonesia 2012

Dengan jumlah pemakai umur (17-30) 2012
55 juta jiwa
37 juta user
KPU.GO.ID
Politics
Boosting Transparency, Credibility and popularity among the

masses
Direct Personal Connection with Voters
Cheap & Measurable ROI
Education : ICT Impact Survey

UGM, 2013
Students of SMA, SMK & MA at Yogyakarta were
surveyed on 2013
ICT Support program for the underprivileged group
is feasible Shared investment (Government
provide infrastructure, Household provide CPE)
provides best ROI for Government and Households
Internet access provides better future lifetime
salary for the students
Delay providing internet at home has negative
impact to the future lifetime salary
TV Band White Spaces interest is

accelerating
TVWS Trial in Yogyakarta (Plan)
28
Km
42 Km
17
Healthcare
Share responsibility between Citizen and Government

Use Technology to educate, change behavior, enable Citizen
Hospital as the last resort
Government
Pendukung Program Unggulan

Akunting/
POS utk
UKM
Pariw
isata
Educ
ation
Modernisasi Perkantoran
Komunik
asi&
Kolabora
si
Tata Naskah
Dinas
Elektronik
Digital
Media
Analytic
Citizen
Service
360
Execu
tive
Dashb
oard
Koordinasi
Pengawasan
Pembinaan
ISB
Source: bkp.go.id
Execute Dashboard for

Government
Increase Productivity
Case
Management
Growth
Projections
Use a stylus to annotate, highlight

text or as laser pointer while
presenting
Citizen Complaint Handling

: Tugimin
: 27094357823049587234
: Jl Berliku no 123, Klaten
KUR
Bank
Sisa
4123412341
BRI
Rp 12,345,678.90
Tgl
Pupuk
Qty (kg)
1 Mar 2014
ZA
50
16 Aug 2014
NPK
75
Tgl
SPBU
Qty (l)
23 Jun 2014
Kolong jembatan
15
16 Sep 2014
Pinggir kali
10
Complaint handling
Tidak rahasia
Jalan
Sekolah
Lain-lain
Rahasia
Corruption
whistleblowing
Call centre
Multi-channel
Name
KTP
Alamat
SMS
Internet
E-mail/surat
Citizen Relationship Management (CRM)
Information Service Bus

PT Pupuk
Indonesia
Dinas Pertanian,
Perkebunan, Peternakan
Pertamina
Cab Jateng
Distributor
pupuk
Bank pelaksana Kredit Usaha Rakyat
Kartu
cerda
s
ASKES
Cab Jateng
SPBU
e-KTP
Kartu
cerda
s
Rumah
Sakit
Kartu
ASKE
S
Dinas
Pendidikan
Sekola
h
Murid bebas
biaya sekolah
Penerapan
Manajemen Risiko
Dalam Penggunaan
Teknologi Informasi
oleh Bank Umum
Agenda
Pengenalan E-Banking
Jenis-Jenis E-Banking
Risiko-Risiko E-Banking
Ketentuan di Bidang TI
Pengaturan BI Mengenai Manajemen Risiko TI :
PBI No. 9/15/PBI/2007
2
Pengenalan Electronic Banking (E-Banking) (1)
Apa Itu E-Banking
Layanan yang memungkinkan

nasabah
Bank
untuk
memperoleh
informasi,
melakukan komunikasi dan
melakukan transaksi perbankan
media Elektronika,
melalui
:
ATM, Phone
contohnya
Electronic
Fund
Banking,
Transfer,
Internet Banking,
Mobile Phone, dll.
Sumber : PBI No.9/15/PBI/2007
3
Pengenalan E-Banking (
Mengapa E-Banking
Keuntungan Bagi Bank :

Memperpendek antrian pada bank
sehingga pelayanan yang diberikan
akan dapat lebih optimal.
Menghemat overhead cost layanan
kepada nasabah.
Sebagai competitive advantage.
Keuntungan Bagi Nasabah :
Mempermudah
nasabah
untuk
mendapatkan informasi seperti saldo,
daftar transaksi yang sudah dilakukan
dan melakukan transaksi seperti
pembayaran telepon, kartu kredit,
transfer, dll.
Menghemat waktu & biaya
4
Jenis-jenis E-Banking (1)
Informational:
pelayanan jasa
Bank kepada
nasabah melalui
media elektronik
baik internet, mobile
phone, telelpon, dll
dan tidak terdapat
eksekusi transaksi.
Communicative:
pelayanan jasa
Bank kepada
nasabah melalui
media elektronik
dalam bentuk
komunikasi atau
melakukan interaksi
dengan Bank
penyedia layanan
secara terbatas dan
tidak terdapat
eksekusi transaksi.
Transactional :
pelayanan jasa
kepada nasabah
melalui media
elektronik dimana
terdapat eksekusi
transaksi
Jenis-Jenis E-Banking (2)

Emoney
ATM
Kartu
Prabayar
Kartu
Debet
Jenis dan Device

E-Banking
Internet
Banking
Mobile
Banking
Phone
Banking
Kartu
ATM
Kartu
Kredit
EDC /
Point of
Sales
Electronic
Fund
Transfer
Risiko-risiko Layanan E-Banking (2)

Skimming, ATM Palsu,
Malware
Man in the middle
attack, key logger,
phishing, website
palsu, Distributed
Denial of Service
Attack (DDOS)
Social
Engineering
Pencurian,
tapping
Skimming, EDC
Palsu, Wiretapping
Card Trapping,
Skimming, Theft,
Hacked
Ketentuan di Bidang TI
Penerbit : Kementerian Komunikasi dan Informatika
Undang-Undang No.11 Tahun 2008 tentang Informasi dan
Transaksi Elektronik.
Peraturan Pemerintah No. 82 tahun 2012 tentang Penyelenggaraan
Sistem dan Transaksi Elektronik.
Penerbit : Bank Indonesia

Peraturan Bank Indonesia No.9/15/PBI/2007 tanggal 30 November
2007 tentang Penerapan Manajemen Risiko dalam Penggunaan
Teknologi Informasi oleh Bank Umum.
Surat Edaran No.9/30/DPNP tanggal 12 Desember 2007 tentang
Penerapan Manajemen Risiko dalam Penggunaan Teknologi
Informasi oleh Bank Umum.
8
PBI No. 9/15/PBI/2007
Pengaturan BI Mengenai Manajemen

Risiko TI
Bab 1
Ketentuan Umum
Bab 2
Ruang Lingkup Manajemen Risiko

Pengawasan Aktif Dewan
Komisaris dan Direksi
Kecukupan Kebijakan dan

Prosedur Penggunaan TI
Sistem Pengendalian Intern

atas Penggunaan TI
Kecukupan Proses
Manajemen Risiko atas
Penggunaan TI
Penerapan Manajemen Risiko TI
ASPEK
Manajemen
Pengembangan
dan Pengadaan
Business
Continuity Plan
Bab 3
Jaringan
Komunikasi
Operasional TI
End User
Computing
Penggunaan
Penyedia Jasa TI
Electronic
Banking
Bab 5
P E LA P O R A N
Bab 4
Bab 6
Lain-lain,Sanksi, Ketentuan Peralihan, Ketentuan Penutup

PBI No.9/15/PBI/2007
Pengamanan
Informasi
Bab 7-10
10

Risiko TI : Ruang Lingkup
Management
Oversight
Sistem Pengendalian
Intern atas Penggunaan
TI
Internal
Controls
Kecukupan Proses Identifikasi,

Pengukuran, Pemantauan, dan
Pengendalian Risiko Penggunaan TI
Pengawasan Aktif
Dewan Komisaris dan
Direksi
Policies &
Procedures
Kecukupan Kebijakan
dan Prosedur
Penggunaan TI
Risk
Management
Processes
Penerapan manajemen risiko harus terintegrasi dalam setiap tahapan penggunaan TI

sejak proses perencanaan, pengadaan, pengembangan, operasional, pemeliharaan
hingga penghentian dan penghapusan sumber daya TI
Penerapan manajemen risiko tersebut disesuaikan dengan tujuan, kebijakan usaha,
ukuran dan kompleksitas usaha Bank.
11

Risiko TI : Penerapan Manajemen Risiko (1)
I. Pengawasan Aktif Dewan Komisaris &

Direksi
Bank wajib
menetapkan
wewenang dan
tanggung jawab
yang jelas pada
setiap jenjang
jabatan yang
terkait dengan
penggunaan TI
Wewenang dan Wewenang dan

tanggung jawab tanggung jawab
Direksi
Dewan Komisaris
IT Steering
Committee
12

II. Kecukupan Kebijakan dan Prosedur Penggunaan TI

1. Memiliki kebijakan dan prosedur penggunaan TI
2. Menetapkan limit risiko

3. Memiliki rencana strategis TI
bisnis bank
dijabarkan dalam rencana
13

III. Proses
Manajemen Risiko Terkait TI
mencakup
identifikasi, pengukuran, pemantauan dan pengendalian atas
risiko terkait penggunaan TI
1. Melakukan proses manajemen risiko, atas aspek-aspek :
Pengembangan
dan Pengadaan
Business
Continuity Plan
Operasional
TI
End User
Computing
Jaringan
Komunikasi
Electronic
Banking
Pengamanan
Informasi
Penggunaan
Penyedia Jasa TI
Apabila Bank menggunakan jasa pihak lain, Bank wajib memastikan

penyedia jasa tersebut menerapkan manajemen risiko sesuai PBI.
14

Lanj. Proses Manajemen Risiko Terkait TI
2. Langkah-langkah pengendalian dalam pengembangan dan
pengadaan TI
Penetapan dan penerapan
prosedur & metodologi secara
konsisten
Penerapan manajemen proyek
Melakukan testing yang memadai
Melakukan dokumentasi dan
pemeliharaan
sistem dan data

yang terjaga
kerahasiaan dan
integritasnya.
Memiliki manajemen perubahan

sistem aplikasi
15

3.
Mengidentifikasi dan memantau serta mengendalikan risiko

akitivitas operasional TI + jaringan komunikasi data + End
User Computing (EUC)
pengendalian fisik dan lingkungan DC & DRC
pengendalian hak akses
pengendalian input, proses, dan output
penggunaan jaringan komunikasi;
desain dan pengoperasian jaringan komunikasi
pemantauan kegiatan operasional TI
pemantauan EUC
16

4. Memastikan
BCP dan DRP
dapat
dilaksanakan
secara efektif
5. Memastikan
pengamanan
informasi
dilaksanakan
secara efektif
Memiliki BCP dan DRP

Pengujian minimal 1 kali setahun
Mengkinikan BCP dan DRP

Informasi yang dikelola terjaga kerahasiaan,
integritas, dan ketersediaannya
Dilakukan terhadap aspek teknologi, sumber daya
manusia dan proses
Mencakup pengelolaan aset Bank yang terkait
dengan informasi, kebijakan SDM, pengamanan fisik,
pengamanan akses, pengamanan operasional, dan
aspek penggunaan TI lainnya
Manajemen penanganan insiden
Dilakukan berdasarkan risk assessment.
17

IV. Sistem Pengendalian dan Audit Intern

Melaksanakan SPI secara efektif:
Pengawasan oleh manajemen dan adanya budaya
pengendalian;
Identifikasi dan penilaian risiko;
Kegiatan pengendalian dan pemisahan fungsi;
Sistem informasi, sistem akuntansi dan sistem
komunikasi;
Kegiatan pemantauan dan koreksi penyimpangan, yang
dilakukan oleh satuan kerja operasional, satuan kerja
audit intern maupun pihak lainnya.
Pelaksanaan audit secara berkala dan adanya kaji ulang
fungsi audit.
18

Risiko TI : Electronic Banking (1)
Penyelenggaraan kegiatan elektronik Banking WAJIB memenuhi
ketentuan BI.
Bank HARUS memberikan edukasi kepada nasabah mengenai
produk electronic banking dan pengamanannya secara
berkesinambungan.
Rencana penerbitan produk elektronik banking HARUS dimuat
dalam RBB.
Produk electronic banking yang bersifat transaksional WAJIB
dilaporkan paling lambat 2 bulan sebelum produk diterbitkan.
Laporan rencana penerbitan produk dilengkapi dengan
persyaratan tertentu.
1
Realisasi rencana penerbitan dilaporkan PALING LAMBAT
bulan setelah implementasi.
19
Akhir Presentasi
Terima Kasih
20
Organized Crime on the Internet:

Cyber Threats & Proactive Defense
The Rising Impact of Cybercrime
* 2013 Norton Report

** National Cyber Security Alliance
*** National Center for Missing and
Exploited Children
The Rising Impact of Cybercrime

Key takeaways:
Cybercriminals have
sophisticated operations to
create and distribute malware
Cybercrime is evolving at
lightning speed
The risk to individuals and

companies is growing
Cybercriminals have global reach
They are using cybercrime to fuel
other illegal activities
Traditional responses wont
suffice proactive, aggressive
action is required
Indonesian hacker attacked Singapore Educational

Institution
Police arrested six alleged hackers (5 Indonesian and 1

Nigerian) accused of accessing corporate e-mail accounts and
stealing some Rp 5 billion ($440,000) from Indonesian
companies
Communications
and Information
Minister Tifatul
Sembiring said
earlier that
websites of
Indonesia's state
ministries and
agencies have
received more than
36.6 million cyber
attacks from
hackers in the last
three years.
In the second quarter, Akamai found that

attacks originated in 175 countries, with
Indonesia accounting for 38 percent of those
attacks - up from 21 percent in the first quarter
Total Sample:
282 Counterfeit DVDs

& Name-Brand Laptop
Computers
with Non-Genuine
Software Pre-Installed
69% malware infection rate
5600+ instances of malware
68% of computers (216)

74% of DVDs (66)
7 in 10 computers infected
1,898 genuine bypass hacks

3,703 were hostile in nature
1,100 unique malware strains
Firewall Rules Changed
Windows Update disabled
97% of computers
15% of DVDs
79% of sampled computers

33% of sampled DVDs
A New Era in the Fight Against Cybercrime
PROACTIVE DISRUPTION
we work with our customers and partners to proactively target online criminals.
Our State-of-the-Art Cybercrime Center is a Global First
Microsofts Botnet Enforcement
Proactive Disruption of Cybercriminal Networks

B49Waldec
B107
Rustock
B79
Kelihos
B71
Zeus
B70
Nitol
B58
Bamital
B54
Citadel
ZeroAccess
2009
2009
2010
2011
2012
2012
2013
2013
Computer
Worm email
SPAM
Cut off 277
Domains from
Command and
Control (C&C)
Establish
Microsofts
standing in Bot
Net cases
World largest
SPAMbot
30 billion SPAM
a day
Collaboration
With Pfizer &
FBI
Counterfeit
Drugs & Goods
3.8 Billion
SPAMs a day
Shared code
with Waldec
First bot net
case to name
Russian
defendant
Counterfeit
Drugs & Goods
13 Million PCs
infected
$100 Million
Losses
Financial Bot wire fraud,
bank fraud, and
access device
fraud
Joined by
industry
partners FSISAC and
NACHA as coplaintiffs
500 Strains of
Malware on
70,000 subdomains
Forensically
established
evidentiary link
between
malware
infections and
counterfeit
digital goods
like pirated
software
First botnet
case targeting
click fraud and
search
hijacking
7 Million HiJacked
Computers
Collaboration
with Symantec
First case in
which court
allowed direct
notification to
victims of
infected
computers
5 Million
Infected PCs
with Malware
in 90
Countries.
$500 Million
Losses
Second global
financial botnet
take down
Botnet Herders
1463 Citadel
Botnets
First US Law
Enforcement
public &
private
disruption
action with FBI
Second click
fraud bot-net
operation
establishing
the link
between
organized
criminal groups
2 Million PCs
infected
$2.7 Million
loss each da
First
public/private
partnership
b/w FBI,
Europol &
Industry
B68
globally
1.4 billion pings from
infected PCs a week
More than 35 billion

messages scanned monthly
Daily tracking of 600,000
250 million
700 million computers reporting monthly
Run more than 40 billion times since 2005
18+ billion web-page
scans per month
Millions of consumers
defended worldwide
Performs billions
More than 420 million active users
Millions of computers
running Microsoft
enterprise antimalware
solutions
Microsoft Security Landscape

Private Cloud
Public Cloud
APPS
On-Premises
INFORMATION
PROTECTION
ACCESS
CONTROL
Online
ANTIMALWARE
POLICY
RESEARCH
MANAGEMENT & RESPONSE
DEVICES
SECURE
DEVELOPMENT
Microsoft Technology and Resources

Private Cloud
Public Cloud
On-Premises
INFORMATION
PROTECTION
ACCESS
CONTROL
Online
ANTIMALWARE
POLICY
RESEARCH
MANAGEMENT & RESPONSE
DEVICES
SECURE
DEVELOPMENT
Data Protection in APAC
Protecting our Customers

Invest in the latest tools and
technologies
Undertake pro-active disruption
Build strong and secure products and cloud

services
Ensure banking IT infrastructure is secure and
only genuine software is used in banking
operations
Educate banking customers on safe online
banking practices and to use only genuine
software due to malware in pirated software
Email to banking customers
Notice in bank websites & premises
Indonesia Cyber Security Measures

Directorate of Information Security, MCIT Republic of Indonesia
Jakarta, 24 June 2014
Cyber Crime in Indonesia

Indonesia ranked tenth in Symantecs
global list as the country accounted for
2.4% of the worlds cyber crimes
in 2011*
Watch the World Get Attacked By Cyber

Criminals in Real Time
(http://map.honeycloud.net/)
Chairman of the Indonesia Security

Incident Response Team on Internet
Infrastructure (ID-SIRTII), data show
there were about 39m attacks in the
past year (2012). Of those, 35%
originated from outside the country
while 65% came from within*
According to news reports in 2010,
approximately 86% of Internet users in
Indonesia are victims of cyber crimes, a
figure that seems high although it is also
reported that Indonesia is more prone to
cyber crimes than most other countries*
Source : *A report from DAKA advisory : Meeting the cyber security challenge in Indonesia :
An analysis of threats and responses, 2013
Credit Card Dumper and Memory Grabber
Server Location
Phishing and Spam
Mobile Malware
Source : Ditkaminfo, 2013
Information Security Incident Reporting on

Government agencies in Indonesia (March 2013)
160
143
140
120
100
80
60
40
20
0
43
15
16
0
13
5 (Five) areas of Cyber Vulnerability in Indonesia
Malware
According to the threat exposure rate (TER) in the Security Threat Report 2013
from Sophos, a security firm, at 23.54%, Indonesia had the highest percentage of
PCs that experienced a malware attack in the world over a three month period
(China was second with 21.26%; Norway and Sweden the lowest with 1.81% and
2.59% respectively)*
Cyber fraud, phishing, email and SMS fraud, local SPAM increase last 2 years
Phishing and Spam

According to Nielsen, a research firm, almost half of Indonesias population
browses the Internet via mobile phones, which is the highest mobile Internet
dependency in Southeast Asia *
Mobile Threats
Data from TNS, a market research company, show that 87% of Indonesians who go
online have a social media account *
Social Media
Between 1 January 2013 until mid-February 2013, 60% of attacks on government
domains were web defacements (followed by malware attacks at 36%), according
to a Government CSIRT (Gov- CSIRT) report
Hacktivism
Source : *A report from DAKA advisory : Meeting the cyber security challenge in Indonesia :
An analysis of threats and responses, 2013
Critical
Infrastructure
Law Enforcement
Cybersecurity
Ecosystem
International
Security
Organization
Cybersecurity Ecosystem
National Security
Organization/
Communities
Cybersecurity Measures
Cybersecurity is broader than just Cybercrime
1
INDONESIA
International
Cooperation
Cybercrime may even be

the dominant part
(international cooperation
in Cybercrime
investigations) *
Develop
culture of
Cybersecurity
to prevent
cybercrime
Legal
Framework
Cybercrime legislation
is in many country the
most complex part of a
Cybersecurity legal
framework*
Global Cybersecurity
Agenda (ID-GCA) :
Cybercrime needs to be
addressed within all pilars
Capacity
Building
CERT for instance are not solely

related to Cybercrime. It can be
important tasks for a CERT. But
not all work of a CERT will be
related to Cybercrime*
Source: *Prof. Dr. Marco Gercke, International Security Measures in Cyberspace, 2012
Technical and
2
Procedural
Measures
ICTs is a vital tool that
becoming generally linked to
organised crime on the Internet
Organizational
Structures
Cyber Security Legal Framework

Agenda 1
Legal Framework
Information and Transaction Electronic Act,

No.11/ 2008
Telecommunication Act, No. 36/1999
Ministerial
Circulation
Government Regulation No.82/2012

(Electronic System Provider and Electronic
Transaction)
Other Supporting Law and Regulation
Agenda 2
Technical and Procedural
Measures
Indonesian National Standard SNI/ISO IEC 27001-2009
Filter Internet : Trust Positive
Forensic Laboratory
Information Security Index
Monitoring by ID-SIRTII/Gov-SCIRT
Malware Analyst
Information Security Index 2011

250
200
YEAR 2011
21
Technology
Asset Management
Framework
Risk Management
Governance
150
100
21 Central
Governments have
been assessed
through KAMI Index
50
1
21

350
YEAR 2012
300
42
250
Technology
Asset Management
Framework
Risk Management
Governance
200
150
42 Central & Local

Governments have
been assessed
through KAMI Index
100
50
1
42

YEAR 2013
62
62 Central & Local
Governments have
been assessed
through KAMI Index
Technology
Asset Management
Framework
Risk Management
Governance
250
200
150
100
50
1
62
Database Blacklist TRUST + Positif

http://trustpositif.kominfo.go.id
The Blacklist Database from 2010 to 2012

Total Blacklist
Internal Research
Complaint
838052
818
4840
Open Proxy
32432
International Pornography
799962
400,000
800,000
Source : Kominfo, 2013
Regulator
Agenda 3
Organizational Structures
Directorate Information
Security- Kominfo
IDSIRTI (Indonesia Security
Incident Response Team on
Internet Infrastructure)
Kominfo
National Crypto Agency
Defense/Military
Ministry of Defense
TNI (Indonesia National Armed
Forces)
National
Cybersecurity
Institution
Law Enforcement
Police
Ministry of Legal Affairs
Attorney
Justice
Intelligence
BIN (National Intelligence
Agency)
BAIS TNI (Indonesian Military's
Strategic Intelligence Agency)
Workshops
and
Training
Public Private
Partnership
Certification
Awareness
Education
Member of ASEAN Network Security

Action Council Working Group
Member of International
Telecommunication Union (ITU)
Bilateral Cooperation in Cyber Security
Steering Committee Asia Pacific
Computer Emergency Response Team
(APCERT).
Member of FIRST (Forum of Incident
Response and Security Teams)
Thank You
hasyim.gautama@kominfo.go.id
ditkaminfo
ditkaminfo
Indonesia ICT Consultative

Forum (IICF)
June 24
Marco Ogliengo
Managing Director
CONTENT
ABOUT ZALORA
INDONESIA & KEY CHALLENGES
WHO WE ARE ZALORA

FILL THE ONLINE FASHION GAP THAT EXISTS IN SEA AND REDEFINING HOW
HIGH-STREET FASHION IS ACCESSED IN THIS PART OF THE WORLD
We provide affordable high-street fashion that is not readily available to offline

shoppers in emerging markets.
2
WHERE WE ARE - THE ZALORA GROUP

WHERE WE ARE
SINGAPORE
HONG KONG
MALAYSIA + BRUNEI
INDONESIA
PHILIPPINES
VIETNAM
THAILAND
AUSTRALIA*
NEW ZEALAND*
* The Iconic
3
CONTENT
ABOUT ZALORA
INDONESIA & KEY CHALLENGES
ZALORA INDONESIA DOUBLES IN

SIZE EVERY 6 MONTHS
REVENUE GROWTH
CUSTOMER GROWTH
Our customer base has

grown by ~2000%
since Q2 2012,
reaching millions of
consumers
Zalora Indonesia
Revenue Increase by
+1000% since Q2 2012
INDONESIAN ECOMMERCE: WERE

JUST STARTING
Online commerce revenues and growth
USD Billion
Indonesia e-commerce
only ~0.6% of retail
(UK > 10%)
GROWTH IS DRIVEN BY INTERNET

PENETRATION
Internet penetration Indonesia
WHAT IS HOLDING US BACK

CONSUMER
TRUST
PAYMENTS
INTERNET SPEED
Consumers are still not comfortable buying online (fraud concerns)

In Thailand the government is actively promoting e-commerce
through yearly e-commerce days
Low credit card penetration, low bank account penetration (20% vs
60-80% in China/Thailand/Malaysia)
Inability to accept debit card online payments
Lack of great mobile payment solutions (e.g. legally we cannot use
phone credit [pulsa] for payments]
Zalora circumvents by offering Cash on Delivery, though were still
unable to cover 100% of the territory [and this is not an option to
smaller players]
Slow 3G internet: 50% of our traffic comes from mobile, but

connection is slow and unreliable
Low desktop internet penetration: most people buy during office
hours (fast connections in office). Evening users are mostly mobile.
8
MARCO OGLIENGO
marco@zalora.co.id
WWW.ZALORA.CO.ID
26
OUT
10
WE REACH ALL OF INDONESIA

~70% of Our Orders Are From Outside of Jakarta
We Have Wide and Dispersed Reach

Jakarta
30%
Tangerang
4%
Bandung
4%
Surabaya
3%
Medan
3%
Bekasi
3%
Makassar
2%
Bogor
2%
Denpasar
2%
Others
47%
INDONESIA: WERE STILL AT THE

BEGINNING
Fastest growing
internet audience
251M
+
65.8%
Penetration
73M
36M
73%
Penetration
38M
44% have
purchased in
mobile
23M
SOUTHEAST ASIA AND THE PACIFIC

218 MILLION INTERNET USERS
32% PENETRATION ON AVERAGE
40% INTERNET TRANSACTIONS IN ID ARE FASHION
12
18M
33%
667M
67%
CHINESE ECOMMERCE TIPPING

POINT
INDONESIAN E-COMMERCE
TIMELINE
14
INDONESIA BANK ACCOUNT

PENETRATION
15
Indonesia ICT Consultative Forum

Securing Online Transaction
June 2014
WHY EVERYONE?
PAYMENT GATEWAYS POINT OF VIEW
CONSUMER FRAUD
MERCHANT FRAUD
RISK
INTERNAL FRAUD
Internal Fraud can potentially cause the most damage

section title.p00.
ONLINE (E-COMMERCE) FRAUD
Whats different with the OFFLINE world?
CP vs. CNP
Anonymity (fraudsters can always hide)
More creative ways to steal data
Larger scale (criminal rings in Eastern EU, Asia, Africa)
Some things remain the same:

Fraudsters are smart, calculating, persistent
section title.p00.
TYPES OF ONLINE FRAUD ACTIVITIES
Based on activities, these are categories of online fraud (list may be expanded):
Identity theft: large purchases; bust-out; many purchases; perfect identities (address, phone and
credit card data look clean).
Social Engineering: asking questions, change information through social interaction
orders
Convenience (ease of use): small purchases for testing, safe/unassuming places
Internal fraud: organized criminal rings, sharing info
section title.p00.
hijack
FRAUD PREVENTION TECHNIQUES

CUSTOMER DATA
Minimum requirement
Typical online payment

form
section title.p00.

CUSTOMER DATA - IMPORTANCE
DATA IS IMPORTANT
Data analytics
Fraud scoring
Rules Engine
Etc.
section title.p00.
THE MORE THE BETTER

VARIOUS METHODS/SOLUTIONS
Various fraud prevention techniques/solutions:

Manual review
CVV/Security Code
3D-secure
BIN check
Velocity of change
Velocity of use
Fraud rules
section title.p00.

FRAUD RULES
Fraud Rules
Examples of vendors: Retail Decision, Cybersource
Analyzes data, combined with velocity checks, and then set outcome.
e.g.: automatically set transactions into hot lists (deny) or warm lists (review) based on
data analysis.
section title.p00.

FRAUD RULES
Machine Learning
Big data analysis
Mathematical (statistical model)
Looking for outliers
section title.p00.
INTERNAL FRAUD & DATA BREACHES
www.veritrans.co.id
10
TOP MISTAKES IN SECURITY
Weak/default passwords
Lack of employee education (e.g. security vs. compliance)
Security deficiencies introduced by third parties
Slow self detection
section title.p00.
WHY WE FAIL IN MAINTAINING

SECURE ENVIRONMENT
Lack of awareness by practisioners

No incentive to re-engineer process
Just secure whatever that is already there
Merging different people and process

Slow adaption in evolving technology
Unnecessary exposure of sensitive data
section title.p00.
WHAT WE CAN DO
Identify and isolate privileged users

Audit end user passwords: ensure that passwords are audited and meet a certain
standard
Alert and monitoring: small purchases for testing, safe/unassuming places
Review CDE access rules: is it really necessary?
section title.p00.
BEST PRACTICES
Devaluate data whenever possible

Improve continuously
Stop thinking scope, start thinking risk
It is not out of scope if it can be used against you
section title.p00.
CLOSING
CONCLUSIONS
Why do people shop online - Convenience and trust

Frictions can lead to higher abandonment rate
Fraud will always be present
The key is to how to keep it at a manageable level
criminals only need to be right once, we need to be right all the time
Security = Technology + Process + People
section title.p00.
Data protection & competitiveness:

assessing the economic costs
Presentation for Indonesia ICT Consultative Forum (IICF)
Tuesday, 24 June 2014, Jakarta, Indonesia
Bert Verschelde, Research Associate
Erik van der Marel, Senior Economist

The importance of free cross-border data flows

The economic impact of data flow restrictions
Conclusion & policy implications


The importance of free crossborder data flows
The Internet has transformed international trade and has

created a globally integrated and connected economy in
two ways:
E-commerce and the digitalisation of products: books,
music, movies, taxis, medical equipment etc. are
increasingly supplied digitally
Servification: global commerce and manufacturing is
increasingly dependent on services, in large part thanks to
the Internet and ICT

Both of these developments are spurring Indonesian economic growth
and furthering its integration in the world economy
E-commerce
Online sales are projected to boom in the next two years (Redwing report)
50% of Indonesian consumers not currently buying online plan an online
purchase in the next 12 months (Google report)
Servification
Almost half of global services trade is facilitated by ICT (UNCTAD, 2009)
Typically, data accounts for between 4 and 31% of production input in
services.
In short, the Internet is of crucial importance to the

Indonesian economy and its continued integration in the
regional and global economy
The Internet has been responsible for 21% of economic
growth in developed countries over the past five years
New developments such as the Internet of Things and
Big Data will further spur productivity and growth


The economic impact of data flow

restrictions
Global proliferation of government initiatives to restrict

the free flow of data across borders
In light of revelations on online surveillance by foreign

intelligence services, regulatory efforts have intensified
Given the importance of free cross-border data flows,
restricting movement of data severely impacts the
economy

restrictions
When services firms are required to store and process

data locally, it does not only affect internet companies
Companies in the financial, retail, logistics,

manufacturing, communications sectors all use personal
data across their supply chains
Indonesian businesses rely on access to personal data to
efficiently design, produce, sell and deliver goods and
services

restrictions
Data flow restrictions lead to four economic shocks

1.
2.
Price increases: When firms are required to store and

process data locally, prices of any good or service that
uses data will increase. This cost is passed on to
consumers of the service or good - manufactures,
exporters or end-consumers.
Trade barrier: it creates an additional trade barrier against
data processing and internet services, or any service (to a
lesser extent also goods) that depends on the use of data
for delivery
10

restrictions
Data flow restrictions lead to four economic shocks

3.
4.
Competitiveness declines: as Indonesian exporters face

higher input costs due to the regulation, they suffer a
comparative disadvantage compared to competitors in
other countries. This in turn makes the economy less
attractive to domestic and foreign investment (FDI)
R&D efficiency declines: the effectiveness of R&D is
affected to the extent that product development relies on
customer and market data. R&D is crucial to spur
innovation, a key driver of economic growth.
11

restrictions
Who is affected?
Indonesian producers: their exports become less
competitive, due to increased production costs and lower
R&D efficiency.
Indonesian consumers: price increases lead to welfare loss;
lower investment leads to job losses.
Foreign service providers: incur higher production costs
through required IT capacity expansion and face extra
regulatory hurdles to market access.
12

restrictions
Our study quantifies the costs of data flow restrictions

By analysing of data use intensity across all sectors of the
economy
Introducing price increases and TFP losses to domestic
economy
Estimates impact on domestic GDP and trade and
investment flows
13

restrictions
An economy-wide data flow restriction would impact the

Indonesian economy:
by decreasing economic growth by -0.7% (roughly USD
$6.1 billion)
by decreasing domestic and foreign investment by -2.3%
(lowering FDI by roughly USD $510 million)
by decreasing exports by -1.7%
14


15
The Internet and cross-border data flows are rapidly

transforming global trade, while driving economic growth
Data flows will be of paramount importance to Indonesias
growth trajectory in next few years
Restrictive regulation would heavily impact the Indonesian
economy by decreasing productivity, hampering exports and
discouraging investment
Designing data protection regulation in a way that does not

impede cross-border data flows will be crucial to maintain
Indonesias competitiveness in the ASEAN region and the
world
16
member of Ooredoo Group
Indonesias ICT Ecosystem

Alexander Rusli
President Director & CEO Indosat
02 October 2014
Executive Summary
ICT is essential enabler for economy and development, which contribute

~4.7% of total GDP in 2013 and expected to grow, through direct
contribution in ICT ecosystem and indirectly via externality to general
economy and productivity increase.
Presidential decree on Indonesia Broadband Plan, which signed in 15
September 2014, highlight government focus and support to ICT.
Lesson learned from national broadband plan implementation in other
countries, there are some essential elements: ensuring the availability of
suitable and harmonized spectrum, reducing regulatory cost, providing
incentive to ICT sector and creating healthy competitive environment.
Digital business start to emerge as new growth area which support
economic development of the nation.
ICT Contribution to Economy and Development

10% increase in broadband penetration could boost GDP by

1.38% in low and middle income countries. (World Bank)
10% higher broadband penetration in a specific year is correlated
with 1.5% greater labor productivity growth over the following five
years (Booz & Company)
Smart use of ICTs can reduce GHG emissions by up to 25%.
Mobile technology alone could lower GHGs by 2% by 2020. Ecommerce could lower energy consumption and GHG emissions
by 30% over traditional retail (Broadband commission, GSMA, Carnegie Mellon).
In Indonesia, the quality of education is highly correlated (0.71)
with the availability of internet access (Pustekkom, Kemendikdbud).
ICT (Mobile Industry) Contribution to GDP
(2013)
Mobile industry contributed up to 4.7% of total GDP 2013 and expected to

grow through direct contribution in mobile ecosystem and indirectly via
externality to general economy and productivity increase
Source: GSMA, 2014
ASEAN ICT Profile (2013)

Country
Global
Network
Readiness
Rank
Internet
Users
(%)
Fixed Mobile
Population
BB
BB
(Mn)
(%)
(%)
National Broadband Plan
Singapore
Malaysia
Brunei Darussalam
73%
26%
103%
30
67%
8%
61%
45
65%
6%
48%
Indonesia
64
16%
1%
30%
Thailand
Philippines
67
29%
7%
50%
78
37%
3%
35%
97 Digitally Empowered Nation (2011)
Vietnam
84
44%
6%
27%
Master Plan of Vietname 2010-2015 and PM'Decreee

90 1755/QD-TTg on the approval of National Strategy on
Transforming Vietnam into an advanced ICT country (2010)
Cambodia
Lao PDR
Timor-Leste
108
6%
0.2%
19%
15 Cambodia ICT development Strategy 2011-2015 (2011)
109
13%
0.1%
10%
7 N/A
141
1%
0.1%
0.2%
1 N/A
5 Intelligent Nation 2015 (2005)

30 National BB Implementation NBI (2010)
0.4 National Broadband Blueprint (2008)
Presidential Decree No. 96 (2014)
248
Priorities Of MOCIT Year 2010-2014 (2010)
68 The National Broadband Policy (2010)
Presidential decree on Indonesia Broadband Plan 2014-2019 is signed in 15 September

2014 (PP 96/2014), which emphasize government focus and support to ICT
Source: The State of Broadband 2013: Universalizing Broadband, A report by the Broadband Commission. Indonesia Secretary of Cabinet. ITU. GSMA. IMF
National Broadband Plan:

Lesson Learned From Other Countries
the
2 Reduce
Regulatory Cost
Ensure enough spectrum is available

Renew licenses and refarm spectrum
Prepare for future demand
& Create
3 Incentives
Healthy Competitive
Environment
Source: GSMA
Beyond Connectivity:
Developing Digital Ecosystem
IWIC
Competition
Incubator
Venture Fund
Batch # 1
Indosat Wireless Innovation
Contest (IWIC)
Encourage new idea /
innovation with competition
of potential startup
5 months program,
one batch each year
Initial step in search of potential
idea / innovation
Funding for ideabox startups

Funding for Indosat JVs
Early digital ecosystem
participation in Indonesia
Strategic Partner
3 year program, two batches per year

4 startups already in
Partners also coaching Dunia Digital teams
4 year investment horizon
Developing Digital Platform and Incubating

Local Startups via Ideabox & Venture Fund
Local Apps
& Contents
?
Source: Indosat
Indosat has created a digital unit with

startup culture & environment
Startup culture and environment

Experience in launching mobile commerce, finance and
advertising businesses
Experience in investing in digital startups and joint ventures
Dedicated technology and app development team
More than 100 resources with annual revenue over US$ 18 M
Up to 10 new investments per year through

the ideabox startups accelerator
10
A number of products have been launched in just a

few months
11
Complete ICT Ecosystem

to Deliver Best Customer Experience
Mobile
Devices
Apps
Infrastructure
Cloud
Providers
12
Concluding Remarks
ICT is supporting the country in connecting people, business and

government. This sector contributes to GDP directly via ICT
ecosystem and indirectly via externality to general economy and
productivity increase.
Implementing Indonesia Broadband Plan will require collaboration
among stakeholders, especially in the following focus areas i.e.
ensuring the availability of suitable and harmonized spectrum,
reducing regulatory cost, providing incentive to ICT sector and
creating healthy competitive environment.
Indonesia need to think Beyond Connectivity to enter into digital

business, as opportunities and tools to support economic growth.
13
invest in
The 3rd Executive Meeting of Indonesia ICT Consultative Forum| Jakarta, 2 October 2014
INVESTMENT UPDATES
ICT SECTORS 2009-2014(S1)
INDONESIAN INVESTMENT COORDINATING BOARD
Nurul Ichwan
Deputy Director for Manufacturing Industry Promotion
2014 by Indonesian Investment Coordinating Board. All rights reserved
45,000
FDI to the World
38,139
40,000
35,000
in ICT sectors
30,000
USD388billion invested in 2009-2013,

ASEAN received 5% of global FDI
20,000
To the world
25,000
20,715
18,554
15,000
10,000
7,020
5,000
To ASEAN
2,886
379
2009
Rank
Source
Share
Rank
United States
32%
UK
11%
Spain
2011
Share
Rank
Brazil
13%
Telefonica
6%
United States
6%
Vodafone
4%
7%
India
6%
America Movil
3%
France
5%
Canada
5%
Telecom Italia
3%
Japan
4%
UK
4%
Orange (France Telecom)
3%
Mexico
3%
Spain
4%
Microsoft
2%
Germany
3%
Nigeria
4%
Level 3 Communications
2%
Italy
3%
Chile
3%
2%
Sweden
3%
China
3%
Nippon Telegraph &

Telephone (NTT)
10
India
3%
10
Australia
3%
IBM
2%
Others
26%
61
Bulgaria
0,2%
10
Cisco Systems
1%
Others
73%
Total (102 countries)
100%
Destination
2010
62 Indonesia
0,2%
63
0,2%
Greece
Company
Total (5.368 companies)

100%
The Investment Coordinating Board of the Republic of Indonesia
2012
2013
Share
100%
Source:
Financial Times, 2014.
45,000
40,000
35,000
FDI to ASEAN
To the world
30,000
in ICT sectors
25,000
USD18billion invested in 2009-2013,

Indonesia received 5% of FDI
15,000
20,715
20,000
18,554
10,000
To ASEAN
5,000
2,886
379
2009
Rank
Source
Share
Rank
Destination
Share
United States
36%
Singapore
46%
Japan
13%
Malaysia
16%
UK
10%
Vietnam
South Korea
5%
India
4%
Singapore
Rank
2010
Company
2011
Nippon Telegraph &

Telephone (NTT)
7%
14%
Samsung
4%
Thailand
6%
IBM
3%
Philippines
6%
SEA-ME-WE 5
2%
3%
Indonesia
5%
CSF Group
2%
Germany
3%
Cambodia
4%
Global Switch
2%
Finland
3%
Myanmar
(Burma)
Equinix
2%
3%
Mini-Circuits Tech.
2%
1%
Nokia
2%
10
Verizon Communications
2%
Others
46%
Malaysia
3%
10
China
3%
Laos
Others
17%
10
Brunei
0,3%
100%
100%
Total (75 companies)

2013
Share
2012
100%
Source:
Financial Times, 2014.
FDI realization in ICT sectors in Indonesia
Singapore in the lead with USD888million (85%) from USD1.04billion

of total FDI realized since 2010
4500
FDI Realization in ICT Sectors in Indonesia

by Origin Country
4000
3500
3000
Top-10 Countries Based on Capital Expenditure (USD million) in 2014(S1)

Excl. oil, gas, and financial sectors
2500
Rank
2000
Singapore
1500
1000
500
0
2010
2011
2012
2013
Country
2010
2011
2012
2013
2014(S1)
4.052
2.671
1.740
935
888
UK
122
South Korea
25
26
Japan
22
Germany
Australia
Netherland
305
675
485
175
South Africa
India
10
Hong Kong
466
Total (Top 10)
4.834
3.351
2.254
1.163
1.027
Total
4.951
3.686
2.416
1.304
1.044
Source: BKPM, 2014.
FDI realization in ICT

sectors in Indonesia
6000
5000
4000
Dominated by telecommunication
provider,
Slowing down since 2010
3000
2000
1000
0
FDI Realization in Indonesia by Subsector
2010
Top-10 Subsectors Based on Capital Expenditure

(USD million) in 2014(S1)
2012
Plan
Rank
*) Other telecommunication consists of :

telecommunication provider for personal
purpose, defense & security, broadcasting, also
trade of network capacity without providing
additional services
2011
Subsector
2013
Realization
2010
2011
2012 2013 2014(S1)
202
179
874
2.972
1.774
799
256
122
54
11
23
16
Web portal
17
24
11
Big trade of electronic and telecommunication

equipments
12
Big trade of computer, hardware and software
17
Construction of communication systems
Data processing and hosting activities
Electricity system installation
10
Multimedia service
3.686 2.416 1.304
1.044
Wired telecommunication
Other telecommunication*
Big trade based on fee or contract
Total
1
4.951
Source: BKPM, 2014.

Top-10 Companies
Source: BKPM, 2014.
Jakarta

Since 2010, 99.6% of total FDI are located in Java
FDI Realization per location
Economic corridor rank based on investment realization (USD million) 2014(S1)
Rank
2010
2011
2012
2013
S1 2014
Economic Corridor
Java
Bali & NT
Kalimantan
2010
2011
2012
2013
2014(S1)
4.909
3.684
2.415
1.299
1.042
41
Sumatera
Sulawesi
Papua & Maluku
4.951
3.686
2.416
1.304
1.044
Total
Source: BKPM, 2014.
DDI realization in ICT

sectors in Indonesia
Dominated by telecommunication
provider,
Slowing down since 2011
8000
7000
6000
5000
4000
3000
2000
1000
0
2010
2011
2012
Plan
DDI Realization in Indonesia

by Subsector
Rank
Top-10 Subsectors Based on Capital

Expenditure (IDR billion) in 2014(S1)
Other telecommunication*
Wireless telecommunication
*) Other telecommunication consists of :

telecommunication provider for personal
purpose, defense & security, broadcasting, also
trade of network capacity without providing
additional services
Subsector
2013
Realization
2010
2011
2012
2013
2014(S1)
2.878
7.389
5.726
3.913
3.722
71
824
268
102
Big trade based on fee or contract
Construction of irrigation,
communication and waste systems
Electricity system installation
Big trade of electronic and

telecommunication equipments
Data processing and hosting activities
Computer industry and/or cmputer

assembly industry
Computer equipments industry
10
Wireless telecommunication
equipments industry
166
2.951
7.394
6.553
4.347
3.824
Total
Source: BKPM, 2014.
DDI realization in ICT sectors in Indonesia

Top-10 Companies
Source: BKPM, 2014.
Jakarta
DDI realization in ICT sectors in Indonesia

Since 2010, almost 100% of total DDI are located in Java
DDI Realization per location

Economic corridor rank based on investment realization (IDR billion) 2014(S1)
Economic Corridor
2010
2011
2012
2013
Java
2.950,9
7.394,3
6.553,1
4.346,7
3.824,1
Kalimantan
0,1
0,1
Sumatera
0,5
2.950,9
7.394,3
6.553,2
4.347,3
3.824,1
Rank
2010
2011
2012
2013
S1 2014
Total
2014(S1)
Source: BKPM, 2014.
10
McKinsey: Indonesia by 2030, additional USD1.3 trillion

market opportunity from growing middle class
Indonesia today
Indonesia in 2030
Source: McKinsey Global Institute, September 2012.
11
Abundant opportunity from growing consuming class
71% 90million 7.7% p.a.
Population in cities,
producing
86% of GDP in 2030
Additional
consumers by 2030
Consumer
spend growth
in urban areas
1.1
USD
trillion
Market opportunity
in consumer
services by 2030
Urban Households Expenditure

Estimated annual revenue
in 2011 and 2030 (USD billion, 2010 price)
in 2030 (USD billion, 2010-11 price)
12
Population
(million)
Below Global
Consuming Class
Global Consuming Class
135
180
195
85
45
2010
2020
145
110
135
170
Middle Class Growth in ASEAN 2012-2020

Source: AC Nielsen, 2013.
2030 in 5-6% 2030 in 7%

GDP scenario GDP scenario
million
Consuming class
in Indonesia in 2030
4,666
174%
Middle class growth

in Indonesia
2012-2020
2010
2011*
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2,428
GDP per capita
(USD)
High middle class growth & consumer confidence index

120
Nielsen Consumer
Confidence Index
Source: AC Nielsen, 2013.
Source: IMF, Bappenas, UNPP, McKinsey
Indonesia
13
Driven by young and dynamic population

China 1.3 billion
India 1.2 billion
US 310 million
Fourth largest population in the world
Indonesia
248 million
90
Brazil
India
Russia
80
70
Dependency ratio
keeps falling until 2025
China
Indonesia
60
50
40
30
1980
Source: IMF, Bappenas, UNPP, McKinsey
1990
2000
2010
2020
2030
2040
2050
14
Rise of the Middle Class

60%
53%
47%
50%
40%
30%
56%
33%
29%
30%
29%
20%
TV, Refrigerator and Car/Motorcycle Ownership
10%
0%
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
2008
2009
2010
2011
2012
2013
Source: Roy Morgan Single Source Indonesia June 2013 (National)

Base: Indonesian Population 14+ n= 29,087
15
Car and Motorcycle Ownership by Households

100%
90%
Car
Motorcycle
81%
80%
76%
82%
71%
70%
60%
61%
62%
3%
4%
58%
50%
40%
30%
20%
10%
4%
4%
7%
9%
10%
0%
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
2008
2009
2010
2011
2012
2013

16
Ownership of Mobile Phone and Smart Phone

90%
84%
85%
76%
80%
68%
70%
60%
51%
50%
40%
41%
27%
30% 32%
20%
Have a Mobile Phone
10%
Have a Smart Phone
24%
14%
0%
Jun
Sep
2008
Dec Mar
Jun
Sep
Dec Mar
2009
Jun
Sep
2010
Dec Mar
Jun
Sep
2011
Dec Mar
Jun
Sep
2012
Dec Mar
Jun
2013

17
The most promising country for overseas business

(Japan Bank for International Cooperation Survey 2013)
Rank
2005
2006
2007
2008
2009
2010
2011
2012
2013
China
China
China
China
China
China
China
China
Indonesia
India
India
India
India
India
India
India
India
India
Thailand
Vietnam
Vietnam
Vietnam
Vietnam
Vietnam
Thailand
Indonesia
Thailand
Vietnam
Thailand
Thailand
Russia
Thailand
Thailand
Vietnam
Thailand
China
US
US
Russia
Thailand
Russia
Brazil
Indonesia &
Brazil
Vietnam
Vietnam
Russia
Russia
US
Brazil
Brazil
Indonesia
Brazil
Brazil
Korea
Brazil
Brazil
US
US
Russia
Russia
Mexico
Mexico
Indonesia
Korea
Indonesia
Indonesia
Indonesia
US
US
Rusia
Myanmar
Brazil
Indonesia
Korea
Korea
Korea
Korea
Malaysia
US
Rusia
10
Taiwan
Taiwan
Taiwan
Taiwan
Malaysia
Malaysia &
Taiwan
Taiwan
Myanmar
US
Positive Factors
1. Future growth potential of local market
2. Inexpensive source of labor
3. Current size of local market
4. Supply base for assembler
5. Industrial cluster development
Issues of Concern
1. Rising labor costs
2. Underdeveloped infrastructures
3. Execution of legal system unclear (frequent changes)
4. Intents competition with other companies
5. Difficult to secure management-level staff
6. Labor problems
Source: JBIC, November 2013
18
The most preferred destination in Asean region

for future expansion
(AmCham Singapore and US Chamber of Commerce)
Strengths
1. Tax structure
2. Stable government and political system
3. Personal security
4. Housing costs
5. Availability of low cost labor
Challenges
1. Infrastructure
2. Corruption
3. Laws and regulations
4. New business incentives offered by government
5. Availablility of trained personnels
Source: JBIC, November 2013
19
Open opportunities
for foreign direct investment

Negative Investment List
(Presidential Regulation No.39 /2014)
Investment Law
OPEN
(Law No.25 /2007)
OPEN
with
conditions
Mandate equal treatment for foreign and

domestic investors
Freedom to repatriate capital.
CLOSED
All business sectors/fields are open to
investment activities, except those that

are declared to be closed or open with
conditions.
Such conditions include:

Partnership with local partner,
Capital ownership,
Location and
Special permits.
Any investment activities

producing goods/services that is:
Prohibited by Indonesian law,
Dangerous,
Polluting,
Strategic for national security
and/or heritage.
20
Enrollment Ratio
Skilled workforce
(Comparison between the number of

students and people at the school age)
80.0
Challenges
70.0
The gross enrolment ratio for tertiary education was 23% in 2010.
60.0
In a 2006, half of the workforce had just a primary education or less.
50.0
Overall, the country spends about 1.3% of its GDP on education.
40.0
Total R&D spending is less than 0.5% of GDP.
30.0
High-tech exports as a percentage of totals are about 11%.
20.0
67.9%
50.9%
10.8%
University
18.5%
10.0
[Oxford Business Group, 2013]
0.0
20% 12years
Share of state budget
dedicated to education
since 2004.
High school
Top-5
Compulsory
schooling
since 2013.
Number of higher
education graduates
in 2020, covering 6%
of worlds total.
(OECD, 2012)
Partnership between vocational schools and companies operating

in Indonesia to produce graduates with specific skills. There are
850,000 vocational school graduates a year.
Establishment of university of professions, dedicated for the
needs of various professions, by and for the professions.
Education Facilities
35,000
28,600
30,000
High school
25,000
20,000
13,000
15,000
10,000
5,000
Tax incentive for companies who conduct R&D programs.
1,900
University
3,800
21
Challenges and progress in infrastructure

Challenges
The geographical realities: a vast archipelago.
Internet penetration in Indonesia stands about 22%, while the Asian average is 27.5% [Internet World Stats, 2012].
In the WEFs Networked Readiness Index 2012, Indonesia was ranked 53rd.
Many gaps still exist in terms of basic services, and infrastructure falls short when it comes to coverage and quality.
Infrastructure Budget
2005-2013
(IDR trillion)
IDR190
trillion
Progress
The fiscal budget allocated for infrastructure has been
increased eight folds since 2005 to IDR229.5 trillion in 2014.
Indonesia is focused on getting greater connectivity through
MP3EI: Malaysia-to-Indonesia high bandwidth optical fiber
submarine system, a new Australia-Indonesia-Singapore
cable has been announced [Deloitte, 2012 and IDG Connect,
2012].
The Palapa Ring, a fiber-optic back-bone covering all the
main region of the archipelago, scheduled to be finished in
2014 [OBG, 2013].
The Ministry of ICT also started to deploy mobile internet
service centers [OBG, 2013].
Source: National Planning Agency,22

2014.
Labor issues
Wage is no longer a single life support
National Social Security Program (Law No.4/2011)
Health Insurance (BPJS Kesehatan)
Workforce Insurance (BPJS Tenaga Kerja)
Universal health care
Pension, old-age savings, death

benefits and worker accidents
Applied in January 2014
Applied in July 2015
Wage = Productivity
Minimum wage is also based on productivity, besides the criteria of decent living (KHL) and
economic growth (Presidential Instruction No.9/2013).
Wage increase < KHL is directed to fulfill the criteria of decent living with clear plan and timeline.
Wage increase KHL is designed to be in line with productivity and approved by employer and
employees.
Improving certainty and transparency

BKPM recommands that wage increase refers to multiyear formula although the increase may
be implemented annually.
BKPM urges measurement mechanisms to monitor and evaluate wage policies.
23
Closed for Investment

Information and Communication Technology Fields

Closed to Investment
Business Fields
Remarks
Management and Operation of Radio Frequency Spectrum

Monitoring Stations and Satellite Orbit
24
Open for Conditions to Investment


Open with Conditions to Investment
Business Fields (KBLI)
Conditions
Institute for Community Broadcasting (LPK) radio

and television (60102, 60202)
Cable installation for home and buildings (43212)
Telecommunication kiosk (61914)
Internet cafe (61924)
Telecommunication network operation :
Fixed network operation (61100)
Motion network operation (61200, 61300)
Telecommunication service operation :
Content service (ringtone, premium SMS, etc)
(61911)
Call center and other value added service (61919)
Internet service provider (61921)
Data communication system service (61922)
Public internet based telephony service (61923)
Network Access Point (NAP) service and other
multimedia service (61929)
Remarks
Reserved for micro, small, medium

enterprises and cooperatives
65% maximum of foreign capital ownership
49% maximum of foreign capital ownership
25


Conditions
Integrated telecommunication network and service

operation (61100, 61200, 61300, 61921, 61922, 61923,
61929)
65% maximum of foreign capital

ownership
Establishment of Telecommunication Devices Testing

Institution (71202)
95% maximum of foreign capital

ownership
Public Broadcasting :
Radio (60101)
Television (60201)
Special permit : only monopoly

for Radio Republik Indonesia
(RRI), Televisi Republik Indonesia
(TVRI) and other local public
broadcasting
Construction service provider and operator for

telecommunication tower (42217)
Publication of newspapers, magazines and bulletins (press)
(58130)
100% local capital
Remarks
26


Conditions
Broadcasting Agency :
- Private Broadcasting Agency (LPS) (60102)
- Subscription-based Broadcasting Agency (LPB) (60202)
100% local capital and special

permit :
- Only for expansion, 20%
maximum of foreign capital
ownership
- Comply with broadcasting
regulations
Postal operations (53101, 53102, 53103)
Special permit and foreign

capital :
- 49% maximum of foreign
capital ownership
- Comply with postal
operations regulations
Remarks
27
TAX HOLIDAY
IMPORT DUTY
FACILITY
(MoF Regulation No.130/PMK.011/2011)
(MoF Regulation No.176/PMK.011/2009)
5-10
50
years
Investment
Incentives
Tax relief facility, starting

from the commencement
of commercial production.
% for a further 2 years
Reduction of income tax

after the expiration of the
tax holiday and can be
extended by MoF.
Pioneer industry
1. Basic metal industries;
2. Oil refinery industries and/or basic
organic chemicals;
3. Machinery industries;
4. Industries of renewable resources;
5. Communication devices industries.
IDR
trillion
Machines, goods,
materials for production
2 years import duty
exemption or 4 years for
companies using locallyproduced machines (min.30%).
Industries
Which produces goods and/or

services, including:
1. Tourism and culture
2. Public transportation
3. Public health services
4. Mining
5. Construction
6. Telecommunication
7. Port
Minimum investment plan.
28
Improvement of
Ease of Doing Business

2013
No.
Indicator
Procedure
(number)
Time
(days)
Improvement
Cost
Procedure
(% of income
(number)
per capita)
Time
(days)
Cost
(% of income
per capita)
Starting a business
10
48
20.5
16.6
Getting electricity
101
370.6
15
311.5
Paying taxes & premium

insurance
52
Enforcing contract
40
Resolving insolvency
Registering property
Dealing with construction

permit
259
32.2
hours/year
(% of profit)
498
139.4
(% of claim)
4.5
18
years
(% of estate)
22
(% of property
value)
13
158
87.2
7
24
136
32.2
hours/year
(% of profit)
175
1.28*
(% of claim)
1.75
5.08
years
(% of estate)
12
(% of property
value)
22
36.2
10.9
10.9
29
We provide one-stop shop

(PTSP) licensing provision and our
services for investors include
INDONESIA INVESTMENT
COORDINATING BOARD
Establishing an Investor Relation Unit at BKPM for
information, facilitation and inqueries handling from
existing and potential investors.
Rolling-out the Electronic Information Services
and Investment Licensing (SPIPISE) in 105
regions throughout Indonesia.
Helping contain various obstacles and giving
consultation.
Facilitating foreign workers permit.
Providing online investment tracking system.
PLAY
Providing online application process for the

principal license. Other steps needed would be
moved online later in 2014.
Thank You
Indonesia Investment Promotion Centre (IIPC)
Badan Koordinasi
Penanaman Modal
(BKPM)
Indonesia Investment
Coordinating Board
Jln. Jend. Gatot Subroto No. 44
Jakarta 12190 - Indonesia
t . +62 21 525 2008
f . +62 21 525 4945
e . info@bkpm.go.id
www.bkpm.go.id
Sustainable
Investment Growth
42.2
USD
42.2billion
total investment realization

in 2013 (IDR398.6 trillion),
2.1% above the 2013 target,
IDR390.3 trillion.
34.8
DDI
FDI
27.9
28.6
23.4
27.3% increase
from 2012 (IDR313.2 trillion)
24.6
19.5
15.0
16.6
22.4
67.8
% increase
FDI
10.8
4.2
2009
6.8
8.4
10.2
2010
2011
2012
13.6
2013
DDI
2013
Assumption:
Q1-Q2 rate USD 1 = IDR 9,300
Q3-Q4 rate USD 1 = IDR 9,600
% share
of total investment realization
2013
Investment Realization in Indonesia

Based on Capital Expenditure (USD Billion)
from 2012
39.0
32.2
% increase
from 2012
% share
of total investment realization
Source: BKPM, 2014
32
Investment
Realization
Progress
Semester I 2014
Semester I 2014
y-o-y
DDI
20.2%
Investment Realization
in Indonesia
FDI
13.5%
Based on Capex (IDR Trillion)

Excluding Oil & Gas and Financial sectors
Total
15.6%
Exchange rate USD1 = IDR10,500

Based on State Budget of 2014
DDI : Domestic Direct Investment

FDI : Foreign Direct Investment
*)Revised investment target 2014, BKPM Strategic Plan 2010 -2014

**) Towards the 2014 target
33
FDI Realization 2009-2014(S1)

47% of FDI flows to secondary sectors in
2014(S1) and 55% in 2013
6,000
5,000
4,000
3,000
2,000
FDI Realization in Indonesia by Sector

Top-10 Sectors Based on Capital Expenditure
Component of FDI
Realization
Rank
Based on Group of Sectors
Primary
Secondary
7,802
6,520
483
6,286
3,636
9,844
6,790
3,813
6,862
Tertiary
11,770 15,859 6,711
4,883
5,933
6,472
3,940
Sector
2009
2010
2009
2010
2011
2011
2012
2012
2013
2013
2014(S1)
Mining
333
2,201
3,619
4,255
4,816
2,740
Food Industry
534
1,026
1,105
1,783
2,118
2,065
Transport, Storage, and Telecom.
4,152
5,072
3,799
2,808
1,450
1,650
Plantation and Crops
143
751
1,222
1,602
1,605
1,142
Transport Equipment Industry
583
394
770
1,840
3,732
1,028
Chemical and Pharmacy Industry
1,183
793
1,467
2,770
3,142
979
Steel, Machinery and Electronics

Industry
655
590
1,773
2,453
3,327
859
Paper and Printing Industry
68
46
258
1,307
1,169
536
Non-Ferrous Mineral Industry
20
28
137
146
874
523
10
Electricity, Gas, and Water
349
1,429
1,865
1,515
2,222
430
10,816
16,215
19,475
24,565
28,616
14,288
3,337
3,034
1,000
Total
Source: BKPM, 2014.
34
Jakarta
FDI Realization 2009-2014(S1)

54% of FDI are located in Java in 2014(S1)
and 61% in 2013
7%
3%
FDI Realization per location

5%
12%
11%
10%
15%
13%
12%
10%
14%
Economic corridor rank based on investment realization (USD million) 2014(S1)

Excluding oil, gas and financial sectors
20%
Rank
87%
71%
2009
2010
63%
2011
56%
2012
61%
54%
2013 2014(S1)
Economic Corridor
2009
2010
2011
2012
2013
2014(S1)
9,371
11,499
12,325
13,660
17,325
7,707
Java
Kalimantan
284
2,011
1,919
3,209
2,773
2,793
Sumatera
777
747
2,077
3,729
3,395
2,058
Papua and Maluku
596
1,487
1,333
2,735
795
Bali and NT
234
503
953
1,127
889
553
Sulawesi
142
859
715
1,507
1,498
381
10,816
16,215
19,475
24,565
28,616
14,288
Total
Source: BKPM, 2014.
35
The USs investment doubled between 2012 and 2013

In 2013, the US was the 3rd biggest investor;
It ranked 4th in the 1st half of 2014
6000
FDI Realization in Indonesia by Origin Country
5000
Top-10 Countries Based on Capital Expenditure (USD million) in 2014(S1)

4000
Rank
Country
3.394
Japan
713
1.516
2.457
4.713
1.542
Malaysia
472
618
530
711
717
United States
931
1.488
1.238
2.436
663
South Korea
329
1.219
1.950
2.205
655
UK
276
419
934
1.076
646
Netherlands
608
1.354
967
928
605
Australia
214
90
744
226
450
Mauritius
23
73
1.059
780
431
10
British Virgin Islands
1.616
517
856
786
368
Total (Top-10 Countries)
10.747
12.417
15.590
18.532
9.470
Total (97 Countries)
16.215
19.475
24.565
28.616
14.288
1000
2012
2013
2014(S1)
4.671
2000
2011
2013
4.856
2010
2012
5.123
Singapore
2011
5.565
3000
2010
Source: BKPM, 2014.
36
>90% of the USs FDI in Indonesia

flowed to primary sectors,
Mining is still dominating
3,000
2,500
2,000
1,500
1,000
FDI Realization in Indonesia by Sector

Top-10 Sectors Based on Capital Expenditure
Rank
Component of
FDI Realization
Based on Group of Sectors
2010
2011
primary
2012
2013
secondary
S1 2014
tertiary
500
-
Sector
2010
2011
2012
2013
2010
2011
2012
2013
2014(S1)
766,9
1.336,5
1.138,1
2.233,8
616,0
19,5
17,2
2,1
55,7
21,5
3,3
0,1
1,7
6,6
Mining
Food Industry
Rubber and Plastic Industry
Electricity, Water, and Gas
0,3
0,3
0,3
4,8
Other Services
3,0
1,5
14,4
3,8
3,9
Basic Chemical Industry
3,7
10,4
9,4
20,9
3,8
Transportation Industry
3,5
48,8
81,6
3,7
Trade and Repair
132,2
106,7
2,8
5,0
2,3
Basic Metal, Machinery and Electronics
1,2
1,7
4,0
0,2
10
Transport, Storage and Communication
0,2
0,1
0,2
4,2
6,5
18,6
32,9
0,2
930,9
1.487,8
1.238,3
2.435,8
663,1
Others
Total (All sectors)
Source: BKPM, 2014.
37
USAs Investment
150,128
to the world 2009-2013
124,001
132,830
105,757
To the world
An 18% increase in 2012-2013
89,989
Based on Capital Expenditure (USD Million)
Excl. financial sectors
12%
10%
Rank
Destination
To ASEAN
13,956
14,822
2009
2010
5,486
5,095
2011
2012
2013
China
Canada
6.8%
Rank
UK
6.7%
ExxonMobil
4.8%
India
6.1%
Chevron Corporation
3.4%
Brazil
5.9%
General Motors (GM)
3.2%
Mexico
5.7%
General Electric (GE)
2.9%
Australia
2.8%
Ford
2.7%
Singapore
2.3%
Coca-Cola
1.7%
Software & IT services
Germany
2.3%
First Solar
1.7%
Automotive OEM
10
Ireland
1.8%
Starwood Hotels & Resorts
1.4%
29
Argentina
0.9%
Microsoft
1.3%
30
Indonesia
0.9%
10
Level 3 Communications
1.2%
31
Taiwan
0.9%
56%
8%
7%
7%
Coal, Oil and Natural Gas

Communications
Alternative/Renewable
energy
14.2%
7,082
100.0%
Company
Others
75.6%
Total (4,946 companies)
100.0%
Source: Financial Times, 2014
38
USAs Investment
150,128
to ASEAN 2009-2013
124,001
132,830
105,757
To the world
ASEAN received 7.7% of total FDI
89,989
To ASEAN
13,956
14,822
2009
2010
Based on Capital Expenditure (USD Million)

Excl. financial sectors
Rank
18%
Destination
Rank
7,082
5,486
5,095
2011
2012
2013
Company
Singapore
30.7%
IBM
1.1%
Vietnam
18.3%
Convergys
1.4%
Malaysia
16.3%
Cargill
0.5%
Indonesia
11.8%
Coca-Cola
3.8%
Philippines
11.7%
PepsiCo
0.9%
Thailand
8.9%
Procter & Gamble (P&G)
1.6%
Cambodia
1.4%
Crown Holdings
3.0%
Chemicals
Myanmar
0.5%
General Electric (GE)
0.4%
Communications
Brunei
0.3%
Arkansas Best Corporation
1.2%
Metals
10
Laos
0.1%
10
Omnicom Group
0.2%
Others
55%
8%
7%
6%
6%
Coal, Oil and Natural Gas

Electronic Components
100.0%
Others
86.0%
Total (712 companies)
100.0%
Source: Financial Times, 2014
39
Products Compliance
International Markets
David SIOW Regional Manager, APJC
September 2014
CQ JH
2006 Cisco Systems, Inc. All rights reserved.
Cisco Confidential
Market Surveillance Regime in the EU

EU has implemented a Market Surveillance regime
Products may be checked AFTER they have been placed on
the market but NOT before
Manufacturer is fully responsible
ALL is regulated by EU Directives
CQ JH
Cisco Confidential
EU Directives
EU Directives
Adopted by 28 EU member states + 4 EFTA countries
>95% of business in Europe
Most important Directives for Cisco:
R&TTE Directive (1999/5/EC)
EMC Directive (2004/108/EC)
LVD Directive (2014/35/EU)
RoHS Directive (2011/65/EC)
WEEE Directive (2002/96/EC)
(MDD Directive 93/42/EEC)
CQ JH
Cisco Confidential
Placing on the market - EU

Member states shall not prohibit, restrict or impede the
placing on the market and putting into service in their
territory of apparatus bearing the CE marking
Products bearing CE mark cannot be stopped at
customs, means they can freely travel into the EU and
within the EU
CQ JH
Cisco Confidential
Market Surveillance - EU
Market Surveillance and Market Enforcement is
responsibility of member states
Market Surveillance Authorities do random compliance
checks AFTER products are already placed on the
market
This is opposite to a Type Approval Regime where product
compliance is verified BEFORE entering the market
CQ JH
Cisco Confidential
FCC Approval Schemes - USA

Declaration of Conformity (DoC) : Generally used for Class B devices
such as computer peripherals , Analog FXO/modem, DSL, ISDN, T1,
specific compontents such as mother boards and power supplies as well
as for some radio receivers. Product must be tested in an Accredited
Lab
Verification : Generally used for Class A type devices (non-radio) and
some Class B devices (non-computer peripheral)
Certification: Used for Radio based products. Test reports sent to TCB
for reviews, and issues of FCC grant.
Telecom proudcts are done under a SDoC and not reviewed by either the
FCC or TCB
Test reports from any accredited test labs based on ISO 17025.
CQ JH
Cisco Confidential
Import Customs - Enforcement

As part of the importing process , the importer completes a
FCC 740 Form declaring the proudct is either approved for
importation and sale in the US, coming in for engineering
purpose, repair, or will be sold or exported.
The FCC Enforcement Bureau as well as the Authorization
lab investigate reports of non compliant products being
imported , as well as reported cases of interference.
CQ JH
Cisco Confidential
IDA Approval Schemes - Singapore

Enhanced Simplified Equipment Registration: Mainly
Customer Premises Equipment (CPE) such as Analog FXO
(>2 ports), ISDN, WiFi, SRD/Low Power. SDoC process
Simplified Equipment Registration: Equipment such as
ADSL, Cable modem, 2G/3G/LTE. Test reports from an
Accredited Lab or Manufacturer Lab or certificates, includes
SDoC.
General Equipment Registration: Equipment such as
Cellular Base station, Analogue land mobile, Wireless
Broadband Access Equipment. High potential for causing
interference and new technologies. Test reports from an
Accredited Lab or Manufacturer Lab, includes SDoC.
.
CQ JH
Cisco Confidential
Market Surveillance - Singapore

For post market surveillance, IDA may require the
supplier to submit the test results or evidence of
equipment certification as proof of conformity with the
applicable IDA Technical Specifications.
CQ JH
Cisco Confidential
CQ JH
Cisco Confidential
10
Mobile Phone Taxes: Implications for

Encouraging Investment
2 October 2014
Jakarta, Indonesia
Indonesia ICT Consultative Forum 3rd Executive Committee Meeting
Chris Zull, Spectrum Director Asia Pacific
Restricted - Confidential Information

GSM Association 2014
All GSMA meetings are conducted in full compliance with the
GSMAs anti-trust compliance policy
GSMA 2014
INTRODUCTION TO THE GSMA

About the GSMA
The GSMA represents the interests of mobile operators worldwide.
Spanning more than 220 countries, the GSMA unites nearly 800 of the worlds mobile operators with 250 companies in the
broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet
companies, as well as organisations in industry sectors such as financial services, healthcare, media, transport and utilities.
The GSMA also produces industry-leading events such as Mobile World Congress and Mobile Asia Expo.
Mobile taxation
GSMA leads the global conversation on mobile taxation as part of our Digital Inclusion programme
Over the last decade, weve produced numerous studies that describe and measure the mobile taxation barrier
GSMAs Digital Inclusion programme aims to expand connectivity by reducing the barriers to mobile Internet adoption
GSMA 2014
A NUMBER OF CONSUMER TAXES APPLY TO MOBILE

OWNERSHIP
Value Added Tax (VAT) or General Sales Tax (GST): these are consumer taxes incurred when purchasing
every component of owning and using a mobile phone. These taxes are ad valorem and are often expressed as a
proportion of the value of the good or service
Customs duty and excise taxes on imported goods. In mobile telephony, users in developing countries typically
pay import taxes on handsets and other mobile devices. These can either be expressed as a proportion of the
handset value or as a fixed sum or both. These also typically apply to imports of SIM cards, which are paid for by
MNOs and sold as part of the initial connection service
Special taxes on handsets, which in certain countries are still treated as luxury items and often attract high
custom duty rates and other special contributions
Special communication taxes on mobile usage: a number of countries still impose specific taxes on consumers
for using mobile services
Other telecoms specific taxes, such as SIM activation taxes or other taxes on connection, e.g. in Bangladesh and
Turkey, and monthly contributions for post-pay customers
Other special taxes, for example a tax on mobile operators gross revenues
GSMA 2014
TAX CONSTITUTES A SIGNIFICANT PROPORTION OF MOBILE

OWNERSHIP COSTS
Total Cost of Mobile Ownership (TCMO) includes handset costs, connection costs, and call, SMS and broadband usage
costs.
Each of the cost components identified above includes the actual component price as well as taxes paid by consumers.
A 2011 study in 111 countries showed that the proportion of TCMO account for by tax had increased to an average of
18.11% and was higher than this in many developing countries. (Deloitte/GSMA 2011, Global Mobile Tax Review)
Handset costs act as a barrier to the benefits of mobile usage and taxes constituted 23% of this cost on average. In eleven
countries tax constituted over 40% of the handset cost.
TCMO
Handset
Handset Cost
Mobile Broadband
Connection
Tax
VAT( $)
Customs Duty
Connection
Cost
Tax
VAT( $)
Telecoms
Specific Tax
Broadband
Usage Price
Tax
Calls
Call Usage
Price
VAT( $)
Telecoms
Specific Tax
SMS
Tax
VAT( $)
Telecoms
Specific Tax
Telecoms
Specific Tax
Total Taxes
VAT ($), Customs Duty, Telecoms Specific Tax
Total Taxes as a proportion of service costs
GSMA 2014
Service cost without tax
SMS Usage
Price
Tax
VAT( $)
Telecoms
Specific Tax
HANDSET/SMARTPHONE COSTS REPRESENT THE HIGHEST

BARRIER TO MOBILE TELEPHONY AND MOBILE BROADBAND
In the majority of developing countries, fixed access telephony is not as extensive due to
underdeveloped networks. Therefore, mobile telephony represents the universal method of
access to telephony and broadband
To access mobile telephony, owning a mobile handset is a necessary requirement
Equally, smartphones are required to access mobile broadband
However, acquiring a handset represents a significant one-off cost for consumers
GSMA 2014
This may negatively affect the poorest sectors of the population
People on low incomes and those living in rural areas may not be able to afford handsets
INCREASING TAXES ON HANDSETS RAISES BARRIERS TO

MOBILE TELEPHONY AND MOBILE BROADBAND
Handset prices and in the last months smartphones prices have dropped significantly, making it more
affordable for the largest sectors of the population to become connected
Indonesia currently has 317 million mobile connections, 29.3% of which are mobile broadband. With the right
regulations in place, we expect mobile broadband to account for 70.3% of a total of 436 million connections
(GSMA Intelligence, Indonesia data Q2 2014)
However, this positive price reduction effect could be lost due to the introduction of a 20% luxury tax on
mobile devices in Indonesia
By increasing taxation on handset ownership, there is a risk that many consumers may be priced out of
mobile broadband at a time when lower smartphone prices may expand mobile broadband penetration. The
local handset industry has indicated that smartphone sales could fall by as much as 50% due to the tax
Those on lower incomes and living in rural areas are likely to be most negatively affected by this tax
increase, with negative implications on the digital-rural divide and on inequality
20% luxury tax

on mobile
devices
GSMA 2014
Increase in the cost of

device acquisition.
The higher price represents a barrier to

access to mobile services. Low income
consumers are especially hurt. Service
adoption slows.
Access to high-end LTE handsets is
limited, slowing uptake of mobile
broadband
LOWERING HANDSET TAXATION HAS BEEN PROVED TO INCREASE

MOBILE PENETRATION AND MOBILE BROADBAND ADOPTION
Handset sales and mobile penetration before
and after the handset VAT removal
The Kenyan government recognised that

handset price represented a barrier to the
development of the sector
In August 2009, the 16% VAT on mobile phone

handsets was removed
Handset purchases have increased by more
than 200% since the removal of VAT
Mobile connection penetration has increased

from 50% to 70% of the population in Kenya
since the beginning of 2009
Source: GSMA Intelligence
GSMA 2014
EVIDENCE SHOWS THAT AIRTIME TAXES ALSO HAMPER USAGE

AND MOBILE OPERATORS INVESTMENT
In 2009, as part of its response to the economic crisis, the Croatian government imposed a 6% tax on
mobile gross revenues related to voice and text messages. This increased the consumer taxation as
a proportion of total cost of mobile ownership to 28% - the highest taxation levels in the region.
In the year immediately following the introduction of the tax, Croatia suffered the first ever fall in voice
and text message volumes.
Falling revenues and reduced demand led to a reduction in investment in network expansion and
other capex items.
Mobile operator capital investment in Croatia,
HRK millions
Total minutes of mobile usage in Croatia,

millions
Source: GSMA/Deloitte (2012), Mobile telephony and taxation in Croatia
Source: GSMA/Deloitte (2012), Mobile telephony and taxation in Croatia
GSMA 2014
MOBILE TAXATION RISKS JEOPARDISING THE WIDER POSITIVE

BENEFITS OF MOBILE
The mobile sector plays a key role in
economies across the world, and especially
in emerging markets, where mobile can
support inclusive socio-economic
development.
A 10%
substitution from
2G to 3G
penetration
increases GDP
per capita growth
by 0.15%
3.6% of
global GDP
and >10.5
million jobs in
2013
Direct
contributions to
GDP and jobs
Improved
efficiency and
outputs through
improved price
information
A 10% increase
in penetration
results in a
1.38% increase
in GDP
A doubling of
mobile data use
boosts per capita
income by 0.5
percentage
points
Mobile
penetration
enables GDP
growth
The
benefits
of mobile
Innovation and
enhanced
productivity
Reduced
travel time
and costs
Encouraging
small
businesses
Services that
enhance
socioeconomic
outcomes
Reduced access to mobile phones through the

proposed 20% luxury tax may reduce some of
these benefits, with negative impacts on
economic growth.
GSMA 2014
Mobile
health,
government,
education,
etc.
Improved
access to
banking, such
as M-Pesa in
Kenya
THE PROPOSED LUXURY TAX IS MIS-ALIGNED TO

RECOGNISED PRINCIPLES OF TAXATION
GSMA 2014
A 2014 study showed that when mobile taxes were

reduced, the short-term loss in government revenues
was quickly recovered in the medium term due to
growth of the tax base (GSMA/Deloitte 2014, Mobile
taxes and fees A toolkit of principles and evidence)
There are a number of principles that are widely
recognised as contributing to an effective tax system:
In general, taxation should be broad-based
Taxes should account for sector and product
externalities, such as the positive benefits of mobile
The tax and regulatory system should be simple,
easily understandable and enforced
Dynamic incentives should be unaffected
Taxes should be equitable, and the burden of
taxation should not fall disproportionately on the
poor
Governments should seek to align tax policies to
these principles
Ability of market to recover lost tax in years

following an ad-valorem tax reduction
Source: GSMA/Deloitte 2014

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Coordinating Ministry for Economic Affairs

THE INDONESIA ICT CONSULTATIVE FORUM:

1st Executive Meeting Indonesia ICT Consultative Forum

Mid/late April Executive Dialogue Launch and Panel Discussion

Elizabeth Hernandez, ICT Committee Chair, US-ASEAN Business Council

Outcomes: In addition to reporting our findings from the work streams, we

Presentation: Cloud Computing and Its Impact on Our Lives

or enterprises and need to maximize this digital economy, particularly to the

Satria Gunayoman, Consultant, Cisco Systems - HD Asia Advisory

Third Indonesia ICT Consultative Forum (IICF) Minutes

Discussion 1: Supporting Indonesias e-Commerce Market

Enzelin Sariah (Ministry of Trade)

Suggestion: there should be modules for SME education on e-commerce.

Discussion 2: Encouraging Trade & Investment in Indonesias ICT Industry

Taxation should be broad-based

Product Compliance in International Markets by David Siow (Cisco)

Nurul Ichwan (BKPM )

Nurul Ichwan (BKPM)

THE COSTS OF DATA LOCALISATION:

ECIPE OCCASIONAL PAPER

The impact of recently proposed or enacted legislation on GDP is substantial in all

The impact on overall domestic investments is also considerable: Brazil (-4.2%),

Welfare losses (expressed as actual economic losses by the citizens) amount to

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OVERVIEW OF RELEVANT INTERNET AND PRIVACY REGULATIONS

Scenario 1, which is based on the actual proposed regulations as defined in Table 1,

TABLE 1: OVERVIEW OF REQUIREMENTS IN LEGISLATIVE PACKAGES

Data localisation requirement

Consent required for data

Consent required for transfer

Data privacy officers

Sanctions for non-compliance

Government access required

Data retention requirement

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THE OUTCOME OF THE SIMULATIONS

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FIGURE 2: PROJECTED GDP GROWTH (2014); ADJUSTED FOR SCENARIO 2

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FIGURE 3: PROJECTED GDP GROWTH FOR THE EURO ZONE

FIGURE 4: GTAP SIMULATIONS ON INVESTMENTS FOR SELECTED COUNTRIES.

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FIGURE 5: GTAP SIMULATIONS ON EXPORTS FOR SELECTED COUNTRIES.

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The European Union

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from [http://igitur-archive.library.uu.nl/fss/2007-0206-201216/64.%20Explaining%20regulatory%20non-compliance.pdf ], 2003

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Thanguvalu, S. M. and Rajguru, G. (2004), Is There an Export or Import- Led Productivity

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# In# Denmark,# the# government# estiS

Per 100 people

Global: Mobile-cellular telephone subscriptions

Global: Individuals using the Internet

Indonesia: Mobile-cellular telephone subscriptions