DIGITALPRENEUR AS INDONESIA S NEW ECONOMIC PILLAR. Jurry Hatammimi Institut Manajemen Telkom Indonesia

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1 DIGITALPRENEUR AS INDONESIA S NEW ECONOMIC PILLAR Jurry Hatammimi Institut Manajemen Telkom Indonesia THE 36TH FEDERATION OF ASEAN ECONOMIC ASSOCIATIONS (FAEA) CONFERENCE, Kuala Lumpur, Malaysia November 24, 2011 INTRODUCTION 1. Unemployment as impact of global financial crisis The rise of Indonesia educated unemployment : bachelordegree : (2009) (2010) graduate diploma : (2009) (2010) Limited employment offered by government and private sectors become entrepreneur 1

2 INTRODUCTION 2. Indonesia digital market - grow 1.880% from yr 2000 INTRODUCTION mobile internet user:22%(2009) 48% (2011) 8th world s largest mobile internet user cellular subscriber:52m(2007) 91M(2008) 117M(2010) Indonesia is a big and potential internet market 2

3 INTRODUCTION 3. Digitalentrepreneur bring SME as new national economic pillar Indonesia entrepreneur : persons (0,18% from total population) To raise 10%economic growthneed 4,8M persons (2%) OPPORTUNITIES provide ICT (content business) professional manpower & entrepreneur DIGITALPRENEUR. THEORIES 1. Digital entrepreneur (Pamudi, 2010) : individual who uses the internet as a tool to create commercial opportunities, disseminate information, and collaborate with clients and partners. 2. Creative Industry(UK-DCMS Task Force,1998) : Creatives Industries as those industries which have their origin in individual creativity, skill & talent, and which have a potential for wealth and job creation through the generation and exploitation of intellectual property and content 3

4 THEORIES 3. Creative Industries Sub Sector(based on Indonesia Creative Industry Study 2007): 1. Advertising 2. Architecture 3. Art and antiques market 4. Hand made 5. Design THEORIES 6. Fashion Design 7. Video, Film and Photography 8. Interactive Games 9. Musik 10.Art on stages 11.Printing and Publishing 12.Computer service and software 13.Television and radio 14.Research & Development 4

5 THEORIES 4. Micro, Small and Medium Enterprises (MSMEs) Criteria for micro-enterprises in Indonesia governed by the Regulation of the Minister of Finance No. 40/KMK.06/2003, small business by Law no. 9 year 1995 on Small Business, medium-sized enterprises by Presidential Instruction No. 10 of 1998 Criteria Micro Small Medium Asset - < IDR 200 M IDR 200 M M Total < IDR 100 M IDR M >IDR M Sales/year Man Power 1-4 persons 5-19 persons persons THEORIES four pillars driver of Indonesia economy : state-owned enterprises, cooperatives, private sector, MSMEs. Digitalpreneur as a branch of entrepreneurs are doing business in the form of groups of MSMEs. 5

6 ANALYSIS 1. The development of digital content 2. Indonesia s current content Digitalpreneuras Micro, Small and Medium Enterprises (MSMEs) The development of digital content Internet rapid transfer of knowledge technology as all people domain Competition of hardware & platform (Symbian, Windows Mobile, iphone OS, BlackBerry OS, Android, and Nokia OS) with its apps store Development of access network technologies (ADSL, WIMAX, 3G, and fiber optics) Increasing needs of support for business, social, entertainment Indonesia start digital content since 1998 (premium service call & SMS, ring tone, wallpaper, news, games, quiz, dial tone, video) 6

7 ANALYSIS 1. The development of digital content 2. Indonesia s current content Digitalpreneuras Micro, Small and Medium Enterprises (MSMEs) Indonesia s current content 1. Digital Content Competition Indigo Fellowship held by Telkom Indonesia IMULAI (Indonesia Mulai) held by Microsoft Indonesia and USAID IM2 Android Application Contest 2010 held by Indosat SWAstartup Yahoo Mobile Development Award (YMDA) 2009 Indonesia ICT Award (INAICTA) 2. International Awards Love Indonesia Blackberry 'Super Apps' Developer Challenge 2010 in Asia Pacific Region and Ramadhan Pocket Guide made by Veelabs Indonesia as finalist iwritewords the Best App Ever Awards Winner in Best App for Preschoolers in 2009 &the Best iphone Apps for Kids by The New York Times 15 local startup creation Asia's Top 50 Apps

8 Indonesia s current content 3. Acquisition and Cooperation Koprol acquired by Yahoo (USD 1 million) East Venture, Singapore invest in Tokopedia, Urbanesia, PriceArea, Scraplr Merah Putih Inc incubating Lintas Berita, Krazy Market, Info Kost, Ads On It, Daily Social, and Gantibaju.com Djarum(2 nd biggest cigarettes company) acquired the largest Indonesian community forum, Kaskus 4. Local Start-Up Communities gathers startup founders, digital/tech world enthusiasts, investors and media Indonesia s current content 5. Local Application News aggregator applications (Koran Droid, Indonesia on the Go) Religious (Quran, Islamic Pocket Guide, Christian Pocket Guide) Discount and shopping (disdus.com, tokobagus.com, Caripromo, yuktravel,love Indonesia) Culinary (Menoo!) Social networking (Friendzip) Instant messaging (12Frenz) Games (Football Saga, Ponporon, Lilocity, Nyanyi yuk) Business solutions (reservation services, Warehouse Management, Project Management, Invoicing, Customer Base, Product Base, Accounting, Timekeeping, Salary, CRM, ecommerce, and CMS) 8

9 ANALYSIS 1. The development of digital content 2. Indonesia s current content Digitalpreneuras Micro, Small and Medium Enterprises (MSMEs) Digitalpreneur included to the creative sub-sectors, which is computer services and software and also interactive games growth of creative industries from 2003 to 2008: number of businesses : 14.39%, workers absorbed : 14.71%, contribution to GDP :115.51% (increase IDR 193,308 billion) 9

10 Contribution of Indonesia Creative Industry Sector in 2003 and 2008 Indicator Contribution to GDP x IDR1M current value added (national contribution) Number of Labor (national contribution) Number of Business (national contribution) 167,355,000 (8.31%) 6,700,589 (7.38%) 2,623,965 (6.3%) 360,663,000 (7.28%) 7,686,410 (7.53%) 3,001,635 (6.4%) Comparison of GDP Contribution of Indonesia Industry Sector in 2003 and2008 No. Industries Sectors Manufacturing 24.6% 24.4% 2 Agriculture, Livestock, Forestry and Fishery 15.2% 14.4% 3 Trade, Hotel and Restaurants 13.0% 11.3% 4 Mining and Quarrying 8.3% 11.0% 5 Services 9.7% 9.6% 6 Construction 6.2% 8.5% 7 Creative Industry 8.3% 7.3% 8 Finance, Real Estate, and Business Services 7.9% 6.5% 9 Transport and Communication 5.9% 6.3% 10 Electricity, Gas and Water Supply 1.0% 0.8% 10

11 Fashion and Crafts sub-sector:nearly 70% of the total Gross Added Value creative. But Fashion average growth : -0.7% indicates stagnantor going to decline in subsequent years. Crafts average growth:3.17%. Both average growth warning not too dependent to both sub-sector. Sub-sectors digitalpreneur 2 digits average growth. Computer Services and Software 16.87% & Interactive Games13.88%. Far from national GDP average growth: 5.56% Comparison of Gross Value Added Contributionof Indonesia Creative Industry Subsector No Sub Sector Average GVA (x IDR 1M) Average Growth GVA Fashion 49.77% 43.48% 107, % 2 Handycraft 23.76% 24.59% 57, % 3 Design 7.03% 6.38% 15, % 4 Advertising 5.28% 7.58% 15, % 5 Publishing and Printing 4.35% 5.01% 12, % 6 Music 3.47% 5.23% 11, % 7 Architecture 2.25% 2.59% 5, % 8 TV and Radio 1.40% 1.64% 3, % 9 Computer Service and Software 0.66% 1.19% 2, % 10 Research and Development 0.63% 0.75% 1, % 11 Film, Video, and Photography 0.56% 0.63% 1, % 12 Art Market and Goods 0.55% 0.47% 1, % 13 Interactive Games 0.22% 0.36% % 14 Show Art 0.09% 0.10% % 11

12 CreativeIndustry sector workers absorption: 5 th among 10(2008), with the contribution: 7,686,410workers (7.53% from the total national workforce). Average worker absorbed growth of Creative Industry Sector: 3%( ) above national average of 1.82%. Comparison of Worker Absorbed Contribution of Indonesia Industry Sector 2003 and 2008 No Industries Sectors Agriculture, Livestock, Forestry & Fishery 46.26% 41.83% 2 Trade, Hotel and Restaurants 14.88% 16.76% 3 Services 10.54% 12.29% 4 Manufacturing 8.67% 8.53% 5 Creative Industry 7.38% 7.53% 6 Transport and Communication 5.47% 5.88% 7 Construction 4.52% 4.64% 8 Finance, Real Estate, and Business Services 1.30% 1.29% 9 Mining and Quarrying 0.80% 1.04% 10 Electricity, Gas and Water Supply 0.17% 0.20% 12

13 Worker absorbed : Interactive Games: 14% (highest & the only twodigit average growth) Computer Service & Software :5.61%. Both subsectors far from average national employment that is worth 1.82%. Comparison of Worker Absorbed Contribution of Indonesia Creative Industry Sub Sector 2003 and 2008 No Sub Sectors Avg Growth Fashion 53.30% 54.77% -0.26% 2 Handycraft 32.52% 31.07% -0.89% 3 Design 5.24% 5.32% -0.17% 4 Publishing and Printing 2.14% 2.37% 0.93% 5 Music 2.17% 1.51% -1.87% 6 TV and Radio 1.80% 2.13% 5.87% 7 Advertising 0.95% 0.83% 9.38% 8 Art Market and Goods 0.57% 0.63% 4.83% 9 Architecture 0.41% 0.39% 7.36% 10 Film, Video, and Photography 0.33% 0.38% 4.50% 11 Computer Service and Software 0.28% 0.27% 5.61% 12 Research and Development 0.15% 0.13% 4.39% 13 Show Art 0.11% 0.13% 5.08% 14 Interactive Games 0.04% 0.05% 14.00% 13

14 Number of business : Creative IndustrySector : 4 th (2008) 6.4% of the total number of businesses in Indonesia (3 million businesses) Reason of high numbers : Small size business Little barrier to entry Comparison of Total Business of Indonesia Industry Sectors 2003 and 2008 No Indutries Sectors Agriculture, Livestock, Forestry and Fishery 51.9% 45.8% 2 Trade, Hotel and Restaurants 21.6% 25.0% 3 Transport and Communication 8.0% 8.3% 4 Creative Industries 6.3% 6.4% 5 Manufacturing 5.4% 6.3% 6 Services 4.3% 5.5% 7 Construction 1.7% 1.6% 8 Mining and Quarrying 0.6% 0.7% 9 Finance, Real Estate and Business Services 0.2% 0.4% 10 Electricity, Gas and Water Supply 0.0% 0.0% 14

15 Comparison of Number of Business in Indonesia Creative Industry Sub Sectors No Sub Sectors Business AvgGrowth Fashion 50.28% 51.97% 0.4% 2 Handycraft 38.01% 35.16% -1.2% 3 Design 7.20% 7.13% 0.3% 4 Publishing and Printing 2.77% 3.68% 4.1% 5 Music 0.33% 0.47% 7.8% 6 Art Market and Goods 0.40% 0.39% 3.4% 7 Film, Video, and Photography 0.31% 0.23% -12.0% 8 Computer Service and Software 0.28% 0.30% 6.2% 9 Advertising 0.17% 0.26% 20.0% 10 Architecture 0.07% 0.14% 20.5% 11 TV and Radio 0.08% 0.13% 10.4% 12 Show Art 0.06% 0.06% 4.0% 13 Research and Development 0.03% 0.04% 10.9% 14 Interactive Games 0.01% 0.03% 38.0% The exports total value of the Creative Industrysector : IDR 58.4 trillion (2002) IDR trillion (2008) Pass through 2007 crisis Positive net trade/net export ( ) import < 10% of the export annualy 15

16 Comparison of Net Trade of Indonesia Creative Industry Sub Sector No Sub Sectors (x IDR 1000M) (x IDR 1000M) 1 Fashion 34, , Handycraft 17, , Music (62.36) 4 Publishing and Printing Art Market and Goods Interactive games (14.98) Computer Service and Software Research and Development ShowArt TV&Radio Architecture (0.54) (1.85) 12 Advertising (29.16) Design (636.55) 14 Film, Video, and Photography (35.17) (87.62) ANALYSIS 1. The development of digital content 2. Indonesia s current content Digitalpreneuras Micro, Small and Medium Enterprises (MSMEs) 16

17 Digitalpreneuras Micro, Small and Medium Enterprises (MSMEs) Digitalpreneur is part of MSMEs group important role of MSMEs in Indonesia economy : Number of business Number of work force absorbed Digitalpreneuras Micro, Small and Medium Enterprises (MSMEs) Comparison of Indonesia MSMEs Contribution with Large Enterprises in 2003 Type of Business Indicator Contribution to GDP x IDR 1M current value added (national contribution) Number of Labor (national contribution) Small Enterprises (include Micro) 450,415,060 (41.9%) 57,965,368 (88.7%) Medium Enterprises 187,825,282 (17.5%) 7,009,393 (10.7%) Small & Medium Enterprises 638,240,342 (59.4%) 64,974,761 (99.4%) Large Enterprises 436,901,970 (40.6%) 364,975 (0.6%) Total 1,075,142,312 (100.0%) 65,339,736 (100.0%) Number of Business (national contribution) 36,761,689 (99.85%) 51,889 (0.14%) 36,813,588 (99.99%) 1,831 (0.01%) 36,816,400 (100.0%) 17

18 CONCLUSIONS 1. Digitalpreneur developments prove that Indonesia is not only great as the Internet users, but also become a dominant player in Internet-based business. 2. Based on the indicator of national economic pillar, Creative Industry as a new sector (particularly digitalpreneur) experienced a significant increase & contributed GDP in the rank 7 of the 10 sectors (2008) CONCLUSIONS 3. Although subsectors of digitalpreneur (Computer Service & Software and Interactive Games) still give small contribution to national GDP, but the average growth of GVAis very encouraging and the value tend to above the average of 14 sub-sectors. Therefore, digitalpreneur should be developed more serious as it can really rely on the strength of the nation itself. 18

19 CONCLUSIONS 4. The importance of digitalpreneur recognized by the Republic of Indonesia Government. - Presidential Decree number 28 year 2008 on the National Industry Policy which is mentioned in chapter 2about priority for the creative, - Presidential Instruction Number 6 year 2009 on the Development of Creative Economy. 5. Digitalpreneur development is expected to have a major impact on Indonesia economy. creation of more work fields, local work forcewith specific skill, entry of large investment, big export earnings keep preservating the national culture identity CONCLUSIONS 6. Digital content business can be developed in ASEAN countries cooperation, towards ASEAN Economic Community (AEC)

20 THANKYOU 20

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