PROGRAM INTERVENTION TO IMPROVE SMEs’ PRODUCTIVITY “ Improving Economic Growth and Competitiveness ” Rahma Iryanti Deputy Minister of National Development Planning/Deputy Head of the National Development Planning Agency (Bappenas) Jakarta, 15 June 2017
PRESENTATION MATERIALS MSMEs’ Profiles Challenges and Obstacles Improving MSMEs’ Productivity Government’s Supports 2
MSMEs’ Profiles
DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) (1) NON-AGRICULTURAL SECTOR Proportion of Micro and Small Enterprises compared to Medium-Large Enterprises Business Unit Manpower 1.67% Medium 23.72% Medium and Large and Large Enterprises Enterprises 76.28% Micro 98.33% Micro and Small and Small Enterprises Enterprises Source: Economic Census 2016, Edited 4
DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES (2) NON-AGRICULTURAL SECTOR Distribution of Micro and Small Enterprises vs. Medium and Large Enterprises 1.35 million of SME units (98.07% of total companies) 4.89 million of SME units 2.13 million of SME units 451 thousand of SME units (98.51% of total companies) (98.84% of total companies) (98.36% of total companies) 2.7 million workers of SME (76.06% of total workers) 4.19 million workers of SME 10.20 million workers of SME (87.40% of total workers) 989 thousand workers of (82.27% of total workers) SME (80.74% of total workers) 1.49 million of SME units 32.35 million of SME units (99.54% of total companies) (72.59% of total companies) 3.13 million workers of SME 15.93 million workers of SME (85.01% of total workers) (98.20% of total workers) Source: Economic Census 2016, Edited 5
DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES (3) NON-AGRICULTURAL SECTOR Distribution of Micro and Small Enterprises by Business Nature Accommodation, Food and Beverage Other services Manufacturing industry Mining and excavation Wholesale and retail trading; repair and maintenance of motor vehicles Real estate Human health and social activities Education Information and communication Transportation and warehousing Water management, waste water processing, trash recycle and management, and remediation Company services Supply of electricity, gas.hot water steam, and cold air; Construction Financel and insurance Source: Economy Census 2016, edited a. Nationally, 98.33% business unit is dominated by micro and small enterprises (SMEs) and they absorb 76.28 percent of the national manpower. b. Their main businesses are 1) wholesale and retail trading, and motor vehicle repair and maintenance, 2) accommodation and food and beverage, and 3) manufacture industry. c. Three major islands of their distribution are in Java, Sumatra and Sulawesi. 6
DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES (4) JUMLAH TENAGA KERJA INDUSTRI MIKRO DAN KECIL INDUSTRIAL SECTOR Value Added of Micro Indutry Total Manpower in Micro Industries (Million Workers) (Trillion Rupiah) 3.5 3 60 2.5 50 2 40 1.5 30 1 20 10 0.5 0 0 Makanan dan Tekstil dan Kulit, Barang Furnitur Logam Dasar Komputer, Kendaraan Makanan dan Tekstil dan Kulit, Barang Furnitur Logam Dasar Komputer, Kendaraan Minuman Pakaian Jadi dari Kulit dan dan Barang Perlatan listrik Bermotor dan Minuman Pakaian Jadi dari Kulit dan dan Barang Perlatan listrik Bermotor dan Alas Kaki Logam dan Mesin Alat Angkutan Alas Kaki Logam dan Mesin Alat Angkutan Lainnya Lainnya 2012 2013 2014 2015 2012 2013 2014 2015 Total Manpower in Small Industries (Million Workers) Value Added of Small Industries 3.5 60 3 50 2.5 40 2 30 1.5 20 1 10 0.5 0 Makanan dan Tekstil dan Kulit, Barang Furnitur Logam Dasar Komputer, Kendaraan 0 Minuman Pakaian Jadi dari Kulit dan dan Barang Perlatan listrik Bermotor dan Makanan dan Tekstil dan Kulit, Barang Furnitur Logam Dasar Komputer, Kendaraan Alas Kaki Logam dan Mesin Alat Angkutan Minuman Pakaian Jadi dari Kulit dan dan Barang Perlatan listrik Bermotor dan Lainnya Alas Kaki Logam dan Mesin Alat Angkutan Lainnya 2012 2013 2014 2015 2012 2013 2014 2015 Source: Indonesia Statistics 2015 and 2016, CBS
CHALLENGES AND OBSTACLES
CHALLENGES � High number of population in productive age compared to job opportunities (114 million) � Breakthrough is required to create businesses and improve cooperation so as to improve economic growth � Tighter economic competition encourages SMEs/START UP to improve their businesses MSME & Cooperatives’ Conditions • Huge potential requires supports (government, Role* private sector, and • 96.7% general public) workers • Indonesia is a • 15,7% country with the ekspor Obstacles highest number of � Low SMEs in ASEAN producti vity � Poor access to capital, technolo * Data: Kementerian KUKM (2015) gy and
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MAIN OBSTACLES IN DOING BUSINESSES • One of factors that impede SME’s development is capital, loan with interest rate All SMEs (%) Loan problems 19,9 • Interest rate imposed for SMEs and Raw materials 18,8 customers compared to cooperatives and Manpower and human large companies, is among the highest 17,2 resources compared to those imposed in other countries Access to markets 16,7 Sales and distribution 9,7 • Financial institutions’ poor trust toward Licensing 7,5 SMES makes it difficult to obtain loan. Managerial training 3,2 Production 3,2 • It is necessary to have a communication in Production technology 2,2 order to connect every partner and stakeholder (incubator agencies: PT, K/L, Profits and growth 1,6 private sector and other general public) so as to improve SMEs and Start Up as a solution.
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IMPROVING MSMEs’ PRODUCTIVITY
MSMEs in business competition Key: Productivity � Indicator: Human Resource Efficiency 1. Improve SMEs’ added value 2. Product quality 3. Employees’ wages 14
How to improve SMEs’ productivity That SMEs’ improved productivity remains the Government’s main agenda in order to improve Indonesia’s economic competitiveness. It is necessary to identify determinants that form SMEs’ productivity, so that interventions are more focused and produce optimum results. Although productivity rate is company’s (businesspeople)’s internal issue, but when only SMEs are committed to improve their performance, their productivity will go slow and does not provide optimum result. 15
GOVERNMENT’S ROLE IN IMPROVING PRODUCTIVITY Ideally, productivity improvement is an interaction process between the government as � regulator and facilitator, and business society/SMEs. Therefore, productivity improvement is an interaction among three determinants � 1 2 3 Policy environment, related with government’s policies, SME’s managerial skills, related with Workers’ quality, related either directly aimed at companies’ efforts to make innovations, with educational level, manpower issues or provision capital deepening , improve technological skills and work ethics of incentives in order to capabilities, renumeration system, and facilitate productivity career development. improvement 16
GOVERNMENT’S SUPPORTS FOR MSMEs
GOVERNMENT’S SUPPORTS FOR SMEs Improved access to finance : Easy licensing : Improved start-up capital for new businesses Easy licensing based on Presidential Regulation No. 98 of 2014 concerning Licensing for Micro and Small Enterprises � Improved micro financial agencies in order to improve professionalism and service coverage for micro � Licenses are granted in the form of a piece of legal businesses and other general public script issued by the local government (Kecamatan) � Provision of micro business loan scheme with collateral for micro and small enterprises supports to obtain loans � Licenses are granted so as to provide legal certainty � Provision of facilitation/preparation for micro businesses and empower micro and small enterprises in who will apply for business loans with collaterals, and developing their businesses during loan management period � Empowerment accessible by micro and small � Improved capital for new cooperatives in poor areas so as enterprises through this business license covers to facilitate micro business development by their certainty, business protection, business facilitation, members easy access to finance, etc. � Provision of start-up capital for new businesses, which � Provision of online business registration system have yet to have access to start up capital to open a new business. 18
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