Condition of Small and Medium Enterprise in Indonesian

The most dominating business unit in Indonesian is small and medium

enterprise. Small and medium enterprise has proved that this sector could become the
foundation of the national economy in the face of the crisis in 1997. The number is
increasing from 47.1 million in 2005 to 48,9juta units in 2006, 85.4 workers absorbed
soul or in other words absorb 96.18 percent of the entire workforce in Indonesian (2007
bps). But there is no denying that Indonesian still has a big PR to upgrade small and
medium enterprise in order to survive in an era of globalization. Due to the influence of
globalization on small and medium enterprise development also determine the stability
of the national economy.
The era of globalization make social connections and interdependence between
countries and between people become increasingly limitless. During this period there is
a process for distributing new elements particularly concerning global information
through print and electronic media. Indonesian as a developing country cannot avoid
the current changes that occur due to the influence of globalization. Increasingly
sophisticated information technology and the free market as the world economic order,
as well as various aspects of life was affected must increasingly have a competitive
level and high efficiency.
Economic globalization is of international cooperation in the economic field,
which consists of the marketing of goods, technology development, and industry. In a
free market competition Indonesian should have a lot of small and medium enterprises
and able to compete against market competition. To meet the challenges of global
market of Indonesian should develop alternative business like small and medium
enterprise.
With the domestic market is so big, small and medium enterprise opportunities
in developing various kinds of efforts would be great anyway. As an illustration, if we
assume that the local industry is able to accommodate as much as ten percent of the
total population, then it is more than twenty million people will be consumer base. Thus,
the domestic industry actually does not need too troubled by glancing at the export
market, because in addition to requiring large transportation costs, various other
constraints often troublesome. But the opportunities there are also challenges to be
faced by the small and medium enterprise and the government. The challenge to make
products small and medium enterprise became superior of Chinese products. By
improving the quality and quantity so that the price can be competitive. Although in
these products incur higher prices, but when accompanied by a good quality of
Chinese products can then be set aside.
In China 40% of vegetable products from Indonesian. It's a huge opportunity for
Indonesian's agribusiness sector to seize the market in China. Therefore, small and
medium enterprise actors in the country should not focus on mass products, because
there will be competitive because of high production costs. High production costs, he
added that are not caused by infrastructure support and access to capital. small and
medium enterprise perpetrators now need production machinery which must come from
foreign beside agribusiness, which has enough potential to seize the market in China is
the product of bamboo and rattan craft. Surveys show rattan and bamboo products
from Indonesian in China reached 30%. China's small and medium enterprise products
which enter the Indonesian market after free trade between ASEAN and China
(ACFTA) only excels in the upper middle class. The advantage for high-powered
technology, but the necessary commodities lower middle income people, the
Indonesian products could still compete for quality and competitive pricing supported.

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 Development of cooperation and strengthening small and medium enterprise
within the framework of mutual benefit and equality is believed to be able to move the
economy. Perpetrators of Micro, small and medium enterprises (small and medium
enterprise) gets a fresh wind to continue to develop its business products, as one of the
ministerial meeting of the cooperative agreement / small and medium enterprise from
APEC members. Countries that are members of APEC agreed to encourage small and
medium enterprise actors in order to improve the flow of exports and imports from and
to the country. Through the upcoming APEC Indonesian will explore cooperation small
and medium enterprise development in various fields with a number of APEC member
countries, including Malaysia, the United States, China, Singapore, South Korea, and
Japan.
The influence of globalization has positive and negative effects for the
development of small and medium enterprise. The positive effect is easy to obtain
information that can increase knowledge for small and medium enterprises so they can
further develop. Technological developments also can be adopted by small and
medium enterprise. Information technology also helps small and medium enterprise to
make marketing more massive. Small and medium enterprises also have ample
opportunity to market their products to the overseas market, in other words
international more open. Small and medium enterprises are challenged to be "go
international"
While the negative impact will be felt for the small and medium enterprise that
has not been or are not ready to follow the progress of globalization. The increasingly
fierce competition not only from the products in domestic but also foreign products are
increasingly free to enter Indonesian. Small and medium enterprise product must be
prepared to compete on an international scale. If not, it will be a lot of small and
medium enterprises in Indonesian slumped. Small and medium enterprise small capital
to be inferior to entrepreneurs who have capital to survive the effects of globalization.
Traditional markets have been largely abandoned by the urban community, switch on
supermarkets which have many advantages over the traditional market. The
government absolutely must accompany and support the needs of small and medium
enterprise to thrive and compete in globalization.
small and medium enterprise weakness in Indonesian influenced the number
of sub-standard products when compared with the same products from other countries
or the price is too expensive compared to products produced from abroad. Examples
footwear from Thailand can be obtained at the price of USD 20,000.00 - 30,000.00
USD while the same product manufactured in Indonesian can be acquired at a price of
Rp 40.000,00. Based on this case indicates that the products produced in Indonesian
in the production process is inefficient
On the other hand, small and medium enterprise product is said by many as a
pillar of economic growth in Indonesian is facing a global economic downturn that is
uncertain. This can be seen when the economic growth of various countries in the
world experiencing less growth was positive as Japan that only grew 1.7% in 2013 but
in Indonesian's economy would grow about 5.8% in the same year. Economic growth in
Indonesian amounted's caused small and medium enterprise sector accounted for
5.8% of total GDP in 2013.
Characteristics of small and medium enterprises in Indonesian, based on
research conducted by AKATIGA, the center for micro and small enterprise dynamics
and the center for economic and social studies in 2000, are resilient to life and have
the ability to improve performance during the economic crisis. This is due to the
flexibility of small and medium enterprises in adjusting their production processes, able

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to grow with their own capital, able to repay loans with high interest and not too
involved in bureaucracy.
Small and medium enterprises in Indonesian can survive during the economic
crisis caused by 4 (four) things, namely: (1) some small and medium enterprises
produce consumer goods, especially those that are not durable, (2) the majority of
small and medium enterprises rely more on non- banking financing in the business
financing aspect, (3) small and medium enterprises generally strict product
specialization, in the sense that they only produce certain goods or services, and (4)
the formation of new small and medium enterprises as a result of the many layoffs in
the formal sector.
Small and medium enterprises in Indonesian have an important role as
economic support. The main driver of the economy in Indonesian has been basically
the small and medium enterprise sector. In this regard, at least there are several main
functions of small and medium enterprises in moving the Indonesian economy, namely
(1) small and medium enterprise sector as a provider of employment for millions of
people who are not accommodated in the formal sector, (2) small and medium
enterprise sector has contributed to the formation of gross domestic product ( GDP),
and (3) small and medium enterprise sector as a source of foreign exchange earning
country through the export of various types of products produced by this sector.
As the business group with the largest number in the structure of the business
world in Indonesian, ideally small and medium enterprises can play a dominant role in
many aspects of the economy , The reality shows that the small and medium enterprise
built by entrepreneurs who have limited assets, limited business skills and business
networks that are not well coordinated. This condition is inherited from the colonial era
to the present cannot be eliminated, although the number and role small and medium
enterprise in the economic system is relatively big. Small and medium enterprise more
often were marginalized even more so when development policy is directed towards
the pursuit of growth rate, which leads to capital-intensive activities. Multidimensional
recession period that gave birth to the reform era has also provided experience to the
Indonesian nation that the role of
Small and medium enterprises in the national economy needs to be considered,
therefore, in the face of the global economy small and medium enterprises should also
be prepared. One preparation that needs to be addressed is the improvement of the
productivity of small and medium enterprises with the application of appropriate
technology, especially technology that retains the small and medium enterprise criteria
as a group of labor-intensive effort. Other factors that also need to be developed in
order to face the market competition will be intense was the formation of business
networks that must be built through the efforts of the mastery of information and
communication effort. Both aspects of the business can indeed be developed by small
and medium enterprise when the small and medium enterprise is in optimal conditions
within the meaning of the internal condition has been quite strong and small and
medium enterprise environment conducive enough. The ability of small and medium
enterprise internal possible if the group has the power of capital and human resources.
While the external aspects of economic and political environment is conducive. The
conception of development towards the mastery of information and development of
production technology also did not go unnoticed government. To help develop a
network of information and the government has introduced the concept of business
centers and business clusters for development of production technology, while the
government has been disseminating appropriate technologies. Indeed, anything that
has been programmed by the government are stimulants and expected only small and

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medium enterprise together with the community to develop its own, in accordance with
the potential and conditions of each area.
Stimulant activity, government programs should ideally be a broad and
integrated perspective. Policies empowering small and medium enterprises should be
broader than just make a list financial programs and technical support that stand alone
without any connection with each other. To improve the effectiveness of policies
empowering small and medium enterprise is necessary to have a basic concept that
builds on a comprehensive review, especially concerning role of government in many
aspects. One of the central issues in the empowerment of small and medium enterprise
or this is the lack of continuity of the implementation of the programs implemented by
the government or the policy program are partly trial and error. For those reasons, the
need for the existence of a continuous policy directly related to the improvement of
government administration(good government).Government is the single actor that can
guarantee good government organization and a determinant role within the scope of
activities of businesses (small and medium enterprise and large businesses). Likewise,
without laying a basic precondition sound management, regulatory law investment in
basic social services, infrastructure and human capital.
Then special measures to promote business in Indonesian will only be a false
thing only. There are several priority policy areas for the improvement of governance,
among others: the creation and maintenance of political stability and macroeconomic.
Reform of the judicial system, as well as the unemployment budget deficit to reduce the
pressure on commercial interest. Good governance also means implementing policies
and programs in a transparent manner accountable. Environmental stimulation to
enhance the competitiveness of technically and financially. The government cannot
immediately overcome barriers both outside and internal deficits experienced by the
majority or even the entire 40 million micro, small and medium enterprises in
Indonesian.
Instead the role of government is to create incentives and help businesses to be
able to face the competition. In practical terms, this means that evokes an effort to
eliminate monopolies and remove various trade barriers within the country and
internationally. Thus increasing business opportunities and micro businesses and
access to productive resources to improve the competitiveness of micro-enterprises
and the ability to self-employment, regulatory instruments focused on standardization
and certification, as well as devices not directly such as increased access to
information and relevant training, and integrating the issue of the development of micro
in related policies.
Strong competitiveness should be required to increase small and medium
enterprise ranging from the supply side, access to finance, and capital. The resulting
products are expected to compete in the Asia Pacific market openness. Disclosure of
market competitiveness can also be used by the perpetrators small and medium
enterprise to expand market coverage. To overcome the problems that exist, it needs a
formidable entrepreneur development, the government has launched a program for
business development. Information technology support is also needed to develop
quality products and services.
Knowledge is also one important element of human resource development.
Provision of soft skills training and the like also become one of the solutions offered by
the government, but returned to his empirical whether it is working effectively or not. As
done by the ministry of trade of the Republic of Indonesian, which provides training in
product and interior design as well as the importance of patent information for
employers. Which is also accompanied by providing facilities or access to information
to the capitalization of financial institutions.

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 Small and medium enterprise strengthening is expected to answer a variety of
problems associated with maintaining economic growth and competitiveness amid the
global financial crisis, overcoming the problem of employment and overcome the
problem of poverty reduction.
The competitiveness of micro enterprises to productive resources is very
dependent on the progress and actions taken in the field of trade and investment,
infrastructure development, regional development, as well as the new communicates
shuttles. Privatization policies and government spending establish business
opportunities for micro-enterprises.
Besides micro-enterprises is the object, the offender once important
beneficiaries of employment policy, the environment and consumer protection.
Increasing the participation of stakeholders; private sector strong participation of
stakeholders the private sector in policy planning will prevent policy towards particular
groups and facilitate the identification of market distortion. In implementing the policy,
private sector business associations can act as a powerful multiplier, by taking over an
important role in the development of capabilities and increase access to micro, small,
market information and relevant technologies.
At last, public recognition of the private sector organizations will improve the
image of the organization while increasing market forces (bargaining power of the
members collectively against my head other economies. Thus, efforts to increase
participation stakeholder of the private sector will be intensified through the
combination of several kinds of these instruments, including the founder of the forum
stakeholders at various levels, instruments dedicated 'capacity and intensification of
cooperation with business associations in policy implementation stakeholder
participation of the private sector will also increase as the government reduces involved
in providing certain services such as the provision of market information that should be
channeled through private sector associations. Assessment regulations: make
regulations is one of the core functions of the state,
The government and the implementation of administrative arrangements affect
micro-enterprises access to markets, as well as transaction fees and administration.
Legal and regulatory uncertainty may create distorted decision-making process so as
not to excite the micro business planning and long-term investment. And can be a
fertile ground for corruption. Therefore, the creation of business rules and tax
regulations are clear, consistent and non-discriminatory, including administrative
planning for its implementation, a key instrument for the implementation of micro
enterprise development strategy.
From the practical side, this means the creation of laws administrative
procedure as a frame of reference that is increased in various government departments
and agencies that have the function of managing and reviewing legislation and key
laws affecting access to micro-enterprises to the market, transaction costs and
administration, and security business. Besides, there is need for increased attention to
the standardization and certification as a driver of market transparency and consumer
safety, as well as the stimulation of competition and reducing transaction costs and
business risk. Intensive collaboration with stakeholders ,relevant private in particular
business associations, will help identify regulatory barriers and administration and
implementation feasibility and design development. Including strong participation
stakeholders of private to reinforcing standardization of products and services. In this
case, the other key instrument is the establishment of a number of forums and working
groups of stake holders to support the regulatory review process and policies.

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 Does attempt to note in direct services. General experience in Indonesian and
in other countries shows that support direct services to micro businesses by the
government is less well, Indonesian has introduced several schemes of service micro-
enterprises, including credit subsidies, technical assistance and the obligation to make
partnerships between large companies and small companies. Nevertheless, the
scheme, including poorly managed. Promotions and programs government support to
micro-enterprises in the past tend to be a political rather than a real market, and thus
better reflect the purpose politic of on serving the needs of the business sector these
programs are designed bureaucratically centralized, dense with subsidies, and has
target limited. In terms of effectiveness, these programs also hamper the potential
provision of commercial services from the private sector. Therefore, as far as possible,
market distortions services to micro businesses should be addressed through
regulatory instrument, including Indonesian bank regulation and supervision standards
to institutions and financial services. If the direct intervention is considered absolutely
necessary, such interventions should be submitted to the market development, the
provision of financial services and commercial services run private support. This will
increase the reach, efficiency and sustainability of government intervention.

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