From a worldwide perspective, it has been recognized that micro, small and medium enterprises (MSMEs) play a vital role in economic development, as they have been the primary sources of job/employment creation and output growth. Even now it is generally believed that sustainable and inclusive economic development in developing regions (i.e. Asia, Africa and Latin America) depends to a large extent on the vibrant private sector, in particular MSMEs. This book is about MSMEs in ASEAN (Association of Southeast Asian Nations), providing most recent evidence on development and performance of the en
Many reforms have taken place in Indonesia following the Asian financial crisis of 1997 - 1998. The government has embarked upon institutional transformation, making the country one of the region's most vibrant democracies. In social, economic, and political areas, Indonesia has seen much progress. Wide reforms have been carried out in all areas of governance, including in the financial sector, and a new development strategy has been adopted for "inclusive" economic development. This paper examines the shift in Indonesia's national economic development strategy from its "exclusive" orientation during the New Order era before the Asian financial crisis, to its "inclusive" orientation after the crisis. It also examines the impact the reforms have had on poverty reduction and the campaign to create a better environment for micro, small, and medium-sized enterprises (MSMEs). The constraints that Indonesia faces in implementing inclusive development, particularly financial inclusion, are also discussed.
Despite studies on microfinance (MF) or development of microfinance institutions (MFIs) in Asia developing countries, including countries as member states of the Association of Southeast Asian Nation (ASEAN), are growing, not so much attention have been given to the role of MF in financing micro, small and medium enterprises (MSMEs). Based on a key literature study and analysis of secondary/national data, the main aim of this study is to fill this gap. It shows that in many ASEAN member states (AMS) MF has developed to some significant degree, although the rate of growth (e.g. number of MFIs, number of depositors and debtors, total loans allocated, etc.) as well as the market structure of MF vary across member states. From the Indonesian case this study comes with two most interesting facts. First, majority of MSMEs do not have access to credit from banks and/or other formal non-bank financial institutions. Second, MF services or MFIs are growing fast, and the most popular MF program so far is Kredit Usaha Rakyat (KUR), or people business credit (i.e. a credit scheme without collateral), introduced during the SBY period.
AbstractIt is evident everywhere that levels of productivity are higher in large enterprises (LEs) and foreign-owned enterprises than in small and medium enterprises (SMEs), partly because they have higher levels of technology capacity. Thus increasing the productivity of SMEs might be facilitated through improved knowledge or technology. The literature on the development of SME clusters in developing countries argues that clusters are an effective means for technology transfer to SMEs and that government can play as the main source of technology transfer to the clusters, especially in regions where production linkages between LEs and SMEs are not yet well developed. This study indeed shows that in Indonesia government agencies are currently the largest providers of training and similar assistance. However, these programmes are marred by a low level of coverage, lack of effective evaluation and assessment, and a supply rather than demand orientation. The case study of the Tegal metalworking industry also shows that the most important channels for the transfer of technology to SME clusters are not only government agencies but also sub-contracting arrangements with LEs.
The Indonesian government has been trying to encourage entrepreneurship development by supporting the development of small and medium enterprises in the country, since these enterprises provide an avenue for the testing and development of entrepreneurial ability. This paper examines the current developments of SMEs in the country. The paper comes with a number of interesting facts. First, SMEs are of overwhelming importance in Indonesia, as they account for more than 90 percent of all firms outside the agricultural sector, and thus are the biggest source of employment. Second, the representation of women entrepreneurs is low. Third, women entrepreneurs are less educated than their men counterparts. Fourth, the main constraints faced by small entrepreneurs are lack of working capital and marketing difficulties. Finally, the majority of existing studies suggest that the effectiveness of government programs to support SME development programs is low. The paper concludes that in national efforts to develop high competitive entrepreneurships, owners of small enterprises should be given the first priority as they have some previous experience of running a business or of how to survive in competitive markets, and the emphasis should be to promote modernization, capacity building and size upgrading.
The growing attention, in literature on economic development, towards the role of Small-scale Industries (SSls) within the economy of the less developed countries (LDCs), is strongly associated with the recognised current economic and social problems of continuing imbalance in the labour market leading to high unemployment rates, the persistence of large intra- and inter-regional socio-economic inequalities; and the consolidation of extremely concentrated patterns of urbanisation, facing these countries. On the other hand, there is the notion stating that the importance of SSls decreases with the course of economic development. The available empirical evidence on this issue diverges significantly from the afore-mentioned notion. In the background of this contradictory evidence, the paper aimed to discuss this issue and arrive at some general conclusions which would help in deriving a pattern from the available studies and evidence on the issue under reference. The conclusion of the paper suggests that no matter how far a country has developed, but as long as domestic problems of high rates of unemployment, mass poverty or unequal distribution of income exist, SSls will continue to play an important role as a 'last resort' for the poor of the country.
