One Stop Information Service for Indonesian SME

Like in other countries, SME are the main players in the production, distribution and service sectors of the Indonesian economy. The proportion of SME is high in all sectors of the Indonesian economy. If all forms of enterprise, formal and informal, are included in all sectors, there were an estimated 40 million SME operating in Indonesia in 2000, employing approximately 73 million people.

However, most of these enterprises are micro or cottage enterprises rather than SME in the strict sense of the word and the largest percentage are in the agricultural sector (PPTA & The Asia Foundation, 2005: 25). During the economic crisis many of these SME turned out to be more resilient than the highly indebted conglomerates.

The Indonesian government has for a long time been concerned with the development of small- and medium-scale enterprises (SME). Variety programs were designed to promote the SME. However, despite the often-stated government concern about SME development, during the Soeharto era SME were actually not considered a vital part of the economy. Rather than viewing SME as important economic actors and an important part of a vibrant economy, many Indonesian policy-makers viewed them primarily as a social group, which needed assistance based on welfare or equity considerations rather than efficiency. As a result, many programs are in vain and insufficient. Programs maybe useful to those who know about them, but those who could use them the most are unaware of their existence. Many government policies failed to have the desired effect on society.

Through many surveys and studies conducted by concerned academics and foreign experts from donor agencies, it has been recognized that the unavailability of sufficient financing, collateral, applied technology, managerial, skilled human resources, and access to commercial banks, markets, networks, and information are common problems of SME development in Indonesia. They all indicated that market-oriented, demand-and private sector-driven SME promotion programs will be more effective in developing viable SME, including raising their technological capabilities, than the ‘subsidized and protect’ SME programs motivated by ‘welfare’ or ‘equity’ considerations (ADBI: Policies for Private Sector Development in Indonesia, Thee Kian Wie).

Inefficiencies in the licensing framework also create significant obstacles for growing firms. One of the factors contributing to the existence of bribes is the lack of information on licensing processes. It takes up to 97 days to register a business in Indonesia and the level of bribes paid by firms is about 40 percent of the taxes firms pay. The Asia Foundation survey shows that 75 percent of entrepreneurs do not have information on licensing in their regions and because of this, almost half of the use the services of brokers.

The lack of success of the government SME programs can also be attributed to lack of coordination between the agencies in charge of SME programs (World Bank, 2001: 2.16). During the past decade there were at least two government agencies directly concerned with SME development, namely the Directorate-General of Small-Scale Industry, Department of Industry, and the Office of the State Minister for Cooperatives and Small Enterprises. Between these two major agencies concerned with SME development there was little communication to delineate a clear division of their respective responsibilities. There has also been a proliferation of other government subsidized credit schemes extended to small enterprises administered by various government agencies, many of which inevitably overlapped with one another.

Currently, people who have interests in entrepreneurship and small medium enterprise can find information at several government and non-government websites. Each of the website give different kind of information. Some of the information may be adequate for people already engaged in small business. However, none of the above websites give comprehensive advice and guidance to small business operators throughout Indonesia, providing information, referral, business services, and programs tailored to the specific needs of the small business sector. This is not a good, efficient and effective roadmap for entrepreneurs to be. Especially when people have to go to so many different sources.

Business research and development services to SME that are truly responsive to the real needs of the SME should preferably be provided by the private sector, complimented (but not dominated) by government agencies if necessary. Every country has a one-stop service dedicated to encourage small business development. In USA and Australia each state has one. It is time for Indonesia to have one too.