A decade of Indonesian MSME journey: Empowering local products to penetrate global markets – The Jakarta Post

Micro, Small, and Medium Enterprises (MSMEs) and their Role in the National Economy

Micro, small, and medium enterprises (MSMEs) hold a vital role in the national economy, becoming a backbone of economic stability, and have proven to be resilient in the face of crises such as the COVID-19 pandemic. MSMEs dominate economic growth by contributing around 60.5 percent of gross domestic product and absorbing 96.9 percent of the total workforce. Therefore, the government continues to encourage the MSME sector through various policies and programs that are expected to advance the sector so that it can participate in the global value chain.

MSMEs and Economic Stability

MSMEs play a vital role in creating economic stability. When the COVID-19 pandemic changed the global economy, MSMEs operating in various local sectors persisted and even grew. The local products during that time, such as batik masks and personal protective equipment (PPE), not only met the needs of the domestic market but also managed to penetrate the international market. This success shows the great potential of Indonesian MSMEs to participate in the global value chain.

Government Support for MSMEs

Over the past decade, the Indonesian government has shown a strong commitment to support the growth of MSMEs, especially in expanding market access abroad. As part of the 2015 Economic Policy Package, the government issued Finance Ministry Regulation (PMK) No. 177/2016 to support the improvement and expansion of export markets for small and medium enterprises (SMEs). This regulation provides for exemption from import duties and elimination of VAT or PPnBM on the import of goods, materials, and machinery for export purposes, known as Export Destination Import Facilities (KITE) for Small and Medium Industries (IKM). Furthermore, on Jan. 30, 2017, President Joko “Jokowi” Widodo officially launched the policy at the Tumang Copper Craft Center, Boyolali Regency.

The utilization of KITE IKM facilities has also shown a positive trend in the last 10 years. This is indicated by the addition of companies receiving facilities followed by an increase in export value each year. The number of companies receiving KITE facilities reached 125 in the second quarter of 2024 with a total export contribution of US$42.36 million.

Collaborative Efforts and Success Stories

The government also facilitates the expansion of the MSME product market abroad through collaboration between financial, diplomatic, and banking functions, as well as developing MSME potential through structured and standardized MSME empowerment with the Export Clinic program. In recent years, the government’s collaborative actions have been realized through the provision of training and opportunities to learn and explore foreign markets. These collaborative efforts bring information sources from the destination country closer to MSME actors through various activities, such as business matching, international entrepreneurship development and training, facilitating the organization of product exhibitions, and forms of international promotion of MSME products. Meanwhile, since 2018, the Export Clinic program has been providing technical assistance and mentoring to MSMEs to ensure they are ready and able to penetrate the export market. The Export Clinic acts as a center for consultation and training on exports, providing practical guidance on licensing, market connections, and various fiscal facilities available to MSMEs.

Various success stories appeared through this program. For example, from the food industry, in the year 2023, Kelompok Tani Wanoja successfully exported seven tonnes of Arabic coffee to Saudi Arabia and PT Saricotama exported 54 tonnes of frozen coconut juice to China. From the craft industry, CV Bunga Melati successfully exported 9,897 items of coconut fiber decorative pots (kokedama) to Japan in 2023. From the beauty industry, MSME Henny Beauty with its bedda lotong product, a traditional Bugis body scrub, has penetrated the Asian and Australian markets.

Supporting SDGs and Building a Positive Image

The Indonesian government, through various initiatives and synergy between ministries and institutions, is committed to supporting MSMEs and to increasing their competitiveness in the global market. Supportive programs, such as the Export Clinic, fiscal incentive facilities such as KITE IKM, and international collaborations have paved the way for MSMEs to become sustainable export players. The success of MSMEs in penetrating the export market will not only increase national income but also build a positive image of Indonesia internationally.

Source: Finance Ministry

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The issues highlighted in the article are connected to SDG 8: Decent Work and Economic Growth, SDG 9: Industry, Innovation, and Infrastructure, and SDG 17: Partnerships for the Goals.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Under SDG 8: Target 8.3 – Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation.
• Under SDG 9: Target 9.3 – Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets.
• Under SDG 17: Target 17.9 – Enhance international support for implementing effective and targeted capacity-building in developing countries to support national plans to implement all the Sustainable Development Goals, including through North-South, South-South, and triangular cooperation.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 8.3.1: Proportion of informal employment in non-agriculture employment, by sex.
• Indicator 9.3.1: Proportion of small-scale industries in total industry value added.
• Indicator 17.9.1: Dollar value of financial and technical assistance (including through North-South, South-South, and triangular cooperation) committed to developing countries.

4. SDGs, Targets, and Indicators

Source: thejakartapost.com