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Digitalization shows Indonesian MSMEs the way to recovery
According to the 2019 Singapore Economic Survey, MSMEs that utilized digital tools boosted their value and productivity by 25 percent and 16 percent, respectively.
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Sole proprietor: A shoemaker in Tasikmalaya, West Java, photographs his products for online marketing on July 3, 2020. Communications and Information Ministry data shows that 9.4 million micro, small and medium enterprises (MSMEs) have gone digital. (Antara/Adeng Bustomi)
M
icro, small and medium enterprises (MSME), which account for 99 percent of all businesses and generate more than 60 percent of Indonesia's gross domestic product (GDP), have long served as the primary engines of Indonesia's economic growth. They also played a crucial role in protecting the country's economic resilience, especially during the past economic crises.
However, with government-imposed lockdowns, supply chain disruptions and a slowing of consumer demand during the COVID-19 pandemic, this sector has been experiencing a degree of pain they have never felt before.
According to a 2020 study conducted by Katadata Insight Center (KIC), 62,9 percent of MSMEs saw a decline in sales by more than 30 percent. Similarly, a Bank Indonesia (BI) survey revealed that 87,5 percent of Indonesian MSMEs were affected by the pandemic. Of this number, around 93,2 percent were negatively impacted on the sales side.
Though the vaccination program has made some headway and the government has started to ease mobility restrictions across the country, the reality for MSMEs remains worrying. The COVID-19 outbreak is forcing Indonesian MSMEs to rethink their business strategies because conventional "in-person" and "physical interaction" settings are no longer the norm.
As we look beyond COVID-19, the world will continue the transformation toward a digital economy. Cutting-edge technologies, including the Internet of Things (IoT), cloud computing, robotics, artificial intelligence (AI) and data science, have changed the world's economic landscape. In fact, the current pandemic has accelerated the urgency to digitize, as consumers are increasingly required to engage through digital platforms.
Digitalization has proven to be a crucial advantage for MSMEs, both before and during the COVID-19 crisis. According to the 2019 Singapore Economic Survey, MSMEs that utilized digital tools boosted their value and productivity by 25 percent and 16 percent, respectively. Digitalization could also help avert a complete economic halt for MSMEs during the crisis.
According to the Organization for Economic Cooperation and Development, the numerous MSMEs that successfully adapted to the digital platform have overcome the hardships of the pandemic, while those who failed to adapt have been left behind.
