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mall and medium enterprises (SMEs) are feeling the pinch of the domestic economic slowdown as they report plunging sales in what is considered an '€œamber alert'€ for crisis, a high-ranking official says.

The Cooperatives and Small and Medium Enterprises Ministry has been monitoring revenues of central markets in Jakarta and has found that the likes of ITC Fatmawati, Mangga Dua, Grand Indonesia and Thamrin City have seen weakening income.

'€œSMEs have seen their sales slashed by 40 percent due to the economic slowdown,'€ the ministry'€™s secretary, Agus Muharam, said on Sunday, comparing SMEs'€™ recent sales with what had been recorded in '€œnormal'€ times.

'€œThis [sales drop] is actually a amber alert for crisis, although we are not heading in that direction yet,'€ he added.

SMEs, which are considered the backbone of the country'€™s economy, contribute 57 percent to the gross domestic product (GDP) as per 2013, according to the latest data released by the Cooperatives and SMEs Ministry.

They employ 97.3 percent of employees in Indonesia and consist of 57.7 million enterprises.

Agus said SMEs accounted for 95 percent of businesses operating in the country, therefore healthier conditions for them would create a strong foundation for the economy, especially amid ongoing sluggish economic growth.

Meanwhile, Enny Sri Hartati, director of economic think-tank the Institute for Development of Economics and Finance (Indef), blames government policy for the sales drop rather than the economic slowdown.

'€œ[The SMEs sales drop] was due to the government'€™s move to increase fuel prices without considering the hit to purchasing power,'€ Enny explained.

She urged the government to issue policies that helped businesses grow.

Enny cited an example in the textile industry, which has seen flat growth in recent years amid weak sales and rising production costs, with thousands of workers at textile factories across Java getting dismissed earlier this year.

'€œIt'€™s so unfortunate that the government has not made any concrete move to help boost textile sales,'€ she added.

In an effort to aid in the growth of SMEs, Bank Indonesia (BI) issued a regulation that required commercial banks to channel at least 20 percent of their credit portfolios to the SME sector by 2018. SMEs are classified as those having net assets worth less than Rp 50 billion.

The government is also encouraging rural microcredit banks (BPR) to contribute to SME growth, as only 4.5 percent of SME credit recorded until May this year were handled by BPRs. The remaining 95.5 percent were disbursed by commercial banks. (saf)