TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Optimizing Indonesia’s G20 presidency to boost the MSME sector’s growth
In mid-2021, McKinsey wrote that if Indonesia can quickly return to pre-pandemic growth rates, the country may become the world’s seventh-largest economy by 2030, from its 16th position in 2019.
Change Size
Minding my own business: Women package crackers made of betel leaf as part of their small business in Neglasari subdistrict, Tangerang, Banten, on Monday. Women Empowerment and Child Protection Minister I Gusti Ayu Bintang Darmawati has called for more support for women running micro, small and medium enterprises (MSME). (Antara/Fauzan)
For over two years, it is obvious that the COVID-19 global pandemic impact is immense. As the world enters the recovery phase, Indonesia sets an example for other nations by showcasing its ability to do it by having in place excellent macroeconomic and fiscal policies that provided the flexibility to adapt without destroying many years of discipline.
One of the ways to boost their recovery is the collaboration of the public and private sectors, as well as civil society. By the same token, the emergency response was proven effective and efficient, which resulted in a quick rebound in economic activities. In 2021, gross domestic product growth was back at 3.7 percent and is expected to accelerate to 5.2 percent in 2022, based on the World Bank data.
At the Global Health Summit and the Global Supply Chain Summit in 2021, President Joko “Jokowi” Widodo highlighted the need for collaboration between countries, especially to continually increase the capacity and opportunities of the private sectors, encourage digital transformation, as well as expand access to business players in the supply chain, including micro, small, and medium enterprise (MSME). Indonesia’s role model for recovery was widely recognized, as the country is entrusted with the Group of 20 (G20) presidency for the first time since G20 was founded in 1999.
As the world's fourth most populous nation and 10th largest economy in terms of purchasing power parity, the nation’s MSME sector is the lifeblood of Indonesia's economy. In mid-2021, McKinsey wrote that if Indonesia can quickly return to pre-pandemic growth rates, the country may become the world’s seventh-largest economy by 2030, from its 16th position in 2019, rising above Italy, Russia, South Korea, and others.
To achieve this goal, the archipelagic nation must focus on building productivity and competitiveness once the COVID-19 pandemic subsides. The priority clearly should be to continue nurturing the growth of the MSME sector, making it resilient and competitive on all levels: nationally, regionally, and globally.
Indonesia is home to more than 64 million MSMEs, absorbing a vast majority of the national workforce, with still a huge room for economic growth. During the COVID-19 pandemic, MSMEs contributed over 60 percent of the national GDP and were able to employ 97 percent of the total workforce in Indonesia, with women in control and at the forefront of many of these businesses.
However, MSMEs need to make the most of technology in promoting and grow their businesses to stay competitive in this digital-first era.
The development strategy in addressing such challenges should necessarily have an inclusive, responsive system of governance — which rules justly, invests in its people, and promotes growth to small and medium-sized businesses. Indonesian MSMEs must benefit from this G20 presidency. The G20 slogan “Recover together, recover stronger” needs to apply not only to big businesses but to smaller-scale concerns such as MSMEs. During the presidency (December 2021 to November 2022), MSMEs should benefit from the potential to create 33,000 new jobs with a consumption value of Rp 1.7 trillion (US$118 million).
As gender equality is taking center stage in B20 – the official G20 dialogue forum with the global business community — it is very important to highlight women’s role in MSMEs. A study shows at least 52.9 percent of microenterprises, 50.6 percent of small enterprises, and 34 percent of mid-sized enterprises are run by women.
Sasakawa Peace Foundation & Dalberg in 2020 reported that the percentage of women entrepreneurs reached 21 percent, above the global average of 8 percent. Indonesia is already supporting the growth of female-led MSMEs, and it is incumbent upon the B20 to recognize and support this drive.
The government targeted 20 million MSMEs to enter the marketplace in 2022, with a total of Rp 285 trillion (US$19 billion) distributed as smallholder business credit (KUR) to support this growth. In addition to sustainable development-aid and programs for MSMEs, an inclusive economic policy must be able to empower and stimulate trade, as the centerpiece of economic recovery and lifting billions out of poverty.
Also, along with the government, businesses should look at partnering with MSMEs and provide coaching programs to equip them with knowledge, skills, technology, and networks to increase their competitiveness domestically and internationally. Policies can foster such support and mentorship. It is equally important to ensure that policies and support for MSMEs are clear, effective, efficient, and not misused by large global corporations through subsidiary entities. As such, defining MSMEs at a national level is critical.
With G20 members’ support, it will become one of the most important legacies from Indonesia’s B20 presidency to the world economy and its SDG goals. Indonesia could leave a sizeable footprint in the acceleration of the growth of MSMEs, intensifying their resilience, and increasing their capacity to meet global standards and market demand within the global value chain.
MSMEs’ growth is the country’s growth and a clear example of what it means to “Recover together, recover stronger”. Let’s do our part and make it happen for the rest of the world for an inclusive recovery for everyone.
***
The writer is director of Phillip Morris International (PMI) and cochair of 2022 B20 trade and investment task force. These views are personal.
