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Long list of export challenges face Indonesian MSME sector
Support in terms of research and development, as well as access to information technology, will help MSMEs increase their competitiveness in export markets.
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President Joko "Jokowi" Widodo visits a booth at the Inclusive Partnership Movement for Leveling Up MSMEs event and discussion at SMESCO Indonesia on June 10, 2022. The event was organized by the Indonesian Chamber of Commerce and Industry (Kadin) and invited stakeholders, including the government and the private sector, to strengthen collaboration efforts to strengthen MSMEs as the backbone of economic growth.
M
icro, Small and Medium Enterprises (MSMEs) play a very important role in export activities that help increase Indonesia's Gross Domestic Product (GDP).
The pivotal responsibilities of MSME exporters include product diversification and innovation that create unique, regionally distinctive, and value-added products, thereby introducing local products that meet international market demands and preferences to help increase Indonesia's competitiveness in the global market. Additionally, these exporters should focus on job creation, which in turn will increase people's income and purchasing power, and the distribution of economic growth to particularly remote or marginalized areas, so as to open up new business opportunities, increase investment and expand market access for local products. The should also strive for economic empowerment and inclusion, especially for underserved groups of people, so that MSMEs can engage in international trade and access global markets to help improve economic welfare, reduce social inequality and create wider business opportunities. Furthermore, these exporters should increase added value and income by entering international markets to gain benefits from increased production scale, operational efficiency and increased product sales value.
There are several characteristics of MSME exporters. First, they are generally small to medium-size businesses with a limited number of employees and which usually have limited production and resources.
Second, the scope of MSME exporters is usually focused on products that are produced in a traditional or unique way, such as handicrafts, traditional textiles, locally processed foods and products typical of the region. These products often have cultural uniqueness and local added value.
Third, although the contribution to the total value of exports is relatively small, MSMEs have a significant economic impact at the local and regional levels.
Trade Ministry data shows MSME represent 77.28 percent of all exporters, with the remaining 22.72 percent being large-scale exporters. However, MSME exporters only contributed 4.1 percent to Indonesia's total exports, while 95.9 percent was contributed by large-scale exporters.
The government and other related institutions need to support MSMEs in export activities, such as financing, training, access to markets and information and assistance in meeting legal requirements and international trade regulations. By strengthening the role of MSMEs in export activities, Indonesia can encourage economic growth that is inclusive, sustainable and equitable throughout the country.
