HOW TO INTEGRATE SMALL AND MEDIUM INDUSTRY (SMI)

Transcription

HOW TO INTEGRATE SMALL AND MEDIUM INDUSTRY (SMI)
DEVELOPMENT POLICIES IN DECENTRALIZED INDONESIA?
Mudrajad Kuncoro
Professor in Economics
Faculty of Economics & Business
Gadjah Mada University
Indonesia
Email: [email protected]
ABSTRACT
Various Small and Medium Industry (SMI) development policies introduced by the recent Susilo
Bambang Yudhoyono regime have not overcome fundamental SMI’s obstacles. This study
attempts to analyze current policy and situation regarding SMI development using primary and
secondary data. The source of the data are obtained through field survey to Trade and Industry
Office, Regional Planning and Development Board, and Chamber of Commerce and Industry of
all provinces in Indonesia.
There have been many SMI development policies that has been endorsed by
Indonesian government. SMI development policies started from partnership program between
State-Owned Enterprises and small enterprises, 100 days program of United Indonesia Cabinet,
some economic policy packages under the Presidential Instruction or Inpres (i.e. Inpres No. 3
Year 2006 regarding Improvement of Investment Climate Policy Packets, Inpres No. 6 Year
2007 regarding Acceleration of Real Sector Development and Empowerment of Micro, Small,
and Medium Enterprises (MSME), Inpres No. 5 Year 2008 regarding Focus of Economic
Program 2008-2009), roadmap of regional core competencies development, Law No. 20 Year
2008 on MSME, and Presidential Decree No. 28 Year 2008 on National Industry Policy. SMI
face many external factors in the process of development including global financial crisis in
2008 and ASEAN China Free Trade Area (ACFTA) in 2010. The recession in United States and
other destination countries has hit SMI. ACFTA give ease to imported products especially from
China to penetrate domestic market.
Key obstacles in the implementation of SMI development are classified into three main
category based on field survey on 33 provinces in Indonesia: internal SMI factors, government
internal factors, and external factors. Internal SMI factors include lack of capital, raw materials
obstacles, human resource incompetence, marketing obstacles & low competitiveness, lack of
business networks, low technology & productivity, lack of entrepreneurship, and lack of
partnership. Internal government factors include limitation of central/local government budget,
government official incompetence, lack of coordination between government institutions with
different level, lack of coordination between government offices, and unfocused program.
External factors consist of inconducive investment and business climate, high cost economy,
limited quality infrastructure, global competition & ACFTA, distant location between
districts/cities, global economic crisis, legal uncertainty, smuggling practices, and inconducive
social, politic, and safety situation. Obstacles in the implementation of SMI development policy
in 33 provinces will be examined thoroughly. Our findings recommend a policy model to address
SMI obstacles, and hence, hopefully can boost SMI development in Indonesia.
Key Words: SMI, obstacles, development policies
1
1. INTRODUCTION
Small and Medium Industry (SMI) has been the most important sector in the
Indonesian economy. SMI has provided job opportunities hence becoming the
source of income for households in Indonesia. Furthermore, SMI has also
contributed to local economy by increasing non-oil export and become
supporting industry to provide essential components for large-scale industries,
with sub-contract mechanism.
SMI development faces similar obstacles to those of other industry. The
main obstacle of SMI is its incapability to anticipate the ever-growing and hyper
competition. Competitive business situation often hamper SMI to develop
optimally. SMI in Indonesia is also lacking in capital, marketing, technology, and
management. Obstacles faced by SMI in Indonesia are shown in Table 1.
The government offers serious consideration given SMI potencies and
obstacles. The government has continuously implement policies that support
the development of SMI. The policies are not limited to financial aspects but
also marketing, capital, and production skills. Those policies are implemented
by State Ministry of Cooperatives and SME and Ministry of Industry and Trade.
The development of SMI is also supported by state-owned enterprises (SOE)
through their corporate social responsibility (CSR) program. The banking sector
also play an important role in the implementation of policy regarding financing of
SMI. Private parties such as non-governmental organizations (NGO) also
provide SMI development programs. Local governments, which play more
intense role after decentralization, also prioritize SMI development to boost the
economy.
Local autonomy, which has been implemented since 2000, gives local
government the opportunity to manage themselves including in allocating their
resources. Since SMI has been the backbone to many families, local
governments give more consideration on the development of SMI. We shall
note that SMI is one of the sectors to survive in economic crisis in 1998.
In order for SMI to develop optimally, local governments must establish
conducive business environment. In addition, local policies should encourage
the development of SMI. However, the fact shows that current SMI development
policies have not pay their dividends. SMI product competitiveness is still
deemed to be low. In 2008, Indonesia is ranked 51 out of 55 countries in term of
competitiveness. Indonesia has not prove it readiness to compete in global
market. SMI in Agriculture and manufacture sector for example have not applied
modern technology hence they cannot achieve economies of scale to be able to
compete with foreign industry.
2
Table 1. Obstacles Faced by SMI in Indonesia
No
1
Classification
Human Resource
Obstacle
Lack of necessary skills
Lack of technology application
productivity
that
trigger
low
Lack of knowledge and training which focus on business
development
Outdated production technology which is not suitable to
current necessity
2
Technology
Reliance on simple technology
Inadequate infrastructure
Lack of marketing network to penetrate local and
international market
3
Marketing
Complicated chain of distribution
Limited information
Limited access to financial institutions
Limited access to raw materials
4
Business Environment
Non-optimal use of local resources and potentials
Unhealthy competition
Source: Bappenas–Undip (2008) and Bappenas–UGM (2008)
Comprehensive approach to all stakeholders must be implemented to
solve the obstacles faced by SMI (Figure 1). The approach must be exercised
by local government which includes: Regional Planning and Development
Board (Bappeda), Trade and Industry Office (Disperindag), and other related
institutions. SMI development policy should draw attention to obstacles in
financing, marketing, regulation, information, partnership, partnership, facility &
infrastructure, and business opportunities. The role of local governments in
formulating policy is essential since they have more thorough information
relating to SMI in their respective regions.
Figure 1. Comprehensive Support
3
The main objectives of this study are:
 To evaluate current SMI development policies in every province in
Indonesia
 To evaluate problems in the implementation of SMI development policies
in both national and local level
 To evaluate the performance of SMI in national and provincial level after
implementation of SMI development policy
 To formulate appropriate SMI development policies in Indonesia
2. RESEARCH METHODOLOGY
The research methodology is divided in three parts which are described in
following order.
 Source of Data
Written report presents statistics and analysis based on field survey in
each provinces. The report is constructed based on analysis using
primary and secondary data. Secondary data are obtained from BPS
(Statistics Indonesia) specifically the Economic Census in 1996 and
2006. The data are calculated comprehensively and analyzed to
generate the overview of SMI development which is presented through
tables, maps, and figures. Secondary data are also obtained from
Bappeda, Disperindag, and Kadin in 33 provinces and selected
districts/cities. Data obtained from those institutions consist of RPJPD
(Long-Term Regional Development Plan) and RPJMD (Mid-Term
Regional Development Plan), program/activities, and their budget for SMI
development. The report also presents programs and activities from
donor institutions in SMI development.
 Data Analysis
Data obtained from primary and secondary sources are then analyzed
and formulated to present comprehensive overview on SMI (Figure 2).
Data analysis consist of obstacles faced by SMI, regulations, SMI
development policies in mid- and long-term, programs & activities and its
budget regarding SMI development. The analyzed data are primarily
obtained from LAKIP (Government Institution Accountability and
Performance Report) and other report on SMI.
Figure 2. Analysis of Data
Data Analysis
4


Geographic Information System (GIS)
The result of the analysis is comprehensive thematic maps to present
overview concerning SMI current situation based on number of firms,
number of workers, and value of output. The maps also present situation
and challenges in the implementation of SMI development policy.
Recommendation of New Strategies
New strategies will be recommended by the team in effort to support the
development of SMI in Indonesia. The recommended strategies are
formulated based on data analysis and key findings.
3. THE ROLE OF MANUFACTURING INDUSTRIES IN INDONESIA
Industrialization in Indonesia has brought structural transformation since 1968.
The pattern of economic growth seemed to be in line with common structural
transformation pattern in many developed and developing countries. The
transformation generally witnesses a continual decrease of agricultural sector
(called as primary sector) contribution to GDP. In the other hand, secondary and
tertiary sector contributions indicate a continual increase. Table 2 shows these
tendencies between several key periods: 1968 (Repelita I), 1978 (Repelita II),
1988 (Repelita IV), 1993 (industry sector became the dominant sector), 1998
(economic crisis), 2000 (reformation era), 2004-2009 (Kabinet Indonesia
Bersatu I).1
In 1968, agriculture sector contributed about 51% of GDP, the highest
relative to other sectors. Manufacturing industry, for example, only contributed
8.5%. The industrialization had not dominated the Indonesian economy until
1978.2 Agriculture sector’s contribution in 1978 decreased 21.5% compared to
that in 1968. However, declining role of agriculture sector had been
compensated by increasing contribution in mining sector about 13.4%. In 1978,
manufacturing industry contribution reached 10% of GDP, or rose 1.5% than
that in 1968. Other sectors that had been experiencing increase in its
contribution to GDP were service, finance, rental, and financial service, also
transportation and communication sectors.3
Some phenomenal situation occurred after 1978: agriculture sector’s
contribution decreased steadily. The domination of agriculture sector in GDP
formation has decreased and started to shift to manufacturing industry.
Agriculture sector in that period contributed 24.1% but the contribution had
decreased for 6.4% compared to that in 1978. During the same period,
manufacturing sector’s contribution increased 8.5% in 1988 and became 18.5%.
Manufacturing industry replaced the predominance role of agriculture
sector eventually. In the period of 1988-1993, Indonesian economic structure
experienced some significant changes, where contribution of manufacturing
industry exceeded the agriculture contribution. The decreasing of agriculture
commodity production in late 1993, especially rice, resulted in decreasing
1
Repelita (Five Year National Development Plan). Kabinet Indonesia Bersatu is presidential cabinet under Susilo
Bambang Yudhoyono.
2
We use non-oil and gas GDP and GRDP for the analysis.
3
We grouped these sectors to focus on structural transformation from agriculture and mining sector to manufacturing
industry sector.
5
contribution to only 17.9% of Indonesian GDP. In the other hand, expansion in
manufacturing industry resulted in the increasing of its contribution to 22.3% of
GDP. Since 1993, agriculture sector’s contribution never exceeded that of
manufacturing industry. In short, manufacturing industry has been the dominant
contributor of GDP.
Table 2. Sectoral Contribution to Indonesian GDP, 1968-2009 (%)
1968
1978
1988
1993
1998
2000
2004
2005
2006
2007
2008
2009
Agricultural
51
30.5
24.1
17.9
17.4
15.6
15.4
14.5
14.1
11.8
14.1
13.8
Mining and excavation
4.2
17.6
12.1
9.6
8.3
12.1
8.6
9.4
9.1
8.6
8.4
8.2
Manufacturing industry
8.5
10.0
18.5
22.3
23.9
27.8
28.3
28.1
27.8
27.7
26.9
26.3
36.3
41.9
45.2
50.3
50.3
44.6
47.7
48.1
48.8
51.8
52.9
51.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Sectors
Others
GDP
(Q1)
Note: Other sectors include the following: electricity, gas, and water sector; construction sector; trade,
hotel, and restaurant sector; transportation and communication sector; finance, rental, and company
service sector; and service sector.
Source: Calculated from BPS (2009a)
Table 2 explains that manufacturing industry has become the major
sector since 1993. Manufacturing industry contributed 22.3% of total GDP,
higher than agriculture (for about 17.9%). In 1998, manufacturing industry
contributed 23.9% to GDP. The number increased about 1.6% than that in 1993.
During 2000 until 2009, contributions of the manufacturing industry remain
stable between 26.3% and 28.3%.
Manufacturing industry grew steadily from 2002. The highest growth of
GDP of manufacturing industry was evidenced in 2004 that is 6.4% with sector
GDP reaching Rp469.9 trillion. In 2006, it grew 4.6% or Rp514.1 trillion. Even
though the manufacturing industry grew from 2002 to 2008, its share growth
has been decreasing since 2005. The share growth decreased from 2005 to
2008 and in 2008 the share growth a negative 2.3% (Table 3). The last is largely
due to global financial crisis that led recession in major Indonesia’s trading
partner (Kuncoro, 2009).
Table 3. Manufacturing Industry Growth and Share Growth, Indonesia
2002-2009 (%)
Criteria
Manufacturing Industry GDP (trillion rupiah)
2002
2003
2004
2005
2006
2007
2008
419.3
441.7
469.9
491.56
514.1
538.0
557.7
Growth
5.3
5.3
6.4
4.6
4.6
4.7
3.7
Share Growth
0.8
0.5
1.3
-1.0
-0.9
-1.5
-2.3
Source: Calculated from BPS (2009a)
4. SMI BY NUMBERS OF FIRMS, EMPLOYEES, AND OUTPUT
Small medium enterprises (SME) play an important role in Indonesia. Most
enterprises in Indonesia are small and micro enterprises which accounted for
99.8% of total establishment in Indonesia (Kuncoro, 2007; 2009). Brata (2007)
shows small enterprises employed about 91% of total employment and the
contribution of non-farm enterprises in total employment (53%) is higher than
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that of farm-based enterprises although farm-based enterprises accounted for
the majority of establishments (54%).
The number of SME establishment accounted for 1,179,265 which
absorbed 2,755,329 workers in 2006 according to Economic Census 2006
(BPS, 2009b). Value of output from SME in 2006 accounted for Rp15.4 trillion.4
In particular, Economic Census 2006 highlights that the number of SMI in
Indonesia reached 189,732 units or 16.1% of total SME Indonesia. The number
of SMI employee absorption accounted for 496,628 or 18% of total SME
employees and value of outputs accounted for Rp 1.4 trillion or 9.3% of total
SME value of outputs.
The number of SMI in Indonesia in 2006 is concentrated geographically
in Java, especially in the province of Central Java, East Java, and West Java.
SMI in these three provinces reached 100,063 companies or 52.7% of the SMI
in Indonesia. Those provinces, together with SMI in Java (Special Region of
Yogyakarta, DKI Jakarta, and Banten) accounted for 111,414 companies or
58.7% of total SMI Indonesia. The figure shows that Java has been the
heartland of SMI Indonesia. Concentrations of SMI in these provinces above
can also be seen from the share of SMI in the provinces outside the top three
provinces. Share of SMI in South Sulawesi, West Nusa Tenggara, and North
Sumatra, are only 4.2%, 3.4%, and 3.2% respectively. The share of SMI in
every province outside those already mentioned is less than 3%.
The same phenomenon occurs in employee absorption by SMI in
Indonesia in 2006. Employment creation by SMI in the Province of Central Java,
West Java and East Java accounted for 262,272 employees or 52.9% of total
employees. The share of employees in the province of South Sulawesi, North
Sumatra and West Nusa Tenggara reached 3.8%, 3.5%, and 3.2% respectively,
while the absorption in the other provinces is less than three percent.
SMI value of outputs in the province of Central Java, East Java and West
Java accounted for Rp659.12 billion (45.8%) of the value of outputs of SMI in
Indonesia in 2006. North Sumatra Province contributed national value of
outputs of 7.15% (Rp102.7 billion) while West Sumatra Province contributed
about 5.6% (Rp80.3 billion) to the Indonesia’s SMI value of outputs. DKI Jakarta
Province contributed output by 5.3% (Rp75.4 billion) although the share of SMI
and absorption of employees is relatively small. This phenomenon may indicate
that the scale of SMI in DKI Jakarta is relatively larger than the SMI in another
province.
Banten and NAD Province generated 4.4% and 3.2% respectively of the
value of outputs of SMI in Indonesia. This shows the inequality of geographic
distribution of Indonesia SMI as well as the spread of business and employees.
The explanation of the number of SMI, employees, and the value of outputs of
SMI in the 33 provinces of Indonesia are shown by in Table 4.
4
There are 18 sectors of SME in Indonesia which are agriculture, fishery, mining, manufacturing, electricity (including
gas and water), construction, wholesale (including retail store and automobile service), transportation (including storage
and communication), financial intermediaries, government administration service, educational service, health and social
service, other social services, international body, and other sector.
7
Table 4. SMI by Number of Employees, Value of Outputs, and Number of Firms in
Indonesia 2006
PC
Value of
Outputs
(billion of
rupiah)
Number of
Employees
(person)
Provinces
Share (%)
Firms (unit)
Number of
Employees
5
Value of
Outputs
Firms
1
Nanggroe Aceh Darussalam
13,412
45.4
4,987
2.7
3.2
2.6
2
North Sumatera
17,457
102.7
6,354
3.5
7.2
3.3
3
West Sumatera
11,639
80.3
4,603
2.3
5.6
2.4
4
Riau
6,299
19.2
2,189
1.3
1.3
1.2
5
Jambi
4,822
13.9
1,801
1.0
1.0
0.9
6
South Sumatera
10,794
26.5
4,045
2.2
1.8
2.1
7
Bengkulu
2,976
6.7
1,187
0.6
0.5
0.6
8
Lampung
14,068
31.8
5,562
2.8
2.2
2.9
9
Bangka Belitung Archipelago
1,934
9.5
727
0.4
0.7
0.4
10
Riau Archipelago
2,100
9.4
744
0.4
0.7
0.4
11
D K I Jakarta
14,010
75.5
2,737
2.8
5.3
1.4
12
West Java
71,801
218.7
24,043
14.5
15.2
12.7
13
Central Java
101,220
224.3
40,661
20.4
15.6
21.4
14
Special Region of Yogyakarta
10,293
22.2
4,019
2.1
1.5
2.1
15
East Java
89,251
216.1
35,359
18.0
15.0
18.6
16
Banten
12,909
63.1
4,595
2.6
4.4
2.4
17
Bali
12,253
29.4
4,580
2.5
2.0
2.4
18
West Nusa Tenggara
16,024
28.5
6,537
3.2
2.0
3.4
19
East Nusa Tenggara
9,305
11.6
4,570
1.9
0.8
2.4
20
West Kalimantan
6,657
17.8
2,739
1.3
1.2
1.4
21
Central Kalimantan
4,248
12.8
1,718
0.9
0.9
0.9
22
South Kalimantan
9,042
22.2
4,055
1.8
1.5
2.1
23
East Kalimantan
4,839
21.2
1,644
1.0
1.5
0.9
24
North Sulawesi
5,130
12.6
2,155
1.0
0.9
1.1
25
South Sulawesi
18,980
51.8
7,904
3.8
3.6
4.2
25
Central Sulawesi
4,897
10.0
2,041
1.0
0.7
1.1
27
Southeast Sulawesi
6,717
13.4
2,837
1.4
0.9
1.5
28
Gorontalo
2,856
5.3
1,232
0.6
0.4
0.6
29
West Sulawesi
2,373
7.7
1,081
0.5
0.5
0.6
30
Maluku
2,782
4.9
1,076
0.6
0.3
0.6
31
North Maluku
1,550
4.5
690
0.3
0.3
0.4
32
West Papua
1,215
3.9
372
0.2
0.3
0.2
33
Papua
2,775
13.6
888
0.6
0.9
0.5
496,628
1,436.2
189,732
100.0
100.0
100.0
National Total
Source: Calculated from BPS (2009b)
PC = province code
Geographic distribution of SMI in Indonesia has changed considerably
from 1996 to 2006. The concentration of Indonesia’s SMI in 2006 is consistent
with the concentration in 1996 that is geographically concentrated in Province of
Central Java, East Java and West Java. The share of SMI in these three
provinces reached 60.6% in 1996 but the share decreased to 52.7% in 2006.
These changes explain the development of SMI outside the three provinces
above. The decline in the share of West Java in 2006 as compare to 1996 is
due to the regional division into two provinces, i.e. Banten and West Java
5
; i refers to provinces. Same method is applied to calculate the share of employee
absorption and value of outputs contribution. The sum of all provinces is rounded to 100%.
8
Province.
Bali Province ranks top ten in 1996 in the number of SMI in Indonesia with
the share of 4.5%. In 2006, Bali’s share fell to 2.4% and no longer occupies the
top ten positions in terms of the number of SMI in Indonesia. Special Region of
Yogyakarta also experienced a decline in the share in 2006 than in 1996 in the
amount of 3.2% to 2.1% and the province of Special Region of Yogyakarta is no
longer occupied the top ten positions in terms of the number of SMI. The same
phenomenon occurred in South Kalimantan Province, although a decrease in
the share of the number of SMI in 2006 compared to the year 1996 was not as
experienced drastic decline in Bali and Yogyakarta provinces. The decline of
SMI companies in Bali and Special Region of Yogyakarta might be attributed to
Bali Bombs in 2002 and 2005 and earthquake in May 2006 respectively.
The decreasing number of SMI in Indonesia between 1996-2006
accounted for 29.7%. The underlying factors vary by provinces. The economic
crisis in 1998 until 1999 is one of the main factors that slumped business,
including business. The increase of gasoline price, electricity tariffs, transport
costs, and other administered price also becomes the major factor. As for
Yogyakarta, it is the force majeure factor that played a significant role in the
decreasing number of SMI that reached 97.3%. The same factors are
experienced by Central Java and East Java (Lapindo hot mud). The regional
division autonomy program caused a decrease. Banten province which is a
product of region division decreased the number of SMI in West Java up to
64.7%.
The SMI spatial distribution in 1996 and 2006 can be seen in Figure 3
and Figure 4 respectively. Provinces having high number of SMI are indicated
by black color. Provinces having medium number are indicated in gray while
those with low number of SMI are indicated in white. It is clear that provinces
with high SMI firms are located concentrations of high level in Java (marked
with a red circle). Yellow circle in Figure 4 shows the provinces that experienced
an increase in ranking from year 1996-2006 from low grade to medium grade.
Provinces belonging to lower level for SMI units in 2006 were new provinces
such as Riau Islands and Bangka Belitung in the western of Indonesia, and
North Maluku, Papua and West Papua in the eastern of Indonesia.
Figure 3. Spatial Distribution of SMI by Number of Firms in Indonesia, 1996
9
Number of SMI in 1996 which concentrated in the Java Island covered
more than 45% of the total number of national SMI, as illustrated in Figure 3.3.
Distribution of SMI in the medium class (1,150-39,601 firms) covers the island
of Sumatra, Sulawesi, Bali, Maluku, NTB, and NTT. In 2006, the dominance of
Java Island in the number of SMI was even more prominence since Java Island
accounts for more than 58% of the national SMI, an increase about 13% than
that in 1996. The increase in the number of SMI level during 1996-2006 is found
in Central Kalimantan and Bengkulu, from low level to medium.6
Figure 4. Spatial Distribution of SMI by Number of Firms in Indonesia, 2006
5. SMI DEVELOPMENT POLICY CHRONOLOGY
Since the element of Law Number 22 Year 1999 regarding the Regional
Government, there have been a lot of SMI development policies issued by the
government. Chronologically, SMI development policy can be summarized in
Figure 5.
Law No.22 year 1999 is issued as the legal umbrella in the administration
of regional autonomy, namely the division of authority between the central
government, provincial, and district. Financial balance between central and
regional governments is regulated by Law No.25 Year 1999.
This policy was issued with the aim that each BUMN in Indonesia
participated to empower and to develop the economic condition, social condition
of society and the environment, namely through the BUMN partnership
programs with small business and community development program.
This is the first period of President SBY, in which the election is done by
direct election. Nothing surprising in SMI handling-related programs. Among the
100 days program Lawivities in SMIs field are to solve the problem of arrears of
Farm Credit (KUT), encouraging cooperation and SMI access and SME to
banking, and held a public market in order to welcome the Idul Fitri holidays.
6
We use statistical approach to distinguish high, medium, and low class of SMI based on Economics Census 2006
data. Assuming normal distribution of the data, low class is mean minus standard deviation where high class is mean
plus standard deviation. Medium class is ranged between high and low class cut-off point.
10
Figure 5. Chronology of SMI Development Policies After 1998
These bots Laws revised the Law No.22 year 1999 and Law No.25 of
1999. These Laws were issued to support the implementation of regional
autonomy, in which it is expected that efficiencies and effectiveness of local
governance can be achieved. The goal is to accelerate the realization of public
welfare through the improvement, service, empowerment, and community
participation, and increase regional competitiveness. In this latest Law, the
central government only has the authority and responsibility for defense and
national security, religious affairs, and other special functions such as macroeconomic planning, fiscal transfer system, government administration, human
resource development, technology development, and national standards. While
the provincial and district governments in addition to having the authority shall
also have the authority option that has the potential to significantly improve the
welfare of the community in accordance with the condition, uniqueness, and
concerned superior potential areas.
From the vision and mission of the central government, the seriousness
of the government to promote SMI sector is clear the Central Government
assessing of the basic criteria of the achievement of this vision is a high role
and contribution to the national economy, the balanced ability between the SMI
with big industry. The vision and mission of local governments to support the
vision and mission of the central government develop economic sectors. The
vision and mission in provinces are also based on human resources and the
needs of respective regions. The 33 provinces in Indonesia have been trying to
implement policies of central government by setting vision and mission that are
oriented to the community economic development.
Central government hopes that local governments conducts programs
that support the planned targets of developing the regional core competence.
This policy is intended in the context of industrial development in the region to
11
enhance regional competitiveness, through exploiting natural resources, capital
or other tangible assets, and the use of intangible assets such as technology,
knowledge, work processes, and planning. All of the provinces already have a
program that supports the goals set by the central government. This is shown in
Appendix I.
6. OVERVIEW OF SMI DEVELOPMENT POLICIES
This section analyze to what extent the manufacturing industry development
since 1968 has set structural transformation in Indonesia.
Agriculture sector
which has been the main sector since 1968 which contribute 51% of Indonesia
GDP; at the same time, industry sector only contribute 8.5%. Industrialization
has set aside agriculture sector as the main sector since 1978, furthermore,
manufacturing industry sector has become the main sector in Indonesia since
1993. It is interesting to note that manufacturing industry sector's contribution to
Indonesian GDP was relatively stable between 26.3%-28.3% since 2000.
SMI has an important role in the process of industrialization through
number of firms and workers absorption. The number of SMI in Indonesia
accounted for 189,732 (16.1% of total MSME) and absorbed 496,628 workers
(18%) in 2006. The increase of workers absorption in 2006 compare to that in
1996 accounted for 55.3%. SMI in Indonesia generated Rp1.4 trillion of output
value in 2006, which increased 4.6 times than that in 1996. This study also
prove that number of firms, number of workers, and value of output has positive
and significant correlation.
SMI spatial distribution in Indonesia in terms of number of firms, workers
absorption, and value of output remains relatively unchanged during 1996-2006.
SMI was concentrated geographically in Central Java, West Java, and East
Java in 1996. The share of firm numbers in those provinces accounted for
60.7% in 1996. However, share of firm numbers of those provinces declined to
52.7% in 2006. Provinces which experienced increase in share of firm numbers
relative to other provinces are Lampung, West Sumatera, and Banten.
Table 5 shows that the dominant SMI sectors in each province in terms of
number of firms and workers absorption are food, beverage, and tobacco
industry (ISIC 31), wood, wood product, and furniture sector (ISIC 33), and
textile, textile product, and leather sector (ISIC 32). In terms of output value, the
dominant sectors are food, beverage, and tobacco industry, metal, machinery,
and tools sector (ISIC 38), and textile, textile product, and leather sector. In
general, SMI is concentrated geographically in Java particularly in Central Java,
East Java, and West Java based on number of firms and workers absorption.
12
Table 5. SMI Spatial Concentration in 33 Provinces Based on Number of Firms,
Number of Employees, and Value of Output, 2006
Provinces
Number of Firms
Number of Employees
Value of Output
Central Java
Food, beverage, and tobacco
East Java
Basic metal
Basic metal
West Java
Basic metal
Basic metal
Textile, textile product, and leather
South Sulawesi
Non-metallic mineral product
West Nusa Tenggara
Wood, wood product, and furniture
North Sumatera
Basic metal
Basic metal
Chemical product, rubber, and plastic
Lampung
West Sumatera
Banten
Metal, machinery, and tools
Bali
East Nusa Tenggara
Paper, printing, and publishing
South Kalimantan
Basic metal
South Sumatera
Southeast Sulawesi
West Kalimantan
D K I Jakarta
Basic metal
Riau
North Sulawesi
Central Sulawesi
Basic metal
Jambi
Central Kalimantan
East Kalimantan
Gorontalo
Bengkulu
West Sulawesi
Maluku
Papua
Riau Archipelago
Bangka Belitung Archipelago
Basic metal
Basic metal
Basic Metal
North Maluku
West Irian Jaya
SMI in each province has distinct main sector. For example, SMI in
Lampung Province are concentrated geographically in non-metallic mineral
product sector (ISIC 36) based on number of firms and workers absorption.
However, SMI are concentrated geographically in wood, wood product, and
furniture sector based on value of output. Same situation occurred in other
provinces. The situation shows that SMI in each province has distinct industry
structure in terms of number of firms, workers absorption, and value of output.
Next section explains main obstacles in SMI development in Indonesia.
The chapter comprises of three main discussions: (1) SMI development
obstacles in Indonesia; (2) obstacles in the implementation of SMI development
policies in 33 provinces; (3) special problems in SMI development.
13
6. MAIN OBSTACLES OF SMI
Main obstacles and implementation obstacles are reported in detailed and
tabularized. The analysis report that main obstacles are mainly faced by SMI in
Central Java, East Java, and West Java. It is not surprising given the fact that
SMI are concentrated geographically in these provinces. The three main
obstacles that SMI faced include capital (34%), marketing (32%), and raw
material (22.6%).
Obstacles in the implementation of SMI development are classified into
three main category based on field survey which include internal SMI factors,
government internal factors, and external factors (Table 6). Internal SMI factors
include lack of capital, raw materials obstacles, human resource incompetence,
marketing obstacles & low competitiveness, lack of business networks, low
technology & productivity, lack of entrepreneurship, and lack of partnership.
Internal government factors include limitation of central/local government
budget, government official incompetence, lack of coordination between
government institutions with different level, lack of coordination between
government offices, and unfocused program.
Table 6. Obstacles in the Implementation of SMI Development Policy
Matrix in 33 Provinces
√
√
√
√
West Java
√
√
√
√
√
√
√
√
√
√
North Sumatera
√
√
√
√
√
Lampung
√
√
√
√
South Sulawesi
√
West Nusa Tenggara
√
√
√
√
√
√
√
√
West Sumatera
√
√
√
√
√
√
√
Banten
Bali
√
√
√
√
√
√
√
14
√
√
Smuggling practices
√
√
√
Social, politic, and safety situation
Legal uncertainty
√
Global economic crisis in 2008
√
Inadequate electricity infrastructure
Global competition and ACFTA
√
Distant location between districts/cities
Limited quality infrastructure
√
High cost economy
Inconducive investment and business climate
External
Unfocused program
Lack of coordination between government office
K Lack of coordination between government institutions
in different level
Government official incompetence
Limitation of central/local government budget
Lack of partnership
√
Lack of entrepreneurship
Lack of business network
√
Government internal
Lack of technology and low productivity
Marketing obstacles & low competitiveness
Human resource incompetence
√
Central Java
East Java
Raw material obstacles
Provinces
Lack of capital
SMI internal
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Southeast Sulawesi
√
√
Social, politic, and safety situation
Smuggling practices
Legal uncertainty
Global economic crisis in 2008
Distant location between districts/cities
√
√
√
√
√
√
√
√
Central Sulawesi
√
Jambi
√
Central Kalimantan
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
West Sulawesi
√
√
√
Maluku
√
√
Papua
√
√
√
√
√
√
√
√
√
√
Riau Archipelago
√
√
√
√
√
√
√
√
Bangka Belitung
√
√
√
√
Bengkulu
√
√
√
East Kalimantan
√
√
Riau
North Sulawesi
√
√
√
West Kalimantan
North Maluku
High cost economy
√
√
Unfocused program
Lack of coordination between government office
√
√
Gorontalo
K Lack of coordination between government institutions
with different level
√
South Sumatera
DKI Jakarta
√
External
√
East Nusa Tenggara
South Kalimantan
Lack of partnership
Government internal
Lack of business network
SMI Human resource incompetence
Provinces
Lack of capital
SMI internal
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√ √
Source: Field Survey of JICA UGM Team (2010)
West Irian Jaya
√
√
√
√
External factors consist of inconducive investment and business climate,
high cost economy, limited quality infrastructure, global competition & ACFTA,
distant location between districts/cities, global economic crisis, legal uncertainty,
smuggling practices, and inconducive social, politic, and safety situation.
Obstacles in the implementation of SMI development policy in 33 provinces are
summarized in the following matrix.
15
Field survey shows three major obstacles in the implementation of SMI
development policy in 33 provinces (Table 7). The major obstacle is lack of
coordination between government institution with different level (centralprovincial government and provincial-district/city government). This obstacle
may indicate negative impact of decentralization. Second and third major
obstacles are government official incompetence and limited central/local
government budget.
Each province has distinct SMI development policy which depends on
respective local potencies. SMI development policy are implemented through
program and activities in each province. Field survey shows that not all official
understand the roadmap regarding regional industry core competencies
development established by Ministry of Industry (2007). Almost half of the
official states the core industries in each province less than what the Ministry of
Industry (2007) had set. In district/city level, core industries in selected
district/city are consistent with the priority set by provincial government. This
fact indicates that selected district/city has develop core industry based on the
potencies of the region.
Analysis of budget regarding SMI development activities shows that East
Kalimantan Province has the highest budget for SMI development (Rp16
billion), followed by West Java (Rp15 billion), and East Java (Rp10 billion). On
the other hand, Bangka Belitung province has the smallest budget for SMI
development that is Rp116 million. SMI development budget allocation in other
provinces ranges from Rp2 billion to Rp4.5 billion.
The most executed action program were improvement of production
skills with a budget of Rp35.6 billion (31.4%) and strengthening of business
environment/networks with a budget of Rp34.7 billion (30.3%). Overall budget
allocation for strengthening management competitiveness action program and
marketing development accounted for Rp23.4 billion (20.4%) and Rp15.6 billion
(13.6%) respectively. Action program with the least budget allocation were
financial assistance and human resource development which accounted for only
Rp3.1 billion (2.7%) and Rp1.9 billion (1.6%) respectively.
Strengthening of management competitiveness action program was
implemented by the majority of provinces in Indonesia except DKI Jakarta,
Lampung, West Kalimantan, West Sumatera, and Bangka Belitung. East
Kalimantan Province allocated the highest budget for this action program which
accounted for Rp5.6 billion. As for improvement of production skills action
program, West Java allocated the highest budget of Rp6.5 billion. West
Kalimantan, Bangka Belitung, and Gorontalo did not implement improvement of
production skills action program. Strengthening of business network action
programs were implemented in all provinces except Riau, Bangka Belitung,
Riau Archipelago, and Gorontalo. East Java Province allocated Rp8.4 billion
which is the highest budget allocation for the program.
16
Table 7. Obstacles in the Implementation of SMI Development Policy
in 33 Provinces
Number of
Provinces
(%)*
19
57.6
18
54.5
16
48.5
12
36.4
Lack of capital
11
33.3
11
33.3
11
33.3
11
33.3
9
27.3
Lack of coordination between government offices
8
24.2
SMI human resource incompetence
7
21.2
Unfocused program
7
21.2
Social, Politic, and Safety Situation
7
21.2
Lack of business networks
5
15.2
5
15.2
Legal uncertainty
5
15.2
High cost economy
4
12.1
Distant location between district/city
4
12.1
Smuggling practices
4
12.1
3
9.1
2
6.1
Lack of partnership
1
3.0
Global economic crisis
1
3.0
Obstacles in the Implementation of SMI Development Policy
Lack of coordination between government institution with different level (CentralProvincial government and Provincial to district/city government)
Source: Field Survey of JICA UGM Team (2010)
Note: * indicates percentage from total 33 provinces in Indonesia
East Java province also allocated the highest budget for marketing
development action program which accounted for Rp2.3 billion. On the other
hand, DKI Jakarta, Banten, Lampung, West Sulawesi, and Gorontalo did not
implement such action program. Financial assistance program were
implemented in only 11 provinces in which North Maluku allocated the highest
budget of Rp1 billion. Similar situation occurred for the implementation of
human resource development action program which was only implemented in
15 provinces. Special Region of Yogyakarta allocated the highest budget for
human resource development which accounted for Rp365 billion.
7. CONCLUSION
Obstacles in the implementation of SMI policy are classified in three main
categories according to field survey that is internal factors, internal government
factors, and external factors. Internal factors comprise of lack of capital, raw
materials obstacles, human resource incompetence, marketing obstacles & low
17
competitiveness, lack of business networks, low technology & productivity, lack
of entrepreneurship, and lack of partnership. Internal government factors
include limitation of central/local government budget, government officials’
incompetence, lack of coordination between government institutions, lack of
coordination between government offices, and unfocused program. External
factors consist of inconducive investment climate, high cost economy, limited
quality infrastructure, global competition & ACFTA, distant location between
districts/cities, global economic crisis, legal uncertainty, smuggling practices,
and inconducive social, politic, and safety situation. The main obstacles in the
implementation of SMI development policies are lack of coordination between
government institutions (central with provincial government and provincial with
district/city government), government officials’ incompetence, and limited
central/local government budget.
Special problems in the development of SMI are mainly caused by external
factors. Major external factors in many provinces include: earthquake in NAD,
Special Region of Yogyakarta, Central Java, and West Sumatera; Lapindo hot
mud in Sidoarjo which caused the value of industry to decrease by 60-70%; and
bomb attack in Bali which decreased the exports of handicraft products from
West Nusa Tenggara.
Field surveys suggest that not all government officials set the priority
industry based on the roadmap established by Ministry of Industry (2007). There
are 36.4% of officials from 33 provinces that state their core industry less than
what the Ministry of Industry has established. Nonetheless, 97% of core
industries in selected districts/cities are consistent with those established by
Ministry of Industry. The fact shows that the majority of districts/cities have
attempted to establish priority industry based on their potencies.
Action programs implemented by each province are categorized into 6
activities which include: (1) strengthening management competencies; (2)
improvement of production skills; (3) marketing development; (4) financial
assistance; (5) human resource development; (6) strengthening of business
environment/network. Most activities implemented in 33 provinces are
improvement of production skills (31.4%), strengthening of business
environment (30.3%), strengthening of management competencies (20.4%),
marketing development (13.6%), financial assistance (2.7%), and human
resource development (1.6%). The statistics shows that there is a need to
improve activities regarding human resource development and financial
assistance.
Now is the time to arrange efforts, policies, and coordination between
entrepreneurs (Kadin), donor institutions, and government (central, provincial,
district/city) in attempt to establish pro-SMI policies. This study reccomends
several strategic policies. First, functional coordination between related
stakeholders must be improved. Government Decree No. 19 2010 regarding the
Authority of Government as Central Government Representative in the
Province, for example, can be put into effect to improve coordination between
government institutions in provincial and district/city level. Second, there is a
need for continuous evaluation regarding SMI development policies in central or
local level to minimize adverse effects in the development of SMI.
SMI development policies in Indonesia must integrate the following five
18
factors: (1) National Priority (for example, Presidential Decree No. 28 2008
regarding National Industrial Policy ); (2) The purpose of SMI development in
provincial and district/city level according to RPJPD and RPJMD; (3) Policy
direction of national industry development in provincial and district/city level); (4)
Regional Spatial Planning of province and district/city, particularly in regional
economy development zoning; (5) Analysis of primary subsector & commodity,
value chain, and regional core competence (Figure 6). The integration of factors
above is the foundation for provincial and district/city government to establish
SMI development strategies which can later be derived into SMI development
action program in each region.
Figure 6. Integrated SMI Development Strategy
Primary subsector in district/city
Purpose and direction of SMI
development policy according to
RPJP and RPJMD
Primary commodity
Value Chain
Regional Core Competence
National priority
(for example: National
Industry Policy)
Regional spatial
planning:
regional economy
development zoning
SMI
development
strategies in
each province
and
district/city
SMI development
action program
The fragmanted development of SMI in practice can be minimalied by
aligning sectors’ perception regarding SMI: SMI profiles & obstacles and policy
design to improve the performance. Figure 7 shows SMI problem solving
scheme and the establishment of SMI development action program. SMI
development must focus on: First, improvement of policy implementation in
order to enhance the role of technology for the growth of SMI businesses and
competitiveness. Such is feasible through the strengthening of production
process workflow by improving production equipments, efficiency, and
productivity.
19
Figure 7. Problem Solving and SMI Development Program
 Availability of easy-to-attain working capital
and investment
 Availability of fund for innovation
 Improvement of production equipment,
efficiency, and productivity through
workflow and track record
 Revitalization of Kredit Usaha Rakyat
(Community Business Credit)
 Credit insurance for SMI
 Industry standardization
(intellectual property rights,
ISO, SNI)
5
Capital
 Market Expansions
3
1
Raw
Material
 Availability of
raw materials
& their
substitutes
and
supporting
materials
Production
Process
7
4
Market/Buyer
6
Partnership
2
Human
Resource
Management
 Improvement of administration,
financial, and production
management
 Business development service
 Establishment of partnership in
capital, production, marketing, and
raw material.
 Improvement of human
resource through education
and training
20
REFERENCES
BPS (2008), Daerah Istimewa Yogyakarta dalam Angka [Special Region of Yogyakarta in
Numbers], BPS Daerah Istimewa Yogyakarta: Yogyakarta.
BPS (2009a), Produk Domestik Bruto Harga Konstan [Constant Price Gross Domestic
Product], downloaded from http://bps.go.id, January 2010.
BPS (2009b), Sensus Ekonomi 2006 [Economic Census 2006], Laporan Sensus Ekonomi
2006 BPS: Jakarta.
Brata, A.G. (2007), ‘Spatial Concentration of the Informal Small and Cottage Industry in
Indonesia,’ Munich Personal RePEc Arhive Paper, No.12622, downloaded from
http://mpra.ub.uni-muenchen.de/12622/
Departemen Koperasi (2008), Undang-Undang Nomor 20 Tahun 2008 mengenai Usaha
Mikro Kecil dan Menengah [Law Number 20 Year 2008 Regarding Micro Small
Medium Enterprises], downloaded from http://depkop.go.id/keriteria-usaha-mikrouu-20-2008.html, January 2010.
Department for International Development (2010), Where We Work: Indonesia, Department
for International Development Official Website, downloaded May 2010 from
http://dfid.gov.uk/
JICA (2010), Activities in Indonesia, downloaded May 2010 from http://jica.or.id
Kementrian Perindustrian (2008), Peraturan Presiden Nomor 28 Tahun 2008 Mengenai
Kebijakan Industri Nasional [Presidential Decree Number 28 Year 2008 Regarding
National
Industry
Policy],
downloaded
from
http://depperin.go.id/Regulasi/2008/05/Perpr es%20no%2028. pdf, January 2010.
Kuncoro, M. (2007a), “Ayat-ayat Krisis UKM [Verse of Small Medium Enterprises Crisis],“
Rubrik Analisis Kedaulatan Rakyat, downloaded 12 Mei 2005 from
http://kr.co.id/web/detail.php?sid=163203&actmen u=46.
Kuncoro, M. (2007b), Ekonomika Industri: Menuju Negara Industri 2030 [Industrial
Economics: Towards An Industrialized Nation 2003], Yogyakarta: Penerbit Andi.
Kuncoro, M. (2007c), “Strategi Pengembangan Ekonomi Lokal Pasca Gempa di Kabupaten
Klaten [Post Earthquake Economic Development Strategy in Klaten District],“
presented in Bappeda Provinsi Jawa Tengah, Semarang November 12th 2007.
Kuncoro, M. (2008a), “Moraturium Kredit UMKM [Micro Small and Medium Enterprises
Credit Moratorium],“ Rubrik Analisis Kedaulatan Rakyat, 4 Juli
2007,
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Kuncoro, M. (2008b), “Penyusunan Rencana Strategis Pengembangan Ekonomi Lokal
(PEL) Kabupaten Bantul [Establishment of Local Economic Development Strategy
Bantul District],“ presentation by PEL UNDP-ERA Team, Bantul January 15th 2008.
Kuncoro, M. (2009), Ekonomika Indonesia: Dinamika Lingkungan Bisnis Di Tengah Krisis
Global [Indonesia’s Economy: Business Environment Dynamics in During Global
Crisis], Yogyakarta: UPP STIE YKPN.
21
Kuncoro, M., Purnawan, M.E., Budiarto R., Wibawa S., Marwasta D., Suyatna H., Pentarjo,
Aryo G.., Harahap P., Ivan S., Utami S.S., Wibowo A., Khasanah R., Arifin Z. (2010),
The Study of Regional Policy Measures in 33 Provinces In JICA’s Technical
Cooperation Project for SME HR Development Under Economic Crisis In The
Republic of Indonesia, Yogyakarta, LPPM-UGM & JICA.
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Tahun 2006 Mengenai Paket Kebijakan Perbaikan Iklim Investasi [Presidential
Instruction of Republic of Indonesia Number 3 Year 2006 Regarding Investment
Surroundings Enhancement Policy Package].
Tahun 2007 Mengenai Kebijakan Percepatan Pengembangan Sektor Riil dan
Pemberdayaan Usaha Mikro Kecil dan Menengah [Presidential Instruction of
Republic of Indonesia Number 6 Year 2007 Regarding Acceleration of Real Sector
Development and Micro Small and Medium Enterprises Empowerment].
Tahun 2008 Mengenai Fokus Program Ekonomi Tahun 2008-2009 [Presidential
Instruction of Republic of Indonesia Number 5 Year 2008 Regarding Economic
Program 2008-2009].
22
Appendix I
No Province
1
Nanggroe
Darussalam
Program
Aceh
1.
2.
3.
4.
5.
6.
7.
8.
Technical training
SMI database development
Compilation profile of SMI
Organizing contests, competitions, and festivals
Financing SMI business units
SMI training and education
Quality control assurance implementation guidance
SMI product exhibition
2
North Sumatera
1. Entrepreneurship
development
and
competitive
advantages of SMI
2. Support system for SMI development
3. The creation of SMI business climate
4. Micro empowerment
5. Increased promotion and investment cooperation
6. Improving the investment climate and realization of
investments
7. Improving the investment climate and attractiveness
8. Improving the quality of human resources, facilities and
infrastructure of the apparatus
9. Research and development investment
3
West Sumatra
1. Improvement, development and standardization of export
products
2. Improvement of industrial technology capability
3. Develop and expand access of SMI and manufacturing
4. Structuring operating system and institutional builder
5. Enhancement and support institutional development
6. Improving the quality of personnel resources and actors of
SMI
7. Support system for SMI Development
8. Development
of
entrepreneurship
and
SMI
competitiveness
9. Improving the investment climate and realization of
investment
10. Structuring a productive pattern of investment cooperation
4
Riau
1. Preparation of potential resources, facilities and
infrastructure areas
2. Development
of
entrepreneurship
and
SMI
competitiveness
3. Developing a support system for SMI business
4. Coaching and development of enterprises and non-banking
financial institutions
5. Medium and large industry development
6. SMI development
7. Arrangement of structures and improvement of industrial
technology capability
23
No
5
Province
Jambi
6
South Sumatra
Program
1.
2.
3.
4.
5.
6.
SMI's empowerment
Creation of the business climate for SMIs
Entrepreneurship development and competitive advantage SMI
Business development support system for SMI
SMI institutional quality improvement program
Preparation of potential resources, facilities and infrastructurerelated areas of investment
7. Facilitate the establishment of strategic partnership between big
business with SMI
8. A coordinated investment promotion both within and outside the
country
9. Revitalization abroad export promotion institution
10. Build a conducive atmosphere, a clear and transparent rules and
enforcement
11. Implementation of integrated information systems
12. Creating a database of potential and investment opportunities in
the form of profiles and audio visual
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Coordination of venture capital for technology-based industries
Development services and venture capital incubator
Development of SMI technological innovation system
Facilitation for SMIs to the use of resources, technology,
markets, IPR, packacing
Development of SMI in strengthening industrial clusters
Guidance policies related industries and supporting SMI
industries
Facilitating easy access for SMI banking
Facilitation of micro-industry partnerships with large companies
and SMIs
SMI development of superior / one village one product
SMI development in disadvantaged areas, border and coastal
areas
Development of potential industrial centers
SMI product promotion
Increased capacity and service area of SMI training unit
7
Bengkulu
1.
2.
3.
4.
5.
6.
8
Lampung
1. Populist economic recovery and development as well as
handling the impact of global crisis
2. Development of entrepreneurship and SMI competitiveness
3. Development of business support system for SMIs
4. Increased promotion and investment cooperation
5. Increasing employment opportunities, investment and export
Micro empowerment program
SMI development programs
Bengkulu export development program
Fostering SMI clusters in strengthening the network industries
Socialization IPR to the SMI
Potential industrial district development program by conducting
Dekranasda
24
No
9
Province
Bangka
Belitung
Islands
10
11
Program
1.
2.
3.
4.
5.
Consumer protection and trade security products of SMI
Improvement and development of SMI products
SMI technology development
SMI development centers
SMI development
Riau
Archipelago
6.
7.
8.
9.
10.
11.
Development of counter marketing of SMI products
Procurement workshops and training for SMIs
The exhibition and bazaar products SMI
Superior product training
SMI superior product exhibitions
Cluster development efforts
D K I Jakarta
1. Applying the principles of good governance in the management
of affairs of SMI
2. Increasing the capacity of administering affairs of SMI
3. SMI policies are integrated and comprehensive solution to the
problem of the city
4. Improving the regulation of safety of goods consumed by the
community
5. Develop and implement the registration system, including street
vendors and SMI to update the data every year
6. Improve management system and institution building and
managing SMME and SMI
7. Improve SMI network performance
8. Regulations to improve SMI access to capital, technology and
markets
9. Facilitate the development of local economic resources
10. Regulations to facilitate the provision of space for the SMI and a
street vendor
11. Increasing the role of public and community affairs professionals
in the organization of SMI
12. Meet minimum service standards and other matters concerning
SMIs
13. Facilitate the development of training to improve the quality and
quantity of export product
14. Perform relocation of industries that are not environmentally
friendly and promote environmentally friendly industries,
technology-intensive and capital intensive
15. Increasing the role of professional communities in matters of
industrial development
16. Industry that facilitate mutual support between the upstream and
downstream
17. The people doing the building industry
18. Building a favorable climate for industrial development
25
No
12
Province
West Java
Program
1.
2.
3.
4.
5.
6.
7.
13
Central Java
14
15
16
Export improvement and development
Domestic trading system development
Securing trade and consumer protection
SMI development
Arrangement of structures and improvement of industrial
technology capability
Creating a conducive business climate in order to maintain the
existence of an existing investment and attract new investment
Increased promotion and investment cooperation
1.
2.
3.
4.
5.
6.
7.
8.
9.
Increasing the efficiency of domestic trade
Improving and developing export
Improving consumer protection and trade security
Increasing international trade cooperation
Developing SME
Developing potential centers / industrial cluster
Industry structure arrangement with the guidance of the SMI
Improvement of industrial technology capability
Improvement of human resources, training and equipment aid
industry
D I Yogyakarta
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
SMI development
Development of industrial centers of potential
Science and technology capacity of production systems
Upgrading of industrial technology
Development and creative industries
Increased cooperation and international trade
Improvement and development of exports
Protection of consumers and trade security
Improving investment promotion and cooperation
Improving the investment climate and investment realization
Preparation of potential resources, infrastructure and regional
infrastructure
East Java
1.
2.
3.
4.
5.
6.
SMI development
Structuring the industrial structure
Improvement of natural resource-based industries
Improving the quality of human resources
Improvement of industrial standardization
Increased capacity of industrial technology
1.
2.
3.
4.
5.
Improving the investment climate and investment realization
Improving investment promotion and cooperation
Protection of consumers and trade security
Development of SMI
Quality improvement and regional labor productivity
Banten
26
No
17
Province
Bali
Program
1.
2.
3.
4.
5.
6.
Strengthening SMI development
Achieve a strong economic populist
SMI partnership development
Development of small industries and home industries
Technical training
Promotion SMI business unit
18
West
Nusa
Tenggara
1.
2.
3.
4.
5.
Improving the investment climate and realization of investment
Consumer protection and trade security
Development of SMI
Quality improvement and regional labor productivity
development of regional products
6.
19
East
Nusa
Tenggara
1.
2.
3.
4.
5.
6.
7.
8.
20
West
Kalimantan
1.
2.
3.
4.
5.
21
Central
Kalimantan
1.
2.
3.
4.
5.
6.
7.
Technical training
Compilation / collection / processing / updating / analyst data
and statistics
Preparation of program and work plan / program technic
Exhibition / visualization / publications and promotions
Community services aid
HR competency improvement apparatus
SMI development and quality
Operational guidance and smi empowerment services unit
Development of industrial technology innovation system
SMI facilities with private partnership
Fostering SMI clusters in strengthening the network industry
Technical Education and Training
The preparation / collection / processing / updataing / statistical
data analysis
6. Preparation of programs and work plans / technical courses
7. Exhibition / visualization / publicity and promotion
8. Improvement of human resource competencies
9. SMI quality coaching and development
10. SMI Operational and empowerment coaching services unit
Education and training
SMI data collection
SMI development programs are coordinated,
Exhibitions / visualization / and promotion of SMI
SMI quality coaching and development
Giving an award to the perpetrators of SMI
Empowerment and SMI coaching services unit
27
No
22
Province
South
Kalimantan
Program
23
East
Kalimantan
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
24
North Sulawesi
1.
2.
3.
4.
5.
6.
25
Central
Sulawesi
1.
2.
3.
4.
5.
6.
7.
8.
26
South Sulawesi
1. Utilization of Education and Training Center for small industries
and households
2. Technical guidance on development of industrial products
3. Provision of resources to the SMI facility
4. SMI in strengthening the coaching industry cluster networks
5. Granting business permits ease of SMI
6. Providing easy access to banking facilities to the SMI
7. Facilitation of cooperation and partnership with SMI
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
SMI development
Development of potential industrial centers
SMI's empowerment in East Kalimantan
Increased capacity of production system technology
Development of entrepreneurship and competitive advantage
Development of SMI business support system
Creation of a conducive business climate
Strengthening and development of industrial clusters in East
Kalimantan
Marketing development
Skills improvement products
Increasing competence management
The financial aid system
HR development
Strengthening the business environment
Economic empowerment of the people
SMI institutional quality improvement
SMI Partnership
Development of business support system for SMI business
SMI's empowerment
Development of potential industrial centers of SMI
Development of entrepreneurship and SMI competitiveness
SMI database development
Improving the investment climate and realization of investment
Improvement and export development
Improvement and development and exports
Increased capacity of production system technology
Structuring program of industry structure
28
No
27
Province
Southeast
Sulawesi
28
29
Program
1.
2.
3.
4.
5.
Creation of a conducive business climate for SMI business
Developing a support system for SMI business
Supervision programs to improve institutional quality on SMI
Development of savings and loan financing facility (FPSP)
Gorontalo
1.
2.
3.
4.
SMI management training / KUD
SMI supervision, monitoring and achievement awards
Facilitating ease of formalization of SMI business entity
Supervision and control of the execution of local regulations
regarding the management of the forest product industry
West
Sulawesi
1.
Science and technology program to increase the capacity of
production systems
SMI development program
The upgrading of industrial technology programs
Industry structure planning program
Program development potential industrial centers
2.
3.
4.
5.
30
Maluku
1.
2.
3.
31
North Maluku
1.
2.
3.
4.
5.
6.
32
West Papua
1. Improved facilities and infrastructure and resource capacity
building apparatus
2. Development of entrepreneurship and SMI competitiveness
3. Infrastructure development of consumer quality tests and
consumer goods
4. coaching and industrial development
5. Improving the quality of industrial competitiveness
6. Consumer protection and trade security
7. Increased institutional SMI
SME development
Development of industrial clusters
Consumer protection
improved human resource capacity development activities as SMI
Improved technological capabilities SMI equipment
Empowerment and SMI development
Strengthening and development of industrial clusters
Increased HR managers of SMI
Improving science and technology manager of SMI.
29
No
33
Province
Papua
Program
1.
2.
3.
4.
5.
6.
Trade promotion and business investment
Extension and dissemination of information SMI
Increasing human resource capacity through technical training and
management, activities and internships
Product diversification
SMI development
SMI product marketing development
Source: Compile from Middle Term Regional Development Plan in 33 Provinces of Indonesia (2010)
30
31
32

HOW TO INTEGRATE SMALL AND MEDIUM INDUSTRY (SMI)

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