PresidentJoko Widodo, the Indonesian government has focused its efforts on boosting thecountry’s digital economy. To continue the trajectory, the government’s plan includes supporting eight million Small and MediumEnterprises (SMEs) to be “digitally empowered” by year 2020. The attention of special governmentis how this SMEs being a foremost contributor to Indonesian Gross DomesticProduct (GDP) and also open employment. Based on the Cooperatives and SMEMinistry in 2014, Indonesia had 57.9 million SMEs which contributed to about58.
92% of the country’s GDP and absorbed 97.30% of the country’s workforce. Deloitte AccessEconomics commissioned reported that reveals that boosting digital engagementamong Indonesia’s SMEs could increase annual economic growth of the country by2%. Such a jump would have Indonesia on track to becoming a middle-income classcountry by year 2025. Figure 1.1. SME Digital TechnologyOpportunity and ChallengeSource: Deloitte Financial Advisory The report is finding that greater use ofdigital technologies such as social media, broadband and also e-commerce candeliver significant benefits for SMEs segment, including:Up to 80% higher in revenuegrowthBeing one-and-a-half timesmore likely to increase the employmentBeing 17 times more likelyto be more innovative Figure 1.2.
SME Online Financing andChallengeSource: Deloitte Financial Advisory The key directions forgovernment policy to support digital local SMEs, including: Increasing broadband access. The internet access in Indonesia still remains relatively expensive and quite slow. Increasing a broadband access and the quality of service is an urgency and alternative solution that will encourage digital technology adoption by SMEs and also improve the performance of existing technologies. Helping the SMEs to be proactive in digital businesses. The Indonesia government Government has to provide SME support programs, including how to make a target at increasing SME digital engagement. Expanding e-payments.
Improving trust in the platform of e-commerce payment will increasing bankability of Indonesian consumers, businesses and also expanding alternative payment systems will increase the volume of digital transactions. Expanding access to finance. Digital SMEs model need a mix of international also domestic sources of finance which are currently barriers that reduce their potential for growth. Expanding e-government services. Government services delivered through online platforms are more cost-effective and efficient. More online government services would build consumer confidence in online activities and services. John O’Mahony as theresearch co-author and Deloitte Access Economics partner at the report’s launchsaid that “Indonesian businesses accelerating their adoption of digital willnot only drive growth and profitability. It will help achieve importantnational objectives for higher employment, improved living standards andgreater international competitiveness.
” Digital needs to be an important agendaitem for the Indonesian Government. 1.2. SME in Indonesia1.
2.1. Definition of SME and Its BasisThe definitionof ‘Small & Medium Enterprises’ (SME) under Indonesian law differs from thegenerally accepted definition defined by turnoverand net assets. Figure 1.3.Indonesian SME DefinitionsSource:SME Act No.20/2008; Indonesia Ministry of Cooperative and SME; DeloitteAnalysis Table 1.
1.SME Contributions to GDP and EmploymentSource:Digital Banking for Small and Medium-sized Enterprises, Deloitte 2015 From the dataexplained that across the five countries, SME contribution in Indonesia is atleast a third GDP and approximately 70% of employment with its share being thehighest and contribution to a GDP stands at 59%, and also to employment standsat 97%. 1.2.2. Ministry of Cooperatives and Small & MediumEnterprises of the Republic of Indonesia and AuthoritiesIn SMEs segment the jurisdiction of policies is notonly limited to the Ministry of Cooperatives and SME, but also involves theFinance Ministry, the Industry Ministry, the Commerce Ministry, etc., and sinceeach of these Ministries individually administer policies for SME.
Inaddition to the Indonesia SMEs Law, there is technical regulation namely IndonesiaSMEs Government Regulation. This regulation stipulates about businessdevelopment (facilities, priority,activity, intensity, deadline,and implementation) of SMEs, types of partnership of SMEs, government role inpartnership of SME and licensing (type, requirements and licensing fee).