Promise for MSMEs Grows Stronger

KOMPAS/PRIYOMBODO

A worker makes tofu at a home industry in Mampang Prapatan, South Jakarta, on Monday (11/11/2019). This micro, small, and medium enterprise (MSME) has not incorporated digital technology. Marketing is carried out conventionally at traditional markets in the Mampang Prapatan and Kebayoran areas.

The Job Creation Law will make it easier for micro, small and medium enterprises (MSMEs) to grow. The attendant regulations must guarantee that MSMEs can develop and protect workers.

The MSME sector has repeatedly proven to be the savior of the Indonesian economy. Small but tough has become characteristic of Indonesia’s MSMEs.

Even in the middle of the Covid-19 outbreak, MSMEs still absorb the workforce and continue to be a source of economic growth. This can be seen at the very least in the agricultural sector, which has millions of businesses and has been the only sector to record positive growth at 2.19 percent in the second quarter of the year.

Read also: Strengthen MSMEs in Domestic Market

The vital role of MSMEs can also be seen in the number of businesses in the sector. According to data from the Cooperatives and Small and Medium Enterprises (SMEs) Ministry, around 99.9 percent of all business entities in 2018 were MSMEs. The active workforce in this sector numbers around 116,978,631 workers, or 97 percent of the national workforce. The sector contributes Rp 8.57 quadrillion to the economy, or about 61 percent of the combined contribution of MSMEs and large businesses.

Read also: Open Draft, Intensify Dialogue

Even though they play such a large role in the economy, MSMEs seem to have been left to run on their own so far. The regulations that apply to large businesses generally apply to MSMEs also, including the manpower regulations. Manpower Minister Ida Fauziyah said in a discussion with the media on Monday evening (12/10/20202) that in practice, only 7 percent of employers fulfill the obligation to provide severance pay when terminating employees, and that these were generally large companies.

People who possess the entrepreneurial spirit also face many obstacles in starting a new business.

In practice, many owners of MSMEs have been forced to violate or disregard the existing regulations. Another impact is that MSMEs have been slow to grow, with the sector growing only 2.02 percent from 2017 to 2018. People who possess the entrepreneurial spirit also face many obstacles in starting a new business. These obstacles range from the various business permits they require, ranging from the environment to the location of the business and employment, as well as obstacles to obtaining credit, which requires collateral. Everything takes time and money, as well as both formal and informal processes.

Kompas/Priyombodo

Workers choose threads at Dewi Sambi Boutique\'s convection business in the Larangan area, Tangerang City, Banten, on Tuesday (29/2/2020).

Small is beautiful, said Oxford-educated economist E.F. Schumacher. He encouraged the growth of SMEs, in part because their smallness allowed for equal distribution of welfare and the proper use of natural resources.

Read also: Continually Promoting MSMEs

Our experience so far shows, however, that there is a wide gap between the written regulations and what occurs in the field. The Job Creation Law’s real test will come when it is implemented in the field. Will MSME investments increase, employment absorption increase? Will MSME owners grow to become big entrepreneurs; will MSME employees become more prosperous like the intended purpose of the Job Creation Law? We must create a climate that encourages MSMEs to innovate and become competitive so they can support sustainable economic growth.

The Job Creation Law provides much leeway in doing business to attract investment, including in its provisions on employment. Given the current situation, therefore, we need to ensure that the Law and its implementing regulations can guarantee that our MSMEs will be masters in their own countries and champions in global competition.