BPS Survey: Optimize Support for MSMEs

KOMPAS/FERGANATA INDRA RIATMOKO

Aminah (41), the granddaughter of Kwik Sun Kok, packs bakpia cookies, a bean-filled moon cake-like pastry, at the Bakpia Lestari industry, Mantrijeron, Yogyakarta, Saturday (6/2/2021). The company was founded by Kwik Sun Kok, a pioneer of bakpia production in Yogyakarta. The company is trying hard to survive amid the pandemic and the emergence of new bakpia producers in the city.

With a comprehensive strategy, we can rely on micro, small and medium enterprises (MSMEs) to expand the job field. Support must be directed to productive sectors.

JAKARTA, KOMPAS — The government could exploit MSMEs to reduce unemployment and poverty, which have been rising during the COVID-19 pandemic. With a comprehensive strategy, they could be relied on to create jobs and move the economy forward.

Center of Reform on Economics (CORE) executive director Mohammad Faisal explained on Tuesday that the social assistance program has been used to stimulate household consumption. The government needs to pursue another policy that provides comprehensive support for MSMEs.

The government already has a working capital loan program for MSMEs called Produktif Usaha Mikro (productive micro enterprises; BPUM). The 2021 National Economic Recovery (PEN) budget allocates Rp 14.4 trillion (US$1.03 billion) for the BPUM, at Rp 1.2 million for each of 12 million targeted MSME recipients.

Also read: Politics of MSME Development

Faisal said the government could add consulting services alongside the BPUM. Many MSMEs need advice on entering the e-commerce sector, improving product competitiveness, and accessing new markets.

“We should realize that MSMEs are the backbone of our economy, so a comprehensive policy from the upstream to the downstream, as well as a support system, must be provided. If not, their businesses will not be sustainable, [and] depend on household consumption stimulated by the government’s cash aid program (BLT),” he said.

They should instead be empowered so they could keep growing and create new jobs.

The working capital loan program would not be sufficient on its own, because MSMEs were dependent on household consumption. They should instead be empowered so they could keep growing and create new jobs.

“The new jobs created by MSMEs will fit our workforce demographic that is less skilled. The potential for labor absorption will be bigger,” he added.

Changing direction

Senior researcher Asep Suryahadi at the SMERU Research Institute also agreed with the idea to increase support for MSMEs, because workers who had been laid off during the pandemic had switched to self-employment.

According to Statistics Indonesia (BPS), the share of informal workers increased from 55.88 percent in August 2019 to 60.47 percent in August 2020, equivalent to 77.68 million workers. Meanwhile, the share of formal workers dropped from 44.12 percent to 39.53 percent, equivalent to 50.77 million workers. Informal workers include self-employed workers as well as temporary or unpaid workers.

“Assistance for MSMEs will be necessary to help new businesses and create jobs,” said Asep of SMERU.

Also read: Growth to Overcome Poverty

Nevertheless, the implementation of the BPUM needed evaluation and improvement. Asep highlighted the program’s poor database that had resulted in suboptimal impacts for MSMEs.

“This program [BPUM] has not been successful in reaching MSMEs. There are many MSMEs that have [received] no information on this program or have not been recorded in the [BPUM] database,” he said.

KOMPAS/TOTOK WIJAYANTO

Musano, owner of Joglo Maket Jakarta, which makes scale home models, shows a mockup of an apartment complex in his home in Kembangan, West Java on Thursday (11/2/2021). His business has been hard hit by the Covid-19 pandemic as property companies are prohibited from holding exhibitions to prevent the spread of the disease. Musano\'s earnings have dropped by up to 80 percent due to the lack of orders. He has only been able to maintain one of his eight employees hired before the pandemic.

The government needed to optimize the program by improving the database and the dissemination of information to MSMEs. The BPUM also needed to be expanded beyond providing cash aid as working capital by improving the digital literacy of MSMEs so they could expand to e-commerce.

According to BPS data, Indonesia’s poverty rate reached 10.19 percent in September 2020, returning to a double-digit figure for the first time since March 2018. The poverty headcount also increased by 2.76 million people from September 2019 to reach 27.55 million people in September 2020.

The increased poverty headcount was due to rising unemployment and the adverse effects of the health crisis on the labor market. According to BPS data, the health crisis had affected 29.12 million working-age people, of which 2.56 million people became unemployed. As a result, unemployment increased to 9.77 people as of September 2020.

Successful assistance program

Fiscal policy agency (BKF) head Febrio Kacaribu at the Finance Ministry said the social assistance financed by the 2020 PEN budget had succeeded in maintaining consumer purchasing power for poor people and the near poor.

Without the social assistance program, the World Bank estimated that Indonesia’s poverty rate would have reached 11.8 percent, instead of the current 10.19 percent. “It means that the 2020 PEN budget was able to save 5 million people from falling into poverty,” said Febrio.

Also read: Social Assistance not Enough, Creates more Jobs!

He added that, in addition to social assistance, the government was also supporting the poor and vulnerable through working capital loans, particularly MSME owners, so they could survive the pandemic. The support aimed to improve capital and cash flow for MSMEs.

The government disbursed Rp 112.4 trillion in MSME assistance last year.

Government assistance included interest subsidies, the BPUM, working capital loan guarantee, and direct investment from the Revolving Fund Management Agency (LPDB). The government disbursed Rp 112.4 trillion in MSME assistance last year.

“These assistance programs have helped MSMEs. Ninety-seven percent of BPUM recipients are still able to maintain their business, the poor and near poor were protected during the pandemic,” Febrio said.

KOMPAS/RONY ARIYANTO NUGROHO

Albi (23) inspects one of the quails on his farm, Kudjang Farm Indonesia, in Gunung Batu Village, West Bogord district, Bogor City, West Java, Tuesday (16/2/2021). Demand for quail is rising, especially from supermarkets and online buyers amid growing healthy lifestyles due to its low fat and high nutritional value. The quail breeding business has attracted many young people as quail prices are relatively more stable than those of chicken. A live quail sells for Rp 10,000, while its meat sells for Rp 15,000 per quail. The company receives orders for 30 quails a day, not including those from online buyers.

The government is providing assistance through the 2021 PEN budget for public works programs, for instance by allocating Rp 23.24 trillion to the Public Works and Housing Ministry to absorb 796,826 workers, Rp 3.52 trillion to the Transportation Ministry to absorb 30,988 workers, and Rp 1.64 trillion to the Agriculture Ministry to absorb 2.8 million workers.

The Fisheries and Maritime Affairs Ministry has budgeted a Rp 410 billion public works program for absorbing 5,101 workers, while the Energy and Mineral Resources Ministry has budgeted a Rp 1.6 trillion public works program to absorb 34,000 workers. There are also public works programs in infrastructure as well as a program to strengthen labor-intensive manufacturing.

Also read: Growth Map

Yogyakarta Secretary Kadarmanta Baskara Aji said the provincial administration had also implemented public works programs, such as repair and maintenance of village roads, in addition to MSME social assistance programs.

(This article was translated by Lionel Priyadi)

(The captions were translated by Hendarsyah Tarmizi)