There is an urgent need for policy and strategy to develop micro and small industries (MSEs) to “graduate”. The hope is that these “graduating” MSEs can fill the hollow middle in the national industrial structure, where MSEs dominate in numbers (90 percent of the number of industries in Indonesia), but their productivity is low, thus unable to support large industries to accelerate the growth of Indonesia’s economy and exports. MSE productivity is generally lower, cause by limited access to finance, marketing, raw materials, and limited business partnership. MSEs also are unable to apply good governance and product standardization, and have limited ability to innovate and develop product technology, entrepreneurship, as well as limited access to production input. Only a small number of MSEs are connected to export markets, directly and indirectly. These barriers have made it difficult for micro scale industries to graduate to small scale, even more to large and medium scale. The many efforts by the government to support the development of MSEs have not been optimal. Therefore, alternative ideas, good practices, and models for developing MSEs are needed for them to “graduate” and encourage the growth of new MSEs that are competitive.
Micro and small industry, “graduation”, productivity, access to raw material-capital-marketing, business partnership, governance and standardization, innovation, entrepreneurship, export.