Strategies to Upgrade Micro and Small-scale Industries (IMK)

Many have noted the urgency of policies that help the development and quality enhancement of Indonesia’s micro and small-scale industries (IMK). The hope is that IMKs will “graduate” to help fill the ‘hollow middle’ within the national industrial structure. Currently, IMKs make up 90% of all industries in Indonesia, yet their productivity rates are low. This results in IMKs being unable to contribute largely or effectively towards Indonesia’s economic and export growth. IMK productivity rates generally still fall short of their ultimate potential, which is caused by limited access to financing, effective marketing methods, raw materials, and business partnerships. The industries have yet to establish proper product standardization practices, as well as having limited innovation, product development, entrepreneurial and production skills. Only a small percentage of IMKs have either directly or indirectly broken through the export market.

These problems make it harder for micro-scale industries to “graduate” into small-scale industries, let alone becoming mid-scale industries. 

Post Covid-19, IMKs will also face a rapidly moving digitalization trend and economic recovery prospects that would demand more ecofriendly solutions and higher productivity rates. Efforts by the government to drive the development of IMKs have not been optimal, resulting in the need for alternative suggestions and practices as well as new development models that push IMKs to become more productive and competitive. 

Key Terms

IMK, micro and small-scale industries, upscaling, productivity, access to raw material, funding, marketing methods, business partnerships, product standardization, innovation, entrepreneurship, exports.   

Key Ideas

  1. Highlighting the best practices in improving IMK production capacity and competitiveness. 
  2. Strategies for IMKs on how to survive Covid-19 and post-Covid-19 recovery challenges as well as transforming IMK capabilities in the future.  
  3. Understanding the importance of “graduation” and its indicators in the context of IMK development. 
  4. Strategies on improving IMK productivity that is supported by better access to funding, raw materials, appropriate technologies, and the market itself. 
  5. Strategies on encouraging partnerships between IMKs and mid-scale to large-scale industries. 
  6. Strategies on modernizing IMK businesses, entrepreneurship, standardization and innovation. 
  7. Strategies on improving production capacity for IMKs so that they are prepared for exports and becoming part of the global production network.
--> -->