Workshop Policy Lab for Sustainable Procurement RIDF 2021: Identifying the Challenges of UMKM Policy Design and Implementation

JAKARTA – To achieve a sustainable goods and services procurement method, the government must be aware of three crucial things.

First, they must be aware of the effects and the structure of the laws that are passed down in regulations to each ministry or related institution in order to ensure an orderly system. Second, the system must be able to continuously provide digital access that is available at any time for all the participants involved. The third is to ensure micro, small and medium enterprises (UMKM) improve and meet the procurement requirements and standards.

“The Covid-19 pandemic has greatly affected UMKMs in a way that has diminished their demand and exposed funding and budget limitations. Other obstacles include the limited flexibility of raw material supply from countries that have been affected heavily by Covid-19, which has affected the progression of sectors such as the food & beverage and accommodation industries,” explained the Ministry of National Development Planning/Bappenas’ Director of Small and Medium Enterprises and Cooperatives Development Ahmad Dading Gunadi at the Policy Lab for Sustainable Procurement (PLSP) Road to Indonesia Development Forum (RIDF) 2021 workshop on Tuesday (5/10).  

UMKMs make up almost 99.9% of all business units operating in Indonesia, contributing up to 57.24% to the Gross Domestic Product (GDP), making UMKM development a priority for the government when drafting economic policies ahead.

“We have begun to implement this policy in 2021 so that by 2022, we are able to strengthen our economy to make it more fair and equitable. The most important thing is to keep creating markets for the UMKMs to thrive,” Dading said.

Procurement laws have already been in place, such as the clause in Law no. 11/2020 on Job Creation, which makes it mandatory for the central government and local governments to allocate at least 40% of their procurement budget on purchasing from UMKMs, as well as from other domestic cooperatives.

Desriko Malayu Putra, the Secretariat of Lingkar Temu Kabupaten Lestari and member of the PLSP working team, says that the UMKMs’ struggles under the Covid-19 pandemic are understandable and unavoidable. “Also, if we were to consider existing government UMKM policies and movements, such as the Bangga Buatan Indonesia campaign, we are able to see how much UMKMs were able to benefit from it,” he explained.

Desriko added that the government must also dedicate a large part of its procurement budget to UMKMs in order to bolster the economy. By doing so, sustainable and fair procurement is able to take place. An example of this is the success that the Ministry of Forestry and Environment has had with a rule that emphasizes the procurement of goods and services that fulfil social, environmental and sustainability criteria, which is implemented to have an effect on Indonesia’s efforts to achieve the aims outlined in the United Nations’ Sustainable Development Goals (SDG).

Taking place over three days, from October 5 to October 7, the PLSP Workshop, which is also attended by ministries/agencies and local government representatives, offers an opportunity for key ecosystem stakeholders to contribute towards setting the policy agenda, improving policy implementation and making recommendations to improve policy targeting. Collaborations across stakeholder groups, including policy practitioners that support UMKM organizations, are very important in jointly shaping Indonesia’s policy landscape and creating a conducive and supportive policy climate for UMKMs.

The PLSP Workshop also aims to identify challenges in policies related to eco-inclusive UMKMs to develop prototype solutions to the challenges faced. This program is expected to be able to produce strategic recommendations and implementation patterns that can be used in the future by both regional and national policymakers, as guidelines for sustainable development and further UMKM growth efforts.