IDF 2019: Towards Digital SMEs Global Competitiveness

Nika Pranata, LIPI Researcher, at Innovate session titled "Developing Global Competitive Micro, Small and Medium Enterprises" session.

The Indonesian Ministry of Cooperatives and SMEs noted that in December 2018 there were 60 million MSME units contributing 60.34 percent to the Gross Domestic Product (GDP). This contribution was able to help the employment of up to 97 percent of the total national workforce. The number of small businesses in Indonesia reaches 93.4 percent, medium businesses 5.1 percent, and large only 1 percent. President Joko Widodo on various occasions requested that MSMEs have to upgrade themselves and not only aiming at surviving as small businesses. 

One of the policy pillars resulting from Indonesia Development Forum (IDF) 2019 is the need for modernisation efforts for SMEs and household businesses to compete globally. This effort is very important considering that Micro, Small and Medium Enterprises (MSMEs) are not only the driving force of the economy in Indonesia, but also play a role in creating employment opportunities throughout Indonesia. MSMEs are the key to designing inclusive development by bringing together big and small businesses so that economic equality can touch all levels of society.

Best practices in the field, challenges and solutions that are expected to increase economic development through MSMEs are one of the main topics discussed at IDF 2019 which took place from 22-23 July 2019. IDF 2019 raised the main theme "Mission Possible: Seizing the Opportunities of Future Work to Drive Inclusive Growth"

Jonathan Mitchell, Portfolio Leader, Oxford Policy Management Ltd. said that Indonesia is among the top ten countries with the fastest economic growth, with one of the causes to be the rapid growth of MSMEs. This was stated by Jonathan in the Inspire session entitled "Building a Competitive MSME Business" at the first day of the IDF 2019 event on 22 July 2019.

So what should be done to boost the productivity and quality of SMEs in order to level up?

To be able to promote inclusive economic development, Jonathan said that these small businesses needed to be encouraged to become export producers to the global market. Certainly this needed to be preceded by improving the quality of products. Also, MSME entrepreneurs who have assets needed to be encouraged to become landowners to meet the needs of businesses for lands.

"Inclusive growth will be more easily achieved by collaboration between large companies and the MSME business ecosystem which is rich in new market potential, which is carried out based on business to business principles that benefit both parties," Jonathan said.

Meanwhile, Januar Rustandu, Project Manager, International Labor Organization (ILO) in the Ideas and Innovations Marketplace Session entitled "Connecting for Scaling Up" said that SMEs need to conduct SCORE Training. SCORE Training is a global program in 15 countries in the world that aims to improve relations between leaders and employees in order to increase SME productivity. This program will target SMEs in Indonesia.

"The problems of SMEs in Indonesia include the absence of records, problems in room layout, Occupational Health and Safety (K3) factors, and others. Another problem is the absence of a strong relationship between leaders and employees. Arrogant leaders, bad working conditions which is lacking in terms of safety and health protection are often found in SMEs. SCORE Training is here to eliminate these things," said Januar.

Go Online, Go Global

In today's digital era, technology plays a crucial role in encouraging the development of MSMEs to compete on the global stage. Nika Pranata, LIPI Researcher and IDF 2019 Call for Submission winner, stated that in the current era of unlimited trade, there are at least three things that can be done by stakeholders together to improve MSME competitiveness. The three steps are (1) domestic protection by setting cross-country trade regulations, (2) domestic improvement with UMKM go digital go online, and (3) global export support by improving cross-country trade facilities and infrastructure.

In the Innovate session titled "Developing Global Competitive Micro, Small and Medium Enterprises" featured speaker Rifki Pratomo, CEO of Andalin, explained Andalin has a mission to help SMEs reach the global market.

"Platforms like us help small and medium businesses to export with a higher level of efficiency, including the benefits they will enjoy, as they can save time, cost, and get informational data," said Rifki.

On reaching out to the global market, Ari Satria, Director of Export Development of the Ministry of Trade said that many SMEs did not know about the costs or regulations on exports. 

"This is the impact of the lack of government socialisation to businesses which make SMEs unable to run optimally to achieve their commercial targets. This is also one of the challenges the government needs to address to help people trained on the export of goods and services," Ari said. 

Digital Breakthrough for Boosting Social Business  

The rise of social businesses by utilising technology to address social problems is another potential that is believed to be able to drive economic growth. In fact, this breakthrough of social business has succeeded in sectors that have so far been considered to be adapting slowly to the digital world, such as agriculture, marine, fisheries, and other sectors.

One of the social businesses that shared inspiration about its business at IDF 2019 was Utari Octavianty from Aruna Indonesia. Aruna shared stories about efforts to improve the efficiency of the fishery trade chain by partnering directly with more than 2,000 fishermen so that they can provide maximum benefits to Aruna's fishing partners and buyers. There are also other business models such as those run by HARA, utilising data inclusion to increase farmer productivity.

"Crucial data such as farmers’ data and land area are very important for capital loans and risk calculation, but often these data are not available. The unavailability of this data makes farmers' productivity lower, for example when compared to that of Vietnam. Although our results are the highest in Asia, or 2.5 times greater than Vietnam. We believe this problem can be answered through digital technology, which in turn can increase the economic commodities from the agricultural sector," said Imron Zuhri, HARA's Co-Founder.

The key to economic development through MSMEs or social enterprises is good collaboration with more established large industries and the use of technology. Supporting creative development and social enterprise is an effective effort to tackle unemployment and inequality in economic growth, and to build an inclusive society going forward.

Important recommendations delivered by the speakers and participants of IDF 2019 will provide recommendations for the formulation of policies for the development of Indonesia's MSME development strategy and the strengthening of social enterprises. The goal is to continue to grow in accordance with technological developments and face increasingly diverse challenges.