MSMEs - driving force of Indonesian economy: KEIN

 

Jakarta (VNA) – Indonesia's economic stagnation at 5 percent over the last several years is caused not only by external factors but also domestic ones, according to the National Industrial Economic Committee (KEIN).

Antara news agency quoted KEIN deputy chairman Arif Budimanta as saying that structural problem is the cause, particularly because the structure of economic players is imbalance.

The economic stagnation is also caused by expanding the current account deficit, payment balance deficit, income gap, and limited job opportunities, Budimanta said.

He emphasised the need to optimise micro-, small-, and medium-sized enterprises (MSMEs) to boost the economy.

According to a study conducted by the Megawati Institute, MSMEs contribute 99.99 percent of entrepreneurs, 97 percent of employment, and 60 percent of GDP, as against major companies that contribute only 0.01 of business players, three percent of employment, and 40 percent of GDP distribution.

However, MSMEs only receive 20 percent of banking finance distribution, compared to 80 percent for major companies, the survey shows.

Indonesian MSMEs are also not maximal in the production value chain at the national as well as global levels, compared to those in neighbouring Malaysia and Thailand.

Only 6.3 percent of Indonesian MSMEs are capable of being involved in trade chain in Southeast Asia, and its contribution to the national export is only 15.8 percent, compared to 29.5 percent in Malaysia and Thailand.

This shows that so far MSMEs are considered only as an externality and not as a strategic player in the national economy.

Based on a simulation carried by the Megawati Institute, if 10 percent of the country's MSMEs are upgraded, such as micro business being upgraded to small and medium ones, it could boost Indonesia’s national economic growth by 7 percent, even up to 9.3 percent.

Economic experts of Indonesia are of the view that the government should make this sector become a backbone of the national economy by making appropriate breakthroughs.-VNA