SME and Entrepreneurship Policy in Indonesia 2018

image of SME and Entrepreneurship Policy in Indonesia 2018

SMEs play an important role for economic growth and social inclusion in Indonesia. Based on data from the Ministry of Co-operatives and SMEs, Indonesian SMEs account for nearly 97% of domestic employment and for 56% of total business investment. 

Indonesia has a Micro, Small and Medium Enterprise (MSME) Law and a specific ministry dedicated to co-operatives and SMEs. The wealth of public programmes for SMEs could be streamlined, and more could be done to support innovative companies able to generate productive jobs and participate in international markets. The development and implementation of an SME strategy would be instrumental to improve the overall coherence of national policy measures, objectives and measurable targets. 

The review of SME and entrepreneurship policy of Indonesia is part of a peer-reviewed series, by the OECD Working Party on SMEs and Entrepreneurship, which aims to improve the design, implementation and effectiveness of national SME and entrepreneurship policies.



SME and entrepreneurship characteristics and performance in Indonesia

This chapter first presents information on the structure of the Indonesian SME sector and its performance in terms of productivity, export, investment and innovation. Second, it offers an overview of entrepreneurial attitudes, entrepreneurship performance and business ownership in Indonesia. The chapter shows that the average Indonesian SME is small by international standards, but that there has been a recent consolidation by which larger SMEs (e.g. medium-sized firms) have come to account for a larger share of total employment and total investment. However, Indonesian SMEs continue to be poorly integrated in global markets and do not undertake much R&D or other forms of innovation. Entrepreneurial attitudes are generally positive in Indonesian society, but risk aversion is still high and contributes, together with other factors, to low entrepreneurial activity (i.e. the act of being in the process of creating a business). On the other hand, business ownership is widespread and one of the contributing factors to the small size of Indonesian SMEs.




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