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.



The local dimension of SME and entrepreneurship policy in Indonesia

This chapter presents information on the local dimension of SME and entrepreneurship policy in Indonesia. It includes information on geographical differences in economic and SME activity, the role of local governments in SME policy, existing mechanisms for the tailoring of national policies to the local context, and mechanisms to ensure policy co-ordination among different levels of government. Indonesia features large local variations in wealth, the business environment, SME and entrepreneurship activity, and enterprise access to strategic resources, which reflect the large size of the population and the geographical expanse of the country. A large-scale devolution of powers in the early 2000s has given significant SME policy functions to local governments, which has helped provide the necessary flexibility to target national policies to the local context. Nonetheless, appropriate tailoring of national policies to local business needs and effective policy co-ordination across levels of government are on occasion impaired by the large number of government institutions involved in SME policy and by uneven policy capacities at the local level.



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