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 strategic framework and delivery system for SME and entrepreneurship policy in Indonesia

This chapter describes and assesses the legal and policy framework underpinning SME and entrepreneurship development in Indonesia, including existing mechanisms for policy formulation and policy implementation. The chapter shows that SME development is a policy priority in Indonesia, enshrined in Law 20/2008 (also known as the MSME Law) and in the National Medium-Term Development Plan that drives Indonesian development policies in each five-year legislation period. As a result, many ministries implement programmes for SMEs and entrepreneurs. This is generally good for the strengthening of domestic SMEs, but also raises co-ordination challenges and, on occasion, results in some programmes lacking sufficient scale. The chapter suggests that the draft of an SME Strategy and the establishment of an SME Inter-Ministerial Council could add clarity to the SME policy framework and strengthen policy co-ordination. Similarly, an SME policy portfolio analysis would help the government to understand whether SME policy spending is balanced and meets government priorities.


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