How MSMEs in Indonesia Are Surviving during Covid-19 Pandemic

JAKARTA, KOMPAS.com – As the covid-19 pandemic wreaks havoc on many businesses in Indonesia, the micro, small and medium enterprises (MSME) sector surprisingly turns out otherwise.

The MSMEs remain important in their contributions to the country’s economic growth amid the global uncertainty due to a never-ending threat posed by the Covid-19.

The government said that the MSMEs have contributed 8,573.9 trillion rupiahs ($597 billion) or 61.07 percent to the gross domestic product (GDP), higher than large businesses which stood at 5,464.7 trillion ($382 billion).

Amid waves of layoffs, the MSME sector absorbed 117 million workers or 97 percent of the total workforce in the country.

Also read: Indonesian SMEs That Resisted Digital Adoption Collapsed during Pandemic

In terms of target, the Ministry of Cooperatives and Small and Medium Enterprises has set a target of contributing 62.36 percent to the GDP in 2021 and 65 percent in 2024. Besides, the ministry will increase its MSME export from 14 percent in 2020 to 15.12 percent in 2021. The export target will increase even more to 21.60 percent by 2024.

Previously, the Indonesian Chamber of Commerce and Industry (Kadin) said that there are about 65 million MSMEs throughout Indonesia that can become effective avenues to produce various high-quality products to cater to the need of domestic and international markets.

MSMEs amid pandemic

When the pandemic first hit Indonesia last year, Kadin said that about 50 percent or equivalent to 30 million MSMEs was affected and forced to temporarily close their business activities.

The situation could even be tougher when the Indonesian Institute of Sciences (LIPI) issued its research saying that if the pandemic persists, based on the financial aspect, 85.42 percent of the MSMEs could only run their activities for a year.

On top of that, in terms of health aspects, MSME players are also prone to get infected with the virus as they have to deal directly with various customers every day.

Also read: More Indonesian SMEs Poised to Gain Access to Social Assistance Programs: 

Therefore, many MSMEs were pushed to shift their ways of selling the product and service from offline to online. During the pandemic, it was reported that internet traffic was up 15-20 percent.

With the challenges, the government came up with several programs to help the MSMEs. A stimulus package of about 123.46 trillion rupiahs ($8.5 billion) was also provided for the MSMEs, including a lending program with a lower interest rate under the microcredit program (KUR).

KOMPAS.com/SUKOCO Some products of MSMEs.

Social assistance of 28.8 trillion rupiahs ($2 billion) was also provided for unbankable MSMEs. Under this program, 12 million MSMEs received a zero-interest grant of 2.4 million rupiahs ($167).

It was hoped that the assistance programs would empower the MSMEs in moving the wheel of business and maintaining the welfare of the people amid the pandemic.

What are the survival strategies?

To cope with the Covid-19 challenges, the Minister of Cooperatives and Small and Medium Enterprises encouraged Indonesian MSMEs to embrace the digital ecosystem by promoting their products via e-commerce platforms.

Also read: 7,000 MSMEs Register for Private Covid-19 Vaccination Scheme: Indonesia Business Chamber

Teten Masduki had previously said that only 13 percent of the MSMEs have utilized e-commerce as their platforms to promote and sell their products. The remaining 87 percent of the MSMEs were still selling their products offline.

Teten also said that it was important for the MSMEs to be able to adapt to the current situation by producing innovative products. Citing an example, he said that some MSMEs who sell bags or clothing have been also producing cloth face masks.

The ministry has been encouraging the MSMEs players to use digital technologies to reduce their costs. To do so, the ministry with the help of other parties have also provided various training programs for the MSMEs.

KOMPAS/HERU SRI KUMORO An exhibition of products made by Indonesian MSMEs in Jakarta.

Also read: 9 Indonesia’s State Firms Award Projects Worth $818.4 Million to Local MSMEs

As the country observed National SME Day on August 12, Deputy minister for SME Eddy Satria said that with all the Covid-19 restrictions, the ministry has provided four main programs to help the MSMEs cope with the challenges and continue to grow.

The program encouraged MSMEs to enter the formal sector by registering their business activities. Once they are registered with the government, they will receive assistance and training.

Through the program, his office will also accompany the MSMEs to enter the supply chain and encourage the use of digital technologies. Until now, almost all digital platforms already have an agreement with the ministry as part of the efforts to scale up the MSMEs.

To modernize the country’s cooperatives is also part of the strategies to grow the local MSMEs.
He said that the government has allocated about 700 trillion rupiahs ($49 billion) to help recover the economy and one-sixth of the budget has been allocated for MSMEs.

With the government-led recovery plan, it is hoped that the local MSMEs could make use of the opportunities and explore innovative products to alleviate the burden of Covid-19.

Source: Kompas.com