Reforming Policies for Small and Medium-Sized Enterprises in Indonesia

May 2015

Authors: Nicholas Burger, Charina Chazali, Arya Gaduh, Alexander D.Rothenberg, Indrasari Tjandraningsih and Sarah Weilant.

Small and medium-sized enterprises (SMEs) are critical for emerging economies like Indonesia but simultaneously challenging for policymakers looking to support their growth. Including micro firms, SMEs are responsible for more than 97 percent of total employment in Indonesia and represent 99 percent of all firms. The Indonesian government has tried to assist SMEs through programmes, such as subsidised credit, one-stop shops to lower business registration costs and government-sponsored trade fairs. However, there is little evidence on how effective these programmes are or on ways to improve government policies aimed at helping SMEs. We conducted structured interviews with 192 firms across five provinces in Indonesia to investigate the constraints that firms face and how existing programmes do – or do not – help reduce these constraints. We conclude the report with policy recommendations targeted at the Indonesian government and other stakeholders, focusing on the importance of credit and on the need to remove information barriers.

The mission of the National Team for the Acceleration of Poverty Reduction (Tim Nasional Percepatan Penanggulangan Kemiskinan or TNP2K) is to coordinate poverty alleviation policies in Indonesia. As part of its tasks, TNP2K conducts and commissions research reports and studies with the objective of facilitating and informing evidence based policy planning (http://www.tnp2k.go.id).

This work is a product of the staff of the RAND Corporation. The findings, interpretations, and conclusions herein are those of the authors and do not necessarily reflect the views of the Tim Nasional Percepatan Penanggulangan Kemiskinan (TNP2K), the Government of Indonesia or the Government of Australia.

Attribution:

Burger, N., C. Chazali, A. Gaduh, A.D. Rothenberg, I. Tjandraningsih and S. Weilant. 2015. Reforming Policies for Small and Medium Enterprises in Indonesia, Jakarta, Indonesia, RAND Corporation in collaboration with Tim Nasional Percepatan Penanggulangan Kemiskinan (TNP2K), Jakarta, Indonesia.

Support for this publication was provided by the Australian Government through the Poverty Reduction Support Facility (PRSF).

You are free to copy, distribute and transmit this work for non-commercial purposes.

To request copies of the report or for more information on the report, please contact the TNP2K - Knowledge Management Unit (kmu@tnp2k.go.id). The reports are also available at the TNP2K website.​