In this webinar, Dr Astrid Meilasari-Sugiana, Dr Gunardi Endro and Dr Suwandi shared their observations on the constraints faced by Indonesia’s Micro, Small and Medium Enterprises (MSMEs) during the pandemic and elaborated on some policies that have been implemented to assist these companies. Drawing on both policies and economic ideology of the country, the speakers attempted to highlight solutions and discussed how it could aid in the recovery of the economy after the pandemic.
INDONESIA STUDIES PROGRAMME WEBINAR
Thursday, 25 February 2021 – ISEAS – Yusof Ishak Institute invited three speakers, Dr Astrid Meilasari-Sugiana (Lecturer and researcher at Universitas Barkie’s Political Science Department), Dr Gunardi Endro (Lecturer and researcher at the Faculty of Economics and Social Sciences in Universitas Bakrie) and Dr Suwandi (Lecturer in Universitas Bakrie) to speak in a webinar titled “Constraints and Opportunities for Indonesia’s Micro, Small, and Medium Enterprises (MSMEs) amidst the COVID-19 Pandemic” Moderated by Dr Siwage Dharma Negara (Senior Fellow and Co-Coordinator of Indonesia Studies Programme, ISEAS – Yusof Ishak Institute), the three speakers presented their findings on how the pandemic had affected MSMEs in Indonesia and discussed on the possible outlook of MSMEs in the near future.
Dr Astrid Meilasari-Sugiana started off the first presentation of this webinar by first introducing the background of MSMEs in Indonesia. Seen as the backbone of Indonesia’s economy, MSMEs contributed about 61% of Indonesia’s GDP in 2018 and employed up to 97% of the workforce in Indonesia. Dominating mainly in the retail, hospitality and agriculture sectors, these companies had been experiencing the effects of the pandemic which had rapidly decreased the country’s economic growth by -2.5%. Dr Astrid analysed the short and middle term impacts through a series of survey results and identified a few key impacts, focusing mainly on the reduction in revenues and profit margins, decrease in assert values as well as number of workers employed. Using online platforms to promote products was observed to have taken an upward trend during the pandemic (at least 60%) but that had led to unregulated competition online which gave rise to price slashes and profit reductions. Dr Astrid also highlighted that most MSMEs believed they could only survive no more than 10 months after the first social distancing policy was enacted in March 2020, with cost being the most challenging aspect to tackle in the future. Many had identified the need to seek loans from family members and relatives in order to survive the second year. This pattern was consistent in both male and female owned MSMEs, with most having no intention to close their businesses during the pandemic. Dr Astrid proceeded on to elaborate on the existing government interventions designed to support MSMEs during the pandemic. While there is an array of assistance given by the government, most of MSMEs have indicated in the survey that they were not aware of these assistances and only 17% seek help during the pandemic. Based on that, Dr Astrid pointed out the need to have a consolidated database of all the available assistances for MSMEs so that there could be better outreach to those who needed immediate help. At the same time, there is also a need to streamline and coordinate all these interventions in order to ensure there is alignment between both national and regional level interventions. Dr Astrid therefore concluded her presentation with a few key pointers, stating that while most of the MSMEs do not have intention to close their business, a shift to focus their business on online platforms would be the next step most MSMEs would undertake in the post pandemic era. Apart from that, banks in Indonesia would also need to position themselves to be more competitive and efficient so as to provide more effective loaning services to these enterprises in the future.
Dr Gunardi Endro began the second presentation of the webinar by first introducing the historical background of Indonesia’s economy, followed by explaining the conceptual understandings between democracy and economy. Dr Gunardi highlighted that Indonesia’s economy is very different from other countries’ economy as culture plays a key role in shaping its operations. This can be seen in its 1945’s constitution where the basis of the economy before the amendment was focused on the concept of cooperation and familial ties, a key cultural element in Indonesia. Drawing further analysis from this introduction, Dr Gunardi proceeded to list down the contrasting definitions between democracy and economy. Democracy, in general, is based on the idea that the people’ sovereign is placed above themselves and they work together for the interests of the group, effectively making it a bottom-up approach. This is in contrast to economy which focuses on satisfying needs and desires, with its emphasis being put on the economic system more than the individuals’ needs. It is therefore fundamentally challenging to materialise democracy in the economic sphere due to their differences in nature. As such, Dr Gunardi argued that the spirit of Gotong Royong could be the key in mitigating the contrasting ideology behind democracy and economy. Seen as the fundamental culture of Indonesia, Gotong Royong emphasizes on the idea of ‘togetherness’ and it ensures that the maximum effort put in by citizens for their own welfare would go hand in hand in ensuring the collective welfare of the country. In that way, by applying Gotong Royong at the individual, social corporate, market and national level, it will enable the development of democratic practices within the economic sphere. Dr Gunardi therefore believed that Gotong Royong should be included in the implementation of future policies for MSMEs as it would aid in developing an overall culture of economic democracy and integrity. This would bring about stronger cooperation with MSMEs from future investors which would in turn boost the prospective growth of these companies.
Dr Suwandi started off the third presentation of the webinar by introducing the cooperative types and their respective functions in the Indonesian economy. Defined as the ‘breath’ of Indonesia’s economic democracy, the coops were deemed as excellent platforms for MSMEs to build up and advance their businesses. Focusing mainly on Saving and Loans Coop (SLCoop), Dr Suwandi’s research attempted to investigate the impacts of the pandemic on its operations, specifically looking at three business clusters, (1) food production, (2) batik trade and (3) tourism. Using a variation of impact variables as the basis of analysis, his research had shown that the pandemic had led to uncontrollable impacts towards the SLCs in the food production and tourism business clusters, while the SLCs in batik trade cluster were observed to be much better prepared towards the impacts of COVID-19. Based on that, Dr Suwandi proposed some policies to support the respective SLCoops, specifically looking at capital strengthening stimulus and risk mitigation education for SLCoops facing uncontrollable impacts and accelerated digitization of services for well-prepared SLCoops. Besides that, Dr Suwandi also mentioned that cooperatives in the other sectors had suffered greatly from the pandemic and this had, overall, hindered the development of cooperatives in Indonesia. General problems faced included unregulated number of cooperatives, lack of member’s participation as well as low recruitment of young people for these cooperatives. The self-operating nature of these cooperatives also made it hard for them to mitigate challenges collectively. Dr Suwandi therefore suggested a few solutions that can be implemented to encourage the growth of coops, one of which would be to move toward modernization and digitalization. He argued that this move would effectively increase the scale and efficiency of business and promote better delivery of its services in the future.
The webinar drew an audience of 50 participants from both Singapore and abroad. The panel then discussed on a range of topics during the Question-and-Answer segment which included topics such as impacts of COVID-19 on MSMEs in the tourism industry, the difficulties in obtaining bank loans for small and micro enterprises as well as possible solutions to increase government assistance for these companies. This session ended off with a closing remark from two of the speakers who gave interesting exemplars of Gotong Royong among MSMEs in Indonesia.