Developing SMEs in digital era<\/p>\n
By Daniel Kingsley<\/p>\n
This is the first of two articles on advancing small and
\nmedium enterprises.<\/p>\n
JAKARTA (JP): Private sector small enterprises will have a
\nmajor impact on the overall development and growth potential of
\nthe economy during the latter stages of the present economic
\ncrisis, and during the postcrisis period. The sectors' ability to
\ncreate employment will make a valuable contribution in
\nstabilizing social structures, which should help to ensure social
\nstability.<\/p>\n
Structural changes in the economy of small and medium
\nenterprises (SME) as the government becomes more free market
\noriented, decentralized and democratic, will have an impact on
\neach sectors' ability to grow and expand.<\/p>\n
Some sectors will benefit from these changes more than others,
\nbut as the market distortions begin to melt, the opportunities
\nwill grow. Of all the components that make up the economy's
\ninfrastructure, information and communication access will have
\nthe biggest impact on the pace of SME growth and development in
\nthe coming years.<\/p>\n
SMEs have suffered since the rapid development of corporate
\nbusiness from the mid-1980s. The problems escalated as corporate
\nbusiness became more monopolistic, and oligopolies, barriers to
\nentry, overregulation, market protection and corrupt legal
\npractices, became more prominent.<\/p>\n
Business infrastructure at the SME level also became weak
\nduring this period as many public works, transportation access
\nand government services were diverted to regions being developed
\nby large conglomerates. Manpower quality suffered at all levels
\nof the SME business hierarchy, as owners and employees had little
\naccess to training programs.<\/p>\n
Given that the world economy is beginning to unite all levels
\nof national economies through the proliferation of digital
\ntechnology and multilateral agreements such as the World Trade
\nOrganization, it is critical that the Indonesian SME economy keep
\npace with structural changes.<\/p>\n
In 2010 all economies of the Association of Southeast Asian
\nNations (ASEAN) will be competing without barriers to trade, and
\nit is vital to SME development, and the Indonesian economy, that
\nlocal sectors are competitive and prepared for a free market
\neconomy.<\/p>\n
Growth and export potential will be lost if the access to
\ninformation is not developed.<\/p>\n
The development of the facsimile and Internet became a
\nstandard for communication in urban areas during the 1980s, but
\nthe lack of telephone lines in rural areas prevented access to
\ninformation and a comparative disadvantage to the SMEs in these
\nregions. Investment potential will be lost to competing ASEAN
\nnations without a stronger information access system.<\/p>\n
This writer's company, Trade Management Indonesia (TMI), deals
\nwith Indonesia SMEs and foreign investors exclusively, and our
\nexperience over the past two years has shown us that:<\/p>\n
o SMEs have extreme growth potential.<\/p>\n
o Current infrastructure is not yet conditional to foreign
\ninvestment or extensive growth.<\/p>\n
o There are a lack of business alliances in Indonesia to
\nattain growth potential demanded by investors, who usually
\nrequire a maximum of seven years for return on investment.<\/p>\n
o There is a lack of investor awareness about SMEs.<\/p>\n
The company's principle activity has consisted of an ongoing
\nprogram to survey SMEs for general and quantifiable information,
\nwhich is entered into a database for investor access. The
\ndatabase contains a cross section of manufacturing sectors. We
\nsee the import replacement and export-oriented sectors as having
\nthe best potential.<\/p>\n
Most investors are waiting for legal changes as well as more
\ndirect information access to SME activities from their home
\ncountries. They are not prepared to get on a plane yet, but they
\nare willing to learn about investment potential through the
\nInternet.<\/p>\n
To empower SMEs does not require huge subsidies or elaborate
\nand expensive programs that the government cannot afford at the
\npresent time.<\/p>\n
Indonesians are creative, entrepreneurial and hardworking.
\nThey understand how to utilize their skills; provide them with as
\nclose to perfect information as possible, and they will do the
\nrest. Information access will lead to legal reform; a competitive
\nenvironment, including access to price information, technical and
\nmanagerial competence, financing, skills and manpower, training,
\ninvestment, inter- and intra-provincial markets, export markets
\nand complementary business alliances.<\/p>\n
Most SMEs have never had access to these vital ingredients for
\ngrowth. SMEs that have survived since 1997 have done so for
\nvarious reasons, including product line, flexibility in product
\nredesign, financial exposure and access to information.<\/p>\n
In the case of the smallest enterprises, many of those with
\naccess to information during this period were able to reinvent
\ntheir product lines. It is unfortunate that those with limited
\ncommunication line access were at a comparative disadvantage.<\/p>\n
E-business is usually associated with big business, and it is
\nnow a permanent component in big business infrastructure.<\/p>\n
But e-business is part of the SME business infrastructure as
\nwell. In Singapore, the Singapore Productivity and Standards
\nBoard has a sophisticated website that SMEs can use to access sub
\ncontractors and, indirectly, manpower from other ASEAN countries.
\nIndonesia must position itself to take advantage of this
\nopportunity.<\/p>\n
E-business is about redefining business models, reinventing
\nbusiness processes and enhancing relationships with customers,
\nsuppliers and employees through collaboration.<\/p>\n
E-business delivers great payoff potential by extending the
\nbenefits of market information into the small enterprise or
\ncooperative, and extending critical company data from them to
\npotential markets, customers, and business alliance partners.<\/p>\n
The writer is managing director of PT Bumi Trade Management
\nIndonesia and a consultant on the development of small and medium
\nenterprises.<\/p>",
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"sponsor": "Okusi Associates",
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