What the SMEs don't need: Unwise intervention<\/p>\n
The following are excerpts of an interview with Erna E.
\nChotim, current research director of the Bandung-based Akatiga
\ncenter. Set up in 1991, its main focus of research has included
\nlabor, small and medium enterprises and land issues.<\/p>\n
Question: Your organization recently completed a study on small
\nand medium enterprises (SMEs). What were your findings?<\/p>\n
Answer: One of the most important factors that contribute to
\nthe marginalization of SMEs is the upstream-downstream business
\nstructure. The upstream flow of goods, the supply of raw material
\nas well as production activities which mainly involve SMEs are
\nconcentrated on the upper-stream of industry.<\/p>\n
Large businesses control both upstream and downstream
\nindustry, and they are there not because they are more
\ncompetitive but because of (government) facilities and
\nincentives. Take wood-related industry, for example. We know who
\ncontrols forest concessions as well as the downstream chain of
\nindustry. This leads to monopoly and oligopoly.<\/p>\n
Such a structure puts SMEs in poor position. Now if SMEs want
\nto have a better bargaining position with a better margin of
\nprofit, they should have access to both ends of industry.
\nTherefore, the government's approach to SMEs development must
\nrefer to this industry structure.<\/p>\n
Q: What can be done to correct the situation?<\/p>\n
A: The small and medium entrepreneurs can strive to access
\ndownstream industry, but it is the government that has to take
\nproper intervention. Instead, the government often intervenes by
\napplying policies that cause (adverse) impacts on other sectors.<\/p>\n
Take the government's decision to reverse its earlier policy
\nof allowing only half-processed or processed rattan exports. The
\ngovernment believes the new policy would benefit rattan farmers,
\nbut downstream rattan business such as rattan-furniture workers
\nin Tegalwangi, Cirebon in West Java, now suffer from limited raw
\nmaterial. The farmers in Kalimantan now prefer to export their
\nrattan rather for a bigger profit.<\/p>\n
The government is often like that, issuing policies that later
\non will have to be amended by other policies.<\/p>\n
Q: Why does the government has such a piecemeal policy on SMEs?<\/p>\n
A: Poor coordination among technical departments in charge of
\nSMEs development. The mobilization of credit schemes for SMEs,
\nfor instance, has led to greater availability of capital but out
\nthere, problems remain because there is no coordination.<\/p>\n
The current government has promised to turn SMEs into the main
\npillar of its economy, but it really should take a more serious
\napproach. The government has been focusing its attention on
\ninjecting capitals but neglecting the fact that most SMEs are
\nable to overcome this problem but are hampered by other problems.<\/p>\n
Remember how during the worst of the economic crisis many
\nbanks stopped issuing credits and yet the small businesses
\nsurvived because they had the internal mechanisms to solve the
\ncapital problem.<\/p>\n
Our recent study in Bali, Central Java, Yogyakarta, West
\nSumatra and South Sulawesi showed the SMEs had ways to survive.
\nThey subcontracted, they had principals that could help them in
\nthis matter, they borrowed from relatives.<\/p>\n
Not that capital is not important, but there are certain
\nstages when other problems such as the exporting process that
\nimposed on them a greater strain. This is where the government
\nand banking help is needed.<\/p>\n
Q: The government pledged in its Letter of Intent for the IMF to
\nempower SMEs. Your opinion?<\/p>\n
A: Support from such international institutions usually takes the
\nform of technical assistance such as training, help with credit
\nissuance and others.<\/p>\n
But let's discuss the problem of training for SMEs. The
\ngovernment still applies training modules indiscriminately,
\nregardless of the different characteristics in the small
\nbusinesses.<\/p>\n
There is no medicine that cures all diseases, so training
\nmodules should be adjusted to the SMEs' needs. Considerations
\nshould be given to the kinds of the businesses engaged, and the
\nupper and downstream structure of the industry they are in.<\/p>\n
If a small enterprise needs access to the market, then
\ntraining should be given on that matter. Training for businesses
\noutside of Java, where marketplaces are distant, for example,
\nshould be different from training for Java-based SMEs.<\/p>\n
In Yogyakarta, for instance, there are a number of
\n(traditional) food businesses which have been given credit
\nseveral times. Every time a new loan was to be given, the
\nbusiness owners were given some training on healthy food
\npreparation. Come on! They know all that already.<\/p>\n
What they need is training on other matters such as obtaining
\nlicenses (for expansion). The problem is that such training is
\nnow a condition of credit.<\/p>\n
The business owners told me they took the training and the
\ncredits even though they knew that they wouldn't be able to do
\nmuch with the money. They needed, say, Rp 100 million for
\nexpansion but only Rp 25 million was given. \"We're not
\nprogressing nor regressing with the credits\", they told me.<\/p>\n
The reason why they took the loans was because who would
\nrefuse money? Some business owners even used the credits for
\nother purposes, such as renovating their houses, rather than to
\ndevelop their business.<\/p>\n
Q: How will our SMEs survive the free-trade?<\/p>\n
A: It is now time for the SMEs to be allowed to take more
\ninitiatives. Other players, including the government, should
\nreduce their presence if it only causes negative impacts to the
\nsurvival of SMEs.<\/p>\n
The government must instead create a good business climate,
\nwhich enables all entrepreneurs to play a fair game. It should
\nestablish facilities to enable the SMEs to access various
\nopportunities.<\/p>\n
The government needs to phase out its protection of SMEs.
\nAllow them to develop naturally. However, it seems to me the
\ngovernment does not wish to take its hands off SMEs because these
\nare (some government officials' money making) projects. (swe)<\/p>",
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