Resilient SMEs still facing problems

Evi Mariani, The Jakarta Post, Jakarta

Small and medium scale enterprises (SMEs) -- which have proved more resilient than many corporate giants in coping with the economic crisis -- still struggle with persistent problems in tapping overseas markets, according to a government paper.

The problems include the lack of access to banking credits and lack of skills in packaging products, according to the paper written by the directorate general for SMEs at the Ministry of Industry and Trade.

"SMEs' ability in acquiring banking credits is limited, because, among others, they do not own collateral.

"Also, their products do not have good package designs," the paper said.

Concerning the problems relating to banking credits, the government and the Asian Development Bank (ADB) are seeking to solve them by channeling US$85 million in loans to small and medium scale exporters by the end of this year, with lending rates of between 1 to 2 percent below the average commercial rate.

In order to address problems relating to packaging design, the government has developed a design center at the ministry, with the cooperation of art and design students, from the Bandung Institute of Technology in West Java's capital of Bandung and the Indonesian Art Institute in Yogyakarta.

"SMEs can choose and use for free from the ministry the designs for packaging their products," Agus Tjahajana, the director general for SMEs, told reporters last week. "It is difficult for them to tap larger markets if they continue using photocopied logos and packaging."

The design center has produced dozens of computer-designed logos and brands for products such as snacks, coffee, and various traditional foods.

Both programs -- the design center and loan assistance -- aim to boost SMEs' exports. In 2002, SMEs contributed a total of $2.51 billion to the country's exports, according to government data.

The ministry is also organizing an exhibition in Sharjah, United Arab Emirates, to help SMEs boost their export to Africa and the Middle East. The expo will take place in mid-September.

However, the paper conceded that, thus far, the government was still focusing on large companies, despite the fact that SMEs make up most of the country's businesses. In 2002, SMEs reached 3.03 million, or more than 95 percent of the country's total business units, and absorbed 11.89 million workers.

The government has often committed to help improve SMEs' performance but, the paper said, in reality, it has yet to instigate regulations favorable to SMEs.

"The government has yet to formulate an incentive system, special tariffs, subsidies or technical assistance for SMEs or protect them against (large) corporation's tricks," the paper said.

Agus said small companies producing machine or auto parts were often exploited by wholesalers from Jakarta or Surabaya.

"For example, an auto-parts merchant from Sawah Besar (auto-parts center in Jakarta), ordered cheap auto-parts from an SME in a small town in West Java," he explained. "The merchant packaged the parts, stating that they were made in China or Thailand, only to sell them for much more."

In order to protect small and medium producers from being manipulated by traders, the ministry is studying the possibility of developing special markets where they can meet with buyers face to face, he said.

For instance, he said, the ministry is developing machine and auto-parts markets, one in Semarang, Central Java and another one in Cirebon, West Java.