Resilient SMEs still facing problems

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.