Small, medium-scale firms doing well: Economists

Small, medium-scale firms doing well: Economists

JAKARTA (JP): International economists shared their view here
on Tuesday that small and medium-size enterprises (SMEs) have
played a central role in Indonesia's nascent economic recovery.

The economists taking part in a panel discussion on
Indonesia's economic recovery agreed SMEs have been one of the
more resilient components of the economy during the crisis.

"I am sure that Indonesian businesspeople have repatriated
some capital here despite the persistently negative market
sentiment toward the country," said Wong Yit Fan, Standard
Chartered Bank's chief economist for East Asia.

But most of the capital was plowed into SMEs, in line with
the negative public's sentiment toward conglomerates, Wong added.

He said most investors now focused on SMEs because the
majority of businesspeople preferred to maintain a low profile so
as not to attract attention and become the target of the public's
animosity for conglomerates.

According to Wong, SMEs are taking a much bigger role in the
Indonesian economy, and since banks have not yet resumed
commercial lending the liquidity must have been derived from
repatriated capital.

"This is a very good development since SMEs provide jobs, they
are much more nimble, much more agile and they tap the potentials
of the economy much more efficiently than big companies. SMEs cut
across all types of industries, largely export oriented," Wong
said.

The World Bank's country director for Indonesia, Mark Baird,
agreed that the development of SMEs should be a key component of
the government's recovery policy in the medium term.

"Moreover, they are a key source of jobs, especially for the
poor and the more vulnerable segments of the people," Baird
added.

The key issue though is what kind of policies will be
implemented to empower SMEs, he added.

Baird also expressed concern over the impact of the
decentralization of political and fiscal power to the regions,
saying local administrations might introduce regulations that
could be inimical to the growth of SMEs.

He suggested the government find new ways to strengthen the
banks that serve SMEs. Baird said past credit programs for SMEs,
many of which were subsidized, were often too fragmented to be
effective and such programs had in fact undermined the banks
intermediation function for SMEs.

He stressed the important role the private sector played in
developing technical support for SMEs. (bkm/vin)