SMEs: Encouraging people to be their own boss

SMEs: Encouraging people to be their own boss

Do we really value entrepreneurship? The Jakarta Post recently
talked to Hetifah Sjaifudian, a public policy expert at the
Bandung-based Akatiga social research center, and a co-writer of
the 1995 book (in Indonesian) Strategies and Agendas in the
Development of Small Businesses.

Question: What are the main challenges facing Indonesian small
and medium-scale enterprises (SMEs)?

Answer: The uncertainty of so many things. People need things
to be manageable, while now everything is so uncertain. When the
rupiah drops in value against the U.S. dollar, prices of raw
materials, production costs and transportation expenses all
increase. When the rupiah fluctuates, it is difficult for SME
owners to make firm business decisions. This is the most
difficult challenge.

Another challenge comes from changing regulations. The reform
era has brought with it new regulations which are not always
better. Take, for example, the presidential decree on the
provision of goods and services which gives new conditions and
licensing procedures. On the surface they seem to be part of a
campaign for reform, but in reality, corruption and collusion
remain in full force.

Tendering procedures may seem correct on the surface, but they
have actually become more complicated. They actually create more
burdens for businesspeople. The (business climate) has yet to
become conducive and give (small-scale businesspeople) more
opportunities.

The same thing could be said about the government. I
personally trust people like chief economics minister Rizal Ramli
who have commitment (to better the lot of) small-scale
businesspeople. In reality, however, there is no political will
to help SMEs.

Yes, there is an interministerial task force, with consultants
from the Asian Development Bank, geared to help SMEs. Whatever
these consultants say, we do. But we have yet to see our own
people, say from the Ministry of Trade and Industry, do
something. I'm really not sure whether President Abdurrahman
Wahid has really improved the situation for SMEs.

Q: Any other challenges?

A: Certainly there are other problems. Loans for SMEs, for
instance, have become even more difficult to access because of
the prohibitively high interest rates.

There are of course businesses which have grown in recent
years, but they depend very much on the kind of prospective
business they engage in. Cacao bean farmers get more money from
their exports because of the higher dollar rate, not because they
have become more productive.

Q: The government has recently promised support for SMEs,
including mobilizing a number of banks to allocate loans for
them...

A: If we are really involved with small businesspeople, we'd know
that promises are not always kept. This is what has happened for
years. Loans for SMEs are promised, but when small-scale
entrepreneurs want to access them, they are denied.

It is very often the case that promises made to help SMEs are
mere political statements, which do not turn into reality. There
are so many people who wish to start their own businesses and
cannot get loans even when they already have a market, when they
have received orders for their products.

One example would be Nenden, a designer of Muslim garments in
Bandung. The 1997 economic crisis forced her to close all of the
42 outlets she had established. Then when she wanted to start her
business again she could not even get a bank loan of Rp 20
million. The People's Credit Bank (BPR) demanded collateral --
her car, which was worth Rp 70 million -- for a loan of only Rp
15 million. This is simply not enough for a person to run a real
business.

Q: Another promise is that the government will allocate for SMEs
Rp 350 billion saved from the reduced fuel subsidy...

A: In all appearance, the government is caring for SMEs, isn't
it? The Rp 350 billion seems such a big amount, but it's not if
we compare it with the funds the government set aside for
recapitalization of bad banks. The fund for SMEs is less than a
drop in the ocean.

There are so many people who need help. The government must
realize it is not possible to give loans to all of them, but it
could help in other ways. For instance, the government should be
able to create a climate which opens opportunities. By
controlling illegal levies, for instance, or by issuing
nondiscriminatory regulations.

Another form of government subsidy for SMEs would be access to
information. So, budding entrepreneurs could learn what business
is booming and what has potential and what doesn't. Technological
support should also be given -- there are people, for instance,
who grow bananas but do not know how to process and market them.
They should be helped.

Q: Discourse on SMEs usually revolves around the question of how
far the government can intervene in their development without
neglecting the fact that they also need protection. What do you
think?

A: The government should be wise enough and understand the
impacts of its regulations. Of course there is no easy answer. We
will always face this dilemma, and there's no other way but for
the government to seriously study the effects of its policies.

I am really sad about how the policy on SMEs has been
surrendered to foreign consultants such as those from the Asian
Development Bank. What emerges are conditions set by the
government for its loans.

You know the government sets up this policy design for SMEs.
There is no subsidy for bank interest, so the interest rate must
be that of the market rate. In order to realize these conditions,
loans are given in the form of technical assistance currently
being tendered.

Then, the (foreign) consultants will be the ones doing all the
advising for Indonesian SMEs. I don't mind this as long as
Indonesian parties can be fully involved -- we need to know where
we are heading, what intervention is needed, what aspects should
be liberated. Now if we just sit there and surrender to these
international institutions -- which have their own interests and
agenda -- we'll end up with a policy that may only cater to the
needs of multinationals.

We really need to be sensitive about this matter. The sad
thing is, our own economists do not even pay serious attention to
SMEs. We are being managed by economists from Japan, Germany and
other countries. This situation is not necessarily bad, but
people with certain responsibilities such as the (economics)
minister should really pay attention.

Q: Indonesian SMEs find international competition difficult even
now. What do you think their fate will be in the coming era of
free trade?

A: You know, our small-scale businesspeople are real survivors. I
admire them because they have their own strategies to cope. They
are creative, they keep on finding their own ways. I don't
imagine that they will just surrender and die in the free trade
era.

It is possible that free trade will mean the domination of big
businesses, but even small enterprises can survive by becoming,
say, subcontractors or suppliers. But this would very much depend
on how supportive the government is of SMEs.

Q: What are the characteristics of SMEs that survive?

A: Those who are responsive to change, who can turn threats into
opportunities. Precisely because everything is so uncertain they
need to be smart and find their own niche and ways.

Another important thing is for them to a build good, strategic
network among them. They need an information network, for
instance, in order to survive. One of the characteristics of
entrepreneurship is mastery of information.

But I don't think such characteristics are commonplace, may be
only one out of 10 entrepreneurs have the necessary ability to
survive, the creativity, the innovation. Political traditions
have not made us innovative in many spheres of life. We tend to
fear risk-taking.

But this is a problem that needs a long-term solution. Our
children need to be taught since an early age to be creative, not
to grow up thinking that their way of life is to end up as some
one's employee. We need more communities that place value in
entrepreneurship. (Santi W.E. Soekanto)