To Accelerate Fairer Growth Out of the Trap of Short-Term Revenue in the Shortest Time Then Up Class to Advanced High-Income Groups Are Part of Indonesia's Strategic Intention.
For that reason, a free speed that is far higher than Indonesia's current growth rate must be compiled. At the same time, high growth must be more equitable in people's participation and equal distribution of results. Strategy, leadership, and managerial finesse and joint movement must be fine-tuned to enable Indonesia to grow faster and more equitably. Travel like that is a difficult journey. However, Indonesia's neighbors in East Asia have proven their affordability one by one. With the progressive growth of Micro, Small and Medium Enterprises (UMKM) in partnership with Large Enterprises (UB), Indonesia can also foster such development. For this reason entrepreneurship needs to be centralized in development, not only in commercial companies, but also in education and rural development to mention two examples that are far from the shadow when one thinks of entrepreneurship.
In the proposed program, a number of key elements of a more equitable growth acceleration program will be outlined: Pro-UMKM Policies, Entrepreneurial Students, UMKM Expansion in very large numbers with a very large workforce, Businesses and Village Entrepreneurs, Macro Stimulation as Defenders, and Portrait of Indonesian MSMEs 2017. As usual, there is no panacea in development. However, Indonesia's commitment, determination and persistence today to advance MSMEs, including MSMEs based on science and technology, both off-line and on-line, analogue and digital, will also determine whether and to what extent Indonesia occupies a decent place among nations that advanced when he celebrated his first centennial in 2045. Pro-UMKM Policy: Faster and Fairer Indonesia's struggle with the middle income trap is still long. With GDP growth as high as 5.1% per year and a population growth of 1.1% per year, it takes 18 years for income per head to double. Such medium speed would not be enough to release Indonesia from the middle income trap. The experience of East Asian countries, ranging from Japan to present RR China, indicates that the elevation of medium to high income requires:
- Loose speed, ie annual growth that is much higher than 5%;
- High growth resilience for a long time so it did not fall again as in 1998;
- Changes in the structure of an uncaleable factor-based economy to a knowledge-based and highly scaleable economy in the goods and services sector;
- The progressive formation of local companies, including MSMEs that can partner with foreign companies and in the process, advance into innovative national companies and entrepreneurs;
- The spread of growth to space continues to expand, including potential villages, although gradually so as to become a sustainable distribution power.
Centrality of MSMEs
The increasing class (graduation) of Indonesia as part of the high income economic group in 2045 (First Centennial) should be used as a national political commitment as well as a means of gathering acceleration momentum. If the target is soft to touch the lower limit of high income, then total growth must be accelerated to 5.6% per year for 29 years or equal to the current rate of growth. However, such medium speed is vulnerable to deceleration. At that time, Indonesia needed to occupy at least the middle of the high income group. Therefore, the growth of total GNI must be boosted to 9.1% per year.
The second objective is poverty distribution, income equality, and better wealth distribution among citizens (interpersonal) and spatial. The role of poverty can be aided by social assistance mechanisms, as the government does today. While equal distribution of income and wealth requires the movement of people from "survival" activities to activities that increase productivity. Equity in wealth even requires a healthier corporate pyramid, in the sense that it consists of more MSMEs, both in employment, production, innovation in new businesses, and investment. Faster, fairer, and sustainable growth can only be fostered with the progress of MSMEs. Social assistance focused on transfers like today will indeed be needed as long as poverty and vulnerable populations are still large, but social assistance is not a lasting problem solving. This acceleration program can be utilized as a momentum for reinvention of the Open Social Market Economy (EPST) or Managed Market Economy according to ISEI or the Pancasila Economy of Indonesia according to some thinkers. This reinvention is important for two reasons. First, Indonesia needs to emerge with an inclusive and sustainable policy to maintain a calm atmosphere when resistance to capitalism is spreading in many countries. Only in a calm atmosphere will investment strengthen, especially in sectors with higher uncertainty, namely sectors that are more knowledge and technology intensive. However tempting natural resources as a foundation for growth during the uphill cycle, sooner or later they will be plagued by swooping cycles, as shown by Indonesia's bitter experience for more than 70 years. There is no doubt the size of the agricultural, forestry, mineral and marine resources that Indonesia has exploited, but the middle income trap has not yet been passed. Second, consensus on Indonesia's economic system needs to be renewed. When uncertainty escalates due to the flurry of technological changes and in the short term exacerbates imbalance, the basic direction of economic policy needs to be pledged again to appease central and regional policy implementers, local, national and foreign businesses, analysts, trade unions and NGOs. The 2019 elections need to be used as momentum for the inheritance and communication of the basic direction. It must be admitted that faster and fairer growth is difficult to realize. However, some countries have proven that faster and fairer growth can be reached. Macro stimulation or aggregate demand and structural policies focus on the formation of national companies and entrepreneurs or aggregate supply can be mingled so that they mutually reinforce and produce faster, fairer, and more sustainable growth.
Momentum Improves Fifty years since Indonesia's New Economic Policy 1967, twenty years after the 1997-1998 East Asian financial crisis, and ten years after the global economic crisis of 2007-2008, Indonesia needs to gather growth momentum at a loose pace with several important considerations.
First, Indonesia's economic growth is now marked by an incremental acceleration that can be spurred by the push of agreat requests and the encouragement of MSMEs.
Secondly, over the past few years, Indonesia has built massive physical and social infrastructure with the impact of a multiplier effect that will be strengthened, especially if it is complemented by progressive MSME companies and large businesses that support each other.
Third, the acceleration of inclusive growth is needed to maintain the momentum of poverty promotion which lately seems increasingly difficult to suppress even though it is still high.
Fourth, the global economic resurgence in 2018 will hamper the revival of the export market for primary commodities and Indonesian consumer goods which can play an important element in the increase in aggregate demand. At the stern of this revival, there are signs of Indonesia's export resurgence and foreign capital inflows to Indonesia, including direct investment.
Fifth, the open social market economy or managed market economy in the formulation by ISEI needs to be restored in Indonesia with capacity building and MSME facilitation. Only with an integrated program like that can Indonesia strengthen inclusiveness and sustainability of growth at a high enough level to release Indonesia from the middle income trap.
Integrated Advancement of SMEs
The Number of Entrepreneurs Needs to Double. According to BPS, Indonesia's self-employed population with paid permanent workers amounted to 4.45 million people in February 2017 compared to nearly 3 million people in the same month in 2008 or an increase of 4.5% per year. This growth rate, which is much higher than the growth of the labor force, indicates that Indonesia is on the right track as long as it is related to entrepreneurial fertilization. However, even faster growth is still indispensable in order to gather sustainable momentum.
With residents working with permanent workers who are paid 3.5% of the working population, Indonesian entrepreneurship is still relatively weak. If it still only grows by 4.5% per year, while the workforce grows by 1.3% per year, it will take more than 20 years to double the share of the self-employed population with permanent workers to 7%. In fact, "entrepreneurial intensity" (percentage of entrepreneurs) with permanent workers in the working population, 7% has not been classified as high for the country with the current stage of Indonesia's progress. This entrepreneurial intensity is close to 9% in Australia and New Zealand, 7.7% in South Korea, and around 6% in most European countries, although only 2.2% in Japan. This percentage must rise again, given the level of business and business failure tends to rise in the digital era where business excellence in general is more open to being contested (more contestable).
For a long time, the development of Micro, Small and Medium Enterprises (MSMEs) has ranked high in Indonesia's development priorities. Various approaches have been tried, such as the prioritization of MSMEs in the procurement of goods and services needed by the government, Corporate Social Responsibility (CSR), MSME partnerships with large businesses, and various kinds of adopted children and foster fathers. The results of these programs are still very far from satisfying. Although the share of MSMEs in the absorption of Indonesia's national workforce, its share in economic value added is still very small, far smaller than in some other economies, such as the European Union, Germany, Japan and Taiwan.
The desire to lift MSMEs as absorbers of labor, added creators, exporters and pioneers of creativity and innovation is also felt to be very strong throughout the world. MSMEs are placed very high in the order of development policy priorities because of the assumption that only with superior MSMEs growth can be sustainable and inclusive at the same time. The opportunities for progressive advancement of MSMEs are opened by the 2030 SDG agenda, new technologies, new business models, an increase in human capital stocks, and a very strong urgency to reduce social economic inequality between citizens, regions or regions and between generations. In some cases, digitization is indeed diluting the privilege of MSMEs in the form of proximity to buyers. However, overall the above changes are a good opportunity to lift MSMEs to a more symbiotic position with great size. The UMKM Integrated Advancement Program consists of several parts that support each other:
1. UMKM-friendly policies
2. Entrepreneurial Students
3. Existing UMKM expansion
4. Innovative Training and Assistance
5. Village Enterprises and Entrepreneurs
6. Macro stimulation as a barrier
7. Profile of 2017 Indonesian UMKM
Pro-UMKM Policies and Administration
Whatever the business, information is the beginning of research, planning, implementation and business development. One of the most fundamental differences between UMKM and UB lies in the ability to mine information from knowledge and data. In general, MSMEs run business as a routine activity with certain information, while UB employs experts and consultants to explore the superiority of information from data stacks. Every MSME development program must include a strategy to improve the "informedness" of micro, small and medium entrepreneurs. Information needed for the success of MSMEs concerns the entire value chain. Starting from the information market itself, the market for raw materials and intermediate goods, the labor market, the capital goods market, equity and debt capital markets, good production standards, such as SNI, halal standards, and relevant ISO, logistics services market, geography and demographics of consumers or buyers, and local, national, regional and international regulations. Every UMKM is different in its information density. However, whatever effort is made, very complex information is an inherent part of the business.
Complexity makes information unsuitable to be managed centrally. Each UMKM must mine the information needed. Third parties, such as government agencies and services can facilitate by opening as wide as possible at prices that are as low as access to data that are available in warehouses in government offices, universities, and business associations. However, what will be mined from the abundant data is the decision of each MSME.
Information economy is a very decentralized economy and is part of the most resilient market economy. Even in the most centralized command economy with a giant propaganda machine, the decentralized nature of information can never be denied. Therefore, the promotion of the information market is an essential part of the promotion of MSMEs. In the market economy is also developing superior MSMEs, such as in Japan, Germany and Taiwan. In each of these economies, the superiority of MSMEs is not the primary work of the government, but the market results. A very important element of pro-UMKM policy is not the government that acts as a philanthropist, but as a guardian of fair market competition, including in terms of maintaining a lot of data as a public source. The second most important element of pro-MSME policies is related to licensing. Permission describes a lame relationship. The licensor is a monopolist. In a certified country, permission is common. However, in an independent country, the right to exercise is citizenship rights, as stipulated in the 1945 Constitution Article 27 Paragraph 2. Establishing a business is the right of every citizen in any sector, except those prohibited through the Negative Investment List, and anywhere, except which is prohibited according to Spatial Planning. Business licenses need to be removed, replaced by business registration. Once registered, a citizen has the right to run a business, unless the right is revoked because of a violation of law.
Management of permits has improved in Indonesia. One Door Service has become common practice. The time required is shortened until the permit is issued. Management fees for MSMEs were deleted, although they were still collected in several regions as part of PAD. However, the discretion of an official or public or regional employee can still make licensing affairs a source of uncertainty and high transaction costs. "Delete permission, replace with registration" is the direction that must be taken. Standards are another matter. Modern economics is inconceivable without standards. One of the drivers of the formation of the European Single Market is the elimination of different standard compliance costs in each of its members. With standardization, alternating conversion can be avoided and each spare part can be used anywhere and because it is mass produced. Standard compliance is needed to protect consumers, society, the earth and life against emissions of harmful elements, physically and culturally. Standard compliance is like a ticket for companies to enter local, national, regional and international markets. In relation to standards, compliance obligations apply equally to MSMEs and UB. Easing standards for MSMEs is a bad policy and needs to be stopped. What is needed for progressive advancement of MSMEs is capacity building and facilitation in order to comply with standards, such as SNI. Agencies and agencies related to standards, such as the National Standardization Agency for National Development Planning Agency, must be transformed from certificate issuers to agents of capacity building and facilitation, especially for MSMEs dealing with technical constraints that are far more stringent than UB. "Enabling and facilitating compliance with standards for MSMEs" is a very essential part of pro-MSME policies. In capacity building and facilitation, agencies and agencies can invite universities and large companies as partners in education and training of MSMEs with government funding.
The third element of pro-UMKM policy is related to employment. According to the 2016 Economic Census, MSEs in the non-agricultural sector represented 98.33% of businesses totaling 26.7 million. Of these businesses, only 29.5% have a special place to try, the rest do not have a special place for their business. Of the 70.3 million non-agricultural UMKM and UB workers, 76.28% struggled in MSEs and only 23.72% in UB. Employment is a very complex issue and full of dilemmas in Indonesia. That MSEs amounted to as much as they are now in Indonesia, in part because of their informality. If Law 13/2003 is applied to MSEs, the largest portion of MSEs may not be able to comply. A very large part will also be overwhelmed if required to comply with SNI. Here lies a dilemma. If informality is left unchecked, the MSE by itself limits its sales to buyers who are not concerned with standards, that is generally buyers with low purchasing power. Informality also makes UMRs not compatible to partner with UB which is demanded by its sales market and regulators all over the world to demand compliance with standards from all parties involved in its value chain. Faced with this dilemma, a practical choice would be a delay throughout the transition of UMR payment obligations for MSEs. In relation to fast program standards, capacity building and facilities need to be launched. Only by adhering to standards can MSEs expand their markets through groups of low-income buyers.
The fourth element of pro-MSME policy is related to state finances. Taxation does not seem to be an important obstacle to the development of MSMEs. A very large portion of MSMEs do not have a NPWP. The UMKM tax is also based on gross revenue, which is 1% for turnover up to Rp. 4.8 billion and a relatively soft tariff also applies to companies with turnover of up to Rp. 50 billion. The issue that always stands out in the relationship between MSMEs and state finances is assistance to MSMEs that can be in the form of subsidies, access to government purchases, and access to MSMEs to various and valuable social assistance. The most practical is done in the short term, it will be consolidation and coordination of budgeting and the use of expenditures related to MSMEs. In the medium term, it is necessary to consider MSME access to public equity, namely "Indonesian MSME Funds" which are similar to authorities.
As the government injects large equity into BUMNs and BUMDs and as it sets up a PPP Infrastructure funding system, which consists of Project Development Fund (PDF), Viability Gap Funding VGF), Indonesia Infrastructure Guarantee Fund (IIGF), PT Sarana Multi Infrastruktur (SMI) and Availability Payment (AP), very similar institutions are established and developed for the promotion of MSMEs. "Indonesian MSME Funds" as an institution would be even worthy of the government's obligation to the Indonesian people given the role of MSMEs which, according to BAPPENAS, absorb 96.7% of the working population. "Indonesia's UMKM Fund" is designed as a competitive public institution with the main business in the form of capacity building, facilitation, and opening access to equity finance for MSMEs. The final and very important element of each policy is its institutional setting. Human and financial resources for the promotion of MSMEs are scattered in many ministries and regional governments and only a small proportion in the Ministry of Cooperatives and Small and Medium Enterprises. These sources need to be consolidated with the aim of improving strategic intentions of the promotion of MSMEs, leadership that successfully moves all sources and parties, including UB, to the achievement of strategic intentions, good governance of MSME promotion, and horizontal coordination and diagonally all institutions related to the promotion of MSMEs.
Kelompok Kerja Pemajuan Terpadu UMKM, “UMKM: Untuk Percepatan
Pertumbuhan yang Lebih Adil”, Buklet Internal-Terbatas, Prasetiya Mulya Publishing
2018. Dipresentasikan pada Pop-Up Market Universitas Prasetiya Mulya 2018