Providing additional stimulus for micro, small and medium enterprises (MSMEs) may protect our economy amid the new coronavirus outbreak.
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·2 minutes read
Micro, small and medium enterprises (MSMEs) have a strategic role in the economy. A 2017 data from Statistics Indonesia (BPS) showed that MSMEs accounted for 99.9 percent of Indonesian businesses, or amounting to 62.9 million business units according to Bank Indonesia. MSMEs absorb 96.9 percent of manpower, 89 percent of which are micro businesses, and contribute 60.34 percent to the gross domestic product (GDP).
Thus far, MSMEs have proven their resilience in difficult economic situations. Most MSMEs remain disconnected from the domestic, let alone global, financial sector. Because of this, MSMEs have always survived through global financial crises, including in 1998 and in 2008.
Under the shadows of potential Covid-19 pandemic, Indonesia has begun to feel the impacts of the global economic slowdown. Two days ago, the oil price dropped to its lowest value since 1991. Stock markets have also plummeted. Other commodity prices, including gas and palm oil, are expected to be pulled down if demands are not restored soon.
Unlike the 1998 and 2008 financial crises, MSMEs will feel the global economic slowdown due to Covid-19. Currently, those in tourism are feeling the heaviest burden.
The government is providing microcredit program (KUR) for MSMEs with an interest rate of only 6 percent. This year, Rp 190 trillion (US$13.09 billion) has been earmarked for this. Bank Indonesia is preparing MSMEs to enter the national digital financial and economic ecosystem to boost their economic activities and class.
To spur MSME growth, the government must aim to improve MSMEs’ competitiveness and usefulness. Therefore, priority is given to export-oriented MSMEs with high local content, good import substitution, great upstream-downstream linkage and that make efforts to create added value through skills and creativity.
In facing Covid-19, Indonesia has natural protection in the form of its waters that separate thousands of islands, forests and rivers. Such a geographical excellence can be a comparative advantage if the government creates MSME clusters in areas free of Covid-19, especially to boost export-oriented businesses.
The government and KUR-distributing banks must identify these MSMEs with comparative advantages. If the government can provide leniency and incentives for big businesses and financial market investors, it must also be able to provide temporary special treatment for MSMEs, such as through tax deductions.