Reforming Policies for Small and Medium-Sized Enterprises in Indonesia

by Nicholas E. Burger, Charina Chazali, Arya Gaduh, Alexander D. Rothenberg, Indrasari Tjandraningsih, Sarah Weilant

Small and medium-sized enterprises (SMEs) are critical for emerging economies like Indonesia but simultaneously challenging for policymakers looking to support their growth. SMEs — including micro firms — are responsible for more than 97 percent of total employment in Indonesia and represent 99 percent of all enterprises. The Indonesian government has sought to assist SMEs through programs, such as subsidised credit, one-stop shops to lower business registration costs, and government-sponsored trade fairs. However, there is little evidence on how effective these programs are or on ways to improve government policies aimed at helping SMEs. For this analysis, the authors conducted structured interviews with 192 firms across five provinces in Indonesia to investigate the constraints that firms face and how existing programs do — or do not — help reduce these constraints. Reforming Policies for Small and Medium-Sized Enterprises in Indonesia includes policy recommendations targeted at the Indonesian government and other stakeholders, focusing on the importance of credit and on the need to remove information barriers.

Please note: This report is not available on the RAND website but can be downloaded from the National Team for the Acceleration of Poverty Reduction (TNP2K) website.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Micro, Small and Medium-sized Enterprises in Indonesia

  • Chapter Three

    Qualitative Interviews with Small and Medium-sized Firms

  • Chapter Four

    Major Constraints Faced by Micro, Small and Medium-sized Enterprises

  • Chapter Five

    Policies to Reduce Informality in Indonesia

  • Chapter Six

    Recommendations for Improving Policies to Support Small and Medium-sized Enterprises

  • Chapter Seven

    Conclusion

  • Appendix A

    Interview questionnaire

  • Appendix B

    Interview debriefing form

  • Appendix C

    Interview fieldwork logistics

  • Appendix D

    Literature review: laws, policies and definitions

The research described in this report was conducted by RAND Labor and Population.

This report is part of the RAND Corporation Research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/research-integrity.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.