SMEs PROMOTION IN THE ERA OF BORDERLESS

Presented by:

Deputy Minister for Marketing and Business Networking

Workshop “SMEs in The Borderless Era, Shaping Opportunity in The Global Value Chain”

Borobudur Hotel, Thursday, October 1st 2014

Ministry of Cooperative and SMEsRepublic of Indonesia

BORDERLESS ERA

• In the current Borderless era, a growing number of countries are

having International agreements, including Indonesia. One of

them is free trade agreement.

• With the free trade agreement, most likely there will not be a trade

limit between countries. This is because every country has the

right to sell its products, whether goods or services to other

countries without having plagued by restrictions in tax or

customs.

• In 1993 there are around 20 free trade agreements in the world,

whereas until June 2014 there are around 585 free trade

agreements (WTO data), either in the form of Free Trade

Agreement (FTA) or Comprehensive Economic Partnership

Agreement (CEPA), both bilaterally and regionally.

Free Trade Agreement

Globalization

BORDERLESS ERA

HOW LOOKTHE INTEGRATION OF FREE MARKET?

Speed and Creativity

Global Competition and Cooperation

Unprecedented Change

Government

Business People

RANKING OF GDP PER CAPITA2013

IMF World Bank United Nations

INTERNATIONALIZATIONOF SMEs

An effort to internationalize of SMEs is a logical consequence of the development of a global phenomenon that eliminates the boundaries of the country in the business field. Performance management and the higher investment needed for SMEs fully able to perform its business activities internationally.

Internationalization of SMEs is the effort or related conditions with both the products and the business activity of SMEs are entering or integrated with international markets (internationalization refers to the expansion of an enterprise's products into overseas markets of activities).

In details, dimensions of the process of internationalization of SMEs are determined by the performance management and focusing on the activities of business investment. From the two-dimensional would be generated varying degrees of internationalization activities of SMEs.

The higher of the ability of management and the greater of the ability to invest, the greater the possibility of SMEs to make the process of internationalization of its business. Performance management and the higher investment needed for SMEs fully able to perform its business activities internationally.

PE

RF

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MA

NC

E M

AN

AG

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INVESTMENT

IMPORT

EXPORT

LICENSE

COOPERATION

JOINT VENTURE

ABROAD DISTRIBUTION

ABROAD PRODUCTION

DOMESTIC

ABROAD

ABROAD

INTERNATIONALIZATIONOF SMEs

MAJOR SMEs INDICATORS

Source: UU No. 20/2008; BPS 2013

55.856.176 Units

(98,79%)

629.418 Units (1,11%)

48.997 Units (0,09%)

4.968 Units (0,01%)

Large EnterprisesAnnual Sales more than IDR 50 billionAssets more than IDR 10 billion

Medium EnterprisesAnnual Sales IDR 2,5 - 50 billionAssets IDR 500 million – IDR 10 billion

Small EnterprisesAnnual Sales IDR 300 million – 2,5 billionAssets IDR 50 - 500 million

Micro EnterprisesAnnual Sales max. IDR 300 millionAssets max. IDR 50 million

GDP:59,08% (IDR 4.869,5 T)

Labour:97,16% (107.657.509)

Non-oil and gas Export:16,4% IDR 166.625,5 B)

Predicted contribution by 678.415 Cooperative and SME export potential (1.2% of total SME)

TOTAL :57.900.787 UNITS

INTERNAL BARRIERS OF SMEs

• Low quality of human resources (managerial, entrepreneurial, IT).

• Limited access to the productive resources (financing, market, etc.).

• Lack of SMEs ability in the research and market development.

• There are many SMEs that do not have the Legal Entity.• Largely was still depend on informal financial

institutions.• Weakness of communication networks and information

with stakeholders.• Limited facilities and infrastructure that owned by SMEs.

BARRIERS OFABROAD MARKETING

• Relatively small scale of businesses are able to fulfill the needs of a relatively large market;

• A limited understanding of consumer behavior and the terms of trade and other regulations in foreign countries;

• A limited understanding of the structure and behavior of the market and overseas distribution system.

Product Regulation Infrastructure

SMEs Market Access

Financial Access

Innovation and

Technology

Information

CHALLENGE

SMEs OPPORTUNITY (1)

The economic globalization can create market opportunities for SME products. The number of "global middle class" will increase from 1.8 billion in 2009 to 3.2 billion in 2020 and 4.9

billion by 2030.

The potential of national industry and the development of Indonesia as a production base in the region with the support from a

large domestic market, young people / productive, increasing investment and huge

natural resources.

SMEs OPPORTUNITY (2)

The advantages of Cooperative and SME products (unique / high artistic value based on local culture,

handmade) and has met the quality standards (Eastern Europe, UAE, and China market

opportunities for craft products).

The support government policy / cross-linked (Upstream: improving the competitiveness of the product (training, product certification, branding, etc.) and Downstream: promotion & marketing

through facilitation exhibition, business meeting, cargo consolidation).

Increasingly open international market opportunities and economic cooperation, both

bilateral, regional, and regional.

THE MARKET OPPORTUNITIESOF SMEs PRODUCT IN ABROAD

1. Furniture andhome decoration

2. Crafts and fashion

3. Herbal, spa and cosmetic

4. Food and beverages, agribusiness comodity

5. Accessories and other products

Europe, Middle East (UEA), Africa (South Africa), America (US, South America), Asia (China, India)

Asia (Jepang, China, South Korea) Middle East (UEA), Africa (South Africa), Europe (Italia, Jerman, Inggris, Belanda), Australia

Europe, Asia (Japan), Middle East (UEA), America (US)

Asia (Singapore, Malaysia, China, South Korea, Japan), Middle East (UEA), Russia

America, Middle East (UEA), Africa (South Africa), Europe, Asia

Assessment of expansion for potential export markets

CATEGORIES OF SMES PRODUCT MARKET OPPORTUNITY

STRATEGIC EFFORTS

Upstream sector (capacity building)

• Identification of SMEs Potential/Export Oriented & best products.

• Mapping of export destination country based on SMEs products.

• Facilitating the development of capacity building.

• OVOP (one village one product)• Facilitating development of the productivity and

quality of the SMEs.• Developing entrepreneurship (SMEs) export

oriented.• SME Development Partnership (pattern of

franchise, subcontracting, tourism, SOEs)• Facilitation of access to productive resources

(finance, marketing, ICT)

STRATEGIC EFFORTS

Middle sector (infrastructure development)

• Broaden promotion tools of SMEs export.• Establish of PLUT (Program Pusat Layanan Usaha

Terpadu).• Standardization and sertification of SMEs

product• Developing trading board for SMEs• Revitalization Traditional Market.• Developing Modern Retail Cooperative.• Centre for Store Distribution Cooperatives.• Revitalization of the street vendor.• Developing strategic partnership of the

cooperative and SMEs.• Consolidation of ports of export/pooling cargo

SMEs through e-consolidator cargo for SMEs.

STRATEGIC EFFORTS

Downstream sector (promotion and market access)

• Facilitating promotion through home exhibition (SMEsCo Festival Tematic) and participation in strategic promotion events.

• Diversification of the Export Destination Country• Enhancing access and market networking;• Promoting the best products of SMEs through;

international standard of exhibition in domestic or overseas, trading board, SMEs gallery, business matching, display products in SMEs gallery and pavillion provinces, catalog, facilitating entrepreneurhip partner.

• Promotion by catalogue of top products of the SMEs.

• Participating in international forum in terms of SMEs development.

SME Competitive Strategies

1. I n n o v a ti o n - knowledge base business undertaking.

2. I n fo r m a ti o n te c h n o l o g y - to reduce costs and increase productivity.

3. Ni c h e m a r ket - specific and narrow product line.

4. B u s i n e s s n et wo r k i n g - with large enterprises and MNC.

5. I n d u st r i a l c l u ste r i n g - taking advantage of knowledge spill-overs.

6. D i r e c t i nv e st m e nt - exploit ownership advantages abroad.

PROMOTION FACILITATION

D O M E S T I C P R O M O T I O N

a.PARTICIPATION IN ABROAD EXHIBITION

b.BUSINESS MATCHING

Promotion and marketing of domestic SMEs excellent products.

Strengthening domestic market.

Education and love domestic products.

Promotion and marketing of SMEs excellent products to international markets.

Learning tool for SMEs (product innovation, the trend of overseas markets, networking, etc.),.

Strengthening the image and the introduction of Indonesian products in the International market through the catalogs and websites.

a. ORGANIZES DOMESTIC EXHIBITION:

- SMEsCO FESTIVAL

- THEMATIC EXHIBITION (SMESCO Fashion and Accesories Expo; SMESCO Food and Packaging Expo)

b.PARTICIPATION IN OTHER STRATEGIC ABROAD EXHIBITION

PROMOTION AND EXPORT EXPANSION MARKET OF SMEs PRODUCT

Deputy Minister for M

arketing and

Business Networking

Jl. HR. R

asuna Said, Kav. 3

-4,

Jakarta 12940 – I

ndonesia

Telp. +62 21 52992865

www.depkop.go.id

Ministry of Cooperative and SMEs

Republic of Indonesia