Micro, small, and medium enterprises (MSMEs) make up the majority of businesses worldwide and significantly impact economies at local, regional, national, and international levels according to the document. At the local level in Jakarta, West Jakarta has the largest number of businesses that contribute to the local economy. Regionally, MSMEs in West Java increased from 2008-2012 while large businesses fluctuated. Nationally, MSMEs contribute over 97% of employment and 58% of GDP in Indonesia. Internationally, micro enterprises focused on agriculture are more common in developing countries compared to other sectors.

1. Course 4:
Entrepreneurship
and the Economy
1
Written by: Cristiana, Jakarta Smart City Team

2. “ Exploration, interpretation and analysis on relevant
data and statistic to illustrate how micro, small, and
medium business impact the economy
2

3. According to OECD (2017), micro, small and medium businesses which are also categorized in SMEs or MSMEs are
developing rapidly and contributes both positive and negative impacts to the economy. Main problems that most countries
face is the poor economic growth, increase in inequalities and low international trade including the backlash from
globalisation as unemployment rises due to increasing competition through technology advancements. SMEs therefore is
very crucial in helping the positive growth of the economy by serving the roles of promoting sustainable growth through
rapid industrialization and adapting to the digital era as providing employment to all sector (OECD, 2017).
WTO (2016) explained that in accordance to table 7 mentioned below, it can be concluded that micro firms is included as
the majority number of firms in MSMEs. Micro firms is over 95% of total enterprises in 17 OECD countries. In developing
countries, numbers of MSMEs tend to be higher in comparison to total number of firms. There is a missing number of
medium-sized firms in less developed countries. Studies also found out that among sample firms from 45 countries, there
is a missing in both large firms and medium firms (WTO, 2016).
3
Introduction to this topic

4. Table 7. Share of micro, small and medium-sized
firms in the total number of MSMEs (%)
4
Source: (WTO, 2016)

5. Table 8. Sectoral distribution of MSMEs
5

6. Micro enterprise
According to table 7 and 8 mentioned above, MSMEs are divided into four different sector which
includes manufacturing, trade, services and agriculture sectors. Most MSMEs operated in trade,
services sectors followed up with manufacturing and agriculture. 20% of SMEs are in manufacturing
sector and 8% of SMEs are in agriculture sectors therefore, it is concluded that SMEs are over
represented in manufacturing and agriculture sector often due to the combination of low barriers of
entry and low cost of production. Developing countries are found out to be more dominating in SMEs
in agriculture sector compared to developed countries due to the difference between labour intensity
and usage of technologies (WTO, 2016).
6

7. Employment & Innovation
According to WTO (2016), SME contributes the majority of the country’s employment impacts a country’s economic growth and is
considered one of the main source of jobs in the business sector. Each company in SMEs has employed around 5-250 employees
(excluding most micro enterprises). Data during 1996-2010 shows that the median share of employment level of SME class is 67%. It is
concluded that majority of 99 countries, SMEs account for more than two-third of total employment in private sector. OECD (Organisation
for Economic Co-operation and development) countries concluded SMEs account for 63% of total employment. Large businesses
accounts for 37% of total employment. SMEs also accounts for 70% of primary sector employment in thirteen Africa countries which is
included as low developing countries (WTO, 2016).
WTO (2016) states that above size, other characteristics that related positively which economic and employment growth are the firms
amount of export which relates to increasing skilled foreign labour that will increase productivity of SMEs. The product innovation and
capital intensity SMEs will contribute to increasing economic growth. The quality of infrastructure and operations of businesses
regulations will also impact the economic level. Problems of employment in SMEs may include very low wages compared to larger firms.
The main problem is in the low job stability of employees which is not stable as professional trainings are not provided in comparison to
large enterprises (WTO, 2016).
7

8. Employment & Innovation
According to figure 9 mentioned below, it is
concluded that SME provides 70% of jobs in
general. It provides the grow in income
levels and reduces inequalities and increase
economic diversification. Countries which
particularly is rich in resources and has high
price fluctuations will benefit from the
increase in SMEs (OECD, 2017).
8
Figure 9. SME are the main source of jobs in the business sector

9. Export and Imports
WTO (2016), by encouraging constant innovation and increase in export will increase the growth of
SMEs and companies will expand more easily. By learning the access to foreign market, it will increase
efficiency of SMEs and increase diversity and quality of products. This will contribute to the countries
economy growth by increase in internationalization. Other countries favours in high quality imports
therefore boosting the quality of finished goods by SMEs to reach the standard. The positive
integration between imports and productivity creates better paid jobs. SMEs should also apply
environmental and social requirements to improve working conditions. Health and safety regulations,
labour rights and human rights needed to be applied to all SMEs to be sustainable (WTO, 2016).
9

10. “ Comparison of impacts to
economy by micro, small,
medium and large business
10

11. Productivity
According to the table 10 mentioned below, it shows the total productivity level between different size of businesses in
developing countries. It is mainly focused on the comparison between large business and SMEs. It is concluded that the
productivity level of large firms are much higher compared to SMEs because the large companies are more efficient in
production compared to SMEs due to lack of technology and skilled workers (WTO, 2016).
WTO (2016) explained that large business has a better management in operations compared to SMEs and is active in
technological investments. SMEs need to increase in innovation to increase productivity by being more sensitive to the
surroundings and and adapt quickly responding to customer change. Large corporations are able to fund large production
as many SMEs lacks in financing. SMEs often lack in research and development sector as large enterprise has a higher level
of innovation in general. The general increase of productivity in SMEs by innovating will increasing economic growth and
also enhance, impacts and forces other firms to innovate to increase the rate of survival and growth. In developing
countries, most large firms import machines from abroad which also can be mentioned as the increase in outsourcing
(WTO, 2016).
11

12. Productivity
12
Table 10. Statistic on the firm-level total factor productivity (TFP) in developing countries of large firms and SMEs

13. Productivity
13
Figure 11. SMEs are less connected than large firms to International knowledge networks

14. Innovation
According to the Figure 11 mentioned above, it shows the comparison between large firms and SMEs
that engages in international collaboration for innovations as a percentage of product or process
innovating firms in each size category during the year 2010- 2012. The inputs of innovation for both firm
size may include ideas, finance, skills, technologies to result in output such as licences, goods and
services. It is concluded that large enterprises contributed more innovation in all of the countries
compared to SMEs. Innovation of large business increases and promotes economic growth in the long
run.
14

15. Export and import
The number of export and import affects economy. According to the Figure 12 mentioned below, it
shows the international trade export and import to the economy of both SME and large business. Micro
enterprises has the largest shares in the export categories of accommodation and service sectors.
Large enterprise is the most dominant export in manufacturing sectors. Micro enterprise is dominant in
imports of sectors in service sector such as health care. Large enterprise is more dominant in financial
service imports. Enterprise sectors that is more capital intensive is mostly dominated by large
enterprises such as mining, electricity and as supply. Small fractions of SMEs are found engaging trade
in comparison to large enterprise. SMEs that engages in international trade direct a larger share in the
sales to foreign markets compared to large organisations (WTO, 2016). The increase in both import and
export of SMEs and large firms boost growth and is good for the economy.
15

16. Figure 12. Trade values by sector, exports and imports, 2012
(Percentage)
16

17. Figure 12. Trade values by sector, exports and imports, 2012
(Percentage)
17

18. “ Examination on how micro, small, medium and
large business could impact different levels of
the economy (local, regional, national) in
international context
18

19. Local
19
● The number of small and medium enterprises in Jakarta was
1,154,792 SMEs.
● West Jakarta is an administrative city that has the largest number
of businesses reaching 26.06 % of the economy.
● East Jakarta with 254,116 (21.59 %) of the economy and South
Jakarta with 224,723 (20.05 %) of the economy.
● North Jakarta and Central Jakarta were 217,821 (18.81 %) and
148,261 (13.18 %) respectively (Hasanudin, 2018).
● The least number of businesses is Kepulauan Seribu Regency,
which is 3,773 businesses or only 0.31 %.
● One of the areas in West Jakarta that is aggressively growing
SMEs is Kembangan District, currently the number of SMEs has
reached 800 business units that impacts the whole local economy
greatly by providing employment, economic growth and
development (Hasanudin, 2018)
Source: (infonitas.com, 2018)
Table 13. Number of micro, small, medium and large
enterprise in Jakarta 2016

20. Local
Kepulauan Seribu and West Jakarta however has the lowest number of SMEs and does not contribute
much of total economic growth of the whole Jakarta. Government should perform program to increase
the number business start ups to boost the level of micro, small and medium companies to help the
employment level to rise. Government could provide more financing loans programs and subsidies
that encourages firms to build enterprises because most small. By giving benefits in the programs
given to SMEs entrepreneurs, it will be more easier for firms to expand and boost production. The
increase in productivity will boost profit of the firms, therefore promotes the growth and GDP of
economic activities in Jakarta.
20

21. Regional
Based on Table 14, it can be seen that the number of MSMEs in West Java continues to increase from year to
year, namely from 2008-2012 while the number of UB tends to fluctuate. In 2008, the number of MSMEs as
many as 8,125,761 units while large businesses only 1,523 units and arrived at in 2012 the number of MSMEs was
9,168,356 units while large businesses were only reaching 1,853 units (Pamela, 2014). This indicates that in
economic development in provinces which increase growth. MSMEs are always described as a sector that has a
role important because most of the population is low-educated and alive in small business activities in both the
traditional and modern sectors (Pamela, 2014).
21
Source: (Dinas koperasi dan UMKM Jawa Barat, Quoted by, Pamela, 2014)
Table 14. Growth of Micro,small, medium and large business in West Jawa

22. Regional
The growth of small business from 2009 to 2010 in West Java is very drastic shown on the graph
above. It boosts economic growth and increase opportunities of employment. In 2009 - 2012, it shows
that small business starts to decrease over the years which will be not beneficial to economy which
causes decrease in GDP and the increase of unemployment. Government should try to figure out the
cause of the extreme growth that benefits the economy of the West Java in 2009-2010 and apply to
following years to increase number of small business small business. The rapid decrease in large
enterprise in West Java is very dangerous to the economy which may lead to economic downturn as
large firms contributes most in the economy stability and increases GDP and reduces number of
employment.
22

23. National
According to Dipta (2017), micro business, small business, medium business and large business
contributes to Indonesia’s economy. Total SMEs in 2013 has reached 57.89 million in number which is
99.99% of the whole country’s economy. Large enterprises has the least amount of units, around 5,066
units which accounts for 0.01%. SMEs are able to contribute 97.16% to the job creation and GDP of
58.65% to the economy in Indonesia. The growth all the enterprise decreases poverty and increase
employment of the country and promotes positive economic growth (Dipta, 2017).
23

24. National
Micro enterprise has dominated the number of enterprise in Indonesia. This is not good for the
economy for the long run. Micro enterprise has a hard time expanding towards larger business
because of the barriers that they face such as finance and legality issues mentioned above in the
critical examination in the scope of business ventures. Government should try to help micro business
by providing suitable programs to encourage micro firms to innovate and expand further into small,
medium and large enterprise sector. By doing that, the country’s economy and GDP will increase as it
encourages productivity and number of output to rise.
24

25. International
According to table 7 and 8 mentioned above, it can be concluded that the number of micro business
working for agriculture sector in developing countries which include LDCs has the highest number
among other countries. SMEs working in agriculture sector may not generate profit as much as other
sectors such as manufacturing and service because most of the agriculture sector relies on
government subsidies to barely earn any profit. SMEs should try to work in secondary sector rather
than primary sector in order to promote economic growth of the country and increase GDP of the
country. In order for the economy to rise, government in the developing countries should encourage
micro business to expand towards secondary sector to boost the economy of the country.
25

26. References (Course 4) Academic source
OECD. (2017). Enhancing the Contributions of SMEs in a Global and Digitalised Economy. [online]
Available at: https://www.oecd.org/mcm/documents/C-MIN-2017-8-EN.pdf [Accessed 14
Nov. 2018].
Pamela (2014). [online] Repository.upi.edu. Available at:
http://repository.upi.edu/15415/3/S_PE_1005649_Chapter1.pdf [Accessed 14 Nov. 2018].
WTO. (2018). Levelling the trading field for SMEs. [online] Available at:
https://www.wto.org/english/res_e/booksp_e/world_trade_report16_e.pdf [Accessed 14
Nov. 2018].
26

27. References (Course 4) Non-acedemic
Dipta, W. (2017). Indonesia SME Strategy. [online] Ilo.org. Available at:
https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-jakarta/docume
nts/presentation/wcms_564690.pdf [Accessed 14 Nov. 2018].
Hasanudin, I. (2018). Mendorong Tumbuh Kembang Usaha Kecil dan Menengah. [online]
Infonitas.com. Available at:
http://infonitas.com/features/mendorong-tumbuh-kembang-usaha-kecil-dan-menengah/
818 [Accessed 14 Nov. 2018].
27

28. 28
Thank You
For reading