Created By: Stefanie Wijaya (Jakarta Smart City Team)

1. and the
Economy
Cre By: Ste e W j a
( Jakarta Smart City Team )

2. “● Understand how micro, small, small, and medium
enterprises (MSMEs) impact the economy
● Able to differentiate the impacts to the economy caused by
MSMEs and large business
● Understand how MSMEs and large business could impact the
different levels of the economy (local, regional, national,
international)

4. Definition of MSME worldwide
Source: (NCR, 2011)

5. to the economy (global/international)

6. Contribution of SMEs to Employment by Income Group – Median (2011)
Source: (Ayyagari et al., 2011)

7. Contribution of SMEs to Employment by Region – Median (2011)
Source: (Ayyagari et al., 2011)

8. “
The reason behind SMEs substantial contribution to
employment is due to its nature of being labour
intensive and thus, require a lot of workers in order to
operate. Survey conducted by the World Bank showed
that firms consisting of 5 to 250 workers had
contributed 67% of the total of full-time employment
(Ayyagari et al. 2011; Quoted by Edinburgh Group, 2012).
85% of the growth in employment rates in 2002-2010
was caused by SMEs (de Kok et al., 2011; Quoted by
Edinburgh Group, 2012).

9. Contribution of SMEs to Employment in the Business Sector (2014)
Micro Small Medium
1-9 10-49 50-249
Source: (OECD, 2017)

10. “ Research shows that SMEs are included as
major contributors to employment in all
domains, especially in developing countries.
Based on OECD (2017), 70% of employment is
accounted by SMEs in 2014. In addition, it also
contributed 50-60% of value creation in
national economies around the world (OECD,
2017).

11. ● Globalisation enhanced the needs of collaboration in innovation in getting
inputs such as technologies and skills from abroad for innovation purposes
and exploiting outputs in foreign markets (OECD, 2017)
● Contribution of SMEs to innovation had grown recently (OECD, 2017)
● Innovation had lead to technological developments and more advanced
market demand, allowing SMEs to maximize their comparative advantages
and minimize their structural disadvantages due to limited resources and
capability to reap economies of scale (OECD, 2017)

12. Source: South African Institute of Public Accountants (SAIPA), based on World Bank (2003)

13. “ In developing countries, SMEs contributed
approximately 33% of GDP. It may reach more than half in
most countries if informal businesses in the SMEs are
included as well (OECD, 2017). Edinburgh Group (2012)
mentioned that even though they play a major role in
high-income countries, they are also making a significant
contributions to the GDP of low-income countries as well.

14. Source: (World Trade Organization, 2016)

15. LARGE
BUSINESS
MEDIUM
SMALL
MICRO

16. No. and Percentage of Enterprises, Employment and Gross Value Added
(GVA) for the EU-27 by Size (2012)
Source: (Wymenga et al., 2012)

17. “ In comparison to large firms, SMEs contribution per firm
tends to be lower in terms of employment since there is a
big difference between the sizes of the business. However,
for SMEs as a whole, it provides more employment
opportunities as they are more likely to be labour intensive.
Job creation in the SMEs requires smaller capital costs
than large firms, which is very much needed in developing
countries and economies of high level of unemployment,
especially in the rural areas (Edinburgh Group, 2012).

18. Source: (OECD, 2015)

19. “ In general, SMEs prefer flatter organisational structures which allow
faster communication between members compared to large firms.
This increases their capability to respond to changes in customer
demands due to innovations in the contemporary business
environment, However, unlike large firms, due to the lack of financial
resources to fund for the costs such as the investment and purchase
of advanced technology, this caused SMEs innovation in most cases to
not be based on R&D but only to minimal changes in adapting to
existing products, innovating designs or management and marketing
practices (World Trade Organization, 2016).

20. INTERNATIONAL
NATIONAL
REGIONAL
LOCAL

21. Number of MSMEs and Large Firms in DKI Jakarta based on Districts (2016)
Source: (Badan Pusat Statistik, 2017)

22. Number of Employment provided by MSMEs and Large Firms in DKI Jakarta
based on Districts (2016)
Source: (Badan Pusat Statistik, 2017)

23. “ From the two table above which shows the total units
of MSMEs and large business, it can be seen how they
greatly impacted the economy of DKI Jakarta
Province by creating employment opportunities for
the people. Especially in the West Jakarta, there is a
total of 322,049 units of firms, which had contributed
to a total of 980,661 job vacancies. In total, it had
provided 4,825,464 for the whole Jakarta.

25. ● In Kepulauan Seribu and Central Jakarta, the number of MSMEs are the least
compared to other districts, which means that their contributions towards the
economy are not as much as well
● Government should conduct more activities to help the developments of
these businesses such as the establishment of programs in relation to
financing to help fund for the expansion of the business in order to increase
the employment opportunities in the local communities, especially for micro
and small businesses.
● Aside from expansion, it can also encourage businesses to boost their
productivity level, which results in greater revenue obtained. This will help in
stimulating the economic growth in Jakarta.

26. Number of MSMEs and Large Firms based on Islands in Indonesia - regional (2016)
Source: (Badan Pusat Statistik, 2017)

27. “ From the table above, it can be seen that distribution of firms across
different regions is mostly concentrated in the Western Region of
Indonesia (Sumatra and Java). A total of 16.2 million firms are located
in Java, equivalent to 60.74% of all companies in Indonesia. The rest
are in the Eastern Indonesia (Bali, Nusa Tenggara, Kalimantan,
Sulawesi, Maluku, and Papua), with the largest number of companies
on Sulawesi Island amounting to 8.09%. This shows how big the
influence that SMEs and large businesses can make in the island of
Java through the potential opportunities such as employment.

28. Number of Employment provided by MSMEs and Large Firms based on
Islands in Indonesia - regional (2016)
Source: (Badan Pusat Statistik, 2017)

29. “ As proven in the table above, distribution of labour
across regions generally indicated that more than 81%
is concentrated in the Western region of Indonesia. A
total of 44.6 million employees are located in Java,
which belongs to 63.38% of the companies in
Indonesia. The rest are in the Eastern region, with the
most number of workers located in the Sulawesi
Island, amounting to 6.82%.

31. ● Distribution of the MSMEs and large businesses is not equal across different
regions
● Mostly concentrated in Java, which does not indicate a healthy economic
growth. The development of businesses among different islands in Indonesia
should be in more or less a similar pace so that the gap would not be so big.
After all, these islands should have similar potentials and capabilities in terms
of growth and development.
● Government may initiate more financing sources in other regions aside from
Java, specifically for the type of industries being developed in each island
respectively.

32. Number of MSMEs and Large Firms in Indonesia (2012 & 2017)
Unit Usaha 2012 2017 Perkembangan Tahun 2012-2017
(Unit) Jumlah % Jumlah % Jumlah %
UMKM 55.206.444 99,99 62.922.617 99,99 7.716.172 13,98
Usaha Mikro 54.559.969 98,82 62.106.900 98,70 7.546.931 13,83
Usaha Kecil 602.195 1,09 757.090 1,20 154.895 25,72
Usaha Menengah 44.280 0,08 58.627 0,09 14.347 32,40
Usaha Besar 4.952 0,01 5.460 0,01 508 10,26
Source: (Kementerian Koperasi dan Usaha Kecil dan Menengah, n.d.)

33. Number of Employment provided by MSMEs and Large Firms in Indonesia (2012,
2013, & 2017)
Tenaga Kerja 2012 2013 2017 Perkembangan Tahun
2012-2017
(Orang) Jumlah % Jumlah % Jumlah % Jumlah %
UMKM 101.722.458 97,24 107.657.509 97,16 116.673.416 97,02 14.950.958 14,70
Usaha Mikro 94.957.797 90,77 99.859.517 90,12 107.232.992 89,17 12.275.195 12,93
Usaha Kecil 3.919.992 3,75 4.535.970 4,09 5.704.321 4,74 1.784.329 45,52
Usaha Menengah 2.844.669 2,72 3.262.023 2,94 3.736.103 3,11 891.434 31,34
Usaha Besar 2.891.224 2,76 3.150.645 2,84 3.586.769 2,98 695.545 24,06
Source: (Kementerian Koperasi dan Usaha Kecil dan Menengah, n.d.)

34. “ SMEs accounted for 97.16% of the total industrial workforce in
Indonesia, which was equivalent to 107.66 million, and the rest
of 2.84% was taken by the large firms. This shows how SMEs
play a very dominant role in Indonesia’s economic growth
(Hapsari et al., 2014). In addition, SMEs have a complementary
role with large firms in terms of job creation and economic
growth (Giaoutzi et.al, 1988, Armstrong et. Al., 2000, Tambunan,
2000, Sudarto, 2001; Quoted by Sulistyastuti, 2004). The
existence of SMEs in Indonesia had helped in overcoming
unemployment and income inequalities (Sulistyastuti, 2004).

35. Contribution of MSMEs and Large Firms to the GDP of Indonesia (2012 & 2017)
PDB atas Dasar
Harga Berlaku
2012 2017 Perkembangan Tahun 2012-2017
(Rp. Milyar) Jumlah % Jumlah % Jumlah %
UMKM 4.321.830,0 58,05 7.704.635,9 60,00 3.382.805,9 78,27
Usaha Mikro 2.579.388,4 34,64 4.727.989,4 36,82 2.148.601,0 83,30
Usaha Kecil 740.271,3 9,94 1.234.210,7 9,61 493.939,4 66,72
Usaha Menengah 1.002.170,3 13,46 1.742.435,7 13,57 740.265,5 73,87
Usaha Besar 3.123.514,6 41,95 5.136.223,1 40,00 2.012.708,5 64,44
Source: (Kementerian Koperasi dan Usaha Kecil dan Menengah, n.d.)

36. “ An increase in GDP would mean that the country’s
economy is better than the previous year (Hapsari et al.,
2014). From the table above, it can be seen that there is a
rise in the number of SMEs contribution to GDP from Rp.
4,321,830,00 billion to Rp. 7,704,635,90 billion, which is
an average of 13,05% growth per year. In comparison,
large firms contributed a slower growth of 10,74% per
year. Nevertheless, both are still crucial to the national
economy.

38. ● The significant increase in the number of MSMEs from year to year had indicated
a good performance which would greatly influence and benefit the growth of
Indonesia’s economy.
● However, in relation to the data obtained in the previous section (regional), the
significant increase might only be in Java.
● Government should conduct surveys on each region in Indonesia to find out the
obstacles faced by businesses in those areas and offer solutions to encourage
improvements in terms of development.
● In addition, the growth of large businesses, compared to the MSMEs, is
considered a very small increase. Thus, government may want to develop
macroeconomic policies that encourage the growth of SMEs to large businesses.

40. ● According to the table in slide 14, it can be seen that most MSMEs are located in
the primary sector - agriculture.
● This might possibly hinder the growth of the international economy since it would
be very difficult for businesses under primary sector to expand as much as other
businesses in secondary and tertiary sectors.
● There is a significant difference in the revenue that each sector is capable to
generate, as well as their contributions towards the economy.
● Therefore, in order to further stimulates the growth of the global economy, these
SMEs should be pushed to switch from primary to secondary sector, in which
government can play a role in encouraging them to do so.

41. “
Any questions?

42. Badan Pusat Statistik (2017). Jumlah Usaha/Perusahaan Menurut Kabupaten/Kota dan Skala Usaha di
Provinsi DKI Jakarta 2016. P.1.
Edinburgh Group (2012). Growing the global economy through SMEs. [online] pp.1-44.
Available at:
http://www.edinburgh-group.org/media/2776/edinburgh_group_research_-_growing_the_global_
economy_through_smes.pdf [Accessed 13 Nov. 2018].
Hapsari, P., Hakim, A. and Soeaidy, S. (2014). Pengaruh Pertumbuhan Usaha Kecil Menengah (UKM)
terhadap Pertumbuhan Ekonomi Daerah (Studi di Pemerintah Kota Batu). Wacana, [online] 17(2),
pp.88-96. Available at:
http://wacana.ub.ac.id/index.php/wacana/article/viewFile/308/259 [Accessed 13 Nov. 2018].

43. Kementerian Koperasi Dan Usaha Kecil Dan Menengah (n.d.). Perkembangan Data Usaha Mikro, Kecil,
Menengah (UMKM) Dan Usaha Besar (UB) Tahun 2012 - 2017. p.1.
OECD (2017). Enhancing the Contributions of SMEs in a Global and Digitalised Economy. [online] pp.1-24.
Available at:
https://www.oecd.org/mcm/documents/C-MIN-2017-8-EN.pdf [Accessed 13 Nov. 2018].
Sulistyastuti, D. (2004). Dinamika Usaha Kecil Dan Menengah (UKM) Analisis Konsentrasi Regional UKM di
Indonesia 1999-2001. Jurnal Ekonomi Pembangunan, [online] 9(2), pp.143-164. Available at:
https://media.neliti.com/media/publications/65076-ID-dinamika-usaha-kecil-dan-meneng
ah-ukm-an.pdf [Accessed 13 Nov. 2018].
World Trade Organization (2016). Levelling the trading field for SMEs. World Trade Report 2016. [online]
pp.1-182. Available at:
https://www.wto.org/english/res_e/booksp_e/world_trade_report16_e.pdf [Accessed 13 Nov. 2018].