Trade liberalization effects on the development of small and medium-sized enterprises in Indonesia: a case study

The impact of international trade policy reform on the Indonesian economy, particularly in the areas of economic growth and development of the domestic manufacturing industry, has been studied extensively. However, the implications of such reform on the growth of small and medium-sized enterprises (SMEs) in Indonesia remain under-researched. This paper thus contributes to filling the gap by examining the impact of international trade policy reform, particularly following the 1997 crisis, on the growth of SMEs in Indonesia. Two main questions are posited: (a) how does international trade policy reform affect local SMEs?; and (b) has the growth of SME exports accelerated since the reform? The study does not find evidence that the reform has affected SMEs negatively. On the contrary, with the exception of a slight decline in 1998 due to the economic crisis, the number of SMEs has been growing. The paper suggests that such enterprises have not only managed to survive, but they have also been able to increase their output. Their exports also increased annually.