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Indonesia's small and medium-size exporters and their support systems

Author

Listed:
  • Berry, Albert
  • Levy, Brian

Abstract

The authors survey a sample of 91 small or medium-size exporters of garments, rattan furniture, the two are reasonably equally mixed. About 75 percent of the entrepreneures in garments and rattan furniture, and carved wooden furniture (Jepara), and interview people in public and nonprofit agencies active about issues affecting small and medium-size enterprises (SMEs). Indonesia's garment industry is dominated by entrepreneurs of Chinese descent and the Jepara industry by pribumi (Indonesian Malays); in rattan furniture, the two are reasonably equally mixed. About 75 percent of the entrepreneures in garments and rattan furniture have some university education; less than half of those in the more traditional, skill-based Jepara industry do. In most of the firms, international marketing was handled exclusively through private channels, that is also how most firms acquired technological capability. But such channels appeared to be more readily accessible by larger firms, by educated entrepreneurs, and by non-pribumi who could take advantage of the extended-family network that connects ethnic Chinese in the region. Relying exclusively on private channels means running the risk that participation in export markets will be limited to a relatively narrow base of entrepreneurs. Pribumi and smaller firms relied heavily on collective marketing support provided with a"light touch"- for example, support for participation in trade fairs. The Ministry of Trade's international network of offices geared to providing information and facilitating transactions was of little use to the firms surveyed. Collective technology support also appeared to be somewhat more important for smaller, pribumi firms, although its impact was modest. Employing expatriates was a powerful mechanism for acquiring technological capability, especially in the rattan and garment sectors, although it was concentrated disproportionately among the non-pribumi entrepreneurs. Indonesia's collective institutions suffer from pervasive organizational weaknesses that limit their ability to help broaden the base of private entrepreneurship in small and medium-size firms. Public institutions generally lack the commitment, resources, and flexibility needed to provide quality support to SMEs, and the industry association often lack the professionalism and accountability needed to gain SMEs'confidence. But public support can be useful when it involves relatively simple services, such as support to organize local fairs, to facilitate participation in fairs abroad, or to use foreign private consultants.

Suggested Citation

  • Berry, Albert & Levy, Brian, 1994. "Indonesia's small and medium-size exporters and their support systems," Policy Research Working Paper Series 1402, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1402
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    Citations

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    Cited by:

    1. Abla M. Abdel-Latif & Jeffrey B. Nugent, 1996. "Transaction Cost Impairments To International Trade: Lessons From Egypt," Contemporary Economic Policy, Western Economic Association International, vol. 14(2), pages 1-14, April.
    2. Rock, Michael T., 1999. "Reassessing the Effectiveness of Industrial Policy in Indonesia: Can the Neoliberals be Wrong?," World Development, Elsevier, vol. 27(4), pages 691-704, April.
    3. Tulus Tambunnan, 2007. "Trade and Investment Liberalization Effects on SME Development: A Literature Review and a Case Study of Indonesia," Working Papers 4207, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..

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