#1MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA 3rd ASEAN Inclusive Business Summit: Promoting Inclusive Business Opportunity in Indonesia Victoria br. Simanungkalit Deputy Minister for Production and Marketing 1 BANGGA BUATAN INDONESIA#2MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA BANGGA BUATAN INDONESIA SME Landscape in Indonesia Structure of MSMEs in Indonesia LARGE 5.550 0,01% MEDIUM 60.702 0,09% SMALL 783.132 1,22% MICRO 63.350.222 98,68% IB Policy in Indonesia IB Policy has NOT YET been imposed in the National Policy of MSMEs Development, yet the policy direction in the Medium Term National Development (RPJMN) 2020-2024 stated that: "Promotion of entrepreneurship, MSMEs, and cooperatives is implemented through partnership, between MSMEs and large companies.." The government currently aims to tackle the "missing middle", by increasing participation of not only large companies, but also medium enterprises to actively engage their business with micro and small companies. Total MSMEs: 64,194,056 Source: Ministry of Cooperatives and SMEs - 2018#3IMPACTED GROUPS INDIVIDUAL/ HOUSEHOLD Government Measures to Mitigate COVID-19 Risk COVID-19 IMPACT POLICY Social *Job Loss, Decreased Income • Declining purchasing power, bad credit Safety Net • Fatal threats, health problems MAIN POLICIES KEMENTERIAN KOPERASI DAN USAHA KECIL DAN MENENGAH REPUBLIK INDONESIA MSMEs Decreased activities, business difficulties Lack of sales, business closures • Bad Credit, unable to pay obligations Allowance / Postponement/ 1 Withholding Tax (Article 21/22/25 Income Tax, VAT) ** 2 Loan Allowance / Delay Payment, Credit Restructuring * Economic Real Declining Demand, Shrinking sales Sector Relaxation of Rules and Licensing, Stimulus CORPORATIONS • Reduced production, employee layoffs * Loss / Bankruptcy / Closing, Bad Credit 3 Safety Ease of Doing Business and Investment * Net Raw material supply disruption, production decline 4 REAL SECTOR FINANCIAL SECTOR • Cash-Flow Difficulties, Credit Restructuring • Liquidity issues, Decreasing solvency • Pressure on the money market, capital markets, exchange rates • Threats to financial sector stability Financial Sector Safety Net • Declining demand, business closure, layoffs 5 Process and Service Acceleration, Administrative Reduction and Costs- Special Credit Facilitation for Increasing Working Capital and Maintaining Business REAL SECTOR Source: Coordinating Ministry for Economic Affair, 2020 * : Expansion of the Policy in the 2nd Stimulus * : Expansion of Fiscal Incentives in PMK-23/2020#4MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA IB Potential in Wellness Toursim According to IB promotion program by UN-ESCAP in 2019 in Indonesia Strengths Rich and diverse culture of holistic wellness including several signature experiences. Indonesia is second largest market for wellness tourism in Southeast Asia with 1.3 million direct employees and annual growth rate of 21.5% from 2015-2017. Weaknesses Indonesia lack behind regional competitors in terms of sustainability, sanitation, hygiene and safety in the tourism sector. Limited market linkages and capacity of BOP to engage in wellness tourism. No international brand reputation of wellness tourism in Indonesia (outside Bali). Opportunities • World trends of health and holistic wellness tourism, especially in high-paying markets like USA and Europe. Wellness tourism has high potential for quality tourism with high-value products and services. Wellness tourism has high potential for IB. Threats Risk of over tourism with quality issues for tourists and sustainability issues for environment and local communities. BANGGA BUATAN INDONESIA#5MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA Challenges of IB in Indonesia 1. Limited knowledge and information on IB among government stakeholders and businesses 2. IB has yet to be seen as a promising business model to promote low-income communities 3. Limited participation of large companies/ private sectors to involve in IB 4. Limited collaboration between district level governments to develop wellness destinations and between government and private sector to develop tourism products. BANGGA BUATAN INDONESIA#6MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA Best Practice of IB in Indonesia (1) 1. Lewi's Organics BANGGA BUATAN INDONESIA A company specializes on organic products, such as rice, fruits, sugar, and spices, that applies organic farming methods to ensure the sustainability of the environment. The company has partnered up with many local farmers, not only in making them parts of the business, but also empowering them to cultivate organics products that meet international standards. By doing so, it enables to improve local farmers' livelihood through organic farming and fair trade.#7MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA BANGGA BUATAN INDONESIA Best Practice of IB in Indonesia (2) 2. Martha Tilaar Martha Tillar has been doing vey well in incorporating local communities as part of their inclusive work. As a leading company in health and wellness sector in Indonesia, Martha Tilaar has empowered women in Bilebante Village, West Nusa Tenggara, through capacity building and training program. The training was given to teenage women and also the housewife by bringing some professional and experienced trainers in the SPA field, entrepreneurship, green land management, and so on. As a result, the products are branded as Sari Ayu SPA or as local SPA brand, with the use of local natural resources and local labour/employees from Bilebante Village. The program was part of Innovation and Investation for Inclusive Sustainable Economic Development (ISED), with support form GIZ and BAPPENAS.#8MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA Best Practice of IB in Indonesia (3) 3. HARA Technology BANGGA BUATAN INDONESIA HARA Technology is a data exchange platform that collect data of farmers as their partner. This data is used to help farmers to gain access of credit by banks, through data risks analysis, which determine the amount of credit capital for farmers. The data collected by HARA includes farmes personal data; geotagging such as area, location, and land ownership; cultivation such as time and type of plant, fertilizers and medicines used; ecology such as weather and soil type; up to the transaction value for the sale of the harvest. Farmers can use the data to select crops varieties, planting season, harvesting, and deciding potential market to sell the products.#9MINISTRY OF COOPERATIVES AND SMES REPUBLIC OF INDONESIA 1 BANGGA BUATAN INDONESIA Thank You!