ILUNI UI launches MSME policy recommendations

(Photo: Prive. Doc)

IO, Jakarta – University of Indonesia Alumni Association Policy Center (ILUNI UI) has launched a policy recommendation paper for the government titled “COVID-19 Pandemic and New Normal: Government Policy Recommendation for MSMEs,” Saturday (20/6). 

Minister of Cooperatives and Small and Medium Enterprises, Teten Masduki expressed his appreciation for this working paper as an insight for the government. “The MSMEs in 1998 became heroes in saving our economic sector, but this time it has become one of the sectors affected,” he commented. He further stated that this working paper would be an insight into government policy. “This can be one of the insights for the national strategy section, as well as government policy guidelines,” added Teten. 

Chairperson of ILUNI UI Andre Rahadian emphasized that the MSME is a vital sector for the economy during the pandemic. “With the contribution of MSMEs to Gross Domestic Product (GDP) of 61% and employment of 97% (2018), the MSME sector has a strategic value in the recovery of the national economy,” he explained. Furthermore, Andre stressed that a policy strategy is necessary to safeguard the MSME sector. “For this reason, a policy strategy to restore the right MSME sector is urgently needed,” he said. 

Meanwhile, Chairman of the ILUNI UI Policy Center M. Jibriel Avessina said that MSMEs currently face major problems as a result of COVID-19: a decline in sales, capital problems, product distribution and raw materials. “To address this problem, the ILUNI UI Policy Center compiled a Working Paper that discusses the effectiveness of several government policies,” Jibriel said. The working paper discusses a variety of policies including principal and interest delay policies, loan interest subsidies, MSME working capital credit guarantees and Ultra Micro Financing (UMi), working capital stimulus, Regional Incentive Funds (DID), and social assistance programs for MSME actors in the poor and vulnerable category groups affected by COVID-19. 

Furthermore, the coordinator of the writing team of the Working Paper, Satrio Mukti Wibowo, outlined various analytics of the working papers from the Policy Center. The MSME stimulus policy is a new policy implemented by the government. Therefore, the ILUNI UI Policy Center assessed that the policy and social assistance still exhibits potential problems that can be prevented early on. Potential problems in implementing government policy for MSMEs can be mapped into three categories. First, the effectiveness of the MSME stimulus policy regarding how sufficient the policy is in responding to MSME needs during a pandemic. Second, targeting: there are risks of exclusion or inclusion errors, recipient data validation and eligibility validation. Third, monitoring things related to the stages of policy implementation, the potential misuse of distribution, and complaints. 

Based on the mapping of the problems, Satrio explained the policy recommendations that could be implemented by the government are listed in the working paper. “For some policies that have already begun to be implemented, improvements can be carried out simultaneously with the implementation of the policy,” he added. 

The following are some policy recommendations for the MSMEs recovery in Indonesia. 

Enhancing the role of the Ministry of Cooperatives and SMEs through two additional roles: 

Coaching and education for MSMEs in utilizing technology to sell online. 

One-stop policy for MSMEs, only through the Ministry of Cooperatives and SMEs. 

A quasi-fiscal policy with the cooperation of State-Owned Enterprises (SOEs) to absorb MSME products and establish business cooperation. 

One database system and additional data verification with field surveys. 

Satrio suggested that in entering the recovery period and new normal, the following are several policy options that could be implemented by the government in arousing the enthusiasm of MSMEs in the national economy. 

Mapping MSMEs and health protocols for each MSME category: micro, small, medium enterprises; includes compulsory, independent, optional, and policy categories that must be assisted or directed by the government. 

Simulation or New Normal trial for a certain time (1-2 weeks) and evaluation of whether the implementation of the New Normal at UMKM runs well. 

Encouraging cash-intensive programs (ILO, 2020) through the use of sub-district funds, village funds, and utilization of development programs by Ministries and Institutions (K/L). 

Satrio admitted that further study was needed to address in the future. “Additional studies for cost-effectiveness analysis need to be carried out to determine the contribution of these policies to MSMEs and the national economy so that they can be used as a reference for future policies,” he concluded.