LPEM FEB UI
MoT International ConferenceSeptember 5th 2017, Jakarta
Kiki Verico, Ph.D.
Indonesia’s Trade Competitiveness: Enhancing SMEs Role in GVCs
CONTENTS
01.
02.
03.
04.
05.
BACKGROUND
THE IMPORTANCE OF EXTERNAL BALANCE
INDONESIA’S SMES: LPEM’s FINDINGS
GVCs & SMEs
CONCLUSION
(S-I)+(T-G) = (X-M)
Source: NPI Report BI, 2017
Agriculture Manufacture Service
2000 4.9 15.6 27.7 38.5 21.8 8.0
2001 3.6 15.3 29.1 38.3 19.8 6.9
2002 4.5 15.5 28.7 40.1 20.8 7.8
2003 4.8 15.2 28.3 41.1 21.9 8.1
2004 5.0 14.3 28.1 41.0 15.9 1.6
2005 5.7 13.1 27.4 40.3 11.3 0.3
2006 5.5 13.0 27.5 40.1 22.9 10.9
2007 6.3 13.7 27.0 39.5 24.9 10.5
2008 6.0 14.5 27.8 37.5 12.1 0.1
2009 4.6 15.3 26.4 37.1 25.9 10.6
2010 6.2 13.9 22.0 40.7 22.1 5.1
2011 6.2 13.5 21.8 40.6 26.1 1.7
2012 6.0 13.4 21.5 40.9 -1.7 -24.4
2013 5.6 13.4 21.0 41.5 -4.1 -29.1
2014 5.0 13.3 21.0 42.3 -1.9 -27.5
2015 4.8 13.5 20.8 43.3 7.6 -17.5
Sector Contribution to GDP (%) Net Export
Merchandise
(Billion US$)
Current
Account
(Billion US$)
Economic
Growth
(%)
Year
Source: Calculated based on World Bank data -RI, 2017
Max Rank Max EigenCritical Value for
Max Eigen
Indonesia 0.029 0 15.28 14.07
1 9.96 3.76
Malaysia 0.073 0 23.26 14.07
1 10.54 3.76
Philippines 0.099 0 14.55 14.07
1 5.56 3.76
Thailand 0.000 0 26.37 14.07
1 11.44 3.76
Rejected
HO
VECM
NER & CA
Johansen Procedure
RER & CA
Rejected
HO
Indonesia TB - RER 0.037
RER - TB 0.165
Malaysia TB - RER 0.620
RER - TB 0.000
Philippines TB - RER 0.024
RER - TB 0.127
Thailand TB - RER 0.863
RER - TB 0.623
Granger Causality
(Prob)
Source: Prabowosunu & Verico, 2017, unpublished
Source: Kurniawati & Verico, 2017, unpublished
3SLS GDP to PI PI to GDP
Primary 1.35*** 0.4***
Manufacture 1.5*** 2.8*
Service 0.04* 0.97***
Source: Kurniawati & Verico, 2017, unpublished
Global Production Network Global Service Network Global Value Chain
Source: Tim GVCs LPEM based on OECD Data, 2016
Global Value Chains
Sumber: Verico, 2017Hijau = Potensi Spill Over ChinaOranye=AndalanMerah=MenurunHitam=Urgency
Number of Project Million USD
Food Crops 800 1,589
Farms 150 49
Forestry 108 78
Fishery 124 43
Mining 1,130 2,742
TOTAL 2,312 4,502
Food Industry 1,947 2,115
Textile 886 321
Footwear 279 144
Wood 240 268
Paper 274 2,787
Chemical 1,096 2,889
Rubber 710 737
Non Metal 397 1,076
Metal 2,185 3,897
Medical Instrument 22 9
Transportation 928 2,370
Others 599 75
TOTAL 9,563 16,688
Utilities 748 2,140
Construction 437 187
Trade 5,540 670
Hotel & Restaurant 2,026 888
Transportation & Communication 620 750
Property 1,151 2,322
Others 2,924 818
TOTAL 13,446 7,775
25,321 28,964Total
Agriculture
& Mining
Manufacture
Service
2016
Source: BKPM
Number
of
Prohject
Investment (Million
USD)
Jawa Barat 5,369 5,471 14,773
Daerah Khusus Ibukota Jakarta 6,751 3,398 51%
Banten 2,161 2,912
Sumatera Selatan 251 2,794
Jawa Timur 1,473 1,941
Sulawesi Tengah 252 1,600
Papua 169 1,168
Kalimantan Timur 466 1,140
Jawa Tengah 1,054 1,031
Sumatera Utara 688 1,015
Riau 394 869
Kalimantan Barat 569 631
Kepulauan Riau 880 519
Papua Barat 126 514
Bali 1,371 451
Nusa Tenggara Barat 636 439
Maluku Utara 67 439
Kalimantan Tengah 341 408
Sulawesi Utara 209 383
Sulawesi Tenggara 210 376
Sulawesi Selatan 309 372
Kalimantan Selatan 189 249
Kalimantan Utara 65 161
Aceh 111 135
Maluku 50 103
Lampung 129 86
Sumatera Barat 198 79
Jambi 161 61
Nusa Tenggara Timur 164 58
Bengkulu 59 56
Kepulauan Bangka Belitung 93 53
Sulawesi Barat 28 21
Daerah Istimewa Yogyakarta 252 20
Gorontalo 76 13
Total 25,321 28,964
Source: BKPM
Source: ASEAN Dashboard, 2017
RI’s SMEs in GPNs
Reflector (parabolic)
Solenoid
High Beam Filament
• Principle (built up import)
Lens
Light Bulb
Shield
• Locally Produced owned by Foreign
Brass Wire
• Locally Produced & Locally Owned (SMEs)
Source: Author own illustration based on interview, 2017
2nd, 3rd, etc. tier
2nd, 3rd, etc. tier
2nd, 3rd, etc. tier
0
5
10
15
20
25
30
35
40
45
50
Fashion Kuliner Kriya Film Musik Apl&Game
15.92
45.02
31.18
2.09 3.32 2.46
(%)
Source: Baseline Survey of Creative Economy Roadmap on 6 Provinces 6 Sub-Sector for BEK RI, LPEM FEB UI 2016
Country% of SMEs
in RPN% of Upper Middle
Industry in RPN
Malaysia 46.2 82.4Thailand 29.6 91.1Vietnam 21.4 64.6Philippines 20.1 51.1Indonesia 6.3 52
Source: Tegal SMEs of Metal Industry, 2017
Source: Wignaraja 2013, % of firms
SMEs Contribution in Export
Previous Studies: 1. In the mid- 2000s SMEs in the US, Switzerland, the Netherlands, United
Kingdom, China and Japan contributed around 30%-38% of national totalexports (Hammer & Stamps, 2010). SMEs in ASEAN member states contributedaround 23% of national total exports (Wignaraja, 2012)
2. SMEs in Indonesia (2005-2013) were around 99.99% of the total businessentities contributed around 56-59% of the GDP and absorbed around 97% ofjob vacancies while decreasingly contributed in non-oil and gas exports from18.5% (2005-2007) to 16.9% (2008-2010) and to 15.4% (2011-2013) and 9.3%(2011) of total export including oil & gas (Wignaraja, 2012)
Some Facts : Indonesia’s SMEs & Internationalization
Source: Recalculate % based on Revindo & Gan, LPEM Working Paper, 2017
Product Exporter %Non
Exporter % Total
Agriculture Products 23 74 8 26 31
Food & Beverages 17 30 39 70 56
Furniture 43 54 37 46 80
Handicrafts 59 65 32 35 91
Garments 33 48 36 52 69Leather Products & Fashion
Accessories 15 47 17 53 32
Utensils 15 56 12 44 27
Machinary Components 7 39 11 61 18
Other Products 9 47 10 53 19
Multi Products 50 68 24 32 74
Province Exporter %Non
Exporter % Total
Banten 11 73 4 27 15
DKI Jakarta 56 56 44 44 100
West Java 19 49 20 51 39
Central Java 13 32 28 68 41
DIY 53 90 6 10 59
East Java 76 41 109 59 185
Bali 43 74 15 26 58
Recent Study
Source: Revindo & Gan, LPEM Working Paper, 2017
Large Large
SMEs SMEs
International
Domestic
F&BElectronic,
Machinery, Automotive
1. In 2016 BPS did survey on SMEs of creative economy with 4,400 sample in 57 municipal & city & LPEM FEB UI with 1,055 sample in 6 big cities. Average sample of BPS is 77 per region while LPEM 176 per region. End user: BEKRAF RI
2. LPEM Survey: Western Indonesia: Medan, Jakarta, Bandung and Yogyakarta. Mid of Indonesia: Bali & Eastern Indonesia: Manado for six subsector for 2016: culinary, gift, fashion, music, film and application & game
3. Proportion of SMEs Culinary (46,3%), gift (35,8%), fashion (15,8%), music (0,01%), film (1,3%) and application & game (0,64%).
4. Access to credit is still limited as most uses own capital (85,9%) and this is similar to the BPS finding yet higher proportion of 92,37%
5. Producer directly sell to the consumer around 94,9% and similar to the BPS result with 93,42% of proportion
EducationBackground
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
0
10
20
30
40
50
60
70
Fashion Kuliner Kriya Film Musik Apl&Game
3 1.5 1.5 0 0 04.2
8.2 9.5
0 0 0
14.310.1
13.1
0
5.7
0
43.5
37.9
46.6
13.6
40
26.9
3 2.5 1.84.5 2.9
0
7.7 7.2 5.8
13.611.4
15.4
22.6
30.3
20.7
68.2
37.1
50
1.8 2.3 0.9 02.9
7.7
(%)
Tidak Tamat SD SD & Sederajat SLTP & Sederajat SLTA & Sederajat Diploma I/II Akademi/Diploma III Sarjana S1/Diploma IV Sarjana S2/S3
7,3%
11,1%
Elementary
Secondary
1,6%Unfinished SD
2,4%
7,3%
Diploma I/II
Diploma III
40,8%High School
1,9%Post Grad S2/S3
27,6%Undergrad S1/ Diploma IV
CapitalOwnership
85,9%
14,2%
Own Capital
Others
75%
80%
85%
90%
95%
100%
Fashion Kuliner Kriya Film Musik Apl&Game
83.586.1 84.8
89.194.7 95
16.613.9 15.2
10.95.3 5
Milik Sendiri Pihak Lain
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
Reasons onNot Borrowing
14,3%
5,5%
Difficult Proc
No Guarantee
4,6%Does not know Proc
1,8%
57,2%
Proposal Rejected
Not Interested
16,6%High Interest Rate
0
10
20
30
40
50
60
70
80
Fashion Kuliner Kriya Film Musik Apl&Game
3.8 5 5 5.60
4.2
10.415.5 15.5
5.6
13.3 12.57.5
3.27.7
22.2
3.30
19.817.5 16.4
0
16.7
4.20.9 1.2 2.7
5.60
4.2
57.5 57.752.7
61.166.7
75
(%)
Tidak Tahu Prosedur Prosedur Sulit Tidak Ada Agunan Suku Bunga Tinggi Usulan Ditolak Tidak Berminat
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
Plan to Increase
Capital
66,22%
33,78%
Yes
No
74.8563.48 65.55
76.19
57.1473.08
25.1536.52 34.45
23.81
42.86
26.92
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Aplikasi & Game
(%)
Ya Tidak
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
Barriers in Business
13,9%
31,6%
Raw Material
Marketing
22,4%
2,6%
Capital
BBM
1,2%Transportation
Skill 2,2%
7,2%
Worker Wage
Others
8,8%None
16 16.2 12.1 13.9
31.6 28.1 33.337.5 47.7 48.6
31.6
26.4
19.624.4 25
20.517.1 22.4
11.9
8.612.5
11.410.1
12.5
9.111.4 7.2
12 13.68.6 8.8
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Aplikasi & Game
(%)
Bahan baku Pemasaran Permodalan BBM/energi Transportasi Keterampilan Bayar buruh Lainnya Tidak ada kesulitan
10,1%
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
AdvertisementPRODUCT
66,73%
33,27%
Yes
No
78.5764.21 59.27
90.91 85.71 84.62
21.4335.79 40.73
9.09 14.29 15.38
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Aplikasi & Game
Ya Tidak
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
AdvertisementMethod
14,21%
4,64%
Printed Media
E-Commerce
40,58%
7,98%
Social Media
Website
4,86% 12,16%Distributor Exhibition
15,58%Others
8.718.32 12.41 9.09 14.55 12.28
44.7842.12
33.1657.58 50.91
40.35
6.965.68
8.1
9.09 9.09 31.586.09 2.2
8.35
3.033.64
3.51
14.788.06 17.47
12.129.09
7.0212.6120.33 14.18
6.06 10.91
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Aplikasi & Game
(%)
Media Cetak E-Commerce Media Sosial Website Distributor Pameran Lainnya
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
BuyerCoverage
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
74,42%City/Municipal
14,09%
8,73%
Outer City/Municipal
Outer Province
2,39%Export
66.62
83.7368.16
61.5968.86
52.42
17.57
10.08
16.6916.32
20.29
21.54
12.85.47
10.1315
10.86
15.96
3.01 4.41 7.09 10.08
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Aplikasi & Game
Kota/kab Di luar Kota/kab luar provinsi Ekspor
ProductSubstitution
73,12%
26,88%
Yes
No
76.79 73 72.6461.9
74.2965.38
23.21 27 27.3638.1
25.7134.62
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Apl&Game
Ya Tidak
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
SupportingReceived
5,72%
0,83%
Money
Raw Material
3,51%
1,48%
Marketing
Machinery
2,40%2,68%
Capital
Others
83,39%None
7.47 5.64 4.94 9.09 105.17 5.81
5.71
102.32.3
2.33 4.55
16.67
80.4687.89
80.52 81.82 88.57
56.67
0
10
20
30
40
50
60
70
80
90
100
Fashion Kuliner Kriya Film Musik Aplikasi & Game
Uang Bahan Baku Pemasaran Mesin Barang Modal Lainnya Tidak Pernah
Source: Baseline Survey Roadmap Creative Economy 6 Provinces 6 Subsector, LPEM - 2016
Conclusion 1. 2012- 2015 is the adjustment period for RI’s external economy, SMEs
participation remains a core matter
2. Trade Balance is the essential factor for Current Account & Stability of Exchange Rate
3. Low participation in GVCs & disconnecting comparative product to the ASEAN production network
4. Low participation of SMEs in RPNs
5. Internationalization of RI’s SMEs by product & by province
6. Factors of RI’s internationalization SMEs: Intervention is necessary both by G and NGO
7. Survey findings on RI’s SMEs: Education Background, Barriers in Business, Credit Exposure, Advertisement, Buyer Coverage, Product Substitution, Supporting System
THANK YOU
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