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SMEs are of overwhelming importance to the young and growing economies of most Southeast Asian nations, including Indonesia. The country is a vast polyglot archipelago, struggling with poverty and unemployment, poor and inadequate infrastructure, rampant corruption, insufficient capital, and unequal distribution of resources. It has recently experienced fundamental changes in political governance, regional empowerment, and economic structures as a result of the Asian Financial Crisis, coupled with widespread social unrest which resulted in the ouster of the authoritarian regime of President Suharto. This paper evaluates the existing private sector development policy in Indonesia, which has been found to be both ambivalent and inconsistent. The Guided Democracy and Guided Economy policies of the post-independence era were socialist in nature. The subsequent New Order regime provided preferred treatment to selected segments of society. In order to succeed in promoting SME development to advance the welfare of the economically weak groups, the newly launched programs need to be fine-tuned to allow for the establishment of a favorable and non-discriminative investment climate. There is much that Indonesia can learn from the experience of India and Singapore in implementing meaningful policy that can effectively promote SME development, especially in the production, distribution and service sectors in a global context. Policies have to be market-oriented, demand-driven and not dominated by government agencies which, in the past, have failed to provide services relevant to the actual needs of SMEs.


Originally published:

Bhasin, Balbir B., and Sivakumar Venkataramany. "Globalization Of Entrepreneurship: Policy Considerations For SME Development In Indonesia." International Business & Economics Research Journal 9.4 (2010): 95-103.



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