Entrepreneurship vital for SMEs, says Kalla

Urip Hudiono, The Jakarta Post, Jakarta

Vice President Jusuf Kalla has called on the country's small and medium enterprises (SMEs) to improve their levels of entrepreneurship and innovation if they want to grow their businesses in today's fiercely competitive global market.

Speaking Wednesday during the opening of an SME exhibition in Jakarta, Kalla said that the government, for its part, would continue to support SMEs in securing greater access to financing, and in marketing their products.

He said it was hoped that the exhibition would improve market access for SMEs through promotion and publicity, while the government would continue to encourage big business to transfer production technology to the SME sector.

Kalla said that in order to further encourage the development of the sector, the government had agreed with the central bank on relaxing the rules for the extending of loans to SMEs.

In this regard, Bank Indonesia had recently revised its regulations so as to now allow a bank to assess the collectibility of an SME loan based solely on the enterprise's previous repayment record. Before this change, loan collectibility had to be assessed based on an enterprise's business plan and audited accounts -- something that SMEs found difficult to comply with.

Kalla said that he hoped these efforts would help at least 5 percent of the existing SMEs to grow into mature businesses in the future, but warned that in the current environment of market liberalization, there were limits on how much the government could do to assist SMEs.

"So the most important thing is for the SMEs themselves to continuously improve their levels of entrepreneurship and innovation, and their resilience in doing business," said Kalla, who himself comes from a business background.

"And in this era of global competition, what matters most is product price, quality, and delivery time. SMEs should, therefore, always keep abreast of their markets and adapt their products to what the market wants."

Meanwhile, State Minister for Cooperatives and SMEs Suryadharma Ali said that the government had earmarked some Rp 1.4 trillion (US$154 million) to guarantee loans to SMEs this year. The government also planned to soon issue a package of regulations to further develop the country's SME sector.

The new regulations would address the fact that SMEs were frequently unable to secure loans from the banking sector due to lack of collateral. As a result, they often had to seek loans from other sources at exorbitant interest rates of up to 50 percent, as compared to interest of 14 percent on bank loans.

It is expected that bank lending to the SME sector will amount to some Rp 87 trillion this year.

Figures from Suryadharma's ministry show that SMEs accounted for 99 percent of the country's 44 million business enterprises as of the end of 2005. SMEs also contributed Rp 1,480 trillion -- or 54 percent -- to GDP, and employed 96 percent of the some 80 million workers in employment that year.
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