A Glance of Micro , Small and Medium Enterprises (MSMEs) : By Demonstration MSMEs in Indonesia , Batik in Madura Indonesia

A Glance of Micro , Small and Medium Enterprises (MSMEs) : By Demonstration MSMEs in Indonesia , Batik in Madura Indonesia Name: Mohammed Fateh Alrahman Ali Rabbad SID: 01218148 Major: Management Date: 2020-10-27 Supervised by: HJ.IGA AJU NITYA DHARMANI,SST,SE,MM I. MSMEs in General I.1. Introduction Growth cannot be inclusive unless and until the fruits of the growth is percolated to the bottom of pyramid. Thus from the perspective of the economy, from the perspective of spreading opportunities across the country and perspective of spreading social equality, ( Micro, Small and Medium Enterprises) MSMEs have always plays a very important role in economy , both in developed and developing countries. However, while the MSMEs was considered for a long time as a mere link in the development chain - since any MSMEs might potentially become a large one - recent trends of thought have become interested in such enterprises for their own sake and in the economic and social. They perform a critical role in the economy by providing employment to large number of people who can be unskilled and semi-skilled. Thereby contributing to exports, raising manufacturing sector production and extending support to bigger industries by supplying (raw material, basic goods, finished parts and components, etc.). MSMEs are considered the backbones in most countries around the world due to that not affected by the economic alterations which makes it a great supporter of the economy. MSME is a critical sector in the economy. I.2. Definition, Classification: What Is (MSMEs) (2017). (https://www.researchgate.net/post/What_is_the_definition_of_SMEs_by_the_world_bank) The "Private Sector Development" blog provides what is probably the current World Bank thinking on the subject matter: there is as yet no conclusive definition due to cross-country differences: The definition in USA: United States Small Business Administration. "Size Standards" (2011). (MSMEs) are businesses whose personnel numbers fall below certain limits. the Small Business Administration sets small business criteria based on industry, ownership structure, revenue and number of employees (which in some circumstances may be as high as 1500, although the cap is typically 500).[34] Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO). Therefore, the definition of an SME varies by industry, based on the North American Industry Classification System (NAICS). NAICS is a system developed by the U.S., Canada, and Mexico to standardize and facilitate the collection and analysis of business statistics. • What Is (MSMEs) (2017). (https://www.researchgate.net/post/What_is_the_definition_of_SMEs_by_the_world_bank) • Definition of MSMEs in India (https://www.kvb.co.in/msme/definition.html)\ • What Is The Definition of MSMEs In World bank (https://www.researchgate.net/post/What_is_the_definition_of_SMEs_by_the_world_bank). The definition in India: Definition of MSMEs in India (https://www.kvb.co.in/msme/definition.html) Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. With the enactment of MSMED Act 2006, the paradigm shift that has taken place is the inclusion of services sector in the definition of Micro, Small and Medium Enterprises, apart from extending the scope to Medium Enterprises. The MSMED Act, 2006 defines the Micro, Small and Medium Enterprises based (i) on the investment in plant and machinery for those engaged in manufacturing or production, processing or preservation of goods and (ii) on the investment in equipment for enterprises engaged in providing or rendering of Services. Manufacturing Enterprises – Investment in Plant & Machinery Description INR USD($) Micro Enterprises upto Rs. 25Lakhs upto $ 62,500 Small Enterprises above Rs. 25 Lakhs & upto Rs. 5 Crores above $ 62,500 & upto $ 1.25 million Medium Enterprises above Rs. 5 Crores & upto Rs. 10 Crores above $ 1.25 million & upto $ 2.5 million The definition in Nigeria: (AN APPRAISAL OF NIGERIA’S MICRO, SMALL AND MEDIUM ENTERPRISES (MSMES): GROWTH, CHALLENGES AND PROSPECTS). (2016). According to Yinka Fisher, coordinator of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in Lagos in an interview with Daily Independent (2012), Micro Small and Medium Enterprises (MSMEs) were defined as follows: Micro Enterprise: Any enterprise employing between one to nine people and having a capital base from one naira to ₦5 million excluding cost of land. Small Enterprise: Those that employ between 10 and 49 employees and having a capital base from ₦5 million to ₦50 million so once a business is within that confine, it is running a small enterprise. Medium Enterprise: Any enterprise that employs from 50 to 199 employees and having a capital base from ₦50 million to ₦500 million. If a business is within that confine it is running a medium enterprise and if it has anything above that, it is a large enterprise or a multinational as the case may be. • Definition of MSMEs in India (https://www.kvb.co.in/msme/definition.html). • (AN APPRAISAL OF NIGERIA’S MICRO, SMALL AND MEDIUM ENTERPRISES (MSMES): GROWTH, CHALLENGES AND PROSPECTS). (2016). The definition in Indonesia: Reforming Small and Medium Enterprises (SMEs) in Indonesia: Proposal of a New Legal Entity (2014). In accordance with the Indonesia SMEs Law, micro enterprises are defined as enterprises with net assets less than IDR 50 million (land and buildings excluded) or enterprises which have less than IDR 300 million total annual sales. Firm type Headcount Assets Turnover Micro 3 or less employee a ≤ Rp. 50 mil; t ≤ Rp. 300 mil Small 5- 19 employee Rp. 50 mil < a ≤ Rp. 500 mil; Rp. 300 mil < t ≤ Rp. 2,5 bil; Medium 20 – 99 employee Rp. 500 mil < a ≤ Rp. 2,5 bl; Rp. 2,5 bil < t ≤ Rp. 50 bil; The definition in Ecuador: The definition of an SME in Ecuador is given in concordance with the Andean Community SME law, the Craft promotion law and the Small Enterprises promotion. This definition is presented in table 1: Firm type Headcount Revenues (USD) Micro 1 – 9 Till 100.000 Small 10 – 49 From 100.000 to 1’000.000 Medium 50 – 199 From 1’000.000 to 5’000.000 Matrix of MSME Definitions in (USA, India, Nigeria, Indonesia, Ecuador): How Do Economies Define Micro, Small and Medium Enterprises (MSMEs) ((https://www.ifc.org/wps/wcm/connect/624b8f804a17abc5b4acfddd29332b51/msme-ci-note.pdf?mod=ajperes) Economy Number of Employees Industry Assets /Turnover/Capital/ Investment Definition distinguishes between micro, small and medium enterprises Peculiarities USA     To be considered an MSME an enterprise must be independently owned and operated, and not be dominant in its field of operation. India    Nigeria    Indonesia   Ecuador    • Reforming Small and Medium Enterprises (SMEs) in Indonesia: Proposal of a New Legal Entity (2014). Yunilla Nurhalim (TILBURG UNIVERSITY). • Identifying an improvement method for Ecuadorian small companies (Denise Rodrígueza , Marcos Buestán) (2013). • How Do Economies Define Micro, Small and Medium Enterprises (MSMEs) ((https://www.ifc.org/wps/wcm/connect/624b8f804a17abc5b4acfddd29332b51/msme-ci-note.pdf?mod=ajperes). I.3. Importance The importance of SMEs in economies of countries around the world coincides, especially considering that the momentum of this sector significantly contributes to reducing the concentration of a country’s economy. Therefore, government policies should encourage entrepreneurship and the development of SMEs in order to create jobs and help with the redistribution of wealth. However, it is not only the government’s responsibility; it is also the responsibility of local governments and of course universities. It is important to consider what is stated in the Latin American Declaration on Higher Education, Havana 1997 and in UNESCO’s declaration, Paris 1998, which insists on the need to train university educators on procedures that present alternatives to students’ learning. These documents say that "higher education needs to introduce pedagogical methods based on educating students to learn to learn and create a business, so they can create their own jobs and production units that help reduce unemployment" (Tobar, 2014). I.4. Conclusion MSMEs should not only be aimed at job creation, they should go much further; it must focus on the external market. The internationalization of MSMEs based on the competitiveness of their products and services is vital to sustain dollarization. Therefore, state policies should aimed at promoting the expansion and diversification of exports from the sector of Micro , small and medium enterprises by implementing regions of intensive technology such as technological parks, industrial zones and business incubation centers. Therefore, while emphasizing the crucial role of MSMEs in creating employment, it could be useful to highlight their potential as decent jobs providers. This means not only formulating policies at enterprise level for improving human capital, efficiency and productivity of MSMEs, but also launching structural transformation that provide a regulatory framework conducive to their growth. • World Economic Forum. (2017). The global competitive report 2017-2018. Retrieved on January 6, 2013, from (http://reports.weforum.org/global-competitiveness-report-2017-2018/). II. MSMEs in Indonesia II.1. Introduction Micro, small and medium-sized firms (MSMEs) are a key source of employment and economic growth in Indonesia. They contributed to the country’s economic resilience during the 2008-09 financial crisis. (MSMEs) are a very important part in the economy of Indonesia. Overall business unit in Indonesia, 99.99% of total business units are MSMEs and this sector employs nearly a 97.24% of the entire workforce (Kemenkop UKM, 2012). SME sector has exported as of 16% of total non-oil exports, and accounted for 57.94% of total gross domestic product (GDP) of Indonesia at current prices (Kemenkop SMEs, 2012). This fact shows that MSMEs are very important in the Indonesian economy. II.2. Structure of Establishment in Indonesia This structure shows the number of enterprises and how they affect the Indonesian national economy based to (Indonesia SME Strategy). (Ministry of Cooperatives and SMEs Indoneisa) (2013). Structure shows the number of enterprises in Indoneisa (2013). • (Indonesia SME Strategy). (Ministry of Cooperatives and SMEs Indonesia) (2013). II.3. SMEs Roles in Indonesian economy Small and Medium Enterprises (SMEs) can grow at the current moment if it is supported with good infrastructure and human resources therefore SME play very vital steps in Indonesian economy for the achieving following roles : 1. Providing jobs. 2. Reducing poverty. 3. Triggering economic growth. 4. Ensuring equitable development. 5. Ensuring sustainable development. II.4. Common issues of MSME The common issues that are often faced by micro ,small and medium enterprises owners in Indonesia can be categorized into two main categories: The internal issues include: • Lack of capital. • Advisory services and information. • Limited human resources. • Weak business network and the ability to penetrate the market. The external issues include: • Bad business climate. • Limited facilities for business. • Technology and innovation. • Implications of regional. • Autonomy regulations . • The short-life span of the business • Products; and limited market access. In addition to these problems, some MSMEs are family workers by divide the job between them, thus some problems arise in the following points: 1. The proceeds are paid to the needs and expenses of family members. 2. Most of these families do not have the knowledge to manage these businesses. 3. Ignorance and lack of experience. Therefore, these points prevent the development of these companies, thus the government put some solutions to solve these problems will be mentioned in the following points. • OPPORTUNITIES AND CHALLENGES FOR MICRO-SMALL AND MEDIUM BUSINESS IN INDONESIA FACING ASEAN ECONOMIC COMMUNITY (Raden Aswin Rahadi) (2017). Table 1: SWOT Analysis to the Components Of Batik Production System No Production System Element Element SWOT Problem Statement 1. Technology (Low capacity of batik production) Strength • Batik Tulis (hand-drawn batik) has been longer mastered by the craftsmen in East Java. • Batik Tulis, especially those colored with natural color is relatively more expensive than printed batik. Weakness • The production capacity of batik tulis is low since depending on the women labor's skill. • Natural color for batik tulis is hard to be widely produced since the lack of availability of raw material. Opportunity • Production development into the semi-printed technology with a bigger capacity through appropriate technology introduction of printed-drawn and Sablon-drawn combination. Threats • Not all UKM in Batik production based in a regional area has a skill on printed and Sablon, for that matter, education and training on it are required. • Production technology changes into the semi-printed technology must be offset by market development effort so that all batik products can be absorbed. 2. Capitalization (Low-interest capital is plentiful, UKM is not able to absorb) Strength • There are many capitalizations offering debt for equity with low- interest credit for UKM development. Weakness • There are no many UKMs in batik production which is able to access credit debt for equity with low interest. Opportunity • Maximization of the number of UKM which is able to access capital credit with low interest. Threats • The ability of production management and marketing of UKM engaged in batik production is inadequate, in order to enhance the capability, long-terms empowerment (structured-training and an additional account) are still required. 3. Raw material (low availability and high price) Strength • The number of UKM in batik production that has been existed and its possibility of development in the future. Weakness • The lack of facility provided by government or private sector to build a cooperative of facility and infrastructure for batik development which is able to provide an affordable batik production needs. Opportunity • Establishing economic entity of raw material and additional material procurement for batik production. Threats • In order to establish a cooperative providing facility and infrastructure for batik development, it needs a commitment between related stakeholder (departments and batik craftsman association), funding planning, and the human resources ability to manage cooperative. 4. Human Resource (skilled-batik Strength • A skill to produce batik tulis has been mastered by an old generation which will be easy to be taught to the younger craftsman is getting low) generation. Weakness • Younger generation interest in working at batik production sector is low, the reasons influencing are income and prestige to prefer work at a factory. Opportunity • Younger generation skill is directed into the semi-printed technique so that the production capacity is high, and the old generation craftsmen are directed into the batik tulis which the price is relatively expensive. Threats • UKM consciousness to the importance of craftsman's skill development and the compensation to the performance given. 5. Marketing (Not developed yet a tough partnership system) Strength • The needs of batik have an increase dispositional with the existence of strengthening from the local government and society's consciousness. Weakness • UKM skillfulness to perform low-market development, the vast majority depend on traditional marketing system Opportunity • Establishing a mutual market institutional to facilitate batik marketing from various regions Threats • The difficult to meet related side (departments) entrepreneur to build a mutual marketing network for UKM. 6. Design (Most of the pattern is dominated by Human resources, typical pattern of culture does not appear yet) Strength • A culture to create a natural resources-based batik design has existed at all of the UKMs Weakness • There is no more batik with cultural design produced in East Java Opportunity • Regional cultural utilization to develop batik in East Java Threats • Has not mastered yet cultural exploration technique that can be applied for batik design. • There is not yet an education and training of local cultural-based batik design development II.5. Plans of Indonesian Government to solve the issues of MSMEs The Indonesian government has advocated the importance of SMEs in many official statements. It has formulated and implemented various types of policies and measures aimed at the development of the SME sector. For example: 1- With such a vast and large number of MSMEs in Indonesia, the effort to create the best ecosystem for MSMEs to flourish requires support that can link MSMEs with the way today’s market operates, which is through digital platforms. The Ministry of Cooperatives and SME Through this program, the government aims to transform eight million MSMEs to become digital-savvy MSMEs by 2020 by supporting them in joining online market platforms. This program aims at increasing MSMEs’ digital awareness through activities such as seminars, workshops, and training on MSMEs digitalization and also by providing one million free .id domains which can be used for MSMEs to expand their business through an online platform. In addition, the government has also launched collaboration with six of the nation’s largest online marketplaces to help promote and sell MSME products to their markets. 2- The Indonesian government has tried almost all types of SME support such as the introduced in 1974 and carried out as one of the main technical support programs for small-scale industry. ( Program Pembinaan dan Pengembangan Industrial Kecil) BIPIK This 3- program was aimed to provide training and education to SME in order to improve the quality of human resources and the quality of their products. 4- Provide comprehensive support from financial institutions as part of efforts to promote community empowerment, especially for middle-, low-income and small-scale enterprises (MSME). This group of companies has limited access to official financial institutions so far. Therefore, in order to deal with such problems, many non-bank financial institutions have evolved into the community, operating services in business development and community empowerment, which are established by the government or society. These institutions are known as Microfinance Institutions (MFIs), a financial institution created specifically to provide business development and community empowerment services through loans or microfinance for members of MFIs and the community, deposit management, or advisory services. Services in business development that are done not only for profit. Where MFI`s business activities cover business development and community empowerment through loan or financing for micro-scaled business of MFI members and society, deposit management, or giving consultancy services in business development. • (The Development of Business Clusters in Indonesia) By Aknolt Kristian Pakpahan (2014). • MFIs Organizing (https://www.ojk.go.id/en/kanal/iknb/Pages/Microfinance-Institutions.aspx). II.6. Conclusion In Indonesia MSMEs has high contribution in grow the economic and they provide a large number of employment and hence generating primary or secondary source of income for many rural poor households , Thus it is important for the government to continue empowering and developing the enterprise to conducting its business performance, hence its success and development of national and local economics performance through Gross Domestic Product and Gross ,and generating good employment and their products , because the continuation and development of MSMEs will benefit all components of the Indonesian economy. III. Batik in Madura Indonesia III.1. Introduction Batik is both an art and a craft, which is becoming more popular and well known in the West as a wonderfully creative medium. Also Batik is a Javanese method of producing designs on fabric by using a wax resist. The art of decorating cloth in this way, using wax and dye, has been practiced for centuries. In Java, Indonesia, batik is part of an ancient tradition, and some of the finest batik cloth in the world is still made there. The word batik originates from the Javanese tik and means to dot. Batik companies in Madura are classified as small enterprise. The workers in these companies in Madura specifically are families combined; each family has specific job and the processing of a special part of the manufacture of batik, which benefits the national economy. There are many kind of Batik types which named from the place where they come, such as Lasem’s Batik, Indramayu’s Batik, Pekalongan’s Batik, Yogyakarta’s Batik, Solo’s Batik, Madura’s Batik, etc. Every types of Batik has its own characteristics which depict the people’s activities and traditional values. III.2. History Even though its exact history is uncertain, fragments of batik’s projected origin dates back to the first century where it was discovered in ancient Egyptian tombs. Evidence of early Batik has also been found all over the Middle East, in India, Central Asia and Africa. By the nineteenth century, after the importation of more finely woven cloth from India and Europe, it became a highly accomplished art form in Java and Bali in Indonesia. Recognizable motifs, patterns and colors were developed and designed to identify one’s family, social status and geographic origin. Some experts feel that it was originally reserved for Javanese royalty on that island, and possibly a pass time of the princesses and noble ladies of the time. The word Batik seems to come from an Indonesian word 'ambatik', a cloth with little dots. Indonesia, most particularly the island of Java, is the area where batik has reached the greatest peak of accomplishment. The Dutch brought Indonesian craftsmen to teach the craft to Dutch warders in several factories in Holland from 1835. The Swiss produced imitation batik in the • ( Indonesian Ba – A Cultural Beauty ) (Departemen Perdagangan Republic Indonesia) ( 2008). early 1940s. A wax block form of printing was developed in Java using a cap Which made it one of the symbols of the heritage of the State of Indonesia. III.3. How to manufacture batik To make batik, selected areas of the cloth are blocked out by brushing or drawing hot wax over them, and the cloth is then dyed. The parts covered in wax resist the dye and remain the original color. This process of waxing and dyeing can be repeated to create more elaborate and colorful designs. Once the fabric is painted with wax designs, it is placed in a dye bath where only the areas with no wax are dyed. Batik masters can produce complex designs by layering colors and using cracks in the wax to produce fine detail lines. Even if you are not a master, you can get some great effects using just a few materials and a creative spirit.After the final dyeing the wax is removed and the cloth is ready for wearing or showing. According to data that the researcher have attached , making one batik in madura it depends on what the customer had request , however in the regular situations making one batik taking from 1 month up to 1 year with normal workers from 1 to 6 , because in madura they divide the work for many families like every family had their job for choose the fabric , coloring and drawing pattern. III.4. Batik Peri Kecil Business Process According to data that the researcher has attached, making batik in Madura is special, because in Madura they divide the work for many families like every family had their job as in the following points: 1. The first family prepares the fabric by prewash it with hot water and dyes the fabrics in base colors. 2. Second family their job is drawing the pattern and manufactures the shapes add more details to the fabric. 3. Third family their job to waxing the fabric and drying it under the sun. According to the data many families in Madura have benefit from this mechanism .Also The wage of employees in Madura paying per project, moreover High quality is guaranteed in the batik industry as each family is specialized in manufacturing a specific part, which shows us a great example of the Batik industry in Madura and makes it distinct from other regions of Indonesia. • (BATIK, A BEAUTIFUL CULTURAL HERITAGE THAT PRESERVE CULTURE AND SUPPORT ECONOMIC DEVELOPMENT IN INDONESIA) (2013). III.5. Value and Quality There are two types of batik: luxury and regular types. Both have distinct characteristics but the luxury type can stay for many years more than the regular type. The batik has a high quality that makes it expensive. For the luxury type, the price starts from 500,000 RP up to millions, while the regular type ranges from 35,000 to 255,000 RP which makes them possess valuable properties and high quality. III.6. Conclusion Batik is one of the creative industries , Indonesian culture that displays a unique mix shaped by long interaction between original indigenous customs and multiple foreign influences. The creativity of Indonesian people has given birth to numerous attractive art forms. Therefore the Batik industry needs the support, development and attention of the government to distinguish this product, which may make it a unique product if exported abroad and considered a national treasure owned by Indonesia. • (BATIK, A BEAUTIFUL CULTURAL HERITAGE THAT PRESERVE CULTURE AND SUPPORT ECONOMIC DEVELOPMENT IN INDONESIA) (2013).