Scholarly article on topic 'Barrier Factors and Potential Solutions for Indonesian SMEs'

Barrier Factors and Potential Solutions for Indonesian SMEs Academic research paper on "Economics and business"

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Abstract of research paper on Economics and business, author of scientific article — Maya Irjayanti, Anton Mulyono Azis

Abstract Facts that Indonesian SMEs have a great potency related with the ability to survive in crisis times do not lead to products capability. Moreover, several factors became reasons why the image of Indonesian SMEs does not emerge significantly; even though the product could meet market's interests. This study seeks to identify the potency of SMEs and reasons for inability in competing in global market and the outcome will be obtained in measurement form consisting several barrier factors faced by SMEs. The methodology adopted in this research is critical literature reviews, quantitative and qualitative data collection through questionnaires to 200 respondents and in-depth interviews with each of them. The research showed there are ten major barriers faced by SMEs: competition barriers; financial access; price of energy; technology; inefficient production cost; economic factors; management skill; process; limitation of sales; and raw material. Most SMEs agreed that government should dedicate more efforts in certain actions to eliminate SMEs barriers, like security standards improvement, development programmes, good financing policy, rational energy policy, continuous performance evaluation, commitment of corruption termination, and many supporting program needed by SMEs. Hereinafter, this research could contribute government programmes for empowering SMEs as the pillars of Indonesian economy.

Academic research paper on topic "Barrier Factors and Potential Solutions for Indonesian SMEs"

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Procedia Economics and Finance 4 (2012) 3 - 12

International Conference on Small and Medium Enterprises Development with a Theme "Innovation and Sustainability in SME Development" (ICSMED 2012)

Barrier Factors and Potential Solutions for Indonesian SMEs

Maya Irjayantia*, Anton Mulyono Azisb

_abSTIE EKUITAS, Jl. P.H.HMustofa 30, 40124, Bandung, Indonesia_

Abstract

Facts that Indonesian SMEs have a great potency related with the ability to survive in crisis times do not lead to products capability. Moreover, several factors became reasons why the image of Indonesian SMEs does not emerge significantly; even though the product could meet market's interests. This study seeks to identify the potency of SMEs and reasons for inability in competing in global market and the outcome will be obtained in measurement form consisting several barrier factors faced by SMEs. The methodology adopted in this research is critical literature reviews, quantitative and qualitative data collection through questionnaires to 200 respondents and in-depth interviews with each of them. The research showed there are ten major barriers faced by SMEs: competition barriers; financial access; price of energy; technology; inefficient production cost; economic factors; management skill; process; limitation of sales; and raw material. Most SMEs agreed that government should dedicate more efforts in certain actions to eliminate SMEs barriers, like security standards improvement, development programmes, good financing policy, rational energy policy, continuous performance evaluation, commitment of corruption termination, and many supporting program needed by SMEs. Hereinafter, this research could contribute government programmes for empowering SMEs as the pillars of Indonesian economy.

© 2012 The Authors. Published by Elsevier Ltd.

Selection and peer-review under res ponsibility of Parphyangan Catholic University. Keywords: Indonesian SMEs; Barriers; Potential Solutions

1. Background

Early 2012, the Indonesian Ministry of Industry is targeting exports worth $200 billion rupiahs, in which the SME is the most valuable sector (PelitaOnline, 2011). SME involvement is a serious commitment taken by Indonesia's government to develop Indonesia's SMEs, as an important foundation of Indonesian economies.

* Corresponding author. Tel.: +62-8122035889; fax: +62-22-7204597. E-mail address:mayairjayanti@yahoo.co.id

2212-5671 © 2012 The Authors. Published by Elsevier Ltd.

Selection and peer-review under responsibility of Parahyangan Catholic University.

doi: 10.1016/S2212-5671 (12)00315-2

Nevertheless, according to the ministry of Industry, 2011, it is estimated that there will be many obstacles that should be faced, like information access; market understanding; entrepreneurial motivation; and capital, which became the challenges in achieving those targets. This is consistent with research from Siringoringo et al. (2009) who stated that insufficient information is one of the constraints in SMEs development, and it is also supported by the Organization for Economic Cooperation and Development, which states that the lack of information to analyze the market causing a major barrier for SME development (OECD, 2009).

Meanwhile, competition in international markets depends on the competitive advantage of SME products. It means, to highlight the benefits of the product, the government should help SMEs to eliminate all barriers which would reduce the attractive part of the product. For start, to eliminate the SMEs barriers, the government should realize what the real problems that will be faced by the SMEs are, in order to decide the effective way for helping SMEs to develop their strengths and potentials.

Currently, SMEs can be regarded as the backbone of Indonesia's economy. Out of 100% business in Indonesia, 99% of them are SMEs, which contribute greatly for the revenues. This is more than 50% of Indonesia's total GDP and also absorbed up to 97% workers. Based on data from the Ministry of Cooperation and SME (2011) there are 55.530.000 SMEs in Indonesia.

SME has a large and strategic role in supporting economic growth in Indonesia. Ironically, Indonesian SME products are facing strong competition with imported products, even in its own country (Siringoringo et al., 2009). With the opening of free trade area agreement, Indonesian market were flooded with foreign products which easily adapted and chosen by customers. Not to mention, foreign products are even able to provide cheaper items with better quality compared to Indonesian products. These facts raise the question, what is the exact barrier for Indonesian SMEs resulting to inability to compete in both local and international markets? In fact, viewed from our strategic advantages, Indonesian SMEs are surrounded by abundant resources and availability of human resources (Chamindale and Vang, 2008). These factors can actually be the competitive advantages when Indonesian SMEs competing in global market. Yet, due to various internal factors faced by SMEs, we have not been able to optimize those advantages to win in the global market.

Tambunan (2009) stated that Indonesian SMEs face many obstacles, especially in terms of finance and business management issues, most of which have cost constraints for SME which are located in the large city, where they face harder competition without any access to bank loans or government financing institution. They must seek for their own financing through loans, informal businesses and face another problem like high rate of return demanded by informal lending institutions. Other obstacles include difficulties encountered in obtaining raw materials; high production cost; difficulties in transportation and distribution; cost of energy or fuel, as well as labor cost. Supported by Mead and Liedholm (1998), reasons that become barriers to SME in developing countries are the market access isolation of the SME; information; finance; and government support. In fact, according to the Indonesian Department of Cooperation, Labor and Transmigration, in 2012, the dominant barriers faced by the SME were financial and market access. SME cases studied by Swierczek and Ha (2003) in Vietnam also describe the condition of local SME which were still struggling over various limitations which include capital, equipment, and technologies.

Currently, only 23% or 13 million SMEs were able to obtain capital loan facility from various bank (Borneonews, 2011). From a financial perspective, there still many SMEs that has little access to bank loans, either because of technical constraints, such as not having or insufficient collateral, or non technical constraints, such as limited access to banking information. For those reasons, some observers and practitioners still consider the success of the ability of SME to survive the global crisis, because Indonesian SMEs did not depend on bank loan and uses local currency (Rupiah) for business transactions, so in other word, difficulties to bank loans also became the SME's power in order to survive global monetary crisis.

Based on previous discussed problems, it is interesting to research more about the phenomenon. Our study is interested to find and analyze:

i. What is the real potential barrier faced by SME Indonesia nowadays?

ii. What kind of solutions that are expected by Indonesian SMEs from the government, which should guaranteed the ability to develop and survive in global markets?

2. SME in Indonesia

SME is a priority sector in Indonesia as a basis for making economy policy target (Tambunan, 2008), but the government still pay little attention to the obstacles that are faced by SMEs, such as, less supportive policies and regulations (Private and Kanai, 2011; Manning, 2005; Tambunan, 2009; Al-Hyari et al., 2011; Olawale and Garwe, 2010), inadequate infrastructure (Lawrence and Tar, 2010; Olawale and Garwe, 2010; Siringoringo et al., 2009), high fuel prices (Tambunan, 2009). In addition, now Indonesian SMEs face a strong competition, due to the opening of markets inside the country from free trade area agreement which become a threat to SME with so many well-known services in local market. Therefore, the government should seriously consider SME promotion and develop program that is strongly required as a strategic move to emerge the economy. SME as a pillar of the country's economy is expected not only to increase household incomes and employment opportunities, but also the economic prosperity of the country equally.

Nowadays, Indonesian SMEs still have so many obstacles which include capital, lack of technology, limited knowledge about business management and production. Private and Kanai (2011) stated in his study, despite the presence of SMEs, this is an important key to economic growth. Indonesian government looked like having difficulties in maintaining SMEs continuity. In fact, the government has issued a supporting program to help SME through soft loans, but in reality it still did not show positive movement due to lack of knowledge and limited information. This reason can be caused by barriers in information technology that happened in Indonesia, this statement also supported by the research of Utomo and Dodgson, (2001) which explain why adoption of Information technology in Indonesia is so slow. The explanation is because the infrastructure is still running slowly and has not reached all areas equally. Table (1) describes the various potential barriers faced by SMEs, especially in developing countries such as Indonesia.

From various sources, the authors collected all indicators that have been studied by many Researchers about the SME sector in developing countries includes Indonesia. In result, there are more than 30 factors that became barriers of SME development. Inadequate infrastructure was one factor that causes difficulties for SME to open wider market access, to communicate, and to fulfil commitment to the customer (Lawrence and Tar, 2010; Olawale and Garwe, 2010; Siringoringo et al., 2009). Infrastructure constraints also affected the technology adoption because technology requires the readiness of supporting infrastructure (private and Kanai, 2011; Olawale and Garwe, 2010; Siringoringo et al., 2009; Mutula and Brakel, 2007), meanwhile technology may be one of the solution that can be taken to solve SME product with quality standards.

In Indonesia, the Ministry of Cooperatives and SMEs admitted that one of the main obstacle of Indonesian SMEs is capital, this fact is supported by various studies which were stated that SMEs in developing countries have little access to financing from financial institutions due to various factors (Ardic et al., 2012; Olawale and Garwe, 2010; Hartungi, 2007; OECD, 2009). Some Indonesian SMEs turned to informal finance, although burdened by a relatively high rate of return.

Difficulties in obtaining raw materials also contributed to one of many obstacles faced by Indonesian SMEs, such as rattan furniture and handicrafts. According to the Association of Furniture and Handicraft Rattan Indonesia, 2011 was a difficult time for SME rattan furniture in Kalimantan because they had to refuse many orders due to the difficulty of obtaining raw materials of rattan. Tambunan (2009); Siringoringo et al. (2009); Hamisi (2011). The study also found that there are also barriers in the SME supply chain which caused difficulties in the materials anticipation. Siringoringo et al. (2009) also stated that Indonesian SMEs do not have sufficient capacity to manage well management that causing wastes in production process.

Table 1. SMEs Potential Barriers

Potensial Barrier

Process (expensiveness, difficulties, bad custom arrangement) Long Time Duration Administrative Process Geographical Location Government Policy and Regulation

Economic Factors (fiscal and monetary policies of the

government, inflation, interest rates and foreign exchange rates)

Competition Barriers

Political Barriers

Crime and Corruption Rate

Insufficient Information

Standard Quality

Trade Agreement

Management Skill

Infrastructure

Technology

Financial Access

Raw Material

Inefficient production cost Low capability in high production Marketing Difficulties

International Market Knowledge

Lack of knowledge in transaction method

Limitation of sales

Limitation of Buyer

Limitation Destination

Price of Energy

Transportation

High Labor Cost

Lack of Good Human Resources

Managerial Capacity

Low Capability

Legal Barriers

Lack of Focus

Reference(s)

Manning (2005); Siringoringo, et al. (2009) Siringoringo, et al. (2009) Mawardi, et al. (2011)

Pribadi and Kanai (2011); Manning (2005); Tambunan (2009), Al-Hyari, et al. (2011); Olawale and Garwe (2010) Olawale and Garwe (2010)

Siringoringo, et al. (2009)

Al-Hyari, et al. (2011)

Olawale and Garwe (2010)

Siringoringo, et al. (2009); OECD (2009)

Siringoringo, et al. (2009); Lewis, et al. (2006)

Siringoringo, et al. (2009)

Olawale and Garwe (2010)

Lawrence and Tar (2010); Olawale and Garwe (2010); Siringoringo, et al. (2009)

Pribadi and Kanai (2011); Olawale and Garwe (2010);

Siringoringo, et al. (2009); Mutula and Brakel (2007)

Ardic, et al. (2012); Olawale and Garwe (2010);

Hartungi (2007), OECD (2009)

Tambunan (2009); Siringoringo, et al. (2009);

Hamisi (2011)

Siringoringo, et al. (2009)

Siringoringo, et al. (2009)

Tambunan (2009); Siringoringo, et al. (2009);

Hamisi (2011)

Siringoringo, et al. (2009)

Siringoringo, et al. (2009)

Cooperative and SME Department Journal (2006)

Cooperative and SME Department Journal (2006)

Siringoringo, et al. (2009)

Tambunan (2009)

Tambunan (2009); Hamisi (2011);

Siringoringo, et al. (2009)

Tambunan (2009)

Pribadi and Kanai (2011)

OECD (2009)

Siringoringo, et al. (2009)

Al-Hyari, et al. (2011)

Pribadi and Kanai (2011)_

SME that has passed the managerial challenges in the production process still faces other significant obstacles to business continuity. Indonesian SMEs are lacked of knowledge about markets and global agreement, which is become the reason why their target market is relatively small. Good SME products will be weak without market absorption. Bad promotion becomes one of the reasons why Indonesia is defeated by another brand of other countries. Besides, the government has not aggressively provide guidance on foreign transactions for SMEs, and it requires extra effort from the SMEs if they want to have adequate knowledge of international market transaction.This fact is supported by various studies from Tambunan (2009); Siringoringo et al. (2009); and, Hamisi (2011), where those facts effecting the sales level and buyers number of Indonesian SMEs are still not meeting the expected target (Cooperative and SME Department Journal, 2006).

Indonesia still have another problem which became SMEs constraint. High fuel prices led to Indonesian SMEs inefficient production. Hamisi (2011) added that SME must also consider transportation, especially in developing countries, where transportation systems still poor and often making distribution process delayed. In addition, labor costs are relatively high for Indonesian SMEs (Tambunan, 2009). The numbers of Indonesian labor are plenty, but only few that actually have sufficient expertise in the business (Siringoringo et al., 2009; Personal and Kanai, 2011). This research was supported by Olawale and Garwe (2010) which stated that a lack of expertise will have an impact on the weakness in the management ability to the business. According to OECD (2009) managerial capacity is one factor that caused the surviving failures of SME.

Ironically, although many studies suggested the importance of SMEs for economic growth, SME barriers often come from our own government form and regulatory policies that do not support the SMEs business to climate (Personal and Kanai, 2011); Manning, 2005; Tambunan, 2009, Al-Hyari et al., 2011; Olawale and Garwe, 2010). Al-Hyari et.al. (2011) also mentioned legal aspects which also a barrier for SMEs opportunities. Bad policies can lead to a complex, difficult, and expensive process (Manning, 2005; Siringoringo et al., 2009). Bad process could be the long time duration of administrative process which effecting to delayed process of SME products distribution to the market (Siringoringo et al., 2009), this impact is significant for Indonesian SMEs brand image. Besides, a less controlled trade agreement process (Siringoringo, 2009) makes Indonesian product left behind in global market competition.

Political situation, especially in Indonesia, could be other challenges for Indonesian SMEs, Al-Hyari study (2011) on SMEs in Jordan that pointed a fact that politics is a significant barrier, especially in export activities, which likely to occur in Indonesia. Coupled with plenty corruptions in Indonesia, which also affect the sustainability of potential SMEs with financial trouble. It is also mentioned by Olawale and Garwe (2010) that SMEs are vulnerable to engage in corruption crimes, mostly Indonesian SMEs involved, which possibly caused by poor regulation and bureaucracy that makes them had no choice to agree with illegal payments from bureaucrats. Certainly, Indonesian SMEs have a weak bargaining position against the illegal activity from bad bureaucracy. In addition, the uncertainty of Indonesia's economy add another barriers that must be faced by the SMEs, which was also faced by African SMEs in 2010 (Olawale and Garwe, 2010). Economic conditions may include many aspects such as fiscal and monetary policy, inflation, interest rates, and currency exchange rate.

Another barrier factor faced by SME is the lack of information access (Siringoringo et al., 2009) which causes the SMEs missed many opportunities that may offer a chance of success. As mentioned earlier, the infrastructure became one of the factors that was responsible for the occurrence of information access barriers. Information access difficulties impact on knowledge limitation about the business and product quality standards. It explains why Indonesia considered as one of the countries that barely able to meet the standards in international markets. In fact, Lewis et al. (2006) assumed, even SMEs must implement a Total Quality Management in their company to compete in international markets. Other reasons, SMEs found themselves could not concentrate on their main vision, they made the effort as a livelihood that can give them a decent life without any strong ambition to grow into large businesses with broader market.

3. Research Methodology

Type of research used in this study is descriptive, this method aims to create a picture or a description of a situation objectively. In this study the authors aim to describe the factors that challenge SMEs in Indonesia. This study obtained through the questionnaires that consist of particular barrier reasons of SMEs. Total of 200 were randomly distributed to SMEs in six areas of Java Island which includes Jakarta, Banten, West Java, Central Java, Yogyakarta, and East Java. 180 Questionnaires were considered by the authors while the rest were rejected because they did not meet the desired criteria in the study due to various factors such as: (1) Respondents did not provide the requested data, (2) Respondents did not properly fill out the questionnaire, (3) Respondents choosed less than ten items (4) Respondents did not sort the items according to priority level.

Questionnaires were completed by selecting 10 of the 33 reasons that considered as SMEs barriers in Indonesia. 32 reasons obtained through a literature review conducted by the author, the authors also add another reason if the 32 items listed did not represent respondents' selection. After selected and the choices were sorted by the reasons of importance, the respondents answers will be valued as 1 (one) and the blank choice valued with 0 (zero). The total score value then compared with the total score obtained. The formula used (P= Percentage; X= Score obtained; N= Total Score):

4. Analysis Results and Discussion

In this study, primary data were collected to examine the various problems faced by SMEs in Indonesia, through questionnaire from 180 respondents. At this descriptive analysis, respondents were asked to choose 10 of the 33 reasons that reason considered to be the potential barriers that the respondent faced in SME business today. Once has been selected and then sorted by the reasons at the rank of importance, the data result is described in Table 2.

Based on the data in Table 2, we can conclude, at least 10 major reasons seem likely to be chosen by the respondents. First, 124 respondents picked technology as SMEs weakness to compete in global market, since the cost of technology still high for them, most SMEs in Indonesia use simple technique and tools in their production. Three reasons that are often selected by the respondents are competition barrier; price of energy; and financial access were selected by 112 or 62% respondents. They thought that the market is fulfilled with many competitors with more strengths which made it difficult for them to compete. Financial Access and Price of Energy become serious problem for respondents who consider capital became one factor that really made their business grow slowly. They stated that financial institution operates not on their side, they found many difficulties when they tried to apply for credit financing from banks, due to the complex requirement that could not be fulfilled by the SMEs. Technology used is also become the reason why SMEs could not operate effectively and efficiently, placed them far from market winner position. They also claimed that the price of energy was responsible for their business survival, if government still abandon their main problem on that, SMEs are in dangerous position in their own country. 92 respondents or 51% chose in-efficient production cost as another major reason faced by SME currently, it is reasonable since stated before, SMEs found difficulties in financing access, at the same time they faced high price of energy, so we can conclude that these phenomena have significant impact to every operational activity. Meanwhile, 84 or 47% respondents chose that the lack of good human resources is also the reason why Indonesia SME grow slowly, it proofs that government should be more serious in providing a good training skill for certain SMEs that need it. 76 respondents or 42% stated that economic factors (fiscal and monetary policies of the government, inflation, interest rates and foreign exchange rates) and management skills also contribute problem to SMEs. Reasons the process difficulties include the expensiveness, bad custom arrangement, and bad bureaucracy also stated by 68 respondents or 38%, the same level also chose low managerial capacity in business made SMEs could not survive for long term.

Table 2. Barrier Factors Based on Respondents Opinion

P = — x100%

No Barrier Factors

Frequency

1. Process (expensiveness, difficulties, bad custom arrangement)

2. Long time duration administrative process

38% 9%

No Barrier Factors Frequency %

3. Geographical location 44 24%

4. Government policy and regulation 44 24%

5. Economic factors (fiscal and monetary policies of the government, inflation, interest rates and foreign exchange rates) 76 42%

6. Competition barriers 112 62%

7. Political barriers 48 27%

8. Crime and corruption rate 48 27%

9. Insufficient information 36 20%

10. Standard quality 24 13%

11. Trade agreement 12 7%

12. Management skill 76 42%

13. Infrastructure 12 7%

14. Technology 124 69%

15. Financial access 112 62%

16. Raw material 52 29%

17. Inefficient production cost 92 51%

18. Low capability in high production 37 21%

19. Marketing difficulties 39 22%

20. International market knowledge 63 35%

21. Lack of knowledge in transaction method 13 7%

22. Limitation of sales 64 36%

23. Limitation of buyer 60 33%

24. Limitation destination 52 29%

25. Price of energy 112 62%

26. Transportation 32 18%

27. High labor cost 32 18%

28. Lack of good human resources 84 47%

29. Managerial capacity 60 33%

30. Low capability 44 24%

31. Legal barriers 35 19%

32. Lack of focus 13 7%

33. Another barrier reasons 16 9%

Based on the table, it can be seen that SMEs in Indonesia have at least ten main obstacles as shown in Table 3. First, SMEs argued that intense competition is a daunting challenge to be faced today, not only to compete with other SME products, but also with a large-scale enterprises. Rank 2 illustrates the impact of financial crises on Indonesian SMEs today. SMEs still find it difficult to gain financial access from formal financial institutions to develop their businesses worsen by the price of energy which is continually increasing from year to year. Furthermore, many SMEs stated that they have been unable to adopt technology which can help them produce more efficient in time and cost. SMEs could not afford the price of technology, worsen by their limited acces to finance institution. This technology barrier effected SMEs difficult to manage their production cost, put them behind their competitor in global market. At next barrier choosen, SMEs blamed the economic factors that make them difficult to make predictions for future business development. SMEs also admitted that they lack in reliable and skillfull employees due to lack of education and training related to the business. The next difficulty is the administration process by which SMEs have to deal with complex and expensive procedure, made them assume that bad administration processes have significant influences for SMEs development. Many problems faced by SMEs impact their number of sales and profit levels. SMEs currently assume the bad sales performance was causing them difficult to develop the business because of income limitation. Finally, the difficulty of obtaining raw materials around the location made SMEs must work extra hard to find, even with additional cost in order to maintain business continuity.

Table 3. Ten Potential Barriers

Item No Barrier Factors Rank

6 Competition barriers 1

15 Financial access 2

25 Price of energy 3

14 Technology 4

17 Inefficient production cost 5

5 Economic factors (fiscal and monetary policies of the government, inflation, interest rates and foreign exchange rates) 6

12 Management skill 7

1 Process (expensiveness, difficulties, bad custom arrangement) 8

22 Limitation of sales 9

16 Raw material 10

5. Potential Solutions

SMEs expected many solutions which government and another stakeholders should corcern if they intend to develop SMEs in order to increase their competitive advantages in global market. SMEs respondents agree that government should concern to improve security standards while goods was delivering from the company to the market since Indonesian crime really become a serious threat for SMEs. Government should maintain the SMEs sustainability by creating more programs spreaded all over the area, civil servants should go to the SMEs market and see how the SMEs conditions to create an effective program to solve SMEs development problem. One solution provides a separate institution that works specifically to foster SMEs potencies. This program can be represented by creating special institution in each region in Indonesia as a place for SMEs to conduct consultations and find solutions for their problems, or regularly send their people to check SMEs conditions to reduce constraints faced by SME. Furthermore, they should regularly evaluate programs to measure performance and effectiveness of their program in helping SMEs.

SMEs in Indonesia faced financial problem so they need more soft loans with simple requirements of SME credit scheme applications. Government should protect the prices of primary goods, because it also influences another material price. SMEs agree that government should eliminate permit fees for opening new business, because many of them thought that the price quite expensive for their first time to run business. This licensing is costing significantly for SME and respondents found this factor as another threat to achieve their goals. Government should revised this policy and creates supporting determination to prevent SMEs from people who take advantage from their business.

To eliminate financial barrier government is obligated to preserve rupiah currency, and seriously keep energy prices like electricity, fuel, and other energy costs affordable for SME. Government should facilitate SME with technology through soft loan to buy supporting technology for their business. Since many SMEs have problem with the land cost, they expected that government could provide land leasing for business with a very affordable price for SMEs, or provide viable and strategic location for SME.

Indonesia is facing corruption problem and this fact also influence SMEs sustainability. Government should give the best effort to eradicate corruption. SMEs need a supporting policy to help them survive. There should be a strict punishment for bureaucrats who collect illegal fees from SMEs. The other thing is SMEs expect government to conduct serious programs to develop SMEs in global market without any significant charges, for instances, training for overseas marketing, skill and knowledge development, and entrepreuneurial motivation training.

6. Conclusion

The study concluded that there are at least ten major barriers faced by SMEs: competition barrier; financial access; price of energy; technology; inefficient production cost; economic factors; management skill; process; limitation of sales; and raw material. Those barriers will become challenges for the government program to make the Indonesian SMEs product overcome the international markets competition. The target of Ministry of Industry to increase the export value up to $200 billion in 2012 will be more easily achieved by anticipating and eliminating potential barriers faced by Indonesian SMEs.

Based on survey and interviews, many SMEs hope that government would help seriously reduce and prevent their problems. The SMEs expectation can be achieved if government is commited to improve their people performance in all departments that would indirectly influence for the SMEs business climate. Through a good governance and very high value performance, government would support SMEs to eliminate all barriers for business development. For example, with a high awareness of the SMEs importance contribution to the country's revenues, the government will endeavour to facilitate all the opportunities for SMEs growth, such as easy loan application from formal financial institutions, conducting training programs and skills equally all over area, technology procurement assistance, and many more. In addition, the well performance of officials government will help much to create a stable economic condition, make the needs are affordable for SMEs, like energy and raw materials, which greatly affects the cost of production. Strict regulations will help to reduce many SMEs problem that is related to security, process difficulties, and corruption.

Finally this study have propositions for further research that could complement the existing shortcomings of this research. Future studies are expected to reach respondents with broader terms which are including the whole Indonesia area, or researchers can choose specific object of SMEs with specific criteria, instead of general. Further research may also done by identifying detail steps of potential solutions implementation that were expected by SMEs that have been surveyed in this study.

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