MSMEs Exports Are Expected to Push Indonesian Trade Forward

MSMEs Exports Are Expected to Push Indonesian Trade Forward

  • InCorp Editorial Team
  • 28 November 2022
  • 5 minute reading time

MSMEs play a significant role in the growth of Indonesian trade and economy. Their contribution accounts for 99% of all business units. Additionally, MSMEs made up 60.5% of the GDP and 96.9% of all jobs in the country.

MSMEs’ Role in the Indonesia Trade Climate

The first two years of the Covid-19 pandemic deteriorated the state of local MSMEs. Based on a survey conducted by UNDP and LPEM UI, 48% of MSMEs had issues with raw materials at the time.

Up to 77% of MSMEs had declining incomes, 88% had declining product demand, and even 97% had declining asset values. The survey is conducted with the involvement of more than 1,180 MSMEs in Indonesia.

To help revive these businesses, the government kick-started multiple initiatives, including Program Pemulihan Ekonomi Nasional (PEN) and Bangga Buatan Indonesia (BBI).

These initiatives have proved successful, as seen in the increase in contribution to exports: from 14.37% in 2020 to 15.69% in 2021.

They are utilizing SMEs’ prospects for market integration via the Global Value Chain (GVC) and Global E-Commerce (GEC) to boost their competitiveness on the global stage. MSMEs can be incorporated into GVC through domestic aggregators and overseas affiliation firms through indirect exports.

Collaboration For Indonesian MSMEs Export Initiatives

Another prolific demonstration of government initiative in supporting the growth of MSMEs is seen in the signing of an MOU to initiate Indonesia Trading House in Tokyo, Japan, late last month. The signing of this MoU is believed to help increase and ease exports to Japan.

Potential Exports from Indonesia

MSMEs Exports Are Expected to Push Indonesian Trade Forward

One of Indonesia’s trading partners with considerable market potential is the Netherlands. Indonesia and the Netherlands have had a close historical relationship since the colonial era.

The partnership seems advantageous for Indonesia since the Netherlands serves as a hub and entry point for Indonesian goods into the European market. Additionally, a few large-scale distributors in the Netherlands distribute food and beverage items imported from Asia.

Many of the exported items are also sold to other European nations. Approximately, around 1.7 million Indonesians live in the Netherlands, which can aid Indonesian MSMEs in selling their products there.

MSMEs that wish to start exporting goods to the Netherlands must be aware of the kinds of Indonesian goods that have already made it to the Dutch market.

In the Netherlands, food and beverage goods are the most widely marketed. For instance, frozen stingrays, jackfruit, mango, sambal pecel, anchovies, andaliman, tea, nutmeg, spices, pepper, cinnamon, chili sauce, crackers, and candy.

The Dutch market has also seen the entry of handcrafted and manufactured clothing items, wood charcoal, musical instruments, footwear, and even coconut oil.

How to Establish an Exporter Company

Products from Indonesia’s MSMEs have a tremendous opportunity to enter the export market. In achieving that, some players still rely on the exporting company. With the increasing demands, establishing exporting enterprises might offer possibilities for thriving in Indonesia’s business climate.

Before establishing companies in Indonesia, investors must understand that some processes and techniques must be followed for their items to be sold abroad remain unknown to many.

Ari Satria, the Ministry of Trade’s Director of Market Development and Export Information, outlined the four steps business players must complete for their products to be exported legally from Indonesia.

The outlines include administrative preparation, legality as exporters, export product preparation, and operational preparation. To conduct international business, a company must have a permanent office or a contract and various auxiliary equipment.

Business actors must also establish a corporate profile to serve as marketing material for potential customers and have a communication network with operational staff members who can speak English.

The exporting company must take all necessary legal precautions to market its products. Several conditions that companies must include the following:

  • Surat Izin Usaha Perdagangan (SIUP),
  • Tanda Daftar Perusahaan (TDP),
  • Nomor Pokok Wajib Pajak (NPWP), among other documents.

Key Elements for Exporting Goods

While completing the requirements mentioned above, these enterprises must learn to understand the critical elements of the international market. Business actors must know about the demands, quality, packaging, payment terms, and delivery time of doing exports.

In addition, they should also ensure sufficient capacity for continuous production. On the other hand, business people must also modify their goods to suit their customers’ preferences.

Product design, consumer preferences, applicable trading laws, and product standards are just a few parameters that need to be considered. Business players also need to be aware of other operational details.

Business actors must provide operational details, including export protocols, documentation, and processes. They also need to understand the export strategy and export-import laws and regulations necessary for exporting business.

Even though the government has invested much in training to promote the export of goods, other challenges still await entrepreneurs.

Additionally, business people are constantly urged to participate in various initiatives and use the resources made available by the Ministry of Trade, such as the Designer Dispatch Service (DDS) and One Door Customer Service Center.

Businesses can access various services by signing up for the one-door service, including marketing support, market research findings, and requests for commercial relations from Indonesian trade representatives abroad and the Indonesian Embassy.

Incorp Indonesia (formerly CekIndo) provides consulting services to help you establish export routes from Indonesia. Another service extended by us pertains to business registration.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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