The Indonesian economy was also battered by the pandemic, which left micro, small, and medium enterprises (MSMEs), the country’s economic backbone, struggling for survival.
Prior to the COVID-19 outbreak, MSMEs accounted for 60 percent of the nation's gross domestic product (GDP) and employed around 97 percent of its workforce.
The pandemic's impact on MSMEs included sales declines, product distribution halts, marketing problems, and capital and raw material shortages.
To keep MSMEs afloat, the government decided to intervene and prepared long- and short-term strategies such as tax incentives, credit relaxation and restructuring, working capital financing, and digital transformation training, among others.
Digital transformation is key for ensuring MSMEs can survive and thrive post-COVID-19, according to Finance Minister Sri Mulyani Indrawati.
"The role of digital technology is paramount for MSMEs as the pandemic has hastened the transition to a digital economy," she said at a Google for Indonesia event on December 2, 2021.
Entrepreneurs could utilize digital technology to enhance product quality, access new capital opportunities, and expand market reach, she pointed out.
The government has established cooperation with various stakeholders, including the private sector, to ramp up MSME recovery and growth by supporting their access to digital technology, the minister noted.
The government has also collaborated with technology company Google, whose digital literacy class has covered more than two million MSMEs, she said.
Indrawati lauded Google's collaboration with international non-profit organization KIVA to cooperate with local partners to distribute low-interest business loans with a total value of US$10 million.
"While the government has assisted MSMEs by enacting policies to empower enterprises, the private sector has performed its duty by introducing digital technology. We hope the Indonesian economy and MSMEs would recover in the near future," Indrawati remarked.
Earlier, Minister of Cooperatives and Micro, Small, Medium Enterprises (MSMEs), Teten Masduki, had said that MSMEs adopting digital technology have managed to survive the challenges posed by the COVID-19 pandemic.
"MSMEs could survive (the pandemic) to run their businesses because they adopted digital technology," the minister said on November 2, 2021.
According to World Bank data, 80 percent of MSMEs that are connected to the digital ecosystem have better resilience, he noted.
Research conducted by the United Nations Development Programme (UNDP) in October 2021 identified several obstacles faced by MSMEs during the pandemic—production costs (35.2 percent), decline in demand (30.2 percent), government regulations (27.5 percent), financial access (4.9 percent), and raw material procurement (2.2 percent), according to the minister.
However, the adaptation of MSMEs to the digital ecosystem has had a very positive impact and helped business owners to survive and even develop their businesses, Masduki said.
MSMEs dominate 99.9 percent of businesses in Indonesia, with around 65.4 million MSMEs registered in the country, he pointed out.
MSME players, especially micro-enterprise players, including small shops, have the potential to have a significant impact on the improvement of people's welfare and national economic recovery, he said.
For that reason, Masduki affirmed that his ministry has continued to support the acceleration of national economic recovery and digital transformation.
The ministry has set a target of digitalizing 30 million MSMEs by 2024, he said. To meet the target, 6 million MSMEs need to go digital every year, he added.
As of late September 2021, as many as 16.4 million MSMEs have migrated to the digital ecosystem, he informed. That number has increased by more than 100 percent compared to before the pandemic, he noted.
"The pandemic has opened opportunities for the digital economy to grow where the potential digital economy value in Indonesia is projected to be the largest in Southeast Asia. By 2025, digital economic transactions are estimated to reach Rp1,700 trillion," the minister pointed out.
Meanwhile, as of November 2021, over 13 million MSMEs have adopted the Quick Response Indonesia Standard (QRIS), a digital payment system developed by Indonesia’s central bank, Bank Indonesia (BI).
QRIS users are dominated by micro and small business actors. Through the use of QRIS, BI hopes to help businesses run amid the pandemic, head of Bank Indonesia's payment system policy department, Retno Ponco Windarti, said.
She further said that BI and its partners are currently expanding QRIS to overseas locations and starting to implement the National Open API Payment Standard (SNAP) in the payment system.
In the past year, the use of QRIS as a payment channel has grown by 163.5 percent (year on year), or Rp2.13 trillion, she noted. Cross-border payments using QRIS and Thai QR Payment from Thailand are also being tested, she informed.
In the future, BI plans to expand QRIS to ASEAN countries such as the Philippines, Malaysia, and Singapore, Windarti informed.
The Internet era, thanks to the development of Internet communication technology, has provided solutions to the impacts of the COVID-19 pandemic in various sectors, particularly economy and education.
Hence, the government needs to continue efforts to promote the National Digital Literacy Movement initiated by the Communication and Informatics Ministry.
Officially launched by President Joko Widodo on May 20, 2021, the National Digital Literacy Movement is aimed at accelerating digital transformation, particularly by improving the skills of Indonesian human resources in the digital field.
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Editor: Rahmad Nasution
Copyright © ANTARA 2021
