Indonesia Should Do More to Encourage Home-Grown Entrepreneurs: Experts
Jakarta. As Indonesia’s economy enjoys surging growth and makes strides to become a more featured player on the global stage, business experts say the country suffers from an alarmingly low rate of entrepreneurship.
According to Jakarta State University (UNJ) chancellor Bedjo Sujanto, 5 percent of Indonesia’s 240 million people should ideally be entrepreneurs, because an entrepreneur can employ 20 people, on average.
“One employer for every 20 employees is ideal, not too high, not too low. It’s ideal because it would provide a good average for the different types of businesses in the country, from the micro to the large-scale ones,” Bedjo said.
“If a nation has too many entrepreneurs, then too many businesses would struggle to find the workers necessary for them to grow big and successful.”
But at the moment, Indonesia is at only a fraction of Bedjo’s 5 percent target. According to Joko Sutrisno, director of vocational schools development at the Ministry of Eduction, only 0.5 percent of Indonesians are entrepreneurs.
That anemic proportion compares especially poorly to those of business-centric countries like the United States (7 percent) and nearby Singapore (6 percent).
Worse, of Indonesia’s miniscule 0.5 percent, only 30 percent graduated university, Joko said.
Bedjo said that figure showed “that the education system in the country does not effectively instill the entrepreneurial mindset in students.”
He added that, until three years ago, the education system urged students to be employees rather than entrepreneurs.
“That’s the way our students in schools are taught — that they have to be disciplined workers and work hard. But they are not taught enough entrepreneurship skills like how to manage employees and invest,” Bedjo said.
Still, both experts agreed that the government’s efforts to encourage entrepreneurship have improved considerably in the past three years. According to Joko, entrepreneurs totaled just 0.2 percent of the population before they started.
Some of the government’s recent efforts included increasing the amount of practical entrepreneurial skills taught to students in vocational schools, he said.
According to Joko, prior to three years ago vocational schools spent equal amounts of time teaching theoretical entrepreneurial studies and practical studies. But since that time, practical studies have accounted for 70 percent of instruction, and theoretical studies 30 percent.
Bedjo said more and more high schools and universities now included entrepreneurial education programs, but the efforts are still insufficient if the government intends to achieve its target of 4 percent entrepreneurship by 2014.
“If the current pace continues, I think by 2014, between 1 and 2 percent of the population will become entrepreneurs,” he said.
Prasetyantoko, an economics analyst at Atma Jaya University, also argued that major government programs to promote entrepreneurship were not working as effectively as they should be.
“If we look at how government programs have been working for the last three years, such as the KUR [People’s Business Loans] program and the PNPM [National Program for Community Empowerment]… they should have brought the entrepreneurship rate to 1 percent of the population by now,” he said.
Prasetyantoko said that the KUR program — an initiative started in 2007 to provide micro-sized businesses and small-to-medium enterprises with access to loans of up to Rp 500 million ($56,000), with risk default shared between the government, the central bank and state loan insurance firm Askrindo — suffers from accessibility problems.
The scheme is operated through six state-appointed banks, and the government has allocated Rp 20 trillion from this year’s and last year’s budget to fund it.
“Businesses often have a hard time getting access to this credit, as they are often considered undeserving of the credit. The appointed banks have requirements that are too high for the small businesses’ assumed cash flow,” Prasetyantoko said.
The PNPM, meanwhile, allocates government funds to 4,805 districts across the country that need financial backup for development. The districts receive anywhere from Rp 750 million to Rp 3 billion, based on number of residents. It also began in 2007.
The central government disburses funds to district governments, who then allocate the money to the districts’ infrastructure projects. Small businesses can also receive loans of Rp 20 million or more under the program, which does not have funding limits.