Disaster- Resilience Of Small And Medium Enterprises (SMEs) in Indonesia Survey Results and Policy Environment

Transcription

1 Disaster- Resilience Of Small And Medium Enterprises (SMEs) in Indonesia Survey Results and Policy Environment Dr. Eugenia Mardanugraha Faculty of Economics and Business - Universitas Indonesia

2 AGENDA Indonesian SMEs defini.on and profile Legisla.on and policies about SMEs development. Legisla.on and policies about DRM Key findings of the survey Key Challenges & Considera.ons for SME disaster resilience

3 DeGinition of SMEs under Law No. 20 of 2008 and the structure of MSMEs Large Scale Business 5,066 enterprises (0,01%) Sales/year > Rp 50 billion Asset > 10 billion Medium Scale Business 52,106 enterprises (0,09%) Sales/year Rp Rp 50 billion Asset Rp 500 million - Rp 10 billion Small Scale Business 654,222 enterprises (1,13%) è Dominate in the trade and hotel sectors. Sales/year Rp 300 million - Rp 2.5 billion Asset Rp 50 million - Rp 500 million Micro Scale Business 57,189,393 enterprises (98,77%) è mostly in the agricultural sector. Sales/year < Rp 300 million Asset < Rp 50 million By aggregated industry sectors: 48.8% are in the agricultural sector (including forestry, and fishing industries), 28% are in the combined wholesale and retail trade, and hotel and restaurant sectors

4 SMEs contribution to the economy

5 Legislation for SMEs and cooperatives SME policy Ministry of coopera.ves and SMEs (MOCSME) Law No. 20 of 2008 on SMEs and Law No. 25 of 1992 on Coopera.ves. Most ministries have a role in SME development. Coordina.ng ministry for the economy includes SMEs in na.onal economic development policies Most recent - banks to decrease credit lending interest rate for SMEs to under 10% (from about 17%).

6 Legislation and policies about DRM Disaster Risk Management policy Na.onal Disaster Management Agency (BNPB) Law No. 24 of 2007 on Disaster Management (DM Law). Climate change adapta.on Directorate General of Climate Change in the new Ministry of Forestry and Environment (MoFE) and Ministry of Na.onal Development Planning (MNDP/ BAPPENAS).

7 SME Resilience Survey in Indonesia The SME Survey of 400 respondents focused on SMEs in urban areas of Indonesia that have experienced disasters from natural hazards. DKI Jakarta and surrounding areas (Bogor, Depok, Tangerang, Bekasi), which ocen experience flooding; Yogyakarta, which experienced the erup.on of volcano Merapi in 2010, and prior to that the major earthquake in 2006; Aceh, which suffered massive losses from the Indian Ocean earthquake and tsunami in Place taken Number of respondents One- on- one interview in Aceh 100 One- on- one interview in Jabodetabek 165 Seminar in Depok 65 Seminar in Jogja 70 Total 400

8 Hazards that cause SME business disruption Perception of hazards that will potentially disrupt operations Regional or global economic crises Fire Theft Foreign currency Fluctuations Power blackout Accidents Flood Data loss Earthquake Drought Water shortage or contamination Cyber attacks Transportation system breakdown Insect Infestation Volcanic eruption Civil unrest Pandemic / Epidemic Armed conflict Tsunami Terrorism Tornado Typhoon Lightning Landslide Wild Fire 48% 43% 35% 27% 26% 19% 15% 12% 8% 7% 7% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 1% 1% 0% 0% 10% 20% 30% 40% 50% 60% Respondents experience of major disruptions Regional or global economic crises Foreign currency Fluctuations Flood Power blackout Theft Fire Accidents Earthquake Volcanic eruption Drought Transportation system breakdown Data loss Water shortage or contamination Cyber attacks Insect Infestation Terrorism Pandemic / Epidemic Armed conflict Tsunami Civil unrest Wild Fire Typhoon Lightning Landslide Tornado 14.0% 9.5% 9.0% 8.3% 8.0% 7.5% 4.0% 2.8% 2.8% 2.0% 2.0% 1.8% 1.5% 1.5% 1.0% 1.0% 0.8% 0.8% 0.5% 0.3% 0.3% 0.3% 0.3% 0.0% 31.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

9 SME Disaster Coping Mechanisms Top coping mechanisms used to deal with business disruption and emergencies Top risk Financing mechanisms in use By using savings 63% None 43% Through loan without With support from family By working more to By reducing expenses We don t have any coping 34% 24% 21% 19% 13% Fire insurance Motor/car insurance Insurance for employees Natural catastrophe 8% 7% 4% 18% 9% Insurance for profit losses 4% Through loan from banking By selling or pawning assets Through loan with interest Through loan from suppliers By claiming insurance 8% 7% 7% 5% 5% Commitment lines Thec insurance Performance bonds Key person insurance 3% 3% 1% 1% Through dona.ons/gics 3% Deriva.ves 0% 0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50%

10 About BCP The majority of respondents were not familiar with BCP: Only 10% of respondents had ever anended any training related to BCP. Only 9% having anended relevant training related to disaster risk management Top reasons for not preparing BCP: Our enterprise has not heard of BCP before (62%) Lack of informa.on on procedure for preparing a BCP (32%) Lack of human resources to handle BCP prepara.on (19%) Top reasons for developing a BCP: To avoid economic losses (55%) To protect employees (26%) To gain our clients confidence (17%) 82% of respondents would like to parbcipate in a nabonal planning process to support SMEs to prepare for and recover from hazards and disasters

11 SMEs preferred government incentives to encourage BCP adoption Provision of technical assistance, consultancy service, or training in BCP preparation and disaster preparedness 57% Subsidies, grants, and soft loans for the preparation of BCP 43% Tax credits, deductions, and exemptions for SMEs with BCP 30% CertiFication schemes Awards and recognitions for disaster resilient SMEs Legislation, policies, and institutional arrangements that encourage SME participation in disaster risk management (DRM) Don't know 19% 17% 16% 16% 0% 10% 20% 30% 40% 50% 60%

12 Key Challenges Lack of disaster preven.on and risk financing for SMEs. No reliable SMEs data base. Lack of coordina.on between ins.tu.ons in developing SMEs and disaster reduc.on. DRM modules for regulators and SMEs are s.ll scanered. More commitments from stakeholders in SMEs Disaster resilience issues.

13 Key Considerations for a SME Roadmap Legisla.ve base for government SME support Sta.s.cal base for government SME policy targe.ng Mul.- hazard BCM for SMEs Disaster preven.on and climate change adapta.on - reducing underlying risk Disaster Insurance and Risk Financing Ins.tu.onal coopera.on mechanisms for response and recovery support Private Sector and SME Capacity