In response to government’s regulation to impose 1% tax of total turnover on small business having turnover of at least Rp4.8 billion per year as per July 1, 2013, the Indonesian Chamber of Commerce [KADIN] rated that such a policy was counter productive to the development of this segment which still needed capital support.
As known, per July 1, 2013 the Government put in effect Government Regulation [PP] no 46/2013 on income tax on revenues received or earned by tax subject having certain gross income. The Government imposed tax of 1% on small business [UMKM] whose turnover was maximum Rp4.8 billion a year.
In particular KADIN stressed that while the nation was supposed to empower small business to ward joining the ASEAN Economic Community 2015, the Government was not giving them incentive but burden them with this 1% tax instead.
KADIN believed the development of UKM in Indonesia still craved for attention from many parties, especially the Government, in regard to capital and nurturement. In some other developing countries, UKM players clearly had full support from their Government, such as in extra capital injection, low bank interest facilities, and tax exemption.
The result was that product competitiveness of the said countries were strong at the regional and global market. To illustrate, players of small business in China were enjoying good privileges so their products were marketable to other countries including Indonesia. It was common sense that the development of UKM in Indonesia be supported, but the central or local Government.
Jakarta as reference city could serve as example. UKM players in Jakarta should be the portrait of successful UKM for all of Indonesia toward AEC 2015. Many things had to be done for the development of UKM sector in Indonesia. UKM development called for attention from all parties, not just the Government.
Academicians must also actively participate by giving inputs, while the banking industry participate I terms of financing and counseling. Seminars and discussion related to UKM must be encouraged to create implementable formulae for solutions in supporting national UKM whereby they could compete in AEC 2015.
The rising voices that urged the Government to support UKM to grow was based on the fact that KADIN still saw the national small business sector as in unprepared condition to compete in AEC in 2015. The UKM sector sill needed support in order to develop before joining the AEC in 2015. The UKM sector was today in still in too helpless condition to face the regional open market.
The government was expected of their support in terms of capitalizing and training. The State Owned Companies [BUMN] and Provincial Owned Companies [BUMD] could play their roles in supporting UKM in terms of capital as long as regulations permitted.
In terms of capital access. Bank Indonesia could also play their active role. For example by giving incentives to credit providers banks. This was in line with BI’s effort to increase UKM’s portion of credit at least by 20% in 2018.
The logic of it was, that banks might finance UKM, they needed incentives. For example easy procedure to open branch offices. Open ATM locations etc. in parallel with that, BI must try to set low credit interest rate for UKM.
If national UKM had good access to banking services, and obtain credit at low interest, UKM could strengthen their competitiveness whereby to compete in MEA 2015. BI, together with the government, could motivate UKM to diversify their business.
Indonesian’s vast population and sound middle class mean broad opportunity for UKM to increase their production capacity. It was expected that development of UKM would be concentrated on Small-and –Medium-Industry [IKM whereby to bring added value and multiplier effect socially and economically.
As known, data of the Ministry of Trade had it that 70% of total UKM in Indonesia specialized in the trading sector. This was in line with absorption of banks’ credit allocation which was dominated by trading, hotel business and restaurants [PHR]. Even the People’s Credit Business [KUR] was dominated by the trading sector which contributed 60% of total KUR channeled worth Rp30 trillion.
BI together with the Government [central and local] could coordinate in conducting trainings in entrepreneurship to motivate UKM to diversify business line not just in trading. Some UKM players should be encouraged to become resolute businesspeople and venture to be producers. Or else, national UKM would be stuck only as traders and market products of other countries. To make it clear, national UKM would only be seller of foreign products, especially that of China.
If national UKM could be sound producers, the profit margin and added value would be enjoyed by the producer countries. As traders, UKM would only make measly margin, while they were benefiting nothing of the added-value factor. BI claimed they had prepared some strategies to help development of UKM at home.
Secondly, to prepare data and information though Website to enable banks and customers to see the prospect and feasibility of a business line.
Thirdly, to conduct training sessions regularly and continually. In this case BI would foster collaboration with Government institutions and banks, especially to tackle a problem faced by UKM, i.e. financial management.
Fourthly, to facilities UKM development, product wise or marketing wise; collectively for UKM of the same business line. The focus of UKM development by BI was agriculture for food resiliency.
From the above picture it was apparent that some institutions had played their role and given their contribution to develop national UKM especially toward AEC 2015. Now it was up to the UKM players themselves to respond to the help.
National UKM must change their mindset and viewpoint to look at MEA 2015 as an opportunity, not a threat; thereby UKM players would think positively and constructively and abandon helplessness and dependency. (SS)
Business News - 05,2013