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Group 3 - Comparison between SG & ID for development of MSME's (policy, collaboration between stakeholder & example)

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Group 3 - Comparison between SG & ID for development of MSME's (policy, collaboration between stakeholder & example)

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Comparison | Singapore | Indonesia
Policies | Foreign policies: The emphasis of government policy on foreign investment in manufacturing.
Local policies: For local SMEs, the priority is to develop policies that encourage the use of technology (Smart nation initiative) and this entails grants to SMEs to utilize new technological products and services to digitize their business operations.

| Indonesia provide loan for the local enterprise to increase their business
Collaboration | Encouraging collaboration with overseas partners: Local firms have been encouraged to set up joint ventures with European companies

“growing through internationalisation remains a top strategy for SMEs, given the increasing domestic competition.”Leung Wai Ling, Chief Executive Enterprise Singapore

Encouraging collaboration within Singapore: MNCs to mentor SMEs: Under the Local Enterprise Upgrading Programme (LIUP), the Economic Development Board brings together local companies and MNCs for the purpose of improving the operating efficiency of participating SMEs, widening their product range and introducing new processes and finally to undertake joint product or process development with the MNCs. Currently, there are more than 130 local firms under the tutelage of 26 MNCs.
Encouraging collaboration between local government agencies: To further support Singapore companies in growing and seizing business opportunities, a new agency – Enterprise Singapore – will be formed through a merger of two key government agencies, SPRING Singapore and International Enterprise Singapore. This new agency, which will be launched this year, will seek to deepen its understanding of the overall needs of industries and enterprises, and expand its networks and partners locally and overseas to benefit local companies.

| local enterprise get a loan from the goverment, the goverment give an investment for them to increase and make their bussines better
Example | Productivity Solutions Grant (PSG): For companies looking to kick-start their adoption of technology with pre-qualified IT solutions and equipment that enhances productivity.

Enterprise Development Grant (EDG): For companies looking for more support as they undertake deeper transformation in business upgrading, innovation and internationalisation.
Ms Agnes Toh runs the Mei Zhen Hakka food stall at the Shunfu Mart Food Centre. She was linked up with a business adviser from one of the SME Centres who gave her suggestions on how she could speed up the preparation of ingredients. By tapping the PIC, she was able to buy a food processor and cutting machine, helping to halve preparation time for dumpling fillings. | KUR (Kredit Usaha Rakyat)

Policies

Financing:

Strong government support with various government initiatives such as SkillsFuture, IMDA, Enterprise Singapore

E.g. SMEs are given a large sum of grants to offset training cost via SkillsFuture,

Enterprise Singapore has various grants:

Productivity Solutions Grant (PSG): For companies looking to kick-start their adoption of technology with pre-qualified IT solutions and equipment that enhances productivity.

Market Readiness Assistance (MRA) Grant: For companies looking to take their business overseas. Includes support for overseas market set-up, identification of overseas business partners and overseas market promotion.

Enterprise Development Grant (EDG): For companies looking for more support as they undertake deeper transformation in business upgrading, innovation and internationalisation.

International Co-Innovation Programmes: Companies keen to grow and internationalise can tap funding programmes for cross-border collaboration projects on technology development and co-innovation.

Land Productivity Grant (LPG): For companies looking to defray part of the initial relocation cost due to land use optimisation.

Private sector wise:

Venture capital in Singapore is regulated under Monetary Authority of Singapore (“MAS”)

Large amount of funding from Venture Capital (“VC”) firms and Private Equity (“PE”) firm

Most South-east Asia-based VC and PE firms are strategically located in Singapore due to its attractive finance regulation as well as ease of inflow and outflow of cash reserves

Stability in Policy making: In Singapore, policy are more than often enforced and regulated over a period of time without much changes. However, in Indonesia, due to the emerging markets, the policies are still under development, particularly for financing and start-ups creation.

Collaboration between stakeholders

Singapore: Startup SG Founder grant - Startup SG Founder provides mentorship and startup capital grant to first-time entrepreneurs with innovative business ideas. Enterprise Singapore will match $3 for every $1 raised by the entrepreneur.

Singapore: On-Job Training Blueprints -  PSB in Singapore has created an On-Job Training blueprint for certain jobs in certain industries. Given how expensive it can be and a waste of resources to use previous employers to train new employees, SMEs can use these blueprints to help reduce cost of training.

Indonesia: Private public partnership (“PPP”) - The government raise open tender for greenfield projects such as Hospitals. Private operators can then bid for the tender, and the government will select the private partner based on a selected list of criterias. The private partner then has to follow strict regulations and criterias such as certain key performance indicators, in order to receive a number of fees. This model is almost unseen in Singapore, but extremely popular in developing nations such as Indonesia and Philippines

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Question: How can MSMEs compete with other key economic players such as large firms and companies based in urban areas?

How MSME's compete with other key economic players such as large firms and companies based in urban areas?

How do we even define the market for MSMEs? I.e. Bakso in Malioboro vs Bakso in City Mall serve 2 different markets, have different price points, and have different menu options.

By aiding MSMEs in such a manner, will it be deemed as anti-competitive by these larger players?

Assuming these questions have been answered, MSMEs can compete with larger players along the following tangent:

Quality of services offered

Be flexible. Starting from focusing on particular demand of a certain group of customers.

VC and Accelerators

A number of studies show that the small business sectors of manufacturing industry experienced growth in businesses that produce certain superior products. It is not only having high added value but also absorbing a number of workforce. In today's complex global economic development, the role of the small industry sector is being more important in the national economy. The essence and efficiency of the sector are larger and have a strategic position, because besides having a comparative advantage is also natural in the form of availability of abundant raw materials, but making the cost of production becomes cheaper and has a weak competitiveness in the face of medium and large entrepreneurs.

There are five main problems faced by small business in five areas. They are (1) Weak in design; (2) The low productivity caused by the quality of human resources and technology; (3) Frequent fluctuations in raw material supply, both of quality and price; (4). Low awareness of entrepreneurs about Intellectual Property Rights; and (5). The existence of new product market competition.

MSMEs should improve competitiveness by improving product quality, business licensing, halal certification. MSMEs should develop the efforts to increase creativity and innovation, pay more attention to the distribution of products and MSMEs should be more concerned about the distribution of products.

In developing small business, business managers need to pay attention to the company's circumstances including competence and access to information and competitive advantage by conducting education and training, searching and gathering information as well as developing information facilities. To increase competitive advantage both cost advantage and product differentiation superiority managers must have competence and control information. In addition, for related parties, both government, universities, associations, cooperatives and medium / large companies can conduct guidance and training for craftsmen in both production and managerial fields.

Key recommendations include:

Develop strong co-ordination between the private sector, all levels of government, and MSMEs to help MSMEs find information on policies and programs already available to them through digital advertising and local information centers.

Support in-school entrepreneurship training, particularly through the Ministry of Production and Ministry of Education in Indonesia.

Invest in information and communications technology (ICT) infrastructure to support MSMEs to reach online resources and tools, as well as potential employees outside of their personal networks.

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Role of Digital Platoforms in Supporting MSME Digitalisation: SG vs Indo

Platforms in SG:
Carousell, Grab, FavePay, Burple, Cudy (Education)

Platforms in ID:
Gojek, Tokopedia

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Explanation of the platforms:
Carousell: Peer-to-peer platform for sales of second-hand and first hand goods ranging from clothes, textbooks, to cars, and even houses etc.

Grab: Besides allowing individuals to drive freelance, they also help restaurants to deliver food, and provide on-demand parcel delivery

Favepay: Started out as Groupon, they provide discount vouchers for businesses in F&B, massage and beauty services, outdoor activities or leisure activities. They also expanded as a payment platform where customers gets cashback on their purchase to help SMEs build up loyal customer bases.

Cudy: Platform to contact tutor and students, allowing them to teach and learn anywhere using the digital platform.

GoJek: Motorbike rides, car-rides, food delivery, water delivery, GoGlam, etc. These enable SME to be more accessible to users of the application even if they were unaware of their existence in the first place.

Tokopedia: online marketplace.

Recommendation:
1) Incorporate payment solutions into the digital platform to enable a smoother experience and transaction.
2) Create more platform strategies.
3) Branding & Credibility. Where there are a lot of msme, the platform will become overpopulated and there will be a rising need for differentiation.
4) Track key business figures and conduct analytics. This will help them to make decisions such as when to amp up promotions, pricing, and manage inventory (retail), and manpower schedule (services) to avoid loss of sales.

Benefits
1)  Lower barrier to entry: Digital Platforms allows MSMEs to list their products/services on digital platforms easily
2) Increase outreach effectively for MSMEs
3) For retailers, they are able to reduce inventory cost when they order from supplier on-demand
4) More information = more competitive selling. Benefits consumers who can compare between providers at their fingertips.

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Cost, Benefit and challenge digitization of MSME

Cost

1. Financial cost in building facilities to support digitization in rural areas of Indonesia

2. Labour cost to train workers to be well-equipped with the necessary skills

Benefit

1. Increase marketing opportunities for MSMEs to reach out to new markets, both international and national tourists

2. Increase efficiency in businesses, especially manufacturing

3. Create a network of information, easier to support, more efficient integration between industries

Challenges

1. Relatively low penetration of internet connectivity in rural counterparts of Indonesia

2. Possible unskilled labour due to little or no knowledge about digitization

3. Reluctance to change business processes due to perceived risks and financial burden

4. Effects of digitization are not felt within a short span of time / requires a long time for integration

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ICT Skills for Digital Economy (SkillsFuture): Lessons to be learnt for Indonesia

SkillsFuture- Nationwide movement to provide opportunities for Singaporeans to develop their skills (e.g. programming)

Current initiative in Indonesia:
Inter-ministerial collaboration in Indonesia, where Ministry of
Education and Culture (MoEC), Ministry of Research, Technology and Higher Education
(MoRTHE), Ministry of Manpower (MoM), and Ministry of Communication and
Informatics (Kominfo) are jointly building an ICT skills development framework.

Ways to improve:
Marketing efforts:

- Road shows to interact with locals that are not tech savvy

- Creating incentives for locals to learn these skills (e.g. Receiving vouchers when signing up for credits)
-Word-of-mouth by people who have attended the courses

- Digital ad: Facebook, instagram, or even partner with shopee

Making learning affordable and accessible:
- Provide financial support to people willing to learn but unable to do so
-  Wide range of courses for people to choose from

- No age limit to encourage lifelong learning
- More educational facilities and provide online courses to provide more learning opportunities

- Integrate into student’s curriculum to promote familiarity with system

Courses available - tailored to fit the current trend that Indonesia is progressing towards

Mobile app usage and basic computer skills

Basic english language

Financial literacy skills

Farming?

Simple entrepreneurial skills

Business strategies

Tourism related skills

Other small interest groups (e.g. flower deco, baking)

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How the Digitization of MSME impact on ASEAN. Integration or Disintegration?

Stand:
The Digitalization of MSME helps to integrate these MSME not only domestically but also internationally as they have a accessible and affordable platform to reach out to their customers.

Introduction:

Micro and small and medium enterprises (MSMEs) account for around 99 percent of existing business enterprises in Indonesia and employ more than 95 per
cent of the total workforce across the country.

The Indonesian government has set a goal of becoming a digital economy advanced country and launched "2020 Go Digital Vision".   Indonesia produces 4 unicorn companies: GO-JEK ( ride share ),   Tokopedia ( e-Commerce ),  Bukalapak ( e-Commerce),  Traveloka ( flight and hotel booking)

“MSMEs Go Online” was launched in November 2017 to facilitate MSMEs to be able to compete in broader markets Through this programme, the government aims to transform eight million MSMEs to become digital-savvy MSMEs by 2020 by supporting them in joining online market platforms.

In addition, the government has also launched a collaboration with six of the nation’s largest online marketplaces to help promote and sell MSME products to their markets.

Integration in ASEAN:

Digital integration can improve the efficiency within and between companies and remove the physical distance between individuals and local businesses to enable ASEAN to harness the scale of all entities. The collective power of all ASEAN member states ultimately will enable ASEAN to more effectively compete globally as an integrated economy.

ASEAN member states play an important role in enabling digital integration in a way that will benefit both individuals and local businesses. If this role is not fulfilled, progress will be slow and uneven, risking the widening of the digital divide (the economic gap created by different levels of digital integration) across ASEAN. It is critical for ASEAN to accelerate the progress of digital integration and ensure all member states take deliberate and coordinated actions to build a regionally integrated digital economy that lifts every participant.

Many CEOs and founders of MSMEs has voiced out that Digitization has helped out with their business and you can kindly refer to these testimonials here on page 4 & 5 here: https://www.bain.com/contentassets/37a730c1f0494b7b8dac3002fde0a900/report_advancing_towards_asean_digital_integration.pdf

Main benefits for MSMEs

It facilitates expansion of their businesses as it enables them to reach out to more customers and/or vendors.

It improves or optimizes operations, which translates to reduced costs. The interview indicates that 72% of the MSME respondents in ASEAN are strongly interested in expanding their businesses while cost reductions due to improvement of productivity
and operations are less of a priority.

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Developing Collaborative Framework for digital economy in ASEAN

Improvements:
1. Digitalisation in ASEAN can be improved via new digital infrastructure.

2. Digital platformers have the expertise to improve the digital capability of MSMEs and are the key to expansion.

Limitations:
1. Outreach efforts limited due to language barriers.

Recommendations:
1. MSMEs to collaborate with digital platformers to create a framework to communicate with major digital platformers in the region.

2. Provide a platform for local MSMEs to address social concerns.

3. Governments also need to utilise traditional methods to communicate effectively to reach out to the majority of the ASEAN MSMEs, which currently made up of local business circles.