EXECUTIVE SUMMARY
1. Background
Aceh’s economic
growth has been getting better since the era of peace, but still lower than the national economic
growth. In 2011, Aceh's economic growth stood at
5.02%, while the national economic growth reached more than 6%. If the contributions of oil and gas are excluded, Aceh's economy grew slightly to 5.89%. The decline of oil
and gas industries’
activities was the cause of lower Aceh’s economic growth with oil and gas.
Micro, Small and Medium-sized Enterprises (MSMEs) play a strategic role in Aceh’s economy, as applicable in the national economy. Data from the Ministry of Cooperatives and Small and Medium-sized Enterprises in 2008 revealed the important role of MSMEs nationwide. First, the number of MSMEs’ businesses in all economic sectors reached 51.3 million units, or 99.9% of total businesses. Second, the potential of MSMEs to absorb labor reached 97.04% of the total work force. Third, the contributions of MSMEs to the Product Domestic Bruto (PDB) accounted for 55.56% of the total PDB.
Based on data from the Department of Industry and Trade of Aceh in 2008, Aceh had about 280,000 MSMEs. Data from this source also states that Aceh’s MSMEs absorbed more than 90% of work force. Agriculture, trade, and services were sectors in which Aceh’s MSMEs were very much involved. Given that, these sectors need to be developed in the future in light of the improvement of MSMEs’ role. Thus, these sectors will continue to provide an important contribution to employment and local revenues.
This report contains the results of research on development of leading commodities/products/business types (leading KPJu) of Aceh’s MSMEs in 2012 by economic sector/sub-sector and cross-sector. Besides within the province, leading KPJu here also include the scope of all districts/cities in Aceh. The determination of leading KPJu was done in stages, beginning with the determination leading KPJu at the subdistrict level, then at the district/city level and ended at the provincial level. The determination of leading KPJu used bottom-up approaches involving officials of local government and government agencies/institutions, MSMEs’ businessmen/women, bankers, academia, and other stakeholders.
The method of the determination of KPJu used was modified AHP (Analytic Hierarchy Process). The method was called so because this study also applied the Borda and Bayesian Methods in determining leading KPJu at the subdistrict, district/city and provincial levels. Besides leading KPJu, it was also determined potential KPJu which can be leading KPJu in the future if treated with specific policies. The main parameters used in the determination of leading KPJu were related to the contributions of KPJu to job creation, local economic growth, and KPJu’ competitiveness. Furthermore, it was also established criteria for the consideration of leading KPJu in subdistricts and districts/cities. The criteria for the subdistrict leading KPJu consisted of the number of businesses, markets, the availability of inputs, and the contributions of the commodity to subdistrict's economy. The criteria for the district leading KPJu included the availability of skilled labor, raw materials, capital, means of production/business, business technology, social and cultural conditions, business management, market, commodity price, employment and the contributions of the community to district's economy.
It is hoped that the results of this research can be input and reference for all stakeholders associated with the development of Aceh’s MSMEs. For financial institutions, their loans are expected to be targetted to the development of leading commodities recommended by this research. Similarly for investors, the results of this study are expected to be guidance for future investment. Meanwhile, for related government agencies, the results of this study should also be considered as reference in making decisions related to MSMEs.
2. The Government and Bank Indonesia (the Central Bank of the Republic of Indonesia) policy on MSMEs Development
The Central Government through the Ministry of Cooperatives and Small and Medium-sized Enterprises carries out 5 steps of empowering Cooperatives and MSMEs (CMSMEs). The five steps are as follows: 1) Improving conducive business climate for CMSMEs. 2) Developing CMSMEs’ products. 3) Developing products and marketing for CMSMEs. 4) Increasing the competitiveness of CMSME’s human resources. 5) Strengthening cooperative institutions.
Aceh’s government, through the Medium-Term Development Plan of Aceh (RPJMA) 2012- 2017, stresses the importance of the development of MSMEs. In RPJMA 2012-2017, it is stated that the third mission of RPJMA 2012-2017 which is "Strengthening the economic and quality of human resources" is carried out by "Expanding employment opportunities through infrastructure development of the real sectors as well as siding with MSMEs and cooperatives." This statement shows that the government's attention to MSMEs aims to expand employment opportunities for the community at large.
In RPJMA 2012-2017, there are at least two main programs directly related to MSMEs. The fourth main program, namely "Food security and value added" attributed to "Enhancing the role of private sectors, MSMEs, and Aceh-Owned Enterprises. While the fifth main program “Poverty Reduction” is pursued by “improving the competitiveness of MSMEs and cooperatives” through “fostering and development of cooperatives and MSMEs”
Bank Indonesia’s tasks in assisting MSMEs are indirect and implemented in three policy instruments. First, the stipulation of credit policies that encourage banks to give loans to MSMEs. Second, institutional development is done by establising cooperation among financial institutions, such as between commercial banks and BPR (Bank Perkreditan Rakyat or People’s Credit Banks) as well as between BPR and Lembaga Dana Keuangan Pedesaan (Rural Fund Institutions), for the sake of a broad range of lending. Third, the provision of technical assistance which include: training for officials of banks and financing institutions for MSMEs, providing information on the results of relevant research, credit statistics, data about potential commodities, as well as promoting MSMEs in bridging relationship between MSMEs and banks. MSMEs policies stipulated by Bank Indonesia aim to encourage banks to increase lending to MSMEs and help improve the capability of MSMEs to be able to meet the requirements set by Bank Indonesia.
Development of Micro, Small and Medium Enterprises (MSMEs) in Aceh can not
be separated from the support of the banks in SME lending. As of September 2012, the outstanding loan MSME Aceh province reached
Rp7, 2T or approximately 35.96% of total loans channeled. Compared to the
previous year, SME loans grew 8.09%. Seen by sector, lending to micro, small,
and medium dominated by trade sector with a share of 47.76%. While MSME credit
absorption in primary sectors such as agriculture and fisheries are still
relatively minimal, each by only 4.85% and 0.13%.
Given the scale of its business, the largest share of SME loans disbursed
to credit customers a small category with 67.64% proportion. The rest, is a medium credit of 16.39% and 15.97% of micro-credit.
However, the number of categories of micro-credit accounts far more than small
and medium-sized loans. The number of microcredit borrowers reached 82.608. Credit
MSME category are refer to Law No.20 of 2008, which is classified as a small
loan is a debtor to a net> Rp50juta - Rp500juta or net proceeds>
Rp300juta - Rp2, 5M.
3. Leading KPJu
Per Sector/Subsector
In general, each
district/city has different leading KPJu per sector/subsector. This difference results from factors,
such as the location of the region, natural conditions, labor, the availability of business raw materials, and economic, social and cultural conditions of each district/city. Areas with the administrative status of cities, for instance, have
relatively prominent commodities in sectors of
hotel and restaurant, and services. Meanwhile, many areas with the status of districts rely
on agricultural commodities. Districts/Cities located near coastal areas, also tend to have leading commodities in the fisheries
sector.
In the food crops subsector, rice has the highest ranking. This is not surprising given the fact that all districts/cities develop this commodity, except for Sabang. Corn and cassava rank second and third in this sector. Facts show that there is no district/city that does not develop these two commodities. The next leading commodities in this subsector consist of soybean and sweet potato.
In the vegetable subsector, the most leading commodity in all districts/cities is long pepper. Of all districts/cities, just in Sabang this commodity is relatively undeveloped. Other leading commodities in this subsector from the highest to the lowest rankings include chili, tomato, cucumber, and potato. Physical characters of long pepper, a bit more durable and not easily damaged compared to other vegetable commodities, lead this commodity to be a favorable one.
Durian is a leading commodity taking the top position in the fruit subsector. This tasty fruit grows in most parts of Aceh. Overall, just in Lhokseumawe, Sabang, and Banda Aceh this fruit is rarely planted. Despite having a high economic value, a lot of Aceh durian stem from old trees. Attempts to rejuvenate this fruit are essential for its survival and development in the future. Fruit ranked below durian include banana, papaya, mango, and orange.
For the plantation subsector, oil palm tops the list. Although allegedly caused some environmental damage, as happened in the Tripa Swamp Forest of Nagan Raya District, until now oil palm is still a popular commodity in the plantation subsector in Aceh. It is important to note that in the future oil palm plantation should not be developed in the primary forest because it can damage natural environment, destroy biodiversity and lead to flooding. Other leading commodities below oil palm include cocoa, rubber, coffee, and areca nut (pinang).
In the livestock subsector, broiler cultivation is the most leading commodity. The development of broiler cultivation is in line with consumption demands. Chicken meat becomes major consumption after fish because of the relatively high price of beef and mutton in Aceh. Commodities ranked below broiler cultivation include duck cultivation, beef cattle cultivation, carabao/buffalo cultivation and goat cultivation.
Marine fish catching is ranked first for leading commodities in
the fisheries
subsector, while shrimp is ranked second. Aceh with vast territorial waters has a rich
variety of fish, such as tuna,
snapper, mackerel, squid etc. Commodities ranked below marine fish
catching consist of freshwater fish, namely tilapia, carp, and catfish.
For the forestry subsector, bamboo ranks the highest. Many people use bamboo for house materials (floors, walls, etc), plaited mats, and others. Following bamboo are commodities of sugar palm, walnut,
rattan, and mangrove. Commodities in the
forestry subsector certainly need to be managed carefully in order to
create balance between planting
and harvesting which in turn can
prevent damage
to environment.
In the mining sector (type C quarrying), sand quarrying takes the top position. The next leading commodities in this sector include stone/coral, limestone, clay, and mountain rock. Commodities of type C quarrying are widely used for the construction of houses and infrastructure. Businesses in this sector should be managed carefully. Damage to roads traversed by vehicles transporting type C quarrying, water pollution due to the dredging of river water, and loss of agricultural land and plantations are problems to be prevented in the development of this sector.
The industrial sector puts furniture industries as the most leading commodity. Other leading commodities following furniture industries include industries of water refill, tofu/tempeh, brick, and garment. Water refill business is now mostly found in many areas, from villages to the province. Nevertheless, in some areas, especially urban areas, this business begins to show a tendency of saturation.
For the trade sector, trade of basic food commodities is ranked first. Trade of basic food commodities (rice, sugar, cooking oil, eggs, kerosene, etc.) which provides the basic needs of the community, is business that appear in a lot of districts/cities in Aceh. The next leading commodities in the trade sector include trade of plantation products, drug store/pharmacy, furniture trade, and trade of fishery products.
Coffee shops become the most leading commodity in the hotel and restaurant sector. Coffee shops are businesses that can be found in all parts of Aceh, both in cities and in remote villages. Acehnese people’s penchant for coffee and the best quality taste of Aceh coffe (especially Gayo coffe) known far abroad lead coffee shops to be profitable businesses. Motel/inn is ranked second. The next leading communities include catering, restaurant, and hotel.
Table 1. Leading KPJu per Sektor/Subsektor in Aceh Province
Sector/ Subsector
|
Leading Commodity (Leading KPJu)
|
Weight
|
Ran-king
|
Sector/ Subsector
|
Leading Commodity
(Leading KPJu)
|
Weight
|
Food crops
|
Paddy (rice)
|
28.0360
|
1
|
Vege-tables
|
Long pepper
|
12.8281
|
Corn
|
11.1558
|
2
|
Chili
|
9.8205
|
||
Cassava
|
6.0606
|
3
|
Tomato
|
7.3293
|
||
Soybean
|
5.9185
|
4
|
Cucumber
|
3.4348
|
||
Sweet potatoe
|
5.8726
|
5
|
Potato
|
3.3574
|
||
Fruit
|
Durian
|
9.6605
|
1
|
Plantation
|
Oil palm
|
14.0513
|
Banana
|
5.7488
|
2
|
Cacao
|
8.1666
|
||
Papaya
|
4.9063
|
3
|
Rubber
|
6.6311
|
||
Mango
|
4.8003
|
4
|
Coffee
|
4.5349
|
||
Orange
|
3.4612
|
5
|
Areca nut
|
3.6664
|
||
Livestock
|
Broiler cultivation
|
8.9604
|
1
|
Fisheries
|
Marine fish catching
|
9.8774
|
Duck cultivation
|
7.6731
|
2
|
Shrimp
|
5.7442
|
||
Beef cattle cultivation
|
7.2303
|
3
|
Tilapia
|
4.6958
|
||
Carbao/buffallo cul’n
|
5.0660
|
4
|
Carp
|
4.3706
|
||
Goat cultivation
|
5.0232
|
5
|
Catfish
|
3.9539
|
||
Forestry
|
Bamboo
|
43.5433
|
1
|
Mining (Type C Quarry-ing)
|
Sand
|
36.9976
|
Sugar palm
|
23.2396
|
2
|
Stone/coral
|
23.6526
|
||
Walnut
|
21.5287
|
3
|
Limestone
|
13.5159
|
||
Rattan
|
17.1726
|
4
|
Clay
|
7.6625
|
||
Mangrove
|
9.9207
|
5
|
Mountain rock
|
1.1878
|
||
Industry
|
Furniture
|
8.0419
|
1
|
Trade
|
Basic food commod’s
|
12.6107
|
Water refill
|
5.5756
|
2
|
Plantation
products
|
11.1106
|
||
Tofu/Tempeh
|
4.7808
|
3
|
Drug st/Pharmacy
|
7.8902
|
||
Brick
|
3.3093
|
4
|
Furniture
|
4.1224
|
||
Garment
|
3.0117
|
5
|
Fishery
Products
|
3.7240
|
||
Hotel & Restaurant
|
Coffee shop
|
18.9411
|
1
|
Transpor-tation
|
Motorized
pedicab
|
16.6379
|
Motel/Inn
|
18.1608
|
2
|
Motorized
boat
|
2.3777
|
||
Catering
|
12.9593
|
3
|
Motorcycle
taxi
|
1.9739
|
||
Restaurant
|
12.8002
|
4
|
Public car
|
0.7475
|
||
Hotel
|
9.8089
|
5
|
Pedicab/tricycle
|
0.2612
|
||
Services
|
Motor repair shop
|
5.0510
|
1
|
Tourism
|
Beach
tourism
|
16.1905
|
Paramedic/Nurse
|
4.8935
|
2
|
Agro-tourism
|
15.2981
|
||
Tailor
|
3.4195
|
3
|
Cultural
tourism
|
5.3607
|
||
Rice Milling Unit
|
2.4145
|
4
|
Island
tours
|
4.6182
|
||
Auto repair shop
|
2.1508
|
5
|
Dam/lake
tourism
|
3.5188
|
Source: Primary data, 2012 (processed)
In the transportation sector, motorized pedicabs become commodities beating other commodities. As a unique means of public transportation in Aceh, motorized pedicab is quite popular because of its mobility speed, convenience and relatively low fare. Motorized pedicab is different from labi-labi (Aceh local public
transportation), which typically
moves slowly and forces many passengers.
Other transportation modes ranked below motorized pedicab include motorized boat,
motorcycle taxi, public car, and pedicab/tricycle.
For the service
sector, motorcycle repair shops are ranked first. Motorcycle repair shops grow widely due to the rapid addition of motorcycles nowadays. The addition of motorcycles is associated
with a variety of easy credit that has been offered by motorcycle dealers for the last couple of years. Motorcycle repair shops surpass other commodities in the service sector: paramedic/nurse, tailor, rice milling unit, and auto repair shop.
Beach tourism is ranked first in the tourism sector. As a province located on the northern tip of Sumatra Island, many Aceh’s districts/cities have beaches. Only in the highlands of central Aceh, beaches do not exist. Coastal area development supported by adequate infrastructures need to be provided in order to improve tourism in Aceh. Other leading commodities in this sector include agro-tourism, cultural tourism, island tours, and dam/lake tourism. Overall, leading KPJu per sector/sub sector at the provincial level can be seen in Table1.
4. Leading Cross Sectoral KPJu, Potential KPJu, and KPJu Life Cycle
4.1 Leading Cross Sectoral KPJu
Paddy (rice) is ranked
first for leading cross sectoral commodities.
Using
the Borda method, 9 cross sectoral KPJu with the
highest weighted score in Aceh province below rice include plantation products trade, long pepper, trade of basic food commodities, coffee shop, fisheries products trade, durian, oil palm plantation, motorcycle
repair shop, and cocoa
plantation.
Leading cross sectoral KPJu at the provincial level were the result of aggregation of cross sectoral KPJu in districts/cities, which include 226 KPJu from 14 sectors/subsectors. The weighted scores of top 20 leading cross sectoral KPJu in Aceh Province can be seen in Table 2 below.
Table 2. Leading Cross Sectoral KPJu in Aceh Province
Ranking
|
Sector/Subsector
|
Leading Commodities
(Leading KPJu)
|
Weighted Score
|
1
|
Food crops
|
Paddy
(rice)
|
0.6272
|
2
|
Trade
|
Plantation
products
|
0.2694
|
3
|
Vegetables
|
Long
pepper
|
0.2237
|
4
|
Trade
|
Basic food
commodities
|
0.1822
|
5
|
Hotel and Restaurant
|
Coffee
shop
|
0.1576
|
6
|
Trade
|
Fishery products
|
0.1863
|
7
|
Fruit
|
Durian
|
0.1390
|
8
|
Plantation
|
Oil palm
|
0.1301
|
9
|
Services
|
Motor
repair shop
|
0.0987
|
10
|
Plantation
|
Cacao
|
0.1016
|
11
|
Services
|
Auto
repair shop
|
0.1006
|
12
|
Transportation
|
Public car
|
0.0746
|
13
|
Fisheries
|
Marine
fish catching
|
0.0655
|
14
|
Plantation
|
Coffee
|
0.0648
|
15
|
Services
|
Rice
Milling Unit
|
0.0648
|
16
|
Fruit
|
Rambutan
|
0.0690
|
17
|
Industry
|
Tofu/Tempeh
|
0.0725
|
18
|
Food crops
|
Corn
|
0.0679
|
19
|
Fruit
|
Mango
|
0.0451
|
20
|
Services
|
Paramedic/nurse
|
0.0447
|
Source : Primary data, 2012 (processed)
4.2 Potential KPJu
For cross sectoral KPJu at the provincial level, coffee is a potential commodity. Coffee,
especially Gayo coffee, is wellknown
in foreign countries because of its quality taste. In 2011, Aceh Gayo coffee was exported 7.854 million tons to several
countries in Europe and America. Although Gayo coffee is not ranked in the top 10
leading cross sectoral KPJu at the provincial level (mainly because it is only grow in the central region of Aceh), this commodity, as a major export commodity, has a significant role for Aceh’s economy. Furtermore, this commodity also support economic development in terms of
employment. Unfortunately, until now Gayo
coffee is still exported via the Sea Port of
Belawan in Medan, North Sumatera.
The development of big sea ports in Aceh is a solution of the dependency on the Medan Sea port. The development of the port in the area close to the location of Gayo coffee cultivation and processing, such as the Sea Port of Krueng Geukuh in Lhokseumawe, for instance, is expected to enable Aceh to export this commodity from its own region. Thus, economic value added obtained by Aceh will increase and at the same time this can help improve Aceh’s economy as a whole.
Auto repair shops and tofu/tempeh industries are also potential commodities that need attention and support. Auto repair shops are ranked 11th in the rankings of the leading cross sectoral KPJu at the provincial level. The development of this commodity seems to be related to the increasing number of four-wheeled vehicles in Aceh, especially private cars, since the post-tsunami rehabilitation and reconstruction. Meanwhile, tofu/tempeh industries which provide healthy, nutritious and low-cost food, are ranked 17th. Tofu/tempeh can be an affordable food alternative other than fish, egg, and meat.
4.3 KPJu Life Cycle
From the perspective of product life cycle, overall, leading cross sectoral KPJu of the provincial level
are at the stages of growth and mature. In terms of
competition, the development of commodities that
experience the stage of growth tends
to be competitive and has a more open
business, while business space
and competitive development of commodities at the
mature stage tend to become
narrower.
Commodities at the mature stage are mainly from subsectors of the agricultural sector. Those commodities include: paddy (rice), long pepper, durian, marine fish catching, coffee, rambutan, corn, and mango. Leading cross sectoral commodities that are also at a mature stage consist of: coffee shop, fishery products trade, public cars, rice milling unit, and paramedic/nurse. These commodities have been long standing business in the community economic development.
Commodities that are in the growth stage are dominated by trade and services commodities. These commodities cover trade of basic food commodities, motorcycle repair shop and auto repair shop. The remaining commodities at this stage include cocoa (agricultural sector) and tofu/tempeh (industrial sector). Plantation products trade had actually grown steadily for a long time. However, military conflicts taking place in Aceh in the past did not enable the development of this commodity. Peace between GAM and the Indonesian government has gradually boosted this commodity development.
For oil palm, its life cycle is at a transitional stage, between stages of growth and mature. In areas such as Singkil, Nagan Raya, East Aceh, and Aceh Tamiang, for instance, this commodity has been experiencing a mature stage. In areas such as North Aceh, Pidie, Pidie Jaya, South Aceh, West Aceh, and Aceh Jaya, this commodity is still in a growth stage. As a whole, life cycle of leading cross sectoral KPJu at the provincial level can be seen in Table 3.
Table 3. Life Cycle of Leading Cross Sectoral KPJu in Aceh Province
No
|
KPJu
|
Life Cycle
|
|||
Introduction
|
Growth
|
Mature
|
Decline
|
||
1
|
Paddy
(rice)
|
√
|
|||
2
|
Plantation
products
|
√
|
|||
3
|
Long
pepper
|
√
|
|||
4
|
Basic food
commodities
|
√
|
|||
5
|
Coffee
shop
|
√
|
|||
6
|
Fishery products
|
√
|
|||
7
|
Durian
|
√
|
|||
8
|
Oil palm
|
√
|
√
|
||
9
|
Motor
repair shop
|
√
|
|||
10
|
Cacao
|
√
|
|||
11
|
Auto
repair shop
|
√
|
|||
12
|
Public car
|
√
|
|||
13
|
Marine
fish catching
|
√
|
|||
14
|
Coffee
|
√
|
|||
15
|
Rice Milling
Unit
|
√
|
|||
16
|
Rambutan
|
√
|
|||
17
|
Tofu/Tempeh
|
√
|
|||
18
|
Corn
|
√
|
|||
19
|
Mango
|
√
|
|||
20
|
Paramedic/nurse
|
√
|
|||
Source: Primary data, 2012 (processed)
5. Constraints of the Development of MSMEs’ Leading KPJu
In general, the development of MSMEs’ leading commodities in Aceh faces various obstacles. Based on the results of focus group discussions at the district/city and provincial levels which involved MSMEs stakeholders held by the Research Team, it can be concluded that constraints of leading KPJu development are associated with aspects of capital, marketing, managerial ability, and technology adoption.
Lack of capital is a classic excuse in the development of MSMEs’ leading commodities. Lack of capital is caused by lack of information on access to funds, limited ability to make funding proposals, and the difficulties to obtain funding due to the types of business that are not bankable (eg. agricultural commodities). Unfortunately, in many cases, even though there is an increase in demand for their products, businessmen/women cannot meet the increased demand due to lack of capital.
Lack of access to potential markets leads MSMEs to be unable to develop their business optimally. In such a situation, MSMEs tend not to sell commodities in large quantities. Or in another scenario, MSMEs will gradually have low motivation to keep running the business because they do not get maximum economic benefits or they sustain a loss.
Managerial weaknesses are obstacles faced by mostly micro enterprises. Most of micro-scale enterprises run business without planning, control, and evaluation. It occurs because of low quality of human resources, as well as the status of businesses that is personally or family owned ones.
The low technology adoption also makes it difficult for MSMEs to develop their business. This situation, in many cases, results from MSMEs limited knowledge and experience. The low technology adoption in turn leads to a variety of barriers in developing and improving product marketing.
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