Micro, small, and medium enterprises (MSMEs) suffered the most when the pandemic hit Indonesia in early 2020. As movement restrictions were enforced, lack of market demand and hardship in securing material supplies saw many required to halt their business operation temporarily, reduce their number of workers, or even shut down permanently.
According to Teten Masduki, minister of Cooperatives and Small and Medium Enterprises (SMEs), 80% of MSMEs recorded lower profit margins over the past year. A recent United Nations Development Programme (UNDP) further highlights that women-owned MSMEs have been even more disproportionately affected by the pandemic. They have generally suffered more revenue loss than male-owned businesses, given their unequal access to financing compared to male-owned enterprises.
Traditional fabric and weaving businesses have born witness to this hardship. They are also principal sectors of tourism-dependent economies in Indonesia like the five priority tourism of Lake Toba, Borobudur, Likupang, Labuan Bajo, and Mandalika that anticipated becoming the "New Bali".
Whether by coincidence or not, all these places have traditional fabrics that symbolise their locality. Aside from Batik that is commonly known as "Indonesian" despite its Javanese origin, the other destinations all do.
Traditionally, those mostly involved in the fabrics and weaving industry are women. In Lombok area, for instance, such tradition prescribes women are only allowed to be married if they are already skilled in weaving.
Many of them, however, come from impoverished households. More than 70% of households have remained under the national poverty line since the 1980s.
The situation is further aggravated by the pandemic as they have had to depend mostly of their families' income, and not the now-absent tourist economy. Data suggests that national foreign exchange income from the tourism sector dropped by 90% in 2020.
For this, the National Craft Council and Ministry of Cooperatives and SMEs launched the "Cerita Wastra Series" -- a nationwide programme to advance this women-led industry in the five New Bali destinations to upskill their business operations to be able to compete and have bargaining power in the global value chain.
While the textile industry does not fall among the biggest MSMEs in Indonesia by number, its output, to the fashion industry, is the third most promising export-oriented sector. Alongside culinary and craft sectors, these three creative industries add up to US$77 billion (2.5 trillion baht) to Indonesian GDP. Hence, they provide an enabling environment to scale up the Indonesian cultural textile industry that will facilitate a swift recovery beyond the pandemic.
Additionally, as Indonesia is one of the most disaster-prone countries in the world, it is even more important for them to pay attention to their potential environmental consequences of their business operations. The textile industry in the Five New Balis, which grounds its operations in sustainability principles, is important to showcase the country's international commitment to the principle at gatherings such as on the recent COP26 as well as discussions on the wider 2030 development agenda, the United Nations Framework Convention on Climate Change (UNFCCC), and the Sendai Framework for Disaster Risk Reduction 2015-2030 (SFDRR).
In just five months, Cerita Wastra has trained more than 1,250 women-led businesses in the top tourism destinations in business adaptation, export orientation and innovation-sustainability, such as by encouraging sustainable dyeing innovations using natural colouring ingredients (eg, turmeric, mahogany seeds, and purple sweet potato) and promoting the circular economy: reusing fabric waste in production.
The partnership also facilitates the onboarding process for the digital ecosystem, easing of capital access, as well as fostering the establishment of locally-grown cooperatives to function as "aggregators" and "off-takers", by encouraging them to receive apprentices from the Cooperatives and MSMEs' Development Bank (LPDB-KUMKM).
The LPDB-KUKM is in place to provide credit access for newly established cooperatives and further help channel cooperatives' products to be absorbed by their existing corporation partners. So far the agency has acquired a total of 2,026 cooperatives under its apprenticeship since 2008 of which 147 have been onboarded since 2021.
By taking this method, local weaving industries operating under umbrella cooperatives have less fear if the produced goods or not all sold as they no longer fully depend on tourism.
Throughout 2020, LPDP-KUMKM also has liquefied more than US$69.7 million to more than 52,830 cooperatives and MSMEs. In 2021 alone, the agency has further rolled out US$69.2 million in loans to its constituents.
Supomo, President Director of LPDP-KUMKM, stressed that despite the potential risk of providing capital loans during the pandemic, LPDB-KUMKM has various solutions to maintain services for members.
The MSMEs are the backbone of the Indonesian economy, contributing to 61% of the Indonesian GDP or around US$600 billion and absorbing 97% of Indonesian labour, while cooperativism is the cornerstone the Indonesian economy.
This makes the efforts for sustaining and upscaling MSMEs businesses and their human resources one of the top of national economic recovery priorities, especially as microbusinesses constitute 99.6% of the Indonesian 65.4 million MSMEs.
In 2020, the government allocated US$8.6 billion to MSMEs, the second largest allocation after social protection. That figure increased to US$12.8 billion in 2021. Only aiding MSMEs can Indonesia complete a sustainable recovery. To that end, we are on the right track.
Suzana Ramadhani is the Head of Business Management of the National Craft Council, Republic of Indonesia.