Most small businesses could shut down in six months due to COVID-19: UNIDO

The majority of small businesses might have to shut down within six months, as the restrictions aimed at containing COVID-19 are bringing the Indonesian economy to a standstill and destroying their revenues, according to a survey by the United Nations Industrial Development Organization (UNIDO).Some 60 percent of small businesses might only survive six months if the pandemic restrictions were still in place, according to the survey, which involved 147 small businesses and was conducted between June and July.“There is a set of relevant policies that can be drafted based on the findings of the survey, to help industries and SMEs [small and medium enterprises] to overcome the impacts of COVID 19,” Esam Alqararah, the UNIDO representative for Indonesia and Timor Leste said in a statement on Tuesday. UNIDO suggested that the government offer a wage subsidy to help small businesses retain their workers, while also doubling down on its collaboration with e-commerce platforms to help SMEs keep selling their products amid the pandemic restrictions.“Industry 4.0 can also enhance the SME supply chain, business performance, improve digital enterprise, open new manufacturing, technological career opportunities and integrate the human capacity in the digital world too,” Alqararah said, referring to the fourth industrial revolution.Indonesia’s small businesses, which employ the overwhelming majority of the national labor force and contribute around 60 percent to the country’s economy, have been battered by the COVID-19 crisis.While a Mandiri Institute study shows that digitalized small businesses are more resilient in the global health crisis, the number of small businesses on digital platforms only amounts to around 9 million, or 14 percent of all small businesses, according to the Cooperatives and SMEs Minister Teten Masduki, quoting data from the Communications and Information Ministry. Read also: Govt bootcamp to prep 30 startups to give SMEs a digital leg upThe government has also earmarked Rp 123.46 trillion (US$8.3 billion) for micro, small and medium enterprises (MSMEs) as part of its coronavirus relief package. As of Sept. 28, the government had disbursed Rp 79.06 trillion, 64 percent of the budget.Meanwhile, it has also disbursed nearly Rp 16 trillion, around 72.4 percent, of the budget to 6.6 million MSMEs under the government’s productive social assistance program, according to Budi Gunadi Sadikin, the head of the national economic recovery committee on Wednesday.“In line with the President’s order, we are paying attention to MSMEs because they were the support of Indonesia’s economy in previous crises,” said Budi, who also serves as deputy state-owned enterprises minister, in a separate virtual presser.UNIDO suggested the Indonesian government improve businesses’ awareness of access to its relief package.UNIDO’s survey also found that 92 percent of the surveyed micro enterprises were expecting a more than 50 percent year-on-year (yoy) fall in revenue, leaving them the most severely hit sector.The majority of the micro businesses told the survey they would support the government in issuing a policy that could reduce rent and utility costs to cushion the pandemic’s impact.However, around half of the surveyed small businesses were expecting to recover in a month as the pandemic ended, 27 percent expected two to three months, 14 percent four to six months and the remaining 5 percent, more than six months.Ikhsan Ingratubun, the chairman of Indonesian MSME Association (Akumindo), said that based on the facts he had gathered from his members, many could only survive for three months during the pandemic-induced revenue slump.“We have faced this since February or March. Many closed in June,” Ikhsan told The Jakarta Post in a phone interview on Wednesday,“If their revenue remains only 10 to 15 percent [of the normal levels], it will not be enough to fund their expenses. We therefore estimate they will only last three months,” Ikhsan added.However, how long small businesses can survive the pandemic may differ from one region to another, according to the chairman.Topics :