Client : Asia-Pacific Economic Cooperation (APEC)

Micro and SMEs (MSMEs) drive inclusive and sustainable growth in most APEC economies, as they represent 98% of enterprises, contribute between 40% to 60% of GDP, and dominate employment (60% of total employment in average). The COVID-19 pandemic caused a detrimental impact to this segment in 2020, which has been addressed by series of SMEs policy response across APEC economies, aiming mainly to support MSME’s survival in the short term. However, only some economies have introduced structural policies that were geared towards long term demand sustainability, such as accessing new markets, innovation, and capacity building.

Experiences from Indonesia highlight four main program categories that are more effective in unleashing new demand for MSMEs i.e.: (1) onboarding programs to e-commerce platforms, (2) link-and-match or connecting MSMEs to new markets through business matching and virtual expo; (3) derivative programs from public campaigns to buy domestically produced goods; and (4) quota of government procurement to MSMEs (Presisi Indonesia, 2021). However, only a small percentage of MSMEs responded to the pandemic proactively, with most showing no changes in business planning nor the incentive to seek out government support.

This study aims to (1) explore, review, learn and map current policies on the MSMEs’ demand promotion programs in Indonesia and selected APEC Economies; (2) review, learn, and map current related policies; (3) identify and examine requirements and challenges to implementing demand promotion programs; and (4) recommend critical steps to promote the demand for MSME in Indonesia and relevant APEC Economies. These four objectives are then translated into three main demand promotion policy/program: (1) business and product innovation, (2) expanding market access, (3) marketing and sales initiatives. This study also recognizes the existence of enabling infrastructure and related policies that indirectly support the demand side.