The business environment in Indonesia presents a range of opportunities for women in the private sector, while simultaneously requiring them to navigate obstacles to their success. More...
The business environment in Indonesia presents a range of opportunities for women in the private sector, while simultaneously requiring them to navigate obstacles to their success. Overall, there is a relatively low representation of female entrepreneurs in Indonesia, with woman-run businesses concentrated among micro and small enterprises. Women own about 23% of SMEs in Indonesia, a figure that is growing at a rate of 8.1% annually (compared to a negative growth rate for men’s SMEs). As such, Indonesia’s economic growth is significantly predicated on the ability of these enterprises to flourish.
Indonesia’s economy as a whole is growing steadily, further boosting opportunities for female entrepreneurs. From 2000-2014, the average annual GDP growth rate for the economy was 5.4%. The economy’s GDP, inflation, and unemployment are all stable. As of 2015, trade is concentrated in energy-related products, while Indonesia has largely lost its competitiveness in more traditional export sectors, such textiles. Regional trade is growing, with imports and exports shifting toward Asian and developing economies.
Despite enhanced trade opportunities, many businesses prefer to remain in the domestic market. In a 2013 survey, 80% of Indonesia’s women entrepreneurs reported plans to expand operations domestically rather than regionally, some noting the large size of the domestic market and its growth. Still, many enterprises, particularly SMEs, experience low productivity. This is attributable to a variety of factors: pervasive informality, bureaucratic red-tape, human resource weaknesses, low access to certain productivity-enhancing products (such as various technologies or improved fertilizers), challenges in accessing finance and in hiring and training employees, and myriad social constraints. In 2014, the World Bank’s annual Doing Business report ranked Indonesia 117 out of 189 economies surveyed, considerably lower than the average in 2015 of the East Asia and Pacific economies ranked by the World Bank.
A breakdown of working Indonesian women by job status in 2011 reflects the range of economic roles women play: formal laborers, employees and staff (32%); casual workers in the agricultural and non-agricultural sectors (18%); self-employed (17%); and unpaid labor (31%). Just 4.55% of the 398 CEOs on the Indonesia Stock Exchange are women. Traditional gender roles continue to limit women’s ability to participate in business. Women in Indonesia are expected to take on a predominant share of housework, childcare, and eldercare duties, which can deter their participation in business. In 2012, the Economist’s Women’s Economic Opportunity index ranked Indonesia relatively low with respect to women’s economic opportunity—85 out of 128 countries surveyed. In East Asia and the Pacific, where economic opportunities for women have expanded greatly in recent years, Indonesia does not fare much better, where it is ranked 13 out of 22 economies.
Further constraining female entrepreneurs in Indonesia are regional challenges across the economy’s six provinces. Gaps between the rural and urban areas and west and east impede the economy’s economic development and minimize opportunities for entrepreneurs. A 2011 report by the Asia Foundation on local economic governance found that infrastructure in western Indonesia, the municipalities, and main islands met a higher standard than that of eastern Indonesia, the regencies, and smaller islands. Regional differences can be partly attributed to Indonesia’s dispersed geography, comprised of five main islands, two major archipelagos, and sixty smaller archipelagos. Recognizing these divides, the central government has developed the 2011-2025 Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) in order to strengthen national connectivity, largely through infrastructure development, particularly among the six economic corridors (Sumatra, Kalimantan, Java, Sulawesi, Bali and Nusa Tenggara, and Papua-Maluku). In addition, the social and cultural contexts affecting women’s ability to participate in the workforce vary widely by province. In Papuan culture, for example, women do not have access to education and are excluded from decision-making, severely restricting their ability to engage in any type of economic activity.
To counteract conditions undermining the economic potential of Indonesians, the central government has taken a number of steps to improve the business environment, although specific support services for female entrepreneurs remain limited. Government services are in demand by women entrepreneurs, with trade fairs and training attracting high levels of participation. Moreover, the presence of role models, particularly other female relatives in business, is important in encouraging the growth of woman-run businesses. Indonesia’s 2011 Regional Entrepreneurship Summit emphasized that women would benefit from more role models to help them develop their business potential.
Research by the Asia Foundation shows that Indonesia’s women entrepreneurs benefit greatly from frequent engagement with formal business networks. Women in Indonesia are 23% more likely than male counterparts to be members of a business association and more than half of the business women surveyed by the Asia Foundation say they are members of one or more associations. Despite this fact, networks for women entrepreneurs are somewhat limited. The Indonesian Women’s Business Association, or IWAPI, is the primary network for woman-owned enterprises and business women. A number of larger associations target both men and women, particularly those encouraging cross-border relations, such as the Australia Indonesia Business Council and the Business Indonesia Singapore Association. Online connectivity in Indonesia has significantly developed the scope of informal networks used by women in business. Resources such as LinkedIn, MeetUp, Facebook, WhatsApp, and Mig33 are widely used.
Networks that support women’s access to capital and assets:
Networks that support women’s access to markets:
Networks that support strengthened capacity and skills for women in business:
Networks that support women’s leadership, voice and agency:
Networks that support women and innovation and technology:
A range of private sector initiatives in Indonesia support female entrepreneurs at different stages of development, from establishing a microenterprise to growing a larger or multifaceted firm. These initiatives address a variety of business needs or opportunities including access to finance, market access, mentorship, and online business support. Access to finance is a particular concern to female entrepreneurs in Indonesia and related services are in demand. Research has shown that women who own businesses in Indonesia are 26% less likely to have a bank loan than men. Women are also less likely to have a savings or deposit account than men as opening a bank account can be difficult for women due to restrictions such as need for a male family member’s permission.
The private banking sector is increasingly lending to microenterprises. According to the Wall Street Journal, microlenders typically lend directly to individual entrepreneurs, in contrast to Grameen-style lenders, who have traditionally disbursed funds through women's groups. Indonesian lenders also tend to focus on “rural town markets with hundreds of businesses in one spot, rather than dealing with the costs of going to far-flung villages, as many microlenders do.”
Private sector initiatives are increasingly oriented toward easing the ability to do business. For example, in May 2013, Indonesia’s three major mobile operators (Telkomsel, Indosat, and XL) formed a partnership that allows customers to send and receive mobile money across all three networks.
Initiatives that support women’s access to capital and assets:
Initiatives that support women’s access to markets:
Initiatives that support strengthened capacity and skills for women in business:
Initiatives that support women’s leadership, voice and agency:
Initiatives that support women and innovation and technology:
The Indonesian government recognizes the need to take women’s participation in economic growth seriously. At the 2013 APEC Joint Ministerial Meeting on SMEs and Women, the Indonesian Minister for Women’s Empowerment noted the importance of policies targeted toward female entrepreneurs and called for collaboration between national institutions to achieve this. Similarly, at a 2014 National Entrepreneurship Movement in Jakarta, the Minister of Cooperatives and SMEs announced the Ministry’s objective to work with the Ministry of Women’s Empowerment to better support female entrepreneurs by improving marketing networks and expanding access to finance. In addition, in 2014 the government launched a survey, “Gender Survey in Indonesian Government Goods/Services Procurement System,” to understand how the procurement system can better integrate female entrepreneurs in order to more fully integrate gender into the system. The survey found that women’s access to online procurement mechanisms is limited because of women’s lower e-literacy rates and ability to navigate the internet. Increasing female entrepreneurs’ e-literacy will be necessary as procurement processes migrate online and, as such, efforts must help women understand online procurement requirements and the application process. The survey also found that women’s businesses are concentrated in sectors with low levels of government procurement, such as catering, goods, and perishables. Finally, the survey showed that many businesses are reluctant to participate in government procurement as it is viewed as a “social gathering and formality”, meaning that it is largely inaccessible to those not within insider networks. The government is taking steps to address this through its MCA-Indonesia’s Procurement Modernization Project an important aspect of which will be improving women’s access to government procurement.
The government has run programs for female entrepreneurs through various ministries. The programs include training in product packaging, business licensing, ICT, and patent and intellectual rights. While this training benefits female entrepreneurs, a scan of government services supporting the business environment in Indonesia reveals relatively few direct initiatives or services focused on women entrepreneurs. This trend is reflected in research indicating that 46% of women SME owners surveyed reported that they found the government to be “indifferent” or “hostile/unsupportive” to business. Despite these findings, the demand for government services among female entrepreneurs is high. Women in Indonesia are more likely to participate in government-provided services than their male counterparts, including trade fairs and training.
Despite a dearth of programs providing direct support for female entrepreneurs, the government has taken significant action to build a stronger business environment. For example, the government created six main programs—or Action Plans—to promote SMEs. These address creating a better business environment, primarily through formulating regulations; facilitating market access; providing access to finance, largely in cooperation with financial institutions; improving access to information, largely around IT; helping SMEs better incorporate appropriate technologies into their business; and human resource development. The government’s support for a better business environment has led to a decrease in the amount of time needed to start a business from 168 days in 2004 to 52.5 days in 2014, according to the World Bank’s Doing Business in 2015 report. In support of household industries, many of which are run and managed by women, the Ministry of Trade passed regulations requiring larger retail shops such as Carrefour and Hypermart to source at least 10% of their displayed items from household industry.
In addition, the government has supported the establishment of one-stop shops across 445 local government offices to simplify the process of applying for business permits and licenses. The program has eased the process of obtaining a business permit by consolidating the ability to issue business licenses into one department. Other incidences of formality, however, remain cumbersome, such as getting a construction permit and paying taxes, where the World Bank’s Doing Business report continues to find lengthy procedures and high costs.
Many economies have opened chambers of commerce in Indonesia to expand opportunities for doing business there. Chief among these are the European, British, and American chambers. Although these chambers do not typically provide business services, they are important in the development of Indonesia’s trade capacities and in opening trade opportunities for Indonesian businesses.