Name: Osfred Yuda Mewengkang

SIN: 15061103152

Class: IV D

The Effect of UMKM for The People in MEA

UMKM in bahasa called “Usaha Mikro, Kecil, dan Menengah” is the synonym of SMEs (Micro,

Small, Medium scale Enterprise). Micro Enterprise is productive business owned by individuals and/or

individual business entity fulfilling the criteria of micro business as regulated in this law. Small

Enterprise is a stand-alone productive economic enterprise, carried out by an individual or business entity

that is not a subsidiary or not a branch of a company owned, controlled, or becomes part directly or

indirectly from a medium-sized or large-scale business that meets the business criteria as defined in this

law. Medium Enterprise is a stand-alone productive economic enterprise, carried out by an individual or

a business entity not being subsidiary or branch of a company owned, controlled or part of either a direct

or indirect business of a medium-sized or large-sized business by amount of net worth or annual sales

proceeds as stipulated in law. (Laws of the Republic Indonesia number 20, 2008).

UMKM or SMEs give huge contribution to ASEAN involve Indonesia’s. Until now, around 96%

kind of business in ASEAN is UMKM or SMEs with contribution to Gross domestic Profit (GDP) around

30%-57%; and absorbs labor around 50%-95%. While in Indonesia, UMKM contributing 99.98% units of

business with contribution to GDP as much as 57% National GDP; and absorbs more than 97% of

domestic labor. In this case, UMKM role became very important as the core of creating job vacancies and

economic growth, as good for national and regional. (Ashariyadi, 2016)

Since implementing in 2015, ASEAN Economic Community (AEC) open opportunity of goods

and services exchange will be free in and out (free trade) between ASEAN countries. People in ASEAN

countries will easy to access or get products and services that their needs and wants. For SMEs in
ASEAN countries, the existence of AEC would be momentum to improve the quality of goods and

services provided, because it will be directly faced with a broader market than before. AEC provides

opportunity for SMEs to become a major player in the ASEAN market and allows for integration in

regional production network and global value chain. SMEs with attractive and innovative products with

efficient operation cost could grow up export and driving business growth

Sector Small and Medium Enterprise (SMEs) has already received attention in efforts to improve

the economic competitiveness of Indonesia since the beginning of the 1998 crisis. History demonstrated

that global financial crisis hardly impacted the Indonesian SMEs sector compared to banking or

infrastructure sector which heavily depended upon foreign loans. It is why that SMEs deserves get a

larger portion for development and more opportunities to compete in regional and international level in

particular..

SMEs could be support sector to help economic growth because it is open job opportunity,

reducing the number of unemployment and poverty, and also increasing domestic revenues. SMEc give

contribution to equitable distribution of income and improve the economic ability of the community

engaged in the sector of SMEs both are business owners and to the employees.

Business players in ASEAN must be prepare to compete with other competitor from ASEAN

countries. The quality of human resources of SMEs is need to improve. Very few of SMEs are run by

young people. Improving the quality of human resources of SMEs is a challenges. Various of skills

training, management, and other technical training according to the important needs are held periodically.

The paradigm of think of SMEs players need to be directed to be ready to faces global competition.

In order to make SMEs run well or succeed, the SMEs should get a distributor from any other

company, because many of the other company sells what SMEs sell too, for example if they were selling

the raw materials that we need with low price, of course we can get more profit from that, we bought the

raw materials and process the raw materials and sell it with the price that more than we bought the raw

materials.
 Ability to create and sell (marketing) products are also SMEs players should know, because it is

important in order to compete to satisfy what is people’s needs and wants. Innovation and creativity is

required to have by SMEs players because nowadays people’s need new innovation of product. Make a

unique product is one of innovation and creativity example. Differentiation makes SMEs could still exist.

For small and medium enterprises, the advent of the integrated ASEAN economic era is a selection

process. Those who can see and maximize the opportunities will experience breakthroughs and progress

in their business, while who those cannot adapt, will find it more difficult to run their business.

UMKM for the people in ASEAN Economic Community (AEC) give positive effect and negative

affect. Positive effects that people in AEC can realize are: UMKM or SMEs can open jobs opportunity,

with open job opportunity people can get jobs and it reduce the number of unemployment. Also with the

job created, the number of worker could increase and they could get lessons in the workplace and even

start their own business with the knowledge they get, for example someone opened a business of making

sofa, it started with their kid work in sofa company and get the knowledge needed to make good sofa and

when he got the startup money he bought the tools and open his own business. Government nowadays

boost to infrastructure sector to support the accessibility flow of products and services, because

government see SMEs is very important to reduce poverty and gain the national revenue to boost

economic growth.

UMKM or SMEs also have negative effect to countries if the SMEs players not ready to compete,

because with implemented of AEC, SMEs players must faces with other competitor in ASEAN countries

that have higher skills or knowledge. So, SMEs players must improve their skills and knowledge to

compete with other competitors. Not only the skills and competencies but is your business or product

could be accepted by other countries’ culture? For example Indonesia is a Muslim majority, so every

product should meet the “halal” test and could be sell. But if you can turn it to a good product and meet

the requirements it could be an opportunity to be an established UMKM or SMEs.