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Why Indonesia lacks entrepreneurs

Entrepreneurs push economic growth but today they account for less than 2% of the Indonesian population.
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Entrepreneurs push economic growth. But today, business owners account for less than 2 percent of the Indonesian population. Neighboring countries, such as Singapore and Malaysia, have much higher rates.

I think there are three major hurdles in Indonesia’s entrepreneur creation. First, it’s a mentality problem. For young Indonesians like me, who grew up in the late 1990s and the early 2000s, the education system did not give us what was needed to become aspiring entrepreneurs. Our education system is, or was, only about telling students what to memorize and what to write.

With that kind of education, it was very hard for me to be able to grow as someone who was keen to produce new ideas and concepts, courageous in taking risks and adaptable to changes in an ever-changing world.

This is contrary to the kind of education system that students in other developing countries have been enjoying for many decades. In those countries, students are encouraged to come up with brave and different ideas. Teachers are trained to inspire lively discussions, challenging their students to solve real-life problems. This in the end helps to produce bright young people who are ready to face the real world.

The condition is worsened by the long-ingrained belief that being successful in life equals having a stable job at a government office or at a prestigious multi-national company.

Nothing has really changed dramatically, as reflected by the 2013 national curriculum. Only those whose parents can afford expensive private schools can enjoy the privilege to learn and develop skills needed to survive in this current inter-connected society, in which it is possible for the young to achieve fast-track success through breakthrough inventions.

Meanwhile, the majority of our young people are forced to seek the needed skills outside the formal education system.

The second problem is that our financial sector is not favorable toward those who dream of having their own businesses. When I was entering adulthood, I realized that I was not bankable, which is merely a fancy term used by a bank official to label someone who shows up for a loan with nothing but a business concept and eagerness.

Banks in Indonesia have for a long time adopted a very high micro-lending rate, around 20 percent currently, due to the high level of net interest margin (NIM) — the gap between lending and deposit rates — which is the highest in ASEAN. So unless you are well connected or you inherit a large sum of money from your family, it is very difficult to get the capital needed to start a business.

The lack of commitment from the government to establish a friendly entrepreneurship climate is the third obstacle. While former president Susilo Bambang Yudhoyono may have been successful in boosting the nation’s economic output in his ten-year tenure, his administration failed to build a business climate that was friendly to young generations and the small and medium enterprises (SME) sector.

Though the SME sector makes a very significant contribution to the economy, absorbing more than 90 percent of the domestic workforce and accounting for more than 50 percent of national gross domestic product (GDP), Yudhoyono’s administration never had a clear, visionary entrepreneurship masterplan to produce more SMEs.

The Cooperatives and Small and Medium Enterprises Ministry, for example, was too slow in adapting to the vastness of today’s advancements in technology. The ministry’s programs were never accessible to a mass young audience, with budget always used as an excuse. Not surprisingly, in the last few years most of the entrepreneurial initiatives have been pioneered by the private sector and a small number of wealthy individuals, who have concerns about the current situation.

As a result, young people experience difficulties getting financial assistance and access to startup grants and cheap loans. Free entrepreneurial workshops are also hard to find, in which the young can learn how to manage a business and develop products or even how to find opportunities in foreign markets.

Our hopes are now on President Joko “Jokowi” Widodo’s shoulders. It is worth seeing how far his commitment to improving the entrepreneurship climate in Indonesia goes, as boosting the creative economy was one of his powerful statements during the presidential campaign. As a former businessman himself, improving the country’s entrepreneurial spirit should naturally become one of Jokowi’s top priorities.

As the basic foundation of human capital development, education, while it may not provide quick results, should be included in the government’s grand scheme to increase the number of entrepreneurs in Indonesia. The former education ministry, now divided into two ministries under Jokowi’s leadership, must be able to think outside the box and see education as a strategic partner to the economy.

The government should also start thinking of ways to push the existence of a friendlier entrepreneurial climate, by making new regulations that favor small, first-time or bootstrap entrepreneurs, while creating more programs dedicated to stimulating and producing new business owners on a large scale, specifically targeting the young ones.

It would even be a good idea if entrepreneurship became one of the Jokowi administration’s grand themes in future economic plans.

A recent move from the Financial Services Authority (OJK) to push banks to lower their micro-credit rates is a good example and it deserves our appreciation. Related ministries, government bodies and agencies should follow suit to implement new approaches and breakthroughs.

The writer is an account manager at Golin Indonesia, a communications firm that specializes in marketing communications, public affairs, corporate affairs and government relations

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The Jakarta Post is a daily English language newspaper in Indonesia. The paper is owned by PT Bina Media Tenggara, and the head office is in the nation's capital, Jakarta.

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