Small and Medium-Scale Industries in Indonesia

Until the late 1960s, when the issue of perceived massive and rising unemployment came to the fore, the promotion of small and medium-scale industries had not become a major concern of development policy. Since then, because of the employment generation potential of small and medium-scale industries, more and more governments in the developing countries have adopted policies and measures for the promotion of these industries.In any developing country, most manufacturing activities take place in small and medium industries and these account for an overwhelming proportion of the manufacturing establishments in the country. Available data do not suggest that the importance of small and medium industries declines as the levels of development rise. In fact, since the mid-1970s, small and medium industries may have made a comeback in the developed countries, due to, among other things, the shortening of the product life cycle and the need for flexible responses to changes in currency exchange rates, product markets and technological development.This article attempts to describe the experience of Indonesia in the promotion of small and medium industries for development. In doing so, however, it first briefly examines the general features of small and medium-scale industries and the problems they face.