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No. Directorate General of Small and Medium Industry Ministry of Industry Republic of Indonesia THE COOPERATION FOR STRENGTHENING CLUSTERS (SENTRA) OF SMALL AND MEDIUM INDUSTRIES IN THE REPUBLIC OF INDONESIA FINAL REPORT February 2011 Japan International Cooperation Agency UNICO International Corporation IDD KRI International Corporation JR 11-012 Abbreviations Abbreviation Bahasa Indonesia English AP3MA Asosiasi Petani, Produsen, dan Pelaku Association of Farmers, producers, Agribisnis Minyak Atsiri Jawa Barat and actors Agribisns West Java Essential Oil APINDO AsosiasiPengusaha Indonesia Indonesia Employer Association BALITRO Balai Penelitian Tanaman Obat dan Research Institute for Medicinal Aromatik and Aromatic Crops BAPPEDA BadanPerencanaan Pembangunan Daerah Regional Development Planning Board BAPPENAS Badan Perencanaan dan Pembangunan National Development Planning Nasional Agency BARISTAND BalaiRisetdanStandarisasi Research and Standardization Institution BBIA BalaiBesarIndustri Agro Agro Industry Research Institute BDI BalaiDiklatIndustri Industrial Training Institute BDS Business Development Service BI Bank Indonesia Bank Indonesia BKPMD Badan Koordinasi Penanaman Modal Regional Coordination Daerah Board for Investment BKP4K Badan Ketahanan Pangan Dan Penyuluhan Extension Office for Agriculture, Pertanian Perikanan Dan Kehutanan Forestry and Fisheries BMT BaitulMaalwatTamwil BPPT Balai Pengkajian dan Penerapan Teknologi Agency for the Assessment and Application of Technology BPT BadanPelayananTeknis Technology Service Institute BPR Bank Perkreditan Rakyat Bank Perkreditan Rakyat BPS BadanPusatStatistik Statistic Bureau BRI Bank Rakyat Indonesia Bank Rakyat Indonesia CSR Corporate Social Responsibility DAI DewanAtsiriIndonesia Indonesian Essential Oil Council DAC Development Assistance Committee CD-SMEｓ Center for Development of SMEs DEKRANASD DewanKerajinanNasional Daerah National Craft Regional A Committee DGIKM Direktorat Jenderal Industri Kecil dan Directorate General of Small and Menengah Medium Industries Dinas Dinas Regional Government Office DPE DewanPengembanganEkonomi Economic DevelopmentCommittee DPDS DewanPengembanganDayaSaing Committee for Regional Competitiveness Development EO Extension Officer i Abbreviation Bahasa Indonesia English FEDEP Forum for Economic Development and Forum for Economic Development Employment Promotion and Employment Promotion FGD Focus Group Discussion FPESD Forum Pengembangan Ekonomi dan Sumber Economic Development and Daya Resource Forum FRK Forum RembugKlaster Cluster Forum GAP Good Agricultural Practice GDP Gross Domestic Product GMP Good Manufacturing Practice GTZ German Technical Cooperation/Deutsch Gesellschaft für Technische Zusammenarbeit ICT Information and Communication Technology IKM Industri Kecil danMenengah Small and Medium sized Industry IKOPIN InstitutManajemenKoperasiIndonesia Indonesia Cooperative Management Institute IMS-GT Indonesia, Malaysia, and Singapore - Growth Triangle IMT-GT Indonesia, Malaysia, and Thailand - Growth Triangle IPB InstitutPertanianBogor Bogor Agricultural University ISEO International Seminar for Essential Oil ISO International Organization for Standardization ITB InstitutTeknologiBandung Bandung Institute of Technology JETRO Japan External Trade Organization JICA Japan International Cooperation Agency KADIN KamarDagangdanIndustri Chamber of Commerce and Industry KADINDA Kamar Dagang ｄan Industri Daerah Regional Chamber of Commerce and Industry KPIN Kebijakan Pembangunan IndustriNasional National Industrial Development Policy KUB Kelompok Usaha Bersama Joint Business Group KUR Kredit Usaha Rakyat People’s Business Credit KUT Kredit Usaha Tani Agro Business Credit LIPI LembagaIlmuPengetahuanIndonesia The Indonesian Institute of Sciences ii Abbreviation Bahasa Indonesia English LPG LiquefiedPetroleum Gas MFI Microfinance Institution MIDC(BBLM) Balai Besar Pengembangan Industri Logam MetalIndustriesDevelopmentCent dan Mesin er MOI DepartmenPerindustrian Ministry of Industry MOIT DepartmenPerindustriandanPerdagangan Ministry of Industry and Trade MoU Memorandum of Understanding NAFED(BPE BadanPengembanganEksporNasional National Agency for Export N) Development NGO Non Governmental Organization OVOP One Village One Product P2WKSS Peningkatan Peranan Wanita menuju Empowerment of Women for Keluarga Sehat dan Sejahtera Healthy Good Welfare Households P3UKM Pusat Pengembangan Pendampingan Usaha Centre for Development of BDS Kecil dan Menengah Providers for SME PA PachouliAlcohol PP Pilot Project PDCA Plan Do Check Action PDM Project Design Matrix PKDL Persatuan Kepala Desa dan Lurah District Head and Village Head PIKM Peｍgenbangan Industri Kecil dan Small and Medium sized Industry Menengah Development PUPUK Perkumpulan Untuk Peningkatan Usaha The Association for Advancement Kecil of Small Business QCD Quality, Cost, Delivery RDC ResourceDevelopmentCenter RGDP Regional Gross Domestic Product RPJM Rencana Pembangunan JangkaMenengah National Medium-Term Development Plan SC Supply Chain SETDA Sekretariat Daerah Regional Secretary SME Small and Medium sized Enterprises SMIK SekolahMenengahIndustriKerajinan High School for Handy Craft Industry SMK SekolahMenengahKejuruan Vocational High School SMOCSME Kementerian Koperasi ｄan UKM The Office of State Minister for Cooperative and SME SOP Standard Operating Procedures SWOT Strength, Weakness, Opportunity and Threaｔ TOT Training of Trainers iii Abbreviation Bahasa Indonesia English TQM/TQC Total Quality Management/Total Quality Control UKM Usaha Kecil danMenengah UNDIP UniversitasDiponegoro DiponegoroUniversity UNPAD UniversitasPadjadjaran Padjadjaran University UNWIM UniversitasWinayaMukti WinayaMukti University UPL Unit PendampinganLangsung Direct Assistance Unit UPTD/UPT Unit PelayananTeknis Daerah Regional Common Service Facilities WG Working Group 5S SEIRI, SEITON, SEISO, SEIKETSU, SHITSUKE(Japanese) iv Contents Executive Summary .............................................................................................................. S -1 Chapter 1 Objective, Background and Outline of the Cooperation ..................................... 1 - 1 1.1 Background of the Cooperation ................................................................................. 1 - 1 1.2 Objective of the Project and Expected Results .......................................................... 1 - 1 1.3 Scope of the Activity ................................................................................................. 1 - 3 1.4 Target Area ................................................................................................................ 1 - 3 1.5 Study Team Members and Counterpart Organization ............................................... 1 - 3 1.5.1 Team members ................................................................................................... 1 - 3 1.5.2 Counterpart Organization ................................................................................... 1 - 4 1.6 General Outline of the Cooperation Flow .................................................................. 1 - 4 1.6.1 Stage 1 ................................................................................................................ 1 - 5 1.6.1.1 Analysis of current state of the country’s cluster development and related issues ................................................................................................. 1 - 5 1.6.1.2 Understanding of general conditions relating to the five candidate provinces for the pilot project ....................................................................... 1 - 5 1.6.1.3 Selection of two provinces to conduct the pilot project ............................... 1 - 5 1.6.2 Stage 2 ................................................................................................................ 1 - 6 1.6.2.1 Current state of promotion of the target clusters and related issues ............. 1 - 6 1.6.2.2 Cluster diagnosis training ............................................................................. 1 - 6 1.6.3 Stage 3 (Implementation of the Pilot Project) .................................................... 1 - 6 1.6.3.1 Embroidery cluster in Bukittinggi, West Sumatra ........................................ 1 - 6 1.6.3.2 Nilam oil (essence oil) cluster in Sumedan, West Java ................................ 1 - 6 1.6.4 Stage 4 ................................................................................................................ 1 - 7 1.6.4.1 Preparation of the draft final report .............................................................. 1 - 7 1.6.4.2 Workshop ..................................................................................................... 1 - 7 1.6.4.3 Preparation and submission of the final report ............................................. 1 - 7 Chapter 2 Industrial Promotion Policy and Cluster Development in Indonesia.................. 2 - 1 2.1 Industrial Promotion Policy ....................................................................................... 2 - 1 2.1.1 Industrial Promotion at the Central Government Level and Cluster Development Policy ........................................................................................... 2 - 1 2.1.1.1 National Industry Development Policy ........................................................ 2 - 1 2.1.1.2 Local Industry Core Competence Road Map ............................................... 2 - 3 2.1.1.3 2008 Presidential Decision No.28 concerning National
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