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A Geographical Outlook on West Java Province, Indonesia

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A Geographical Outlook on West Java Province, Indonesia REVIEW OF INTERNATIONAL GEOGRAPHICAL EDUCATION ISSN: 2146-0353 ● © RIGEO ● 11(1), MARCH, 2021 www.rigeo.org Research Article Development of Small and Medium Micro Business: A Geographical Outlook on West Java Province, Indonesia Denny Saputera1 Sakina Ichsani2 Widyatama University Widyatama University [email protected] John Henry Wijaya3 R. Susanto Hendiarto4 Widyatama University Widyatama University Abstract The main business actors in Indonesia are the micro, small and medium enterprises (MSMEs). The role of MSMEs in Indonesia is as a vehicle for driving the economy that can reduce poverty and reduce unemployment through the creation of productive jobs. MSMEs can expand job opportunities, absorb more labor than other business sectors. The contribution of the MSME business unit to the absorption of labor shows that MSMEs have a very important role in development and economic growth in Indonesia. West Java Province is known as the largest MSME producing province in Indonesia. The development of the MSME sector and its role in the growth of employment and income in the province of West Java. Keywords MSME, West Java, Business Unit, Manpower. To cite this article: Saputera, D.; Ichsani, S.; Wijaya, J, H.; and Hendiarto, R, S. (2021) Development of Small and Medium Micro Business: A Geographical Outlook on West Java Province, Indonesia. Review of International Geographical Education (RIGEO), 11(1), 712-719. doi: 10.48047/rigeo.11.1.57 Submitted: 20-01-2021 ● Revised: 15-02-2021 ● Accepted: 25-03-2021 Saputera, D.; Ichsani, S.; Wijaya, J, H.; and Hendiarto, R, S. (2021) Development of Small and Medium … Introduction Most of the business people in Indonesia are micro, small and medium enterprises or known as MSMEs. MSME actors are required to be able to follow the trend of demand and market needs, by producing productively and efficiently and being able to produce products that comply with the best quality standards in the national and international markets. The role of MSMEs in Indonesia as a vehicle for driving the economy can reduce poverty and reduce unemployment through the creation of productive jobs. MSMEs can expand job opportunities, absorb more labor than other business sectors. MSME activities can provide economic prosperity which plays a very important role in creating a positive economic environment for a country. According to data from the Ministry of Cooperatives and Small and Medium Enterprises in 2019 in table 1, the development of MSMEs and Large Enterprises (UB) in 2018 amounted to 64,194,057 business units compared to UB which is 5,550 business units, MSMEs dominate the activities of business units with a ratio of 99.99% compared to 0.01%. Likewise in 2019 MSMEs with a total of 65,465,466 (99.99%) business units compared to UB's 5,637 (0.01%) business units. The comparison of large business units has an impact on the absorption of labor produced according to the data in table 2, where MSMEs in 2018 absorbed 97% of workers (116,978,631) compared to UB of 3% (3.619,507). Likewise, in 2019 the number of MSME businesses was 96.9% (119,562,843) compared to 3.1% at 3,805,829. Table 1: Indonesian MSME and Large Enterprise Business Units (2018-2019) 2018 % 2019 % UMKM 64.194.057 99,99 65.465.477 99,99 UB 5.550 0,00 5.637 0,00 TOTAL 64.199.607 100 65.471.114 100 Source: Ministry of Cooperatives and Small and Medium Enterprises (2018 – 2019) Table 2: Indonesian MSME and Large Enterprise Workers (2018-2019) 2018 % 2019 % UMKM 116.978.631 97,0% 119.562.843 96,9% UB 3.619.507 3,0% 3.805.829 3,1% TOTAL 120.598.138 100% 123.368.672 100% Sumber : (Darma, Wijaya, & Darma, 2020) The contribution of the MSME business unit to the absorption of labor shows that MSMEs have a very important role in development and economic growth in Indonesia. According to Tambunan (2012) MSMEs contribute greatly to the formation of Gross Domestic Product (GDP) growth compared to UB, and according to (Levy, et al. 1999) there is no doubt that MSME performance is very important for economic development in developing countries. So that the role of MSMEs is increasingly becoming more important in economic development in the country because of their influence in employment and Gross Domestic Product (GDP). In 2018 GDP at current prices was 61.07% (9,062.581) and GDP at constant basis was 57.24% (5,721,148). in 2019 MSME GDP at current prices rose by 60.24% (9,580,762) and at constant basis GDP by 57.14% (7.034,146). Mitchell (2019) assesses that Indonesia is included in the top ten countries with the fastest economic growth, one 713 © RIGEO ● Review of International Geographical Education 11(1), MARCH, 2021 of which is due to the rapid growth of MSMEs (Elsi et al., 2020). It can be seen that between economic growth and employment absorption theoretically is shown by Okun's Law where there is a negative relationship between unemployment and GDP. Okun stated that a 1% decrease in unemployment would lead to an increase in GDP growth approaching 2%. In other words, according to Okun's Law and (Williamson, 2018) if GDP increases by 2%, there will be an increase in employment which can reduce unemployment by 1%. This is because the working population contributes to producing goods and services, whereas unemployment does not contribute. Okun revealed that the higher the unemployment rate, the lower the economic growth rate of a country (Vlachvei & Notta, 2015). The contribution of such units may increase if the owner or manager possess the appropriate geographic knowledge. The geography plays a vital role in the business establishment and becoming a stable source of income. Geographic education in this regard can help a lot to smoothly and productively carry out the operations (O. Batubara & Fadjar, 2021). One of the provinces that plays a major role in the Indonesian economy in the MSME sector is the province of West Java. West Java is known as the largest MSME producing province in Indonesia. The development of MSMEs is one of the government's strategic choices to reduce income inequality and poverty. The selection of micro-enterprises as a strategic option for poverty alleviation was chosen because they tend to be mostly cultivated by low-income people. Therefore, this study focuses on the development of the Micro, Small and Medium Enterprises (MSME) sector and its role in employment and income absorption in the province of West Java. Research Purposes The aim of this research is: 1. Meaningful the development of MSMEs in West Java Province within a period of 2 (two) years, in 2018 and 2019. 2. Meaningful how big the role of MSMEs is to labor absorption in West Java Province in 2018 and 2019. Literature Review MSMEs According to Law No. 20 of 2008 concerning micro, small and medium enterprises, it is explained that Micro, Small and Medium Enterprises are business activities that are able to expand employment opportunities and provide broad economic services to the community and can play a role in the process of equity and increase community income. encourage economic growth, and play a role in realizing national stability. In addition, Micro, Small and Medium Enterprises are one of the main pillars of the national economy that must obtain the main opportunity, support, protection and development as widely as possible as a form of firm alignment with people's economic business groups, without neglecting the role of Large Enterprises and Business Entities. State Owned (Tambunan, 2008). Based on the above definition, the objectives of empowering MSMEs based on Article 5 of Law No. 20 of 2008 are: 1. Realizing a balanced, developing, and just national economic structure. 2. Grow and develop the capabilities of Micro, Small, and Medium Enterprises to become strong and independent businesses 3. Increasing the role of MSMEs in regional development, job creation, income distribution, economic growth, and alleviating people from poverty. Based on the criteria for wealth and sales proceeds, according to Law Number 20 of 2008 article 6, the criteria for micro businesses are: 1. At most have a total net worth of IDR 50,000,000 excluding land and buildings for business 2. At most have a total annual sale of IDR 300,000,000. Small business criteria as follows: 714 Saputera, D.; Ichsani, S.; Wijaya, J, H.; and Hendiarto, R, S. (2021) Development of Small and Medium … 1. Have a net worth of between IDR 50,000,000 to IDR 500,000,000 excluding land and buildings for business premises. 2. Have annual sales of between IDR 300,000,000 to IDR 2,500,000,000. Medium Enterprises Criteria as follows: 1. Have a net worth of more than IDR 500,000,000 (five hundred million rupiah) to a maximum of IDR 10,000,000,000 (ten billion rupiah) excluding land and buildings for business 2. Have annual sales of more than IDR 2,500,000,000 (two billion five hundred million rupiah) up to a maximum of IDR 50,000,000,000 (fifty billion rupiah). Barriers in SMEs According to Tambunan (2012) the development of MSMEs does not always run smoothly. There are several obstacles and obstacles that make it difficult for MSMEs to develop, including: 1. Limited capital, access to sources and financial institutions. 2. The low quality of human resources for business actors. 3. Limited ability in marketing. 4. Inadequate information facilities. 5. Distribution, procurement of raw materials and others 6. Costs arise due to complex administrative and bureaucratic procedures. Employment According to the view of Novaria, Marwa, Susetyo, and Azwardi (2016), the large number of available jobs is reflected in the large number of working people.
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