Stories

Supporting Indonesian MSMEs in Accessing New Export Markets

Micro, small, and medium-sized enterprises (MSMEs) are vital drivers of inclusive economic growth worldwide, generating jobs, empowering women, and reducing poverty. In Indonesia, the sector is especially significant—home to more than 66 million MSMEs employing 119 million people and contributing over 60 percent of the country’s GDP. As Indonesia seeks to strengthen its trade competitiveness, Indonesian MSME export sustainability is emerging as a critical priority, ensuring small businesses can meet global standards and unlock international market opportunities.

Indonesia has the highest number of MSMEs among Southeast Asian states and the highest number of people employed by the MSME sector across the entire region. The Government of Indonesia’s focus on enhancing MSME-linked trade capabilities is prioritized in its strategic development plans and ongoing negotiations for multiple free trade agreements. In addition to their substantial contribution to the national economy, Indonesian MSMEs hold significant potential for international market expansion.

Barriers to International Market Expansion

However, their unfamiliarity with complex trade agreements and sustainability standards has been a major barrier to greater global participation, particularly in accessing sophisticated markets like Canada, the European Union and the United States. Despite their sizeable contribution to national GDP, Indonesian MSMEs account for only 15 percent of the country exports.

The underlying challenges faced by MSMEs in reaching export markets include: i) limited awareness of Indonesia’s free trade agreements (FTAs) and how to utilize them for business; ii) poor access to information on tariffs, rules of origin, certification and licensing processes; and iii) weak understanding of and capacity to comply with international quality, labor, social and environmental regulations.

Capacity Building Through BEDO and UNPAR

To address these limitations and enhance the export potential of domestic MSMEs, the Business & Export Development Organization of Indonesia (BEDO) and Parahyangan Catholic University (UNPAR) pioneered training to help small enterprises understand basic notions of sustainability principles and practices. These training programs have supported MSMEs in identifying and documenting good social and environmental practices, and integrating this information into Sustainability Reporting (SR). SR serves as an entry point for MSMEs to adopt sustainable business practices and gradually meet internationally recognized sustainability standards and certifications. The training tools developed by BEDO and UNPAR have adapted to the Global Reporting Initiative (GRI) model – a recognized global standard for business sustainability reporting – to meet the specific business needs of Indonesian MSMEs.

Expert Deployment Mechanism for Trade and Development (EDM) Assistance

Given the limited expertise available in this area in Indonesia, BEDO and UNPAR solicited technical assistance from the Expert Deployment Mechanism for Trade and Development (EDM), implemented by Cowater International and the Institute of Public Administration of Canada, to increase the capacity of Indonesian business stakeholders in the area of sustainable business practices.

EDM is a flexible technical assistance initiative, supported by the Government of Canada, designed to respond to country demands for tailored expertise in areas that can support MSME development, export enhancement and trade policy improvements. Its ultimate objective is to maximize inclusive economic growth in developing countries that have trade and investment agreements with Canada.

Developing a Training-of-Trainers Program

Specifically, Cowater International and EDM stepped in to develop a Training-of-Trainers (ToT) program and provide tailored advice to Indonesian Business Support Organizations (BSOs) on how to enhance MSMEs’ knowledge and skills in sustainable business practices and reporting. EDM’s technical assistance was provided in partnership with Globally Cool. Key activities included designing and delivering webinars to raise awareness about sustainability standards, assessing and refining existing training tools, conducting ToT workshops, developing a series of e-learning materials, and formulating recommendations to promote sustainability standards among MSMEs. The initiative emphasized gender equality and social inclusion, climate considerations, and good governance to enhance knowledge of these emerging themes in international trade responding to evolving regulatory and consumer expectations in the North American and European markets.

Key Project Activities and Achievements

The project took a comprehensive approach in strengthening sectoral capacity and building an understanding of sustainability standards in international trade by addressing a series of needs.

1. Raising Awareness Through Webinars – First, a webinar, organized in collaboration with BEDO and UNPAR, raised awareness about the growing importance of international sustainability standards and their relevance for potential Indonesian MSME exporters and trade sector stakeholders. The webinar reached 93 participants, including Indonesian MSMEs, trainers, consultants, government officials and NGO representatives, with 70 percent of the participants being women.

2. Facilitating Linkages Between Canadian and Indonesian Trade Organizations – The project facilitated linkages between Canadian trade organizations and Indonesian BSOs. A virtual roundtable was organized to connect Indonesian organizations and Canadian importers and trade organizations. This knowledge exchange fostered valuable partnerships and facilitated a discussion around global sustainability business practices. Six Canadian SMEs, TFO Canada and ITPC Vancouver participated in the virtual event, providing insights on mainstream market sustainability practices in international trade.

4. Intensive Training for Indonesian Trainers – To ensure the impact of technical assistance beyond the life of this partnership with BEDO and UNPAR, the project hosted a two-day intensive training session to equip Indonesian trainers with the knowledge and skills needed to effectively deliver sustainability reporting training to local MSMEs. Twenty-six BSO representatives completed the training, gaining expertise in sustainability performance and reporting. The two-day training was accompanied by the development of a comprehensive Trainers’ Toolkit to enable Indonesia trainers to engage a broader range of trade sector audiences.
5. Development of E-Learning Modules- Finally, recognizing the importance of scalability and accessibility, the project developed five e-learning modules, covering specific topics that address international sustainability standards and sustainability reporting. The e-learning modules ensure continued learning opportunities for MSMEs and are hosted on UNPAR’s e-learning platform. They cover various aspects of international sustainability standards, including their significance, prevailing standards, compliance requirements, reporting expectations, and effective use of templates for monitoring progress. Each module comprises an introductory video, written content with interactive elements, assignments and tests. The complete e-learning suite is available for free to more than 3400 learners subscribed to the UNPAR e-learning platform.

Lessons Learned and Future Considerations

One of the key learnings emerging from the delivery of this activity has highlighted the importance of leveraging digital marketing strategies to capture and communicate sustainability practices adopted by Indonesian MSMEs to potential investors, consumers and other stakeholders. Additionally, there is a continued need to embed sustainability knowledge and practices within Indonesian business support organizations responsible for assisting the MSME sector.

As Southeast Asia’s economic powerhouse, Indonesia has enormous potential to capitalize on its workforce and expansive MSME sector to advance greater prosperity and more inclusive growth for its citizens. According to CocoSweet, one of the MSMEs which benefited from EDM’s training, the technical assistance “has brought sustainable transformation to our business in the coconut sugar industry.” Through EDM advice and support “we understood that sustainability is not a burden but an opportunity for sustainable growth and a positive impact on society and the environment.”