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No.JAPAN INTERNATIONAL COOPERATION AGENCY (JICA)MINISTRY OF INDUSTRY, THE REPUBLIC OF INDONESIATHE STUDYONHUMAN RESOURCE DEVELOPMENT FOR SMALL-andMEDIUM-sized ENTERPRISES (SMEs) FOCUSED ONMANUFACTURING INDUSTRIESINTHE REPUBLIC OF INDONESIA(PHASE 2)FINAL REPORTFEBURUARY 2008JAPAN INTERNATIONAL COOPERATION AGENCYUNICO INTERNATIONAL CORPORATIONEDJR08-016

PrefaceThe Government of Japan, in response to the request by the Government of Indonesia,decided to conduct a development study relating to the formulation of a human resourcedevelopment plan for SMEs in the country, and entrusted the undertaking of thedevelopment study to Japan International Cooperation Agency (JICA).JICA organized a study team led by Mr. Toru MORIGUCHI of UNICO InternationalCorporation and consisting of UNICO’s staff members, which visited Indonesia for fieldsurveys, totaling six times between September 2006 and January 2008.The study team held extensive discussions with personnel of Indonesian governmentministries and organizations, in addition to field surveys. It compiled this report as aresult of documentation and other works conducted in Japan after the field surveys.I sincerely hope that this report will contribute to promotion of SME-centric humanresource development policy in Indonesia, and then to the furtherance of friendlyrelationships between the two countries.Finally, I would like to express my deep appreciation to those who have providedcooperation and support for the study and its smooth implementation.February 2008Seiichi NagatsukaVice PresidentJapan International Cooperation Agency

February 2008Mr. Seiichi Nagatsuka,Vice PresidentJapan International Cooperation AgencyDear Mr. Nagatsuka,Letter of TransmittalWe would like to respectfully submit this report upon completion of “The Study onHuman Resource Development for Small-and Medium-sized Enterprises (SMEs) Focusedon Manufacturing Industries in the Republic of Indonesia (Phase 2)”.This study is the ramification of the technical cooperation project “The Study onHuman Resource Development for Small-and Medium-sized Enterprises (SMEs) Focusedon Manufacturing Industries in the Republic of Indonesia (Phase 1)” as well as ongoingrelevant project for SME consultant (Shindan-shi). These projects have providedopportunity for the Ministry of Industry (MOI) to renew its awareness of importance ofdirect consulting for SMEs, leading to the startup of a SME diagnosis consultant trainingcourse in 2006. Based on the results of these technical cooperation projects and against abackdrop of decentralization in progress, the present study was carried out to develop a setof proposals for institutional and organizational buildups as well as programs forimplementation of effective human resource development policy for SMEs by provincialgovernments.The study was commenced with field surveys covering various industrial humanresource development programs conducted by public and private organizations in East andWest Java, together with interview surveys of SMEs that belong to supporting industries.Then, the study team conducted model programs featuring diagnosis and advisory servicesof SMEs, jointly with Shindan-shi of East and West Java who had completed the SMEdiagnosis consultant training course.In the course of these surveys to examine the current state of the ongoing industrialhuman resource programs, the study team came to know the MOI’s new initiative toestablish a special unit to provide direct consulting service by local government, called

UPL-IKM. In parallel to the implementation of the model programs, the study teaminterviewed stakeholders relating to UPL-IKM and its activities and reviewed relevantreports and other documents. As a result, the study team concluded that the UPL-IKMinitiative had an adequate objective and implementation scheme, while its implementationplan seemed to satisfy the needs of local SMEs. The study team has developed andproposed, therefore, action plans that focus on the enhancement of UPL-IKM and thecontinuation of its activities by capitalizing on the results of the current state surveys andlessons learned from the model programs.We hope that UPL-IKM’s organization and activity will be widely adopted andproduce favorable results, thereby developing as core of industrial human resourcedevelopment activity on a local level.Finally, I would like to express my gratitude, on behalf of the study team, for broadsupport extended by Japan International Cooperation Agency, the Ministry of ForeignAffairs, the Ministry of Economy, Trade and Industry, and Japanese Embassy in Indonesiain the course of the present study. Also, I deeply thank personnel of the Indonesiancounterpart and other relevant organizations, in particular the MOI, Industry andCommerce DINASs in East and West Java, and human resource developmentorganizations in the public and private sectors, for extensive cooperation given to the studyteam.Very truly yours,UNICO International CorporationToru MoriguchiTeam Leader, the Study on Human ResourceDevelopment for Small-and Medium-sizedEnterprises (SMEs) Focused on ManufacturingIndustries in the Republic of Indonesia (Phase 2)

Map of Indonesia

AbbreviationsAIMCAssociation of Indonesian Management ConsultantsAMDIAstra Management Development InstituteAPBDAnggaran Pendapatan dan Belanja Daerah (Regional income and expenditure)APBNAnggaran Pendapatan dan Belanja Negara (National income and expenditure)APPAkademi Pimpinan Perusahaan (Leader academy of company)ASPEPAssosiasi Permesinan dan Pengerjaan Logam (Association of Metal Industry)ASPILOWAssosiasi Pengusaha Industri Logam Waru (Association of Metal Industry in Waru)BALAI BESARNational Research CenterBANK JATIMBank Jawa Timur (East Java Bank)BAPPENASBARISTANDBadan Perencanaan dan Pembangunan Nasional (National Development andPlanning Agency)Balai Riset dan Standarisasi (Research and standardization institution)BDIBalai Diklat Industri (Industrial Training Institute)BDSBisnis Development Service (Business Development Service)BDS-PBisnis Development Service Provider (Business Development Service Provider)BNSPBadan Nasional Sertifikasi dan Profesi (National profession certification agency)BPPIBPR JATIMBalai Penelitian dan Pengembangan Industri (Agency for Research andDevelopment of Industry and Trade of MOI)Bank Perkreditan Rakyat Jawa Timur (Public bank in East Jawa Province)BPTIBalai Pelayanan Teknis Industri (Industrial technique service center)BUMNBadan Usaha Milik Negara (National Enterprises)CADComputer Aided DesignCAMComputer Aided ManufacturingCEFECreation of Enterprises Formation of EntrepreneursDAKA PIMDakabalarea Pembinaan Industri Manufaktur (Manufacturing Development)DANA BERGULIRName of revolving fundDINASIndustry and Trade Office of Provincial GovernmentDIPDepartment of Industrial Promotion (Department of Industrial Promotion)EIEnterprises ImprovementEPAEconomic Partnership AgreementGDPGross Domestic ProductGRDPGross Regional Domestic ProductGTZGerman Technical Cooperation/ Deutsche Gesellschaft fur TechnischeZusammenarbeitIDKMIETCIndustri Dagang Kecil Menengah (Director General of Small and Medium Industryand Trade of MOI)Indonesian Export Training CenterIKMIndustri Kecil Menengah (General Office of SME)IMFInternational Monetary Fund-i-

ISOInternational Standard OrganizationITBInstitut Teknologi Bandung (Bandung Technology University)ITSInstitut Teknologi Surabaya (Surabaya Technology University)IVC-SIndustry Value Chain StrengthJABODETABEKJakarta, Bogor, Depok, Tanggerang, BekasiJICAJapan International Cooperation AgencyJITJust in TimeKADINKamar Dagang Indonesia (Indonesian Chamber of commerce and industry)KIKKredit Industri Kecil (Small Industry Loan)LDPLembaga Diklat Profesi (Professional training organization)LPBLembaga Pengembangan Bisnis (Business development body)LPB WARULembaga Pengembangan Bisnis Waru (Waru business development body)LPPMLSPLembaga Pendidikan dan Pembinaan Manajemen (Management of businessadministration institution)Lembaga Pengembangan Sumber Daya Manusia (Human Development Instituteunder YPMG)Lembaga Pembinaan Terpadu Industri dan Dagang Kecil (Development institute ofsmall industry and trade)Lembaga Sertifikasi Profesi (Profession certification body)MINISTRY OF BUMNKementrian Badan Usaha Milik Negara (Ministry of National Company)MOIMinistry of IndustryMONEMinistry of National EducationMTAPMedium Term Action PlanNPONon Profit OrganizationOEMOriginal Equipment ManufacturingPFPPPOLBANPejabat Fungsional Penyuluh Perindustrian dan Perdagangan (Extension officer ofindustry and trade)Politeknik Negeri Bandung (Politechnic in Bandung)POLMANPoliteknik Manufaktur Negeri Bandung (Politechnic in Manufacturing)PPMPusat Pengembangan Manajemen (Center for Management Development)PRASETYABusiness School Name (Name of Business School)PROPENASProgram Pembangunan Nasional (National Development Program)PUSDIKLATPusat Pendidikan dan Latihan Industri (Center for Education and Training)PUSDIKLAT-INDQSPusat Pendidikan dan Latihan Industri (Center for Education and Training ofIndustry and Trade)Quality SystemR/DResearch DevelopmentRENSTRARencana Strategis (Strategic Planning)SENTRACenterSIAPThe Strategic Investment Action PlanSKKNIStandart Kompetensi Kerja Nasional Indonesia (National standard for professioncompetency)LPSMLPT-INDAK- ii -

SMESmall Medium EnterpriseSNIStandart Nasional Indonesia (Indonesian Standard)STMISekolah Teknik Menengah Industri (Industrial Technical School of middle level)TORTerm of ReferenceTSTechnical SpecificationUKMUsaha Kecil Menengah (Small and Medium Enterprises)UPLUnit Pelayanan Langsung (Direct Service Unit)UPTUnit Pelayanan Teknis (Common Service Facilities)YBMBYayasan Bina Mitra Bakrie (BINA MITRA BAKRIE Foundation)YDBAYayasan Dana Bhakti Astra (DHARMA BHAKTI ASTRA Foundation)YPMGYayasan Pendidikan Matsushita Gobel (MATSUSHITA GOBEL EducationFoundation)- iii -

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Table of ContentsChapter 11.1Overview of the Study .1-1Background of the Study.1-11.1.1Indonesia after the Asian Financial Crisis .1-11.1.2Japan’s Assistance in SME Human Resource Development inIndonesia.1-21.1.3Positioning of the Study.1-41.2Objective of the Study.1-61.3Target Sector and Enterprises of the Study.1-71.4Scope of the Study .1-81.5Study Framework .1-81.6Work Description of Study Team Members .1-91.7Field Work Schedule.1-111.8Workshops.1-12Chapter 2National Development Plan and SMEs Promotion Policy inIndonesia .2-12.1The National Development Plan and Its Positioning .2-12.2100-day Development Plan .2-12.2.1Industry groups covered by MOI’s 100-day development plan .2-22.2.2Outcomes expected from MOI’s 100-day development plan.2-22.2.3SME Promotion in MOI’s 100-day development plan.2-22.3Medium-term and Long-term National Development Plans.2-32.3.1Medium-term national development plan (2004 – 2009) .2-32.3.2Long-term national development plan (2005 – 2025) .2-52.4SMEs Development Strategy .2-72.4.1Issues to tackle for industrial development under RENSTRA .2-72.4.2Two pillars of RENSTRA .2-72.4.3Goals for industrial development.2-92.4.4Development concept in RENSTRA for the nurturing ofmanufacturing sector in general and relevant sectors in the Study .2-102.5SME Promotion Policies and New Economic Policy Package.2-15-v-