SMEs Competitiveness in an Integrated Economy: A Preliminary Study from Indonesia

ASEAN Economic Community (AEC) offers both opportunities and challenges to Indonesian Small Medium Enterprises (SMEs). Highly competitive SMEs are likely to exploit opportunities from AEC by expanding their markets and securing raw materials at lower costs. On the contrary, the increasingly intense competition is likely to marginalize less competitive SMEs in their own domestic market. This study aims to analyze the SMEs competitiveness in anticipating AEC. Using 64 SMEs that already export their products or have potentials to export as the sample; this research shows that Indonesian SMEs exhibit a high competitiveness level from the perspective of the production factor, the availability of related and supporting industries factor (especially in relation to the availability of raw and supporting materials), and the demand factor. However, SME owners acknowledge that AEC intensify competition and the government has not provided adequate facilities to improve the SME competitiveness.

JEL classification: F02, F15, Z21.