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Power hike threatens small-scale enterprises

Jakarta Post - July 21, 2010

Slamet Susanto, Yogyakarta – Some 400,000 small and medium enterprises (SMEs) in Yogyakarta province face collapse due to electricity rate hikes that have made them less competitive, according to one business association.

Chairman of the association of Yogyakarta SMEs, Prasetyo Atmosutejo, said on Tuesday that the increase to the electricity tariff would increase production costs by 10 to 15 percent, affecting businesses in direct competition with similar imported products from China. "Even now there are many SMEs that are unable to compete with Chinese products," Prasetyo said.

Tohari, an artisan, said the hike deals a further blow to his business, which already struggles against the influx of Chinese products in the wake of the implementation of ASEAN-China Free Trade Area (ACFTA).

"Unless there is political will from the government, it's just a matter of time for the handicraft industry and SMEs to die out completely," he said.

He said he could previously expect sales of over Rp 25 million a month, but now only makes about Rp 15 million in sales. "The hike in the electricity tariff will make us suffer further," he added.

Claiming to have been in the earthenware industry since 1992, Tohari said the main problem with the handicraft industry was the difficulty remaining competitive. Complicated export bureaucracy has made Indonesian products less competitive on the international market.

Prasetyo said his organization would ask for support from Yogyakarta Governor Sri Sultan Hamengkubuwono X to save the province's SMEs, which make up 99 percent of businesses in the province.

"Without protection, SMEs in Yogyakarta province will have no space to move and will most probably go bankrupt," Prasetyo said.

The condition, according to Prasetyo, had been worsened as most businesses in the province had just recovered from the devastating 2006 earthquake. Over 3,200 have not yet paid off a combined debt of Rp 75 billion because they have yet been able to restart production since the earthquake destroyed their warehouses and factories.