ffs_indonesia_briefing_smes-fa7ca60e0e164be3.pdf

This briefing note by the International Institute for Sustainable Development examines the impact of fossil-fuel subsidy reforms on small and medium-sized enterprises (SMEs) in Indonesia. It argues that while SMEs are generally less energy-intensive than large enterprises, they are more vulnerable to price shocks due to lower coping capacities and a heavy reliance on low-income consumers who are most affected by fuel-driven inflation.

• SMEs are critical to Indonesia's economy, numbering 56.5 million in 2012. Approximately 99% of these are micro enterprises characterized by being unregistered, operating in the informal sector, and primarily located in rural areas.
• Energy costs for SMEs range from approximately 10% to over 65% of total production costs. The impact varies by industry; for example, fuel costs represent 42.4% of operation costs in the food and beverage industry, whereas energy costs in the wood processing industry are about 13.55% of operation costs.
• Indirect impacts of fuel price increases are expected to be more severe than direct impacts. These include rising costs for raw materials and transportation, as well as a decline in purchasing power among low-income households, who are the primary customers for most Indonesian SMEs.
• The June 2013 fuel price reforms led to significant financial distress for SMEs. Anecdotal reports indicate potential bankruptcies in East Java, specifically in Malang where at least 10,000 local SMEs faced bankruptcy due to rising operating and transportation costs.
• Historical data from the 2005 subsidy reform, which included a 30% fuel price increase, showed that production costs for surveyed SMEs rose by an average of 28.1%, while net income dropped by 18.37%. Coping strategies included increasing selling prices (76.8%), reducing product size (45.4%), and reducing product quality (63.6%).
• Fuel subsidy reforms contribute to increased poverty rates. BAPPENAS estimated that the latest price changes would increase the poverty rate from 10.5% in 2012 to 12.1% in 2013, increasing the number of people living in poverty from 26.3 million to approximately 30.3 million.
• The document recommends that the government increase access to bank finance for feasible SMEs, eliminate unnecessary bureaucratic procedures for licenses, reallocate subsidy savings to rural infrastructure and public transport, and support SMEs in adopting energy-efficient technologies and alternative energies.

APA

International Institute for Sustainable Development (n.d.). ffs_indonesia_briefing_smes-fa7ca60e0e164be3.pdf. https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_briefing_SMEs.pdf

Chicago

International Institute for Sustainable Development. ffs_indonesia_briefing_smes-fa7ca60e0e164be3.pdf. n.d. https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_briefing_SMEs.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=ffs_indonesia_briefing_smes-fa7ca60e0e164be3.pdf |url=https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_briefing_SMEs.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndffsindonesiabriefingsmesfa7ca60e0e164be3pdf, author = {{International Institute for Sustainable Development}}, title = {{ffs\_indonesia\_briefing\_smes-fa7ca60e0e164be3.pdf}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_briefing_SMEs.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }