Framework for Entrepreneurship Policy in Indonesia

Abstract

The Indonesian government's policy in supporting entrepreneurship and MSMEs through formal regulations has been in place for the past three decades. First introduced through Law No. 9/1995 on Small Enterprises, by 2024 there were recorded more than 500 central and regional regulations related to entrepreneurship and MSME empowerment. However, in practice, entrepreneurship in Indonesia has not yet become an effective policy to encourage the number of entrepreneurs and the quality of entrepreneurship. The number of entrepreneurs in Indonesia tends to stagnate below 3.5%, with 90.9% of entrepreneurs falling into the micro and ultra-micro categories, below regional minimum wage (UMR). This research aimed to identify the reasons why entrepreneurship policies are ineffective in encouraging the increase of quality entrepreneurs. At the same time, it aimed to develop an entrepreneurial policy framework for local governments to map out policy interventions that are suitable for their respective regional conditions. This research used a qualitative method with a case study of the "Jakpreneur" entrepreneurship policy in Jakarta. In this study, the entrepreneurship policy framework in Indonesia can use a three-level policy approach, namely micro, meso, and macro. Micro-level policies are government policies aimed at developing individual prospective entrepreneurs and MSME actors who are new or have already started their businesses. Meso-level policies are policies from local governments aimed at developing beginner entrepreneurs and MSME actors within the pillars of the entrepreneurial ecosystem. Macro-level policies are government policies at the national level that support entrepreneurship policies to ensure their sustainability. Research findings reveal that the biggest constraints of entrepreneurship policy are the synchronization of macro-level national policies, collaboration among actors at the meso level, and the selection of prospective entrepreneurs.