Introduction

Background and Objective

Small and medium-sized enterprises (SMEs) are important in the economic development of ASEAN countries. In Pillar 3 (establishing an equitable economic development) of the ASEAN Economic Community (AEC) Blueprint, SME development is one of the important components. ASEAN established the 2004–2014 SME Blueprint, which set the policies to develop competitive ASEAN SMEs. The blueprint was followed by the 2010–2015 ASEAN Strategic Action Plan SME Development, which outlined specific activities to implement ASEAN SME policies.

SMEs should take advantage of the establishment of the AEC. Easy access to ASEAN markets generates wider selling potential and more options to outsource production inputs. The latter encourages bigger firms to get input materials from SMEs. In more advanced settings inter-connected production stages that are shared among firms will create mutual benefits among related parties. This will accelerate economic growth.

This chapter aims to examine the extent and nature of SME participation in ASEAN economic integration. More specifically, it attempts to provide a description of the current state of SMEs in Indonesia and survey SMEs on their perceptions on the ways in which they can benefit from this integration.

This chapter is based on a survey of 200 SMEs in Indonesia. The survey gathered information on the perceptions of SMEs on the impacts of ASEAN regionalism on their business activities. The field survey covered firms in the manufacturing sector with more than 10 employees/workers in 9 out of 22 main industries in which SMEs have significant presence. These industries include: (1) manufacturing of food products; (2) manufacturing of beverages; (3) manufacturing of wearing apparel; (4) manufacturing of leather and related products (focus on footwear); (5) manufacturing of wood and products of wood and cork; (6) manufacturing of furniture; (7) manufacturing of electrical products; (8) manufacturing of computers, electronics, and optical; and (9) manufacturing of motor vehicles, trailers, and semi-trailers. Some of the interviewed firms have trading activities with firms from other ASEAN countries while some do not. The survey provides some insights on the trading activities of Indonesian SMEs in ASEAN. It also provides information on factors that enhance their trading activities in ASEAN as well as their engagement in the emerging production networks around the region.