As reported by ITC (2016a), 56 to 60 percent of the global merchandise export value was attributed to the 34 OECD member countries. As SMEs face complex export challenges, the effectiveness of policies and assistance related to exports requires a thorough understanding of the export operations of SMEs. We describe a detailed overview of the methodologies used in this research in the third chapter.
In the fourth, the findings of the research followed by the relevant implications and policy debates will be presented, while the fifth concludes. The empirical evidence of the export barriers listed in Table 1 has been extensively documented, including that related to SMEs. However, stratified sampling was not applicable as the export status of the SMEs was unknown prior to the survey.
Export Barriers Analysis
The analysis of the Likert scale response of the export barriers is as follows. We also rank export barriers based on the average Likert response score of government agencies. We plot government agencies' perceptions of export barriers against SME perceptions (derived from SME survey) using a 3 x 3 grid (OECD-APEC, 2006).
The 50 export barrier items are classified into three broad levels of difficulty, including the top 25 percent (12 most difficult export barrier items). For some export barrier items, public authorities may provide higher average Likert response scores than SMEs (barrier items in cells A, B and D). For the export barrier items located in cells H, I and F, public authorities provide lower average Likert response scores than SMEs.
Government agencies tend to provide too little help to remove these kinds of barriers and must therefore try to increase the current level of provision. For items with export barriers in cells G, E, and C, both government agencies and SMEs give equally low, medium, and high average Likert response scores, respectively. It is likely that the current level of assistance already meets the needs of SMEs and should therefore be maintained (i.e. a low provision for barriers in cell G, a medium provision for barriers in cell E and a high provision for barriers in cell C ).
We also examine the participation of SMEs in export assistance from government agencies. The test of independence (Chi-square test) is used to examine the relationship between SMEs' export status (exporting and non-exporting) with their participation in export assistance provided by central and local governments.
Result
- Export Assistance Provision by Central Government Agen- cies
- Export Assistance Provision by Local Government Agencies
- Mismatch in the Perceived Difficulty of Export Barriers
- Policy Options to Remove Export Barriers
This indicates that the most needed export support for exporters (the export phase) differs from that required by non-exporting SMEs (the pre-export phase). Furthermore, the mean difference test results suggest that exporting and non-exporting SMEs differ significantly in their perceived helpfulness in two export assistance programs: international trade fairs and export financial support (see last column of Table 6). One possible explanation is that these types of export assistance are more effective in helping SMEs to start/try exporting (early export phase), but less useful in maintaining or expanding exports (advanced export phase) (OECD-APEC, 2006).
The SMEs surveyed were asked to indicate their involvement in various types of export assistance provided by local authorities (provincial, municipal and government authorities). Furthermore, the Chi-square test (significant at the 5 percent level) indicates that there is a significant relationship between the export status of SMEs (exporting and non-exporting) and the types of export assistance they access. On the contrary, the participation of non-exporting SMEs varied across five provincial government export assistance programs.
However, the insignificant Chi-square test indicates that there is no relationship between SMEs' export status (exporting and non-exporting) and the types of export assistance SMEs participate in. Next, we examine the helpfulness of local government export assistance - agencies (at both provincial and municipal level) for SME export activities. Therefore, the mismatch between the perceived export barriers of the SMEs and the policy makers can be identified.
Further, the next four most important export barriers were perceived as: B9 (Lack of export insurance); B10 (Granting credit facilities or payment delay to foreign customers); B36 (Economic fluctuations in target markets); and B32 (Unequal treatment in business competition in target markets). The next four export barriers are: B46 (Health, safety and technical standards in target markets); B30 (Unequal treatment in tax/eligibility to affiliate in target markets); B08 (Lack of investment capital) and B32 (Unequal treatment within business competition in target markets). The survey asked each agency's key person(s) to indicate their perceptions of the difficulties of different types of export barriers faced by SMEs.
Government agencies develop and provide export assistance based on a variety of factors, one of which is their own perception of the export barriers faced by SMEs.
Conclusion
Summary and Major Findings
Cells A, B and D include all export barriers that government agencies find more difficult than SMEs think. Therefore, the current level of government assistance provided to address those barriers is probably higher than the level that SMEs actually need. Therefore, the government should formulate export assistance programs based on accurate information on the export barriers faced by SMEs.
Consequently, the government should have a good understanding of the seriousness and urgency of each type of export barriers, with which effective policy measures can be formulated. The results above revealed that misperceptions about the types and severity of export barriers can lead to under- or over-provision of export assistance in certain policy areas. These misperceptions of export barriers between policy makers and SMEs are not uncommon, even in developed countries (see for example Lloyd-Reason & Mughan, 2008; OECD-APEC, 2006).
To obtain accurate information on export barriers, government agencies should proactively collect feedback from SMEs and various actors in internationalization networks. For example, government agencies may regularly conduct surveys of SMEs in collaboration with universities and research institutes. Further, the central government should distribute its policy support for internationalization of SMEs to provincial, municipal and regency governments and coordinate the implementation of its policies.
Since the decentralization of Indonesia's government in 1999, local governments have played an increasingly important role in policymaking (Brodjonegoro & Asanuma, 2000; Resosudarmo, 2004). Without central government guidance, local government may have a stronger domestic market orientation in their assistance to local SMEs (Uchikawa & Keola, 2009).
Research Limitations and Future Studies
This survey covers seven provinces in Indonesia, including all provinces on the islands of Java, Madura and Bali. Out of a total of thirty-four provinces in Indonesia, the seven provinces studied contribute approximately 58 percent of total GDP and 53 percent of total non-oil and gas exports and are centers of economic activity and growth in Indonesia (BPS-Statistics Indonesia, 2014c). The choice of the study region therefore enables the generalization of the research results to a certain extent at the national level (Indonesia).
However, the findings of the study do not reflect the characteristics of the provinces that differ significantly from the provinces studied. In particular, the results may not reflect less industrialized and less developed provinces, where the lack of transport, communication and logistics infrastructure may pose greater barriers to export activities. Therefore, the study did not perform a comparison of the firm's pre- and post-export performance with actual financial performance data, which could use more advanced data analysis methods such as difference-in-differences and panel data analysis.
The scope of the research can be expanded to other areas or provinces in Indonesia to improve the generalization of research results. Future research may also focus more specifically on SME internationalization in a particular province/region or product group/industry. For example, case studies of the internationalization of SMEs in tourist destination provinces such as Bali and Yogyakarta could be considered.
Case studies can also be made on the internationalization of SMEs in specific sectors such as handicrafts, food and beverages, and clothing and fashion accessories. Specific case studies will make it possible to recommend more specific policy measures to promote the internationalization of SMEs.
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Internal – Informative B4 Contacting prospects in target markets Locate and contact prospects overseas in the destination country Internal – Informative B5 Dedicate time to management to deal with internationalization Engage and give the management team time to deal with internationalization such as searching for information and designing an export strategy Internal – Human Resource B6 Insufficient amount and capacity of personnel Prepare personnel and employees who can handle the day today export activities including export documents and communication with foreign partners and customers. Internal–Human B7Shortage of working capitalProvide additional fund for financing of working capital forinternationalization (such as raw materials, wages, research and travel)Internal–Financial B8Shortage of investment fundProvide additional fund for financinginvestments needed for Internationalization (such as additional production facilities)Internal–Financial B9Shortage of export insuranceInsureInsureinternationalization (including export products and assets abroad)Internal–Financial B10Credit facilities or payment sdelaytoforeigncustomersGrantingcreditfacilitiesorpaymentdelaytoforeigncustomersInternal–Financial B11DevelopingnewproductsforforeignmarketsDevelopingnewproductsmoresuitableforforeignmarketsInternal–Marketing B12Customizingproductdesign/stylerequiredbyforeigncustomersCustomizingproductdesign/stylerequiredbyforeignmarketsInternal –Marketing B13Meetingforeignproductquality/ standards /specificationsMeetingforeign product quality/standards/specificationsInternal–Marketing B14Offering satisfactory price from foreign customersOffering satisfactory price from foreign customersInternal–Marketing B15Matching competitors' prices in target marketsMatching competitors' prices in foreign marketsInternal–Marketing B16Lack of overproduction capacity for exportProvide extra production capacity to develop and make exported products Internal marketing continues. External–Governmental B30Inequality in taxation/eligibility to affiliation in target marketsOvercoming the unequal treatment of foreign governments compared to domestic companies in taxation eligibility for affiliationExternal–Governmental B31Restrictions on movement of people in target marketsObtaining visas for business travel and for bringing employees from Indonesia to support operation abroad if necessary External–Governmental B3 2 Unequal Treatment in Business Competition Laws in Target Markets Overcoming the unequal treatment of foreign governments compared to domestic companies in business competition regulations such as mergers and affiliation, trustor procurement and External Government continues.
External–Environmental B37High-risk foreign currency Expectation of high-risk foreign currency External–environmental area B38Unusual business practices in target marketsUnderstanding unusual and informal foreign business practicesExternal B39-environmental-social-and-environment socio-cultural traits, including values and religionExternal–Environment B40Verbal/non-verbal language differences Overcoming verbal/non-verbal language differencesExternal –Environmental B41Lack of infrastructure for trade in target markets Use /exploiting afe-trading capacity anticipating-external markets within 4Political-trading infrastructure within 4. Anticipate and respond to changes in political stability in foreign markets External–Environment B43Negative image of Indonesia or Indonesian products Overcome negative image of Indonesia or Indonesian products abroad External–Environment B44High-rate costs in the target market trade44. Intellectual) protection of property rights in target markets Secure protection of property rights (e.g. intellectual property) in host countries External–Environment B46 Health, safety and technical standards in target markets Compliance with restrictive health, safety and technical standards in a. ariff classification and reclassification in target markets Ensure appropriate and non-arbitrary classification and reclassification in host countries External–Environment B48 Quotas and/or embargoes imposed by target markets Deal with adverse quotas and/or embargoes imposed by host countries B-4 Environments in the external market with the external market. ghcosts of customs administration in host countries, including costs, processing time, complicated procedures and bribery External–Environmental B50 Preferential tariff for exporters from mother countries Handles tough competition with exporters from mother countries with preferential tariff from regional free trade agreement with host countries External–Environmental Source: OECD-206AP(1) ).
