The current economic structure of Indonesia, when viewed from its actors, shows a pyramidal shape or structure, whereby the economic actors at the top consist of large companies that make up only 0.01% or the smallest percentage. Conversely, the majority of economic actors, or 99.99%, are at the bottom of the pyramid, consisting of micro, small, and medium-sized companies, as stated by Prof. Dr. Maman Suratman in his scientific speech at the open session of the Academic Senate of Widyatama University on Thursday, February 1, 2024. In his scientific speech confirming his position as Professor at the open session of the Academic Senate, led by the Rector of Widyatama, Prof. Dr. Dadang Suganda, Prof. Maman assessed that such a pyramidal structure is weak because it is not rooted in the people. He said that such a structure is also fragile in terms of national interests as a nation that aspires to a prosperous, democratic, just, and prosperous life for all people.
The ideal structure is a diamond shape, which is thick in the middle and tapered at the top and bottom. “This structure indicates that middle-class entrepreneurs are dominant, which also indicates a conducive and ideal democratic life because it is supported by a strong middle class,” he explained in front of the guests who attended his inauguration ceremony. In a pyramidal structure, according to him, the chances of economic and social inequality are very high. This is because it is likely that a small group of entrepreneurs will control most of the national “pie” (Lorenz Curve; 20% of the population controls 80% of the national income, or conversely, 80% of the population only enjoys 20% of the national income). The large number of micro and small businesses does not automatically translate into strength, because micro and small businesses generally face a number of problems that hinder their growth, he explained, adding: “These problems include difficult access to capital, marketing, mastery of technology and information, and the poor quality of human resources.”
“As for the issue of capital, it is estimated that around 70% of micro businesses are not yet bankable. One of the efforts to enable Micro, Small and Medium Enterprises to have the strength to grow and develop is by fostering them through cooperatives,” said the management lecturer at the Faculty of Economics and Business (FEB) of Widyatama University.
Speaking about cooperatives, he believes that they are essential in the development process. The development of cooperatives is necessary to overcome the problems faced by micro and small businesses in this country. The first professor at Widyatama University, together with his colleague Prof. Zulganef, further argued that if implemented correctly and successfully, cooperatives can have micro and macro impacts, both directly and indirectly.
Direct micro impacts arise when cooperative companies successfully offer their members services that can effectively and efficiently improve their business activities through credit, procurement of production tools, marketing, and so on. Meanwhile, a more far-reaching impact is that members are also able to apply innovative production methods that can encourage greater productivity improvements, as well as diversify or specialize in the production process.
Meanwhile, indirect micro impacts, according to the senior lecturer, include competitive impacts, namely positive impacts on market structure, where competitors are forced to improve their services, thereby making competition more effective and resource allocation more efficient. Speaking of the macro impact, the professor, who completed his doctoral program at UPI Bandung, said that cooperatives can contribute to political development, as members learn democracy within the cooperative, members are protected through political decisions, or because of increased bargaining power through cooperatives.
In addition, cooperatives can also contribute to socio-cultural development, because cooperatives are voluntary associations built from the bottom up, which are expected to be based on existing social structures and can stimulate certain innovations. This can change traditional societies without destroying their cultural identities.
Meanwhile, in terms of macro or national economic development, cooperatives are also able to contribute to the productive behavior of farmers and artisans by using their own resources, diversifying production structures, contributing to national food procurement, export growth, increasing national income, and creating jobs. The national macro role is basically an aggregation of the micro roles of cooperatives.
So, if the macro role has not yet been realized, it reflects the failure of cooperatives as businesses, added Prof. Quoting Alfred Hanel’s opinion according to Prof. Maman, for the establishment of a cooperative to be successful, the following requirements must be met:
(a) There are prospective members who are dissatisfied with their economic and social conditions and actively want to improve them;
(b) They have sufficient knowledge of cooperatives to apply the cooperative concept as the most appropriate instrument to achieve their common interests;
(c) There are potential benefits that can be realized to meet their needs;
(d) They are motivated to join the cooperative and are ready to make material and financial contributions from the outset;
(e) There are enough prospective members or outsiders who are ready to take on roles and carry out entrepreneurial functions in establishing the cooperative.
Business Partnership Patterns Building Human Resources (HR) Cooperatives and Micro and Small Businesses can be carried out through partnerships. According to data from the Ministry of Cooperatives and SMEs in 2019, the establishment of partnerships between Micro, Small and Medium Enterprises (MSMEs) and Large and Medium Enterprises (LMEs) has only reached 7%. Cooperation programs in various partnership patterns between micro and small entrepreneurs and large/medium enterprises (state-owned enterprises, private companies, cooperatives) play an important role. With various partnership models, both within the same economic sector and across sectors, it is hoped that each party can form a harmonious and comprehensive work system.
This way, the mechanisms and work can support each other to develop and be mutually beneficial, which in turn can strengthen the national economy in accordance with Article 33 of the 1945 Constitution.
In an economic system, every economic actor will seek or form a network of relationships with one another and ultimately create a market or deal with market forms. In a market economy system, economic actors in their network of relationships will try to determine their position. “In order to achieve business objectives, each party is encouraged to use production factors optimally and efficiently. Under such conditions, economic interactions between economic actors will encourage the separation of power,” said Prof. Maman Suratman, who graduated with a bachelor’s and master’s degree from Pajajaran University, Bandung. Strong economic actors will be more dominant in enjoying market conditions and the use of economic resources, leading to the exploitation of weaker parties.
The strength and weakness of one party’s bargaining position in a partnership can be caused by many factors, which can be internal, including aspects of management, capital, technology, marketing, resources, or external, including aspects of market structure, government policy, environmental conditions, and business information.
Internal factors that influence micro and small business activities are still known and controllable. Meanwhile, external aspects are difficult to control. When these factors are linked to market interests, they will encourage the emergence of conflicts of interest between parties in a partnership, such as:
- Large entrepreneurs are important suppliers of goods for micro and small businesses, so micro and small entrepreneurs face limited product choices and, individually, micro and small entrepreneurs are not major buyers (monopsony).
- As suppliers of goods for the production needs of large entrepreneurs (oligopsony market), the products of micro and small entrepreneurs are not important inputs for their business partners.
- Micro and small entrepreneurs and large entrepreneurs compete in the market by selling similar or substitute goods, and generally this competition weakens the position of micro and small entrepreneurs.
For economic actors who survive and are able to maximize profits through market competition, the gradual accumulation of profits is a force in seizing opportunities to dominate the use of economic resources. Conversely, groups of micro and small entrepreneurs who face various limitations must change their “survival strategy” by diversifying their products (product development) or seeking suitable business partners in an effort to anticipate market mechanisms and economic resource mechanisms.
In an effort to harmonize the interests of economic actors bound in both vertical and horizontal partnerships, issues related to production, marketing, management, human resources, and technology will arise. The level of efficiency, productivity, and profits achieved by economic actors involved in partnerships will be achieved if supported by a clear division of labor and business costs for each party.
Meanwhile, the 2015-2019 policy for the development of cooperatives and MSMEs is to “increase the competitiveness of MSMEs and cooperatives so that they can grow into sustainable businesses on a larger scale in order to support national economic independence.” One of the programs is Partnership and Market Access Expansion for MSMEs. In order to achieve this goal, it is necessary to create harmonious partnerships between micro and small entrepreneurs and large entrepreneurs.
Impact of Partnerships With harmonious partnerships, it is hoped that:
- Micro and small entrepreneurs and their partners (large entrepreneurs) will be able to create added value, efficiency, and productivity for both parties, which will further strengthen the national economy and industry.
- Knowledge and management skills transfer will be created and improved;
- Partnerships between micro and small entrepreneurs and large entrepreneurs are expected to be harmonious if they are based on economic interests or business motivation from both parties.
According to Prof. Maman, this means that through such partnerships, each party will reap greater benefits than if they did not enter into a partnership.
This can occur when micro and small businesses face managerial and technical limitations or limited access to resources and markets, making it necessary for micro and small entrepreneurs to collaborate with large entrepreneurs to overcome these limitations.
On the other hand, large entrepreneurs face a situation where conducting all business activities on their own is inefficient, as it requires greater investment, greater attention, and other factors that essentially require more energy or effort, which ultimately leads to higher costs.
Through partnerships with micro and small entrepreneurs, according to Prof. Maman, large entrepreneurs do not have to carry out all business activities on their own, but can shift some of the burden to micro and small entrepreneurs.
Such partnerships will reduce some of the costs for large entrepreneurs, although on the other hand, costs will arise as a result of the partnership or there will be some kind of cost compensation in the form of guidance.
As long as the cost compensation for large entrepreneurs is smaller than if they were to carry out the activities themselves, partnerships with micro and small entrepreneurs will be a good alternative for large entrepreneurs. Large entrepreneurs will be motivated and will strive to form partnerships with micro and small entrepreneurs.
So, what is meant by partnerships between micro and small entrepreneurs and cooperatives with medium/large entrepreneurs is basically business cooperation to achieve certain goals.
Through partnerships, it is hoped that close ties can be established between large/medium enterprises and micro and small enterprises based on the principles of mutual need, mutual reinforcement, and mutual benefit.
The relationship that occurs in such a partnership system is a normal business relationship accompanied by coaching assistance, which is a socio-cultural concern of large/medium enterprises that have various advantages over micro and small enterprises that still have various limitations.
The first professor at Widyatama University also quoted Thee Kian Wee, who stated that partnership is a business collaboration between large/medium-sized companies engaged in the production of goods and services with small industries based on the principles of (1) mutual need, (2) mutual reinforcement, and (3) mutual benefit. The system of interconnection and partnership will generate added value (economic and social) that will strengthen the national industrial and economic structure.
It is also explained that linkages must be implemented in a chain in all directions as widely as possible with mutual benefits, namely through: Vertical linkages, namely: 1. Between upstream/basic industry groups, downstream industry groups, and micro and small industry groups; Between various branches and/or types of industry; Horizontal linkages, namely: Linkages between the manufacturing sector and other economic sectors. Partnerships between micro and small entrepreneurs and cooperatives with large/medium entrepreneurs can be carried out through various partnership patterns, namely partnership patterns related to the characteristics, models, systems, or working methods of the partnership.
In this discussion, partnership patterns are defined as models or working methods of business cooperation between micro and small entrepreneurs and cooperatives with large/medium entrepreneurs. Furthermore, Prof. Maman Suratman argues that there are two patterns that underlie the process of partnership between large and small entrepreneurs, namely:
Economically-oriented interrelationship patterns. These are based on mutual benefit considerations. The relationship between companies occurs because both need each other, as there are services/products that can be offered economically. This pattern is more sustainable and more resilient in the face of various changes. Examples of this interconnection pattern are:
1) A subcontracting relationship between one company and another company that is the “main contractor”;
2) A vendor system in which a small company becomes a supplier of raw materials to a large company;
3) A trade cooperation system in which a large company acts as a “trading house,” supplying raw materials and then marketing the results.
A Development-Oriented Relationship Pattern, which is based on a policy from either the government or the company itself to foster small businesses so that they can grow into larger enterprises.
This type of linkage pattern can be classified into two groups, namely those based more on non-economic considerations, where there is excess capacity that can be used for development. The vision used is short-term, and after some time, it is hoped that the micro and small businesses that are being developed can grow independently. Development-oriented linkages can also be directed to be economic in nature and are expected to later develop into more permanent business partners.
To achieve successful partnerships for micro and small entrepreneurs, the following must be considered:
1. Commodity selection should prioritize commodities that have:
- good market prospects
- manufacturing skills
- a continuous supply of raw materials
2. The selection of centers should be linked to commodity development and take into account the potential of entrepreneurs and their companies
3. Guidance is provided in a comprehensive package to address issues in all aspects of the business (Total Approach).
Furthermore, based on various cases in several countries, such as India and Japan, the success or failure of partnership models depends on:
- market conditions;
- the bargaining power of each party;
- government regulations or intervention;
- the duration of the partnership.
The level of micro-business/member empowerment is determined by eight variables, namely economic satisfaction, knowledge, cooperative benefits, contributive motivation, personal entrepreneurial quality, cooperative motivation, participation motivation, and participation level, concluded Prof. Maman Suratman in his speech.***
Source: (https://cirebon.pikiran-rakyat.com/pendidikan/pr-047669012/orasi-ilmiah-prof-maman-suratman-struktur-pelaku-ekonomi-indonesia-lemah-dan-rapuh-simak-alasannya)
