THE DIFFERENCE IN FINANCIAL PERFORMANCE BETWEEN THAT OF SMALL ENTERPRISES AS THE BUSINESS LINKAGE OF BUMN IN MEDAN AND THAT OF SMALL ENTERPRISES WHICH ARE NOT

CHAPTER I

INTRODUCTION

A.  Background

Small and Medium Enterprises (SMEs) hold an important role within the national economic development. The history showed that such enterprises in Indonesia are sustainable and kept growing despite the economic crisis that struck the country since 1997; moreover it has become the savior for the national economic recovery due to its ability in significantly supporting the Gross Domestic Product (PDB), export growth, and in absorbing the work force.

Based on the survey and data of the Central Bureau of Statistics (BPS) of 2006-2007, it shows that the number of SME increased as much as 2.18 percent that it impacted in the increasing of the ability in absorbing the work force as much as 2.46 percent compared to the statistics of 2006. The SME contribution to Indonesia Economy is also observable such as on its contribution toward the national Gross Domestic Product (PDB) and export value. National Gross Domestic Product was increasing about 6,38 percent that is from Rp 1.035,61 quintillion  in 2006 to Rp 1.963,97 quintillion in 2007 or about 56,09% of the total national PDB. The contribution of SME toward the total national export value was increasing about 16,77 percent that is from Rp 122,31 quintillion in 2006 to Rp 142,82 quintillion.

The data indicates that SME is basically a group of enterprises that holds large potential in reducing poverty and unemployment. However the success in surviving the national economic development does not make SME able to develop from tip to toe. The condition of SME still sensitive because the siding of bank is still low, that free market begins opened, and the limited regulation that support the small enterprises (Hafsah : 2004).

Capital becomes the main issue in developing Small and Medium Enterprise (SME) especially the micro enterprises that it needs a set of regulations to overcome the problem. In developing such enterprises, mainly in providing the capital, the government has already put into effect various regulation such as of granting bank credit, suggesting the fund of Government Letter of Credit  (SUP), and Rolling Loan. However the financial aid is not the most important part in helping the small and medium enterprises to grow. This is underlining that giving such financial aid to the enterprises causes anxiety that they will not allocate the aid efficiently and effectively as expected assuming that they have poor ability in managing the aid toward the development of the enterprises (Siska, 2005).

One of the efforts to help the small enterprises to grow and develop themselves in order to be strong enterprises is by implementing the Partnership Program of “Foster Father” System by big companies either of State-Owned Corporations (BUMN) or private ones. Such has been designed by the government and announced in the State Ministry of BUMN Ordinance No. Per-05/MBU/2007 dated on 27 April 2007 concerning Partnership Program of BUMN with Small Enterprises and Environment Developing Program (PKBL).

In this case BUMN is appointed as the implementer of partnership program since the entire or most of the capital source is from the state wealth which is segregated, and becomes one of the economy actors within the national economy system besides the existing cooperatives, and private enterprises. BUMN also is the producer of goods and services for people welfare, and it plays a strategic role in assisting  private enterprises, and small-scale cooperatives to grow and develop.

The previous researchs that focussed on partnership pattern or the influence of Business Linkage Program towards the financial performance of SME are relatively difficult to be found, mainly that was done on purpose of academic observation. In general, the previous researchs found that the partnership program hold an important role towards the development of SME, that is be measured by the increasing of total  income and in absorbing the work force of SME. Siska (2005) and Meylina (2008), found that partnership program has taken part enough significantly towards the development of SME. Furthermore, the research about Business Development System (BDS), which is a program that prepare an effort service to develop the SME, in characteristic non-financial, has done by Rosyadi (2005) and Imamah (2008), saying that the program of BDS has a significant influence towards the performance of SME. The indicator of measurement toward the perfomance are including capitalization, business unit, production aspect, marketing, income and business profit. Furthermore according to Imamah (2008), she focussed on the influence of BDS Program as fasilitator in get capital, expand market segment towards the development of SME. It is contrast with Kuncoro (2000), that focussed on the linkage between the big enterprises with the small industry based on the pattern of “Foster-Father”, stated that founding of Foster-Father (BUMN or big private companies) assumed it was less effective because Foster-father has just become a “Santa Claus” that grants the fund without taking care of the business of the sub, and the father thought that the partnership is only to fulfill the sosial mission.

Based on the above-mentioned explanation, the writer is interested in making a research to find out the influence of BUMN partnership program of Foster Father for Small Enterprise toward financial  performance of the small enterprise, and to find out if there is a difference in financial performance between small enterprise as the business linkage of BUMN and those which are not. Therefore, the writer decided to give her research a title such as “The Difference in Financial Performance Between that of Small Enterprises as the Business Linkage of BUMN and  that of Small Enterprises Which Are Not”.

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