LCM

Business News

Finance News

The Role of Digital Transformation Facing the Covid-19 Pandemic

Corona Virus Disease (COVID) is a scourge for many groups, from workers who are afraid of losing their jobs, entrepreneurs who are worried that their business is not strong enough to survive amid a decline in consumer purchasing power, to the Government who is preoccupied with how to handle a pandemic that is right for health and also economy. However, all parties are trying to adapt to this situation in order to survive.

In Several Countries, since the first case of COVID occurred in March 2020, many things have been done by the Government and business actors in adapting to this pandemic. The government has implemented Large-Scale Social Restrictions (PSBB) since April to limit community mobility so as to reduce the risk of spreading COVID.

This has forced some business actors to stop or limit their operations. Not only the majority of large business activities are in the formal sector, but also Small and Medium Enterprises (UKM) activities also experience the same thing.

It is common knowledge that SMEs are a quite vulnerable business segment in the midst of this pandemic. This is because many SMEs are not sufficiently strong in capital to face continuous operational losses. In addition, the large number of SMEs that are in the informal sector category makes access to additional capital financing very limited. Meanwhile, the role of SMEs in the economy is very large.

Source: apfcanada-msme survey (2018)

According to the Small and Medium Enterprises Association, the contribution of SMEs to Gross Domestic Product (GDP) in 2019 reached 60 percent. SMEs are engaged in various economic sectors such as trade (26.2%), material industry (24.8%), restaurants, food and beverages (22.6%), etc. The number of workers absorbed by SMEs also reached 121 million in 2019.

The magnitude of the role of SMEs is also a consideration for the Government to provide a special stimulus for SMEs. To continue to support the sustainability of SMEs during the pandemic, the Government has budgeted IDR 120.6 trillion for a stimulus in the National Economic Recovery Program (PEN).

The budget allocation is used for SME credit restructuring, interest subsidies, tax incentives, and SME investment financing. As of 18 November 2020, the realization of the stimulus provided by the Government to the SME sector reached Rp. 96.6 trillion, equivalent to 84% of the available budget.

However, SMEs certainly cannot depend solely on the stimulus provided by the Government. SMEs need to quickly adapt to current conditions in order to survive both during the pandemic and after it ends.

Moreover, if the economy returns to normal but consumer behavior changes according to the habits that existed during this pandemic. Then how can the sustainability of UKM be maintained in the midst of COVID and after?