The COVID-19 pandemic, which has been ongoing for most of 2020, has had a significant impact on human life.Apart from infecting more than 10 million people and killing 1 Million people worldwide as of today as of this writing (28 October 2020), Initially in the pre-pandemic COVID-19, the world economy is projected to increase 0.4 percent to 3.3 percentin 2020 which was previously 2.9 percent in 2019. Then after the pandemic hit, world economic growth fell to -4.4 percent in 2020 as a result, the COVID-19 pandemic has devastated the global economy.The public health crisis due to the COVID-19 pandemic has led to an economic recession that has the potential to trigger a political and social crisis if not handled properly.
The economic recession caused by the COVID-19 pandemic was caused by many businesses closing or reducing their activities to avoid further transmission. As a result, the chain of economic activities such as production, distribution, and consumption is disrupted and results in an economic recession and the number of workers or employees being laid off to reduce production costs, this has resulted in high unemployment and low public consumption because people have to save their expenses considering that the majority have lost their jobs. due to termination of employment as the main source of income.
The impact of the economic recession due to the pandemic that hit all regional regions in the world, including Southeast Asia or ASEAN. Before the pandemic hit, the economy in ASEAN was predicted to grow by 4.7 percent based on an ADB report published in December 2019. Then when COVID-19 was declared a global pandemic, economic growth was only 1.0 percent. This is due to a large number of MSMEs (Small and Medium Enterprises) as the backbone of the economy in ASEAN. MSMEs are the largest contributor to the percentage of GDP and employment for each of its member countries. The results of research on six ASEAN member countries (Indonesia, Thailand, Singapore, Malaysia, and Brunei Darussalam) show that MSMEs contribute more than 50 percent of employment and contribute to GDP ranging from more than 30 to 50 percent per year. This shows how important the role of MSMEs is as the backbone of the economy in ASEAN.
MSMEs have limited capital and production capacity so that when the country experiences a recession due to a pandemic, MSMEs also reduce their production output because little or nothing buys their products. After all, consumers reduce their spending more to prioritize buying necessities, as a result, the profit margin is smaller and only can cover production and operational costs. To overcome this, MSME owners reduce their production output and lay off workers or employees which results in increased unemployment, owners will go out of business if these methods are not able to increase the margin of sales results with production costs. Termination of employment for MSME workers because their places of work are out of business or doing efficiency to reduce operational costs has contributed greatly to the high number of new unemployment, for example, the number of newly unemployed in Indonesia reached 9.77 million in August 2020, this number increased by 2.67 million people compared to the same period last year.
Many ASEAN member countries have realized how important the sustainability of MSMEs,and then strengthening their economic resilience because MSMEs contribute to GDP and large absorption of fields. Various short-term stimulus measures have been taken to save MSMEs amid a pandemic have been carried out by all member countries such as extension or postponement of tax reporting deadlines, direct financial assistance such as facilitating the provision of soft capital loans and providing wage subsidies or incentives for MSME employees and owners. Currently, the most important thing is implementing long-term structural steps to maintain the sustainability of MSMEs in the midst of implementing a new life order (new normal) that changes the lifestyle of the consumer community in the post-pandemic. Structural measures require collective effort for all ASEAN member countries because they change the overall structure of MSMEs to go hand in hand with changes in the lifestyle of the consumer society.
THE IMPORTANCE OF UMKM DIGITALIZATION FOR THE ECONOMY
Strengthening MSMEs cannot be separated from the implementation of SDG (Sustainable Development Goals) or Sustainable Development Goal 8 (eight), namely, promoting sustainable, inclusive economic growth and providing full and productive employment opportunities for all people. The presence of MSMEs expands economic goals, which is increasing the number of jobs. The addition of the number of new jobs by MSMEs provides benefits for the poor and vulnerable to get out of poverty and has an impact on increasing community income which brings success in achieving the first SDGs (eradicating poverty), second (ending hunger), fifth (gender equality), eighth itself, and ninth (increasing industrialization and sustainable innovation).
The results of research conducted by Mckinsey & Company suggest long-term steps that need to be taken by policymakers to prepare and encourage MSMEs to rise again. One of the long-term steps that need to be taken is to prepare MSMEs to implement digitalization in carrying out their economic activities again. This step needs to be taken because the COVID-19 pandemic has forced all businesses to close their physical facilities which are the center of their economic activity and online channels are the only way for MSMEs to survive amid limited physical activity to reduce the number of transmissions. The importance of digitalization for MSMEs to increase their income is evidenced by a survey from Mckinsey in 2018 showing 60 to 95 percent of digital income reaches 10 percent of all the largest corporate sectors. If MSMEs take into account a significant share of the region’s economic activity, this means that increased digital capabilities will also have an impact on increasing income.
The effort to digitize MSMEs to be able to adapt in the era of a new life order also faces many challenges. The challenges that must be faced in realizing digitalization include access to supporting infrastructures such as electricity supply, communication and information technology, and adequate internet access, which are very important in the effort to digitize MSMEs. Also, mastery of technology and information capabilities for human resources is something that needs to be considered because digitization and automation applied to all types of businesses including MSMEs can make many people lose their jobs, for ASEAN member countries there will be 878 thousand new unemployed in Malaysia; 4.5 million in the Philippines; 9.5 million in Indonesia; and 2.4 million people in Thailand. The solution to overcoming this problem is to facilitate new job skills training for job seekers and victims of layoffs (termination of employment) and increase funding and collaborate with companies engaged in technology and information to make this happen.
ASEAN STRATEGY IN DIGITALIZING MSMES IN SOUTHEAST ASIA
Increasing digital capabilities or digitizing MSMEs is also a major concern for ASEAN which was emphasized at the ASEAN + 3 Summit (China, Japan, and South Korea) and the ASEAN Economic Ministerial Meeting. At the 37th ASEAN Summit in Vietnam on November 12, 2020, all ASEAN member countries agreed to launch the ASEAN Comprehensive Recovery Framework (ACRF). The ACRF aims as a coordinated ASEAN strategy that focuses on restoring the critical sectors and vulnerable groups most affected by the pandemic and identifying what actions should be taken in line with regional and sectoral priorities. ASEAN’s attention to the importance of increasing digital capabilities or digitizing MSMEs is reflected in the fourth ACRF strategy which focuses on accelerating inclusive digital transformation and is included in key priorities, namely, providing an online platform and implementing policies related to enhancing digital capabilities. Not only that, improving connectivity is a key priority related to digitizing MSMEs by providing supporting infrastructure and an affordable internet network. Besides, the launch of the ACRF at the 37th ASEAN Summit is an implementation of the 16th SDG which emphasizes international cooperation and an institutional framework in realizing sustainable development. The highest political forum such as a high-level conference (Summit) is a forum that provides political leadership, collective guidance, and recommendations in realizing sustainable development.
To realizing the strategy in these key priorities, there are 3 (three) stages, namely reopening, recovery, and resilience. The reopening stage, namely ACCMSME (ASEAN Coordinating Committee of Micro, Small, and Medium Enterprise) as an agency in ASEAN that coordinates MSME empowerment agencies in ASEAN member countries, conducts in-depth assessments to identify challenges and policy recommendations to support awareness of technology adoption and relevant digital tools among MSMEs; And supporting the integration of MSMEs into global value chains, including establishing mechanisms to help MSMEs increase exports. The identification results report will be followed by policy recommendations for improving the digital capabilities of MSMEs for ASEAN member countries and special recommendations for less developed member countries such as Cambodia, Laos, Myanmar, and Vietnam (CLMV) to get assistance from the IAI (Initiative for ASEAN Integration).
In the recovery and resilient stages, ACCMSME will increase the amount and quality of relevant content in the ASEAN SME Academy. The ASEAN SME Academy is an online media portal for digital skills training for MSMEs launched by the US – ASEAN Business Council in collaboration with USAID (United States Agency for International Development) in March 2014. The ASEAN SME Academy aims to provide free training for MSMEs in ASEAN to improve access to financial products, global and regional markets, information services and business input, and technology and innovation. The training content and information in the ASEAN SME Academy are designed by Forbes 500 listed companies such as Google, Cisco, SAP, and HP. Currently, the ASEAN SME Academy is managed by ACCMSME and its presence will be more useful by improvising the amount and quality of content and translating the training content in it into local languages ​​so that it can be accessed by all groups and target more users as the implementation of ACRF’s fourth strategy.
In addition to the improvised development of the ASEAN SME Academy, ACCMSME has also launched the ASEAN Go Digital program in June 2020. This program is a collaboration between ACCMSME and The Asia Foundation and Google. The main objective of this program is to improve information and communication technology capabilities for MSME owners to increase their productivity and individuals who do not have permanent jobs to participate in the digital economy and help senior stakeholders understand the potential of MSMEs in the digital era. The targets of this program are 200 thousand farmers, agricultural cooperatives, home handicraft producers, and owners of other traditional businesses, totaling 200 thousand people across ASEAN. In carrying out this program, ACCMSME has coordinated with its partners consisting of non-governmental organizations (NGOs) and government organizations in various ASEAN member countries. The Asia Foundation being the main partner of ACCMSME has a role to play in tailoring the training program so that it meets the needs of each country and suits the local context, and works closely with teams of local technology professionals and volunteers in providing training. Realizing the digitization of MSMEs requires adequate supporting information and communication technology infrastructure, namely the internet. Bearing in mind the low internet penetration in several ASEAN member countries such as Cambodia, Laos, and Myanmar, it has created inequality among member countries. To overcome this, ASEAN through the ASEAN Digital Senior Officials Meeting (ADGSOM) or the ASEAN Communication and Digital Ministers Meeting and the ASEAN Telecommunication Regulators Council (ATRC) or the ASEAN Telecommunication Regulatory Council will coordinate each of the telecommunications and digital ministries of member countries in implementing efforts to increase internet penetration in rural and remote areas with the new Universal Service Obligation framework (USO 2.0). Also, to ensure internet affordability for all, ADGSOM and ATRC have prepared a regional policy framework in providing transparent and affordable international roaming services.
Empowering MSMEs through increasing digital capabilities is an important priority for ASEAN in its efforts to restore the economies of member countries because MSMEs are the backbone for almost all ASEAN member countries. The impact of the COVID-19 pandemic, which has changed the way of life of all people around the world, has made MSMEs have to adapt to maintain their business continuity. Therefore, structural handling is needed in maintaining the continuity of MSMEs as the backbone of the economy, such as cooperation at the regional level such as ASEAN as a forum for cooperation and collective action for member countries in the Southeast Asia region. The policy framework that was launched based on consensus at the 37th ASEAN Summit became a guide for ASEAN agencies related to MSMEs (ACCMSME) and digital connectivity (ADGSOM and ATRC) in coordinating government agencies of each member country involved in increasing digital capacity and digital connectivity infrastructure who supports it. This shows that ASEAN has implemented the 16th SDG which emphasizes international cooperation in realizing development, namely increasing the digital capabilities of MSMEs which are closely related to SDG 8 which promotes inclusive economic growth, and MSMEs are a means of expanding employment opportunities for the poor which are closely related to growth. an economy that is inclusive or has an impact on the people.
