From: Tulus Tambunan, 2007, Trade and Investment Liberalization and the Development of Small and Medium-sized Enterprises: A Perspective from Indonesia, Asia-Pacific Trade and Investment Review Vol. 3, No. 2, December 2007.

There is an important ongoing debate in Indonesia on whether the participation of
SMEs in the global economy leads to their sustainable growth. Some of the experts have
a rather pessimistic view of the issue.6 For example, Sulandjari and Rupidara (2002) found
that enterprises and workers in the wood furniture industry cluster in Jepara7 had gained
substantially from participating in export activities. However, they also found that the
industry’s prospects for further growth were questionable. On the input side, the industry
was found to be suffering from the increasing scarcity, and hence rising cost, of its raw
material, wood. On the output side, it was suffering from intensifying competition posed by
China, Viet Nam and other countries. They concluded that the cluster’s gains were not
sustainable and that the intensifying price competition in the international market was
actually promoting the use of cheaper, illegal wood supplies. While these findings may not
be generally applicable to other clusters, they nonetheless raise interesting issues for future
research.

Sulandjari, S. and N.S. Rupidara (2002). “Value chain analysis of wood furniture clusters in
Central Java”, draft report, Centre for Micro and Small Enterprise Dynamics,
Salatiga, Central Java.