POTENTIAL OF MICRO, SMALL AND MEDIUM BUSINESS (MSME) PROCESSING INDUSTRY SECTOR EAST JAVA IN RESPONDING TO THE CHALLENGES OF GLOBALIZATION

Abstract

The global competition demands Indonesia to compete with other countries  in international market. East Java is a province which gives big contribution to  Indonesia’s GDP. From year to year, the source of economic growth in East Java is still  dominated by the processing industry especially by the Small and Medium-Sized  Enterprises (SMEs) sector. This sector is able to contribute more than 50% to East  Java’s gross domestic product (GDP). Considering that, the sectoral development  could be more effective to deploy in this sector for it is the prime mover of East Java’s  economy. In addition to the contribution to GDP, this sector is also able to solve the  employment issues and the demand fulfillment. To collect the datas, writer used  questionnaire to gain the primary data with the East Java SMEs players as the  respondents. Then the data was processed using Balance Scorecard approach to  measure SMEs’ performance. Besides that, writer also used the secondary data that  obtained by the literature study method. In result, it shows that SMEs has a promising  prospect in facing external and internal challenges and pressures. Thus, this result  indicates that SMEs could promote the East Java’s economy and could be a solution  for Indonesia to face the global competition, especially the ASEAN Economic  Community (AEC) that will be officially enacted in the end of 2015.