Background

Government Regulation Number 17 of 2013 on The Implementation of the Law of the Republic of Indonesia Number 20 of 2008 on Micro, Small, And Medium Business (“

GR No. 17/2013

“) is made to utilize the Micro, Small, and Medium Business (

“UMKM”

) in order to improve, to protect, and to give legal certainty of UMKM, and to implement Article 12 paragraph (1), Article 16 paragraph (3), Article 37, Article 38 paragraph (3), and Article 39 paragraph (3) of the Law of the Republic of Indonesia Number 20 of 2009 on Micro, Small, and Medium Business.

The Utilization of UMKM

The utilization of UMKM can be done in the following way:

• Business Development

Government andlocal government prioritize UMKM by: (i)  giving opportunity to participatein procurement on goods and services for the government andlocal government; (ii) Reservations for UMKM through limitation for the large business; (iii) Simplicity in licensing; (iv) Providing fiancial needs; (v) Technology and information facilities.

• Partnership

Under Article 11 of GR No. 17/2013, a Partnership includes the process of transfer of skillsin the field of production and processing, marketing, financing, human recourses and technology in accordance with the Partnership system. However,in Article 12 of GR No. 17/2013, large business isprohibited from owning and/or controlling their UMKM Partners. Furthermore, the medium business isprohibited from owning and/or controlling their micro and/or small business partners.

The partnership system are:

–  The plasma core;

The large business plays the role as the core and UMKM is the plasma; or the medium business as the core, and the micro and small business asthe plasma.

–  Sub-contract;

The large business plays the role as contractor, while UMKM as the sub-contractor; or the medium business as the contractor, and the micro and small business as the sub-contractor.

–  Franchise Partnership;

The large business plays the role as franchisor and UMKM plays the role as franchisee; or the medium business as the franchisor and  micro and small business plays the role as franchisee.

–  General Trade;

The large business plays the role as the receiver of goods, and UMKM as the supplieror the medium business plays the role as receiver of goods, and micro and small business  as thesupplier

–  Distribution and agency;

The large business provides exclusive right to UMKM to sell their goods and servicesor the medium business provides exclusive right to micro and small business to sell their goods and services.

–  Profit share;

UMKM plays the role as a party who runs the business that is owned or funded by the large business. The micro andsmall business plays the role of aparty who runs the business that is owned or funded by medium business.

–  Operational Cooperation;

UMKM and alarge business run a temporary business until the work/project iscompleted;or micro and small business with medium businessrun a temporary businessuntil the work/project is completed .

–  Joint venture;

The local UMKMcan engagea partnership with foreign large business through joint venture by establishing a new company.

The local micro and small business can engagea partnership with foreign medium business through joint venture by establishing a new company.

–  Outsourcing  (penyumberluaran);

UMKM can engagea partnership with a large business through outsourcing (penyumberluaran), by doing business or part of business activity which is not their main business activity. And/or the micro and small business can engagea partnership with a medium business through outsourcing (penyumberluaran), to do business or part of business activity which is not their main business activity.

–  Other partnership;

Aside from the partnership as mentioned above, UMKM can do other kinds of partnerships as long as it does not violate the provisions stated in the Article 10 paragraph (1), paragraph (2), and paragraph (3) also Article 11 paragraph (3). Any form of partnership that performed by UMKM is made in a partnership contract in which the contract shall be made letterally in Indonesian language.

• Licensing

UMKM musthave proof of business legality. The legality can be grantedin the form of business license, the evidence of registration, and the evidence of data collection.

The government together with local government shall simplify the licensing procedures and types of licenses needed for UMKM which basically consist of:

–  Acceleration of proccess that does not exceed the standard periodthat has been stipulatedbythe legislation;

–  Certainty of service charge

–  Clarity regardingthe service that can be tracked in each step of licensing procedure;

–  Reducing file requirements for the same 2 (two) or more licensing application;

–  Removing certain types of licenses; and/or;

–  Bestowing the rights of information  related to services implementation to the public.

• The coordination and control of the UMKM Utilization

The coordination and control of the UMKM Utilization includes the arrangement, integration, implementation, monitoring, and evaluation of:

-The legislation and the policy that have been stipulatedby the government and local government in order to grow the business climate that can give business certainty and fairness in financial, infrastructure, business information, partnership, business licensing, business opportunity,trade promotion, and institutional support.

–  The businessdevelopment program implemented by the government and local government, business world, and public in the scope of production and processing, marketing, human resources, design and technology;

–  The developmentprogram in scope of financing and security; and

–  The implementation of business partnership

Procedure of the imposition of sanctions

The imposition of administrativesanction to large business or medium business which ownor controlled theirmicro or small business partners, can be done based on KPPU initiative and/or based on the report that came to KPPU from:

• UMKM that wasinjured/aggrieved  by the ownership and/or the controlling of his business in relation to the partnership with the large business.
• Micro and small business that wasinjured/aggrieved  by the ownership and/or the controlling of his business in relation to the partnership with the medium business.
• Person who knows the conjecture about the violation of the partnership implementation.Furthermore, the report must be sent in writingaccompanied with clear and complete evidence.

After receivingthe written report, KPPU shall make preliminary examination. If there is an indication about the owning or controlling of the micro or small business partner by the large business or medum business, then KPPU will give written warning to the business that conduct the violation. If there is no respons after3 (three) consecutive written warnings, the process will be continued to futher examination. Based on futher examinaton, KPPU can give the verdict in the form of administrativesanction. In the event that KPPU’sdecision ordered the revocation of business licenses, the authorized official granting that license will have to revoke the business license not later than 30 (thirty) working days after the decision is binding.

Adjustment to the regulation

At the time when this government regulation comes into effect, The UMKM that perform its business activity and do not have a business license, within a maximum period of 3 (three) years shall make the business license.