Indonesia's Struggle with Short-Lived Businesses: A Threat to Economic Growth

The Prevalence of Short-Lived Enterprises

Indonesia is facing a significant economic challenge due to the predominance of short-lived businesses. According to the World Bank's Enterprise Surveys, 70% of Indonesian companies are between 0-30 years old, indicating a high firm turnover rate. This phenomenon is not merely a business cycle issue but a structural problem affecting the country's economic resilience and global competitiveness.

Consequences of High Business Mortality

The economic implications of short-lived businesses are far-reaching:

1. Limited Productivity Growth: Companies that fail to mature lack the capacity for significant investment in R&D and human capital.
2. Weak Global Integration: Short-lived businesses struggle to establish lasting international connections.
3. Reduced Economic Resilience: The constant churn of businesses creates economic instability.
4. Limited Job Creation: Companies that don't survive long-term fail to generate sustainable employment opportunities.

Lessons from Economies with Long-Lived Businesses

Countries like Japan and Germany have demonstrated the value of long-lived businesses:

1. Japan's Centuries-Old Companies: Over 33,000 companies aged over 100 years, supported by cultural continuity and relationship banking.
2. Germany's Mittelstand: Hundreds of thousands of medium-sized businesses that are family-owned, globally competitive, and supported by vocational training and long-term banking relationships.

Policy Recommendations for Indonesia

To address this challenge, Indonesia needs a comprehensive approach:

1. Create Scale-Up Ecosystem: Develop growth funds, venture debt, and business mentoring programs.
2. Enhance Long-Term Financing: Encourage banks and capital markets to support long-term business growth.
3. Strengthen Vocational Education: Implement industry-aligned vocational training like Germany's dual system.
4. Improve Public Procurement: Use government contracts to strengthen local suppliers.
5. Measure Business Longevity: Track firm survival rates and value-add from long-standing businesses.

Conclusion

Indonesia's economic future depends on transforming its business ecosystem to support long-term company survival and growth. By learning from global best practices and implementing targeted policies, Indonesia can create a more sustainable economic foundation for future generations.