Women today contribute in multiple ways to Indonesia’s economic and social progress. They are active and visible in all areas of human endeavor, a positive development. However, women entrepreneurs still face significant hurdles in growing their businesses in both developed economies as well as emerging nations. By Shoeb Kagda
With her recent election victory, German Chancellor Angela Merkel can be considered the most powerful woman in the world. She leads the largest economy in Europe and one of the most powerful countries in the world.
Merkel’s enduring popularity is rare in this political era as she has been German Chancellor for 12 years and is now commencing her fourth term.
Under her leadership, Germany has consistently ranked among the top five most competitive economies in the world and in the post-Brexit world provided stability and assurance to the global business community.
The chancellor has proved beyond any doubt that women can make a difference in the lives of nations both at the very top but also across its middle. She shattered a glass ceiling in 2005 by becoming the first female chancellor of Germany, creating a Merkel effect where more women are now running for public office.
But the question is has she changed the lives of women in Germany and the rest of the world apart from being a role model? According to some studies, women have not made much headway in German corporate boardrooms as none of Germany’s top 30 companies has a female CEO. In the 160 largest German firms, women hold just 7% of executive positions.
Germany, however, is not unique in terms of poor women’s representation in business. Numerous gender-based disparities remain in the global economy as women-owned businesses represent only between one quarter and one third of enterprises in the world.
Furthermore they operate largely outside of value chains and thus international trade, where the greatest opportunities for growth lie, according to a recent report by the International Trade Center (ITC).
Titled ‘SheTrades’, the report points out that being a woman-owned company negatively affects the credibility of their business. Indonesian women entrepreneurs in the services sector confirm that summary.
Women also need better access to patents, internet access, quality certifications, marketing opportunities and customer outreach to run a business successfully, according to an ITC SME Competitiveness Survey of women-led firms in Indonesia. The survey was carried out as part of the SheTrades Initiative to connect one million women to markets by 2020.
It is clear that the contribution of women-owned firms to development is critical but also complex.
Women in Indonesia are not yet full participants in the country’s work force and - by extension - its economy, the report notes. Only half of all women are employed in Indonesia, accounting for just 38% of the total labor force. Contributing to this lack of participation is a tendency among businesses in Indonesia, even in women-owned firms, to employ fewer women as enterprises grow. When women are hired, it is mostly in micro-sized firms that often offer limited earning potential. And when women own or lead enterprises, the vast majority believe that being a women-owned company negatively affects the credibility of their business.
“Only 50% of all working age women participate in the work force; a figure that has not grown in more than 25 years. Raising this would have a number of economic advantages, including boosting growth and tax revenues, revitalizing national pension schemes, and reducing welfare and poverty alleviation costs,” the report adds.
“There are also numerous social benefits, including enhancing the independence of women in society, and breaking harmful gender-based stereotypes.
Indonesia’s national statistics agencies should consider enhancing its collection and reporting of sex-disaggregated data to facilitate more detailed research into the barriers faced by women-owned MSMEs in the country.”
Unfortunately, the share of employed women is highest for micro-sized firms, and decreases as firm size increases. ITC’s survey found that 79% of employees of micro-sized firms are women, compared to just 37% of employees in medium-sized firms. This means that, even among women-owned or -led firms, as businesses grow they tend to employ fewer women.
Policies to encourage hiring women can help. For instance, mandating that companies offer flexible working options, incentivizing work through taxation policy, and improving childcare support have led to increases in the numbers of women joining the workforce in other countries. The key to competitiveness
Having greater female representation in the workforce and in leadership positions is also critical to a nation’s economic competitiveness. According to the just-released Global Competitiveness Report by the World Economic Forum, ten years on from the global financial crisis many economies around the world remain at risk from further shocks and are ill-prepared for the next wave of innovation and disruption.
Among the 17 East Asia and Pacific economies covered in the survey, 13 have increased their overall score with Indonesia and Brunei Darussalam making the largest strides since last year. Indonesia was ranked 36th overall, inching its way up the competitive ladder and moving up five places since last year. Similar to Korea, Indonesia has improved its performance across all its pillars.
Its position in the rankings was driven mainly by its large market size and a relatively robust macro-economic environment. Surprisingly, the report noted that Indonesia is one of the top innovators among emerging economies but the country lags in technological readiness, coming in at number 80 on the list.
Significant advances are also needed in the labor market efficiency pillar which is dragged down by excessive redundancy costs, limited flexibility of wage determination and a limited representation of women in the labor force.
“Countries must establish an environment that enables citizens and businesses to create, develop and implement new ideas that will allow them to progress and grow. The Global Competitiveness Report helps us understand the drivers of innovation and growth and this edition comes at a time when increasing the ability of countries to adopt innovations is critical to achieving broad-based growth and economic progress,” said Xavier Sala-i-Martin, Professor of Economics at Columbia University.
It is clear that the contribution of women-owned firms to development is critical but also complex. Having more women as business owners and in the labor pool has never hurt but these can be important factors to broad-based inclusive economic and social progress. After all, women make up half the world’s talent pool and including them makes a great deal of sense.
There is widespread agreement amongst economists, policymakers and business leaders that economic growth is important for human development and well-being. Growth creates the resources needed for better education, health, and security for higher incomes. Economic growth, therefore, is not an end in itself but a contributor to the improvement of human welfare.