Ekoom Celios: The Green Industry of IKM is Not Enough to Be Regulated, the Government Must Dispense Incentives

JAKARTA - The Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira assessed that accelerating the transformation of the green industry, especially in the small and medium industry (IKM), requires an incentive-based approach to accelerate the transition from IKM entrepreneurs.

Bhima said the government needed to provide concrete support for IKM through various instruments, such as low-interest financing for energy-efficient machine investments, support for green certification which still has high costs, to the provision of tax incentives for business actors who are able to reduce emissions and waste.

"Therefore, the approach cannot be in the form of regulations or campaigns, but must be followed by targeted incentives," said Bhima as reported by ANTARA, Sunday, July 26.

Bhima said that IKM has a strategic role in encouraging an inclusive green industry, considering that the sector has a major contribution to labor absorption and has the potential to enter the global supply chain.

"IKM is the key to accelerating the transformation of labor-intensive green industries. The potential is large for export markets, especially in the food and beverage supply chain to low-carbon automotive components," he said.

In addition to financial support, he assessed that strengthening human resource capacity is also an important factor in accelerating the transformation of the IKM green.

Many business actors still need assistance in calculating energy efficiency, managing waste, and implementing the principle of circular production.

Bhima also sees the use of digital technology and artificial intelligence (AI) can help MSMEs optimize the use of energy and raw materials more efficiently.

On the other hand, Bhima encourages the government to provide more space for green IKM products in the government procurement supply chain.

According to him, environmentally friendly products can be prioritized in the procurement of goods and services, as well as encouraging large companies to involve green SMEs in the industrial supply chain.

He added that the implementation of increasingly strict environmental standards in various export destination countries is an opportunity as well as a challenge for Indonesian SMEs.

Products that have not met sustainability aspects risk losing market access, while SMEs that are able to meet green standards have the potential to get premium buyers and increase the value added of products.

"IKMs that are able to meet standards have a greater chance of entering the global supply chain, obtaining premium buyers, and increasing the added value of their products," he said.

Data from the Central Statistics Agency (BPS) in 2025 shows that the number of MSMEs in Indonesia reached 4.43 million business units or around 99.79 percent of the total national industry.

In the first quarter of 2026, IKM contributed 21.71 percent to the national industrial output and absorbed more than 13 million workers.

The Ministry of Industry (Kemenperin) through the Directorate General of Small, Medium, and Multi-Industry (IKMA) presents the Green IKM Empowerment Program as a strategic effort to encourage IKM actors to implement more competitive, sustainable, and environmentally aware industrial activities.

The program is expected to be able to produce SMEs that implement green practices in their business activities, as well as create role models that can be an inspiration, good practice example, and driver of transformation for other SMEs in various regions.

The Ministry of Industry also launched the Green IKM Transformation Activity Guidelines Pocket Book as a practical guide for the implementation of green activities for IKM, as well as the Green IKM Empowerment Program Book which contains background, indicators, and stages of program implementation.