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People's Owned Enterprise (BUMRA)

The prosperity of a nation is contingent on an effective role-play undertaken by economic players through its business entities. They are the ones that can mobilize and create added value effectively. The People’s Owned Enterprise (BUMRA) is the concept of Corporatization of Cooperatives and Small and Medium Enterprises (SMEs). Thus the legal status, structure and position BUMRA is equal and parallel to the other institutions of the economy. This alignment is also reflected in the strengths of the BUMRA with its economic scalability that is market-oriented, efficient befitting a modern and professionally managed corporation. However, principles of family values and the spirit of togetherness in accordance with Article 33 of the 1945 Constitution still colors the BUMRA as an economic institution. The BUMRA as a corporation can only grow and thrive if it can adapt to fundamental business laws. Business starts from the market – where there’s no market, there’s no business. Therefore, the precursor for a BUMRA management model starts with the management of both national and international markets in a major effort to manage a dynamic market. The industry and large corporations determine the number and quality of raw materials sourced from producers (farmers, fishermen, craftsmen, etc.), which is then coordinated into the structure and management system of the BUMRA. This model delivers mutual benefits between the Industry & Trade with the BUMRA representing the SMEs because:

  • The industry is guaranteed supply of raw materials according to the number and quality required
  • The BUMRA is guaranteed market at current fair prices in accordance with market developments
  • The Industry / Trade and BUMRA synergize to create value through high levels of efficiency and productivity as the basis of national competitiveness

Monopolistic practices of the industry as the single buyer of hundreds or even thousands of small and micro businesses will cease with the presence of the BUMRA who now possess the bargaining power to industrial / large traders. Thus, a monopoly is pitched against a monopsony through business logic alone that in turn will deliver a mutually beneficial price through deliberation and consensus. This brings back the concept of a joint venture in accordance with the principle of family-socio-economic democracy spirit of the Pancasila. The BUMRA whose shares are owned by groups of small producers (who can in turn form cooperatives) have the characteristics of a modern corporation with the position and structure of modern management as well. In essence it exhibits the following:

  • Economy of scale - production and supply of small business constituents (farmers, fishermen) that is part of a supply chain with the scale to meet the needs of the industry. Through efficiency, unit costs can be reduced for the benefit of these small business groups;
  • Marketing & Quality Assurance – The key to sustainable market acceptance is quality assurance that is determined by the market or buyer, in this case industrial or large traders. Quality control support from the industry will ensure significantly better prices. Similarly, an increase in productivity through the learning process or learning curve will be created. This combination of higher prices and productivity can increase the income of small businesses and farmers very significantly. This is in addition to the possibility of land expansion of farmers, and new entrepreneurs of the economy that ensues with the emergence of the BUMR.
  • Financing & Insurance – This is the key to successful development of SMEs. Individually, it is almost impossible for small and micro businesses to obtain the appropriate funding source. They are just not bankable and do not have access to the various funding institutions. The only available alternative left is the “pengijon” or middlemen lenders that comes with not only an unbelievably high cost, but also bind them to sell at a price determined by them. The combination of low productivity and quality does not match market specifications thus entrenching micro enterprises, especially in the agricultural sector, to the bottom of the pyramid. It takes a People’s Business Financing Institution (LPUR) who are specialized and focused to finance the SMEs through the BUMRA corporate settings.
  • Procurement & Logistics – Economies of scale production requires access to production equipment and raw materials (quality fertilizers and seeds) that the BUMRA can obtain at competitive prices. Through the provision of efficient logistics (warehousing, transportation), time and mission critical seasonal crop production requirements can be met.
  • Management & Capacity Building – Sustainability and credibility of the BUMR towards its stakeholders (shareholders, the industry, customers, financial sources, government, and the public) is contingent on the competency of its management. Therefore, skills and the system of management requires unparalled professionalism. The BUMRA management system must be developed to equal those of large corporations . Therefore, capacity building should function effectively, given that skilled management personnel in the regions, where the BUMRA is expected to operate is still limited.
  • Processing & Information Technology – The number of micro-economic players that later forms the business groups (Cooperatives) eventually must be accessible and connected through the use of appropriate information and communication technology (ICT). This enables faster and more accurate sales transactions.

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Tanri Abeng University

Jl. Swadarma Raya, No.58,
Ulujami, Pesanggrahan
Jakarta Selatan 12250 Indonesia

Phone : +6221 5890 8888
Fax : +6221 5890 8118
SK Dikti No : 346/E/O/2012

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