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NON-GOVERNMENT ORGANIZATION (NGO) LEADERSHIP EFFECT OVER SMALL BUSINESS DEVELOPMENT BY TSUNAMI VICTIMS IN NANGROE ACEH DARUSALAM, INDONESIA

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This paper describes an analysis on NGO’s management leadership in reconstructing small business (fishery and boat rental, fish breeding, plantation, motor vehicle transportation) by tsunami disaster victims in Nangroe Aceh Darusalam Indonesia. The leadership tested out by the writer when he himself began volunteering work in the disaster area to help the victims there. After staying there for three months, he was able to find out the effect of NGO leadership based on the model developed by Fiedler (1976) called “A Contingency Model of Leadership Effectiveness” which consists of three situational variables namely a) relations between NGO’s leadership and tsunami-victim businessmen, b) task structure between NGOs and tsunami-victim businessmen and c) position power between NGO leaders and tsunami-victim businessmen. These three variables were applied by the NGOs for capacity building of the tsunami-victim businessmen which led to the establishment of microfinance. To identify the three variables, a survey was conducted through a proportional sample of 210 informants out of 415 people as the population. The data were analyzed by using Path Analysis in the SPSS (Statistical Package for Social Sciences) version 13.01. The value was found out for each variable as follows: a) the relations between NGO leaders (X1) and small business holders (Y) is 0.7306, b) the task structure between NGO (X2) and small business holders (Y) is 0.5632 and c) position power of NGO (X3) over small business holders (Y) is 0.5801. The effect of NGO leadership (X) to develop small business of tsunami victims is 0.5104. The highest value of the three variables was in the relations between the NGO leaders and small-scale businessmen because the victims expected a harmonious relation to develop capacity building. With this kind of relations the social interaction was maintained especially when they adapted to their traumatic experience. The people held informal meetings in friendly atmosphere and they treated each other equally without discrimination.
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Spring 2006, Vol. 5 No. 1

NON-GOVERNMENT ORGANIZATION (NGO) LEADERSHIP EFFECT
OVER SMALL BUSINESS DEVELOPMENT BY TSUNAMI VICTIMS IN
NANGROE ACEH DARUSALAM, INDONESIA

Monang Sitorus
Dean of Faculty of Social and Political Sciences,
Lecturer of Entrepreneurship at Department of
Business Administration, HKBP Nommensen
University, Indonesia
Mailing address: Jl. Sutomo No 4A Medan
North Sumatra, Indonesia
Tel.: 62-061-4522922
Fax: 62-061-4571426
E-mail: Monangporsea @yahoo.com


Abstract

This paper describes an analysis on NGO’s management leadership in reconstructing small
business (fishery and boat rental, fish breeding, plantation, motor vehicle transportation) by
tsunami disaster victims in Nangroe Aceh Darusalam Indonesia. The leadership tested out by the
writer when he himself began volunteering work in the disaster area to help the victims there.
After staying there for three months, he was able to find out the effect of NGO leadership based
on the model developed by Fiedler (1976) called “A Contingency Model of Leadership
Effectiveness” which consists of three situational variables namely a) relations between NGO’s
leadership and tsunami-victim businessmen, b) task structure between NGOs and tsunami-victim
businessmen and c) position power between NGO leaders and tsunami-victim businessmen.

These three variables were applied by the NGOs for capacity building of the tsunami-victim
businessmen which led to the establishment of microfinance. To identify the three variables, a
survey was conducted through a proportional sample of 210 informants out of 415 people as the
population. The data were analyzed by using Path Analysis in the SPSS (Statistical Package for
Social Sciences) version 13.01. The value was found out for each variable as follows: a) the
relations between NGO leaders (X1) and small business holders (Y) is 0.7306, b) the task
structure between NGO (X2) and small business holders (Y) is 0.5632 and c) position power of
NGO (X3) over small business holders (Y) is 0.5801. The effect of NGO leadership (X) to
develop small business of tsunami victims is 0.5104. The highest value of the three variables was
in the relations between the NGO leaders and small-scale businessmen because the victims
expected a harmonious relation to develop capacity building. With this kind of relations the

social interaction was maintained especially when they adapted to their traumatic experience.
The people held informal meetings in friendly atmosphere and they treated each other equally
without discrimination.


Non- Government Organization (NGO) Leadership Effect Over Small Business
Development By Tsunami Victims In Nanggroe Aceh Darusalam, Indonesia

Introduction
In the year 2000 Indonesia possessed 2.74 million units of small-scale and medium-scale
business in industrial sector with 8.1 million workers, in trade sector 9.43 million units with 19.0
million workers. The production value of small-scale business was Rp. 27.9 trillion and export
value was US$ 2.85 billion. The contribution of National Gross Local Revenue was 13.3%
(Nasution, 2000). Of the small-scale business, some operate in Nangroe Aceh Darusalam (NAD)
in Sumatra Island, Indonesia as fishery (using boats), fish breeding, plantation and motor vehicle
transportation. The four types of business are the object of the research as in general the tsunami
victims work in this sector.
Nangroe Aceh Darusalam (NAD) is located at 00 - 60 North Latitude and 950 – 980 East
Longitude with the size of 57,365,570 km2 at the elevation of 125 m above sea level. The
population is 4,218,486 people consisting of 2,119,628 males and 2,098,858 females. The
number of poor people before the tsunami was 1,203.143. There are 21 regencies and 228
districts. The security in this area since 4 December 1976 or 30 years ago when Indonesian
government and the Aceh Separatist Movement (GAM) were in conflict can be depicted in the
following map below:

Figure 1
The Map of NAD Province is the Part of Sumatra Island Indonesia




















By the end of 2004 precisely on December 26, a tectonic earthquake occurred in Asian region.
According to the United States Geological Survey it was estimated to reach 8.9 at Richter scale
and the epicenter was under the sea 250 km from Banda Aceh, Indonesia producing tidal waves
of 20 meters high. This earthquake was believed to be the most devastating one in Asian region
including Indonesia, Sri Lanka, India, Thailand, North Africa, Myanmar, Maldives, and
Malaysia.

Table 1
Number of Tsunami Victims



Status
No
Country
Dead (people)
Missing
Losing residence
(people)
(people)
1 Indonesia
126.
326 93.861
419.682
2
Sri
Lanka 31.187 4.280 545.714
3 India
16.389
No
data 647.599
4 Thailand
53.395
2.932
No
data
5 North
Africa 312
158
2.320
6 Myanmar
90
10
No
data
7 Maldives
82
26
21.663
8 Malaysia
68
12
No
data
Source: UNO Coordination Board (www.hariansib.com) March 2005.


A report from Munich Regroup estimated that the economic loss in Asian region in January 2005
caused by the tsunami reached 140 billion dollars (www.analisadaily.com). A large number of
civilians died and many of them were the small and medium-scale businessmen. There were over
120,000 refugees with 141,000 homes destroyed.

Figure 2
The Stranded Ship Caused by Tsunami Disaster in Lhok Nga Aceh Darusalam














They had to stay in refugee camps not only in the province of Nangroe Aceh Darusalam but also
in other locations outside the territory. Four months after the disaster, Indonesian President
Susilo Bambang Yudhoyono (SBY) appointed and authorized officials of Agency of Aceh
Rehabilitation and Reconstruction (AARR) headed by Kuntoro Mangkusubroto through
Presidential Decision No. 63/m/2005 dated 29 April 2005, and Regulation No.2/2005 to
reconstruct Aceh with the authority power for four years.

To facilitate the aids from donor countries, there has been an agreement made politically
between Indonesian government and the Aceh Separatist Movement to end the conflict by
signing a Memorandum of Understanding on 15 August 2005 under the authority of a
negotiation team represented by Minister of Law and Human Rights, Hamid Awaluddin and the
chairman of the team of ACM represented by Malik Mahmud witnessed by the Head of Crisis
Management Initiative, Marti Ahtisari (former President of Finland) and the signing ceremony
was attended by 50 ambassadors. The MOU endorsement was held at the Government Banquet
Hall Etelaspalnadi, Helsinki, Finland.

Figure 3
The MOU Endorsement by Indonesian Delegation Headed by Hamid Awaludin, and Head
of Crisis Management Initiative, Martti Ahtisari , and Head of Aceh Separatist Movement,
Malik Mahmud, to End the Conflict in the Area on 15 August 2005 in Finland.



















One of the claims agreed in the MOU was to end the conflict so that Aceh could be reconstructed
by posting 200 workers for Aceh Monitoring Mission (AMM) which was established by
European Union and ASEAN countries. The workers were sent to the regencies of Meulaboh,
Bireun, Lhokseumaw, and Banda Aceh and stationed in 10 monitoring posts.

Of the 120,000 refugees, 459 people were identified as small and medium-scale businessmen.
Small-scale businessmen should be empowered as such an action can create new jobs (Bygrave,

1997). To empower them, NGOs now propose a capacity building movement which is oriented
around relief and welfare (Korten, 1987). There are 120 foreign NGO workers and 430 local
NGO volunteers spread out in the refugee camps with 16 international donor institutions such as
World Bank, USAID, BODA, and all the bodies under the UNO and 5,000 foreign consultants to
reconstruct Aceh.

Figure 4
NGO Volunteers Building the 36-type Houses in Cot Paya Aceh





















Wolfgang Fengler, chairman of World Bank reporting committee who described the Aceh
Reconstruction in an article entitled “Developing Aceh and Nias”. The World Bank has allocated
US $ 1.4 billion to repair the infrastructure and housing projects, and US $ 900 million for social
sectors (www.waspada.co.id).

Objective of the Study

As there are a large number of NGO volunteers involved with a big sum of funds given to
Nangroe Aceh Darusalam, this matter becomes a significant topic. Therefore, it is worthwhile to
study “to what extent is the effect of NGO leadership over small-business refugees (fishery, boat
rental, fish breeding, plantation, motor vehicle transportation) so that they can reconstruct the
devastated business in Aceh Nangroe Darusalam, Indonesia by adopting the leadership model by
Fiedler (1976).




Theoretical Framework

Man is the only most important source in developing small business although money cannot be
ignored. Despite advanced technology, man’s role should be the first priority. No matter how
well an organization is established, and how sophisticated the facilities are, without the
intervention of people, these things will mean a little. The people have the capacity, not only to
run, plan, and maintain the organization but also to solve problems faced by the organization and
anticipate the risks that may occur.

One of the ways of finding out the nature of human beings in this case is to identify the
performance of the NGO leadership. A leader is a model of behavior who manipulates his
manner as he tries to influence the behavior of other people as they are. The question is how the
leadership should be exercised by the NGO leaders. This is important to know because there are
many theories of leadership introduced by experts of management.

There are theories X and Y. The main tenets of X theory are (1) some people despise working
hard; (2) people tend to evade responsibilities; (3) people lack ambition to be creative; (4) people
need motivation to do the work; (5) people should be supervised and forced to do their work. If
the X theory assumptions are acceptable, then, the type of leadership needed should be
authoritarian. Next, Y theory has the following assumptions: (1) work is like a game: there is a
time for relaxation; (2) people can control themselves like in a game; (3) people have creativity
to solve their problems; (4) motivation is needed not only in social needs, self-esteem, self-
actualization but also in physiological needs and safety. If the Y theory is applied, then, the type
of leadership should be democratic (McGregor 1960).

Next is the Path-Goal Theory which creates a leadership style in various different situations. A
leader is assumed to be effective when he can influence or motivate his subordinates based on
their capability and satisfaction. Subordinate motivation will increase to the degree the leader
succeeds. The subordinates will feel satisfied if they think that they can achieve what they want
in the job. The leader will always explain the leadership style that is appropriate to achieve the
goals. There are four types of leadership: (1) directive leadership: the leader tends to tell his
subordinates what he expects from them, (2) supportive leadership: the leader always treats the
subordinates equally, (3) participative leadership: the leader always negotiates with his
subordinates, asks for suggestions and ideas before making a decision, (4) achievement-oriented
leadership: the leader always sets a challenging goal so that the subordinates reach the highest
achievement and keep improving their work quality (House, 1971).

The theory of Behavior Pattern suggests that there are two dimensions of leadership namely the
use of authority by the leader and use of freedom by subordinates. This implies that the more
authority the leader exercises, the less freedom the subordinates have. On the other hand, the
more freedom the subordinates show, the less authority the leader will use (Tannenbaum and
Schmidt 1985).

The theory of Managerial Grid contains two axis of “concern for people” (vertical) and “concern
for production” (horizontal). The two axis are drawn with grids to show styles of leadership. This
theory hence proposes five styles of leadership namely: (1) leadership with the exertion of

minimum effort in getting the work done (grid 1.1); (2)leadership with thoughtful attention to the
needs of the people resulting in satisfying relationships the lead to a comfortable , friendly
organizational atmosphere and work tempo (grid 1.9); (3) leadership with adequate personal
performance through balancing the necessity for getting out the work while simultaneously
maintaining morale of the people at a satisfactory level (grid 5.5); (4) leadership with efficiency
in operations resulting from arranging the conditions of work in such a way that the human
elements interfere to a minimum degree (grid 9.1) and (5) leadership with work accomplishment
coming from committed people and interdependence through a “common stake” in
organizational purposes resulting in relationships of trust and respect (grid 9.9).( Blake and
Mouton 1976).

The theory of Contingency in principle assumes that effectiveness of a group or organization
depends on interpersonal interaction of the leader who can see a favorable situation. A situation
is defined as having two characteristics: (1) the level of situation in which the leader directs,
controls and influences the situation, and (2) the level of situation which confronts the leader
with a contingency. The favorable or unfavorable situation if combined with three sub-variables
of leadership style will lead to a) relations between the leader and subordinates which , in terms
of the good or bad relations, will determine how much the subordinates support the leader., (b)
task orientation - what job and how the job should be clearly described to the subordinates, c)
position power which means the extent of the power of the leader in determining the authority of
the leader to punish or give rewards to the subordinates. Therefore, the leadership style is formed
by the three variables (Fiedler 1976).

In exercising the contingency leadership, the effectiveness depends on the capacity of the leader
to interpret and observe the situation which he faces and adapts his style to the situation in such a
way that he is effective in performing his leadership function. Hence, according to the theory of
contingency, authoritative leadership can be effective if a certain situation requires so, on the
other hand, a democratic leader may act authoritatively if a situation forces him to. Fiedler says
that what is best is the leadership style that allows for rather gentle relationships if the situation is
favorable or unfavorable. A leader will be respected by the community in Nangroe Aceh
Darusalam if the NGO leader has power. If the task orientation of the tsunami-victim small –
scale businessmen is vague, then, the leadership style needed to achieve the best is oriented
towards a harmonious relationship and so the task will be easily understood. On the other hand,
if the situation is favorable or unfavorable, then, the task orientation will produce desirable
results. An NGO leader will get the sympathy of the tsunami-victim businessmen if he has
power and ability to identify the goals of capacity building program. He will work in the most
favorable situation. Fiedler’s classification of favorableness of the situation:










Figure 5
Leadership Performance in Different Situational Favorableness Conditions

Task motivated
Relationship Motivated


Good


i
o
n

s

zat
ni

ga

r
Or
nce

p o

ou
Favorable
Moderate
Unfavorable
Gr
Performa

Favorableness of the Situation
Poor
Conditon
1 2 3 4
5 6
7 8
Leader-member
Good Good Good Good
Poor Poor Poor Poor
Relation
Task
High High Low Low High High
Low Low
Structure
Leader Position Strong Weak Strong Waek Strong waek Strong Weak
Power
Source: Hodgetts (1982: 353)

From all the theories presented above, the writer has chosen Fiedler’s theory to analyze the effect
of NGO leadership on small-scale business of tsunami victims. The reasons for this are that first
this theory can be applied and tested to find out its validity for all individuals irrespective of
their jobs (whether they are fishermen, boat lenders, plantation workers, motor vehicle pullers),
religion, education, citizenship, socio-cultural background, and locations of the application
because every leader or subordinate will always seek a favorable or unfavorable situation in
making a decision for themselves, and second the theory can describe simply the leadership
problem and it can be easily applied to small-scale businessmen in Nangroe Aceh Darusalam,
Indonesia.

Methodology

The method of research applied here is a survey (Kerlinger 1973). A sample was drawn through
stratification out of the whole population of tsunami-victim businessmen in the refugee areas of
North Sumatra precisely in Langkat regency. The total number of refuges was 459 family heads
consisting of (a) 270 businessmen of fishery or boat rental, (b) 97 businessmen of fish breeding,
(c) 35 businessmen of plantation and (d) 57 businessmen of motor vehicle transportation
(www.hariansibdaily.com)

Based on the above population, the sample in this study was drawn by applying the formula of
Taro Yamane (in Rahmat’s 1989) such as:


=
N
n

2
Nd
+ 1

where n = number of sample units; N = population ; d = precision; 1 = constant

Based on the above formula, the writer sets ? = 0.05 and so the minimum sample was 214 small
firms. The sample was distributed porportionally according to the type of business with the
following formula:
Ni
ni =
x n

N

where ni = number of – i strata; Ni = the size of – i population; N = total of population; n =
number of samples distributed.

The technique of collecting data was a structured questionnaire using Likert’s scale. The items
were closed ended with 5 options. The questionnaire was designed based on indicators of each
variable. It was then tried out in the field to find out if every item was valid and reliable by using
Pearson’s Product Moment. The sample to tried out was 30 people while to find out the effect of
the independent variable on the dependent one by using Path Analysis. The paradigm of this
research is based on the model of Li Chun (1981).

Figure 6
The Paradigm Structure of the Study based on Fiedler’s Theory














X1

















?PY1







rx1.x2















PYX1

































rx1.x3
X2
PYX2
Y





























rx2.x3























PYX3
















X3




Where: X1 = the relationship between NGO leaders and small-scale business; X2 = task
orientation; X3 = position power of NGO leaders; Y
= Small-scale business; PYX1 = the
structural parameter that indicates the extent of the effect of X1 on Y; PYX2 = the structural
parameter that indicates the extent of the effect of X2 on Y; PYX3 = the structural parameter
that indicates the extent of the effect of X3 on Y; ?= other factors that influence small-scale
business as the impact of tsunami; rx1.x2 =correlation coefficent of X1 on Y; rx2x3 =
correlation coefficent of X2 onY; rx1.x3 = correlation coefficent of X3 on Y.


To calculate the effect of the independent variables (X1, X2, X3) on the dependent variable (Y)
or PYX1,2,3 on Y, a formula is applied such as (Sitepu 1994):

k
PYXi
= ? CRij ryxj ; i = 1,2,3
j = 1

To calculate the correlation among the variables such as X1 until X3 or (rxixj), the formula as
follows is used:

n
n
n
n? xihxjh ?
xjh
xjh
h=
?h=
?
1
1
h 1
rxixj =
=
i# j = ,
1 3
,
2

n
n
n
n
(
2
n? x ih ? (? xih)2 (
2
n? x jh ? (
2
?x jh)
h 1
=
h 1
=
h 1
=
h 1
=

To calculate the extent of effect of other variables (?) which influence the small-scale business
beyond the leadership (X1,X2,X3), the following formula is used:

PY ? =
1
2
? R YX ,
1 X ,
2 X 3

whereas R2YX1, X2, X3 = ? PYXiryxi ; i = 1, 2, 3
For the hypothesis testing, the first, second, and third hypothesis are turned into operational
hypotheses such as:

Ho : Pyxi<0 : there is no significant effect of NGO leadership on small-scale business.
H1 : Pyxi>0 : there is an effect of NGO leadership on small-scale business.

From the hypothesis testing, the interval and high, medium and low levels of effect of the
variables of NGO leadership and small-scale business can be estimated (Sugiyono 1996). To test
the firt, second and third hypotheses, the t-test is applied in which if the t-observed value > t –
table vakue, then, the H0 is rejected and H1 is accepted at ? = 0,05, while for the t- test. The
following formula is applied:

=
Pyxi
ti
i = 1,2,3
n
( 1
2
? R Yx ,
1 x ,
2 x )
3
2
Cii ? x ih
k = 3 and V = n – k – 1
n ? k ? 1

where : Pyxi = path coefficient or effect of the variable xi on y; R2yx1, 2, 3 =coefficient that
indicates the total determination of all the variables (X1, 2, 3) on effect variable (Y); n= sample;
n
k= number of independent variables (X1, X2, X3); 1= constant; ? X 2ih = deviation score on
h=1

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