Coping with Economic Slowdown
In his inaugural address on Oct. 1, 2019, the executive director of the International Monetary Fund (IMF), Kristalina Georgieva, said straightforwardly that the global economy was experiencing a synchronized slowdown.
In his inaugural address on Oct. 1, 2019, the executive director of the International Monetary Fund (IMF), Kristalina Georgieva, said straightforwardly that the global economy was experiencing a synchronized slowdown.
Meaning that the slowdown is very real, while the impact will spread throughout the world. The reason is that global trade is practically stuck, while the production chain is fragmented.
The effect of the global slowdown has begun to affect the Indonesian economy. The economic growth in quarter III-2019 was only 5.02 percent or the lowest since quarter III-2017. It is estimated that growth throughout 2019 will only be 5.04 percent. Faced with this reality, various policy scenarios have been designed to relax the economy so that the slowdown will not continue and instead improve.
How can technological disruption be the deciding factor in avoiding the economic slowdown cycle? Conceptually, the technology together with labor and capital are the key factors in production which, if managed efficiently, will be able to increase the productivity.
While strengthening human resources through the formal education system is long term.
The adoption of technology can be maximized if the quality of human resources is adequate. While strengthening human resources through the formal education system is long term.
Speaking at the Kompas100 CEO Forum in Jakarta on Thursday (11/28/2019), Education and Culture Minister Nadiem Makarim estimated that if all parties participated, the impact from the improvement of the education could only be felt in 15 years. Therefore, a short-term breakthrough is needed.
Regarding technology, Roy Amara, a futurist in the United States, once said, “We tend to overestimate the impact of new technology in the short run, but we underestimate it in the long run.” This statement was later called Amara\'s Law.
Policymakers have the challenge of designing policies as counter-cyclical in coping with the slowdown in the short term, but must still be aware of long-term economic transformation.
Meanwhile, businesses must find new opportunities amidst stagnation from all directions. In every challenge, there are hidden opportunities. Technology has become a key factor in utilizing business opportunities, such as in Tokopedia, Gojek, Traveloka, Bukalapak and other start-ups.
Relaxation policy
In a business cycle, the government policy has the function as a counterweight. The policy should be relaxed when a slowdown occurs. As conveyed by President Joko “Jokowi” Widodo in his speech at the
opening of the Kompas100 CEO Forum, the government is preparing a revision of a number of laws in order to facilitate investment and increase the dynamics of the domestic economy.
The government plans to issue an omnibus law that will revise as many as 74 laws.
The omnibus law on taxation is expected to be approved by the House of Representatives (DPR) later this year, while the omnibus law on job creation is expected to be passed in early 2020. Both are oriented towards loosening the rules so that investors, the business world, and society are more passionate about encouraging economic growth.
In the field of taxation, the revision will cover various aspects, namely Income Tax (PPh), Value Added Tax (PPN), General Taxation Provisions (KUP), Regional Tax and Regional Retribution (PDRD), and the law on customs.
Regarding the income tax, the government will reduce corporate income tax, which is currently 25 percent 22 percent in 2021 and 20 percent in 2023. In addition, the government will also provide an additional 3 percent reduction for five years for companies listed on the stock exchange. Indonesian companies that expand overseas will be exempt from dividend tax.
While related to e-commerce tax, the tax will be imposed not based on a permanent business entity (BUT) or branch offices, but based on economic activities.
In the area of job creation, the target is to create an investment ecosystem as well as the ease and protection of micro, small and medium enterprises (MSMEs) which include 11 business clusters. This bill also includes innovation through research, the establishment of limited liability company, land acquisition and the simplification of licensing procedures and the establishment of special economic zones.
How can technology play a role? Technology is a supporting factor. Another important factor is the human resource. Of the total population working in Indonesia in August 2019 of 126.51 million people, around 57.54 percent of them had elementary and junior high school education, 18.33 percent had a high school education, while other 11.73 percent passed vocational high schools, 2.7 percent holding an associate\'s degree and the remaining 2.7 percent held bachelor’s degree.
The adoption of technology in the micro and medium sectors can become important breakthroughs in order to increase the performance of the sector which account for 97 percent of business entities in Indonesia.
Related to labor challenges and technological opportunities, there are two things that can become the focus. First, adopting technology that is simple, appropriate, but can significantly boost productivity. The adoption of technology in the micro and medium sectors can become important breakthroughs in order to increase the performance of the sector which account for 97 percent of business entities in Indonesia.
Second, increase capacity through training programs in the field of technology. One of the purposes of the pre-employment card program is reskilling or upskilling of the workers.
The collaboration with professional institutions in providing skills is one of the keys to success, in addition to revitalizing existing vocational training centers. In addition, it can also encourage businesses to provide employee training facilities to master new skills based on digital.
Regarding economic transformation, JM Keynes\' advice is very relevant: The problem is not how to find new ideas but how to escape from the trap of old ideas. The threat of the slowing down, which is now in front of our eyes, requires real efforts to find new ways to revitalize our economy.
A PRASETYANTOKO, Lecturer, Atma Jaya Catholic University of Indonesia, Jakarta