The government has promised to boost programs to strengthen consumption, including the preemployment card program. However, industrial sectors that support the economy also need to be leveraged.
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FX LAKSANA AS/ARIS PRASETYO/AGNES THEODORA/M PASCHALIA JUDITH J
·6 minutes read
ANTARA/SIGID KURNIAWAN
Coordinating Economic Minister Airlangga Hartarto (second right) speaks with National Disaster Mitigation Agency (BNPB) chief Lt. Gen. Doni Monardo (left), State-Owned Enterprises (SOEs) Minister Erick Thohir (second left) and Deputy SOEs Minister Budi Gunadi Sadikin after a meeting with President Joko Widodo on Monday (20/7/2020) at the presidential palace compound in Jakarta. The President has signed a Government Regulation (PP) on the management of COVID-19 and National Economic Recovery that regulates the establishment of the COVID-19 Management and Economic Recovery Committee.
JAKARTA, KOMPAS – The government will seek to improve the existing National Economic Recovery program after the economy contracted 5.32 percent in the second quarter of 2020. It should also take advantage of opportunities in the industrial sector that are growing, while also addressing contracting sectors.
Erick Thohir, the chief executive of the COVID-19 Response and Economic Recovery Committee, said the government would provide a number of stimulus programs to help people spend more. In order for the distribution to be on target, he said, it would take time, accurate data and coordination with many parties.
"The PEN [economic recovery] programs implemented by the government are quite numerous and mutually sustainable, such as cash social assistance, non-cash food assistance, the Family Hope Program and credit distribution in the micro, small and medium enterprises [MSMEs] sector," he said in a press statement on Thursday (6/8/2020).
According to Erick, who is also the State-Owned Enterprises (SOEs) Minister, the government will distribute assistance to workers affected by layoffs or furloughs through the preemployment card program. The program is being altered so that it can be run again by the Manpower Ministry in September 2020.
The program targets 13.8 million non-civil servants and non-SOE employees registered with the Workers Social Security Agency (BPJS Ketenagakerjaan) whose premium contributions are below Rp 150,000 monthly. This means workers with a salary of under Rp 5 million per month. "The amount of assistance is Rp 600,000 per month for four months. The disbursement will be given every two months to the bank account of each worker," he said.
Residents crowd the Sidoarjo City Post Office in East Java on Thursday (11/6/2020), the last day before the deadline to receive cash in the first phase of a social aid program from the Social Affairs Ministry. The residents ignored Covid-19 health protocol by jostling while waiting in line. Within two days, the post office had to disburse cash assistance to 9,000 beneficiary families in Sidoarjo.
In addition to the PEN program, the government can improve existing programs to increase household consumption, primarily programs that are able to employ workers and ease the burden on the poor.
Fabby Tumiwa, the executive director of the Institute for Essential Services Reform (IESR), said the development of renewable energy could help the national economy recover from the effects of the COVID-19 pandemic. The trick, she said, was to install rooftop solar panels in poor households that had been receiving electricity subsidies. The rooftop solar panels could also reduce spending on electricity subsidies in the long run.
This program can employ as many as 30,000 new workers and is able to reduce electricity subsidy spending in the long term.
According to the IESR study, the national Surya Nusantara Program could assist the country’s economic recovery. This program involves the installation of rooftop solar panels with a capacity of 1,000 megawatts at peak (MWp) for 500,000 households that receive electricity subsidies. Each house would have an installed capacity of up to 2,000 watts at peak. This program could start in 2021 to contribute to the national target for rooftop solar panels of 6,500 MWp by 2025. "This program can employ as many as 30,000 new workers and is able to reduce electricity subsidy spending in the long term," said Fabby.
Taking advantage
The COVID-19 pandemic has actually brought opportunities to certain sectors that have continued to grow in the second quarter of 2020. These include agriculture, information and communication and health. The government\'s policy strategy has been criticized as failing to have made use of this opportunity.
Almost all of Indonesia’s business sectors have seen a significant decrease in growth or a contraction. As many as 10 of the 17 main business sectors in Indonesia contracted from April to June 2020, with the transportation and warehousing sector, the accommodation sector and the food and drink sector contracting the most. Four of the five sectors that contributed the most to the gross domestic product (GDP) also contracted, including industry, trade and construction.
A solar power panel, which is installed at the yard of the state junior high school SMP Negeri Satu Atap in Kataka village, Kahaungun Eti district, East Sumba regency, East Nusa Tenggara, Wednesday (13/9/2017). The solar power panels is capable of producing 1,500 watts to meet the electricity need at the school, such as recharging laptops belonging to the teachers or energy saving lamps brought by the students.
Several sectors are still growing, namely agriculture, information and communications and health. Statistics Indonesia (BPS) recorded that the agriculture sector had grown by 16.24 percent in the second quarter of 2020. The growth of this sector in the midst of a pandemic was higher than in the second quarter of 2019, when it grew 13.77 percent.
Rusli Abdullah, senior economist for food and energy at the Institute for Development on Economics and Finance (Indef), said that agriculture had continued to grow during the pandemic because it was one of the primary needs of the people.
This made it important for the agriculture sector to be supported, both in terms of health and economic management. If the food supply was disrupted, it would have an impact on the inflation rate and people\'s purchasing power and would further impede the national economy.
However, Rusli continued, despite the fact that they played a strategic role, the welfare of farmers was being eroded. This could be seen from a number of indicators, such as the farmer exchange rate (NTP), which had continued to decline. In January 2020, the NTP was at 104.21. It dropped to 100.09 in July 2020. The rate is a means of measuring farmers’ welfare.
"This is unfair, the price of their commodity has fallen, but their needs have increased. In fact, inflation fell during the April to June [period], but the household consumption index for farmers has increased. This shows, the decline in inflation is only enjoyed by the upper-middle class, not farmers," he said.
A worker makes tofu at a home industry in Mampang Prapatan, South Jakarta, Monday (11/11/2019). This micro, small, and medium enterprise (MSME) has not incorporated digital technology. Marketing is carried out conventionally at traditional markets in the Mampang Prapatan and Kebayoran areas.
Processing industry
The manufacturing industry in the second quarter contracted 6.19 percent from the same period in the previous year. Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman for international relations Shinta Widjadja Kamdani said manufacturing had positive prospects for recovery. However, she said, this required improvement in domestic consumption. "This means that stimulus and government spending to boost consumption must immediately be rolled out to the public," she said.
Shinta estimated that in the third quarter of 2020, industries in the primary sector could recover and survive, including the food and beverage industry, medicine and packaging. Other sectors could recover in fourth quarter or in the first quarter of next year, depending on the efficacy of the government stimulus and the global economic situation.
Indonesian Agricultural Economics Association (Perhepi) advisory board chairman Bayu Krisnamurthi said that plantation commodities had always been one of the mainstays of exports, both before and during the COVID-19 pandemic. However, during the pandemic, a number of challenges emerged, such as the protection of markets in export destination countries.
For this reason, businesses, industry and the government had to pay close attention to exports of plantation commodities that were still running. "In addition to that, national business and industry players must strengthen business relations with importers because they also have an interest in maintaining their supplies," he said.
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