The Covid-19 pandemic has caused a contraction in the economies of almost all countries in the world. According to data from BPS, the Indonesian economy shrank 5.32 percent year-on-year in the second quarter of 2020.
By
KOMPAS TEAM
·5 minutes read
Editorial Note
The Kompas daily recently held another panel discussion on the economy to welcome 75 years of Independence and Golden Indonesia 2045. The speakers of the "Indonesia’s Transformation Towards a New System" discussion included: A. Prasetyantoko, the rector of Atma Jaya Catholic University, Jakarta; Phillia Wibowo, managing partner at McKinsey Indonesia; Shinta W. Kamdanthe, president of the Indonesia Business Council for Sustainable Development and deputy chairperson of the Indonesian Chamber of Commerce and Industry (Kadin); and Sonny Mumbunan, an economist at the University of Indonesia Center for Climate Change Research and the World Resources Institute. Coverage on the discussion below and on pages 13 and A (e-paper) was cowritten by Ninuk M. Pambudy, Ichwan Susanto, Karina Isna Irawan, Dimas Waraditya Nugraha, and Wirdatul Aini of the Kompas Research and Development (R&D) department.
The Covid-19 pandemic has caused a contraction in the economies of almost all countries in the world. According to data from Statistics Indonesia (BPS), the Indonesian economy shrank 5.32 percent year-on-year (yoy) in the second quarter of 2020.
A number of industry sectors have recorded negative growth, including transportation and warehousing as well as tourism, but some continued to post positive growth in the second quarter, including agriculture, forestry and fisheries (16.24 percent); information and communication (3.44 percent); and water, waste management and recycling (1.28 percent). In the first half of 2020, those business sectors that continued to grow were information and communication (10.35 percent); health and leisure (7.01 percent); and finance and insurance (5.87 percent).
The data shows that the information and communication sector has posted consistently high growth throughout 2020, as projected. The data also supports the projection that the Covid-19 epidemic has accelerated digital transformation in society, with the internet as the backbone. The challenge is the readiness of government and businesses, as well as households and individuals, to invest in physical and nonphysical infrastructures to establish digital ecosystems across Indonesia so that everyone can participate. Digital technology is an enabler.
Adopting technology requires competent resources, critical thinking skills, and soft skills, such as communication skills, social skills, emotional intelligence and optimism. Such skills must be taught through formal education, but requires improving teacher capacity and adjusting the educational curriculum.
The Covid-19 epidemic has taught us that digital transformation is imperative in growing an inclusive economy and society. Health and economy must go hand in hand, which can be realized only through public participation that is equal, open and trusted.
The indicators for establishing an inclusive, equitable and sustainable society are readily available in the 17 goals in the United Nations Sustainable Development Goals (SDGs). Indonesia has declared its commitment to the SDGs. Corporate initiatives to include the SDGs in their company’s business plans needs government support, especially during the difficult times of the Covid-19 health crisis.
The Covid-19 health crisis has highlighted the importance of meeting the SDG targets in reducing the number of poor people; in eliminating hunger, malnutrition and stunting among children under 5; and in ensuring equitable education, gender equality, and partnerships with business.
Health and economy must go hand in hand.
The government is providing economic stimulus packages to alleviate the negative impacts of the Covid-19 epidemic on the people\'s lives and livelihoods. The government must ensure, however, that the stimulus is disbursed quickly, safely and appropriately.
In practice, concerns exist over issues with administering the stimulus packages. A mechanism must be established to ensure that the social assistance and stimulus packages are distributed and disbursed quickly and in an accountable manner.
For companies, the loan restructuring scheme for the principal and interest has been helpful. However, they must deal with higher lending rates in the end because the mechanism of restructuring loans is left up to each bank. This is one of the obstacles facing companies, some of which are unable to continue to operate and have had to lay off their workers. In the formal sector, 6.4 million workers have become jobless as of July 2020.
Another important transformation has occurred in the orientation towards the environment. Scientific data shows that the Covid-19 pandemic and other viral outbreaks in the last two decades were a result of poor human treatment of the environment. When forests are damaged, viruses that are harmless to humans and exist naturally in wild animals can change genetically to cause deadly diseases in humans.
Another threat to the sustainability of life on earth is climate change. Indonesia is committed to reducing carbon emissions through the Paris Agreement it signed in April 2016. However, as the government needs large funds to finance the economic recovery program, there are signs that this will again give space to the development of cheaper energy such as coal, which is the largest carbon contributor.
Transformation without distortion
The government has maintained a dominant role in the economy. It can further expand on this role by increasing spending at both the central and regional levels. Strategic infrastructure and industrial development programs can be continued selectively, on the condition that the programs maximize the use domestic raw materials and benefit as many members of the public as possible.
The economic stimulus packages for maintaining growth must go hand in hand with development programs that support human sustainability. Without an environmental orientation, development will only “invite” other outbreaks with unforeseeable consequences due to our inability to manage climate change.
The Covid-19 Mitigation and National Economic Recovery Committee must be able to transform the economy into an inclusive economy, accelerate the development of a digital ecosystem towards a digital society, and push for sustainable development by designing an environmentally friendly economy.
The government also needs to sustain good governance to avoid no policy distortions that will only benefit certain groups and promote nepotism and corruption.