As the second half of 2020 has begun – the global number of Covid-19 cases continues to steadily rise. The transmittance of the virus has also increased exponentially – where 29 August was the third day in a row Indonesia has recorded its highest daily record after confirmation of the increase of 3,003 new cases.
The words “Covid-19” and “unprecedented” have never been uttered without the mention of the other. Undoubtedly so, not a single person this time last year would have comprehended that what started off as a small virus would lead to the temporary halting of the global economy, both economically and socially. The decrease of consumer spending confidence coupled with the uncertainty of when an effective vaccine is to be discovered only triggers the domino effect of negative repercussions for the global economy, and ultimately, society as a whole.
For instance, the global airline industry sees numerous filings for administration and bankruptcy which led to the eventual demise of several airline companies. Our close neighbours, Australia’s Virgin Australia, the second-biggest airline after almost 20 years of operation, has filed for the equivalent of bankruptcy restructuring only for Bain Capital to purchase the airline.1
Indonesian Status
The current state of affairs amidst Covid-19 sees businesses slowly returning to normal operations however with strict protocols of physical, social distancing, and obligatory wearing of facial masks. To date, there has been a total of 172,053 cases, 7,343 deaths, and 124,185, recoveries.2 Covid-19 has now been reported to have made its way to all of the country’s 34 provinces with the most cases reported in the city of Jakarta.
The Indonesian government is continuing to steadily transition the city of Jakarta into the new normal. A quick update of the Covid-19 timeline in Jakarta, the city of Jakarta and most cities throughout Indonesia began to impose large-scale social restrictions or PSBB since April, which saw the temporary closing of malls, restaurants, bars, and entertainment sites to contain the spread of Covid-19. In June, Jakarta entered the ‘transition phase’, where non-essential businesses and some entertainment places were allowed to reopen at reduced capacity and strict implementations of health protocols.
The first transitional phase extension started from 4 June to supposedly end on 16 July, with the governments gradual announcement to gradually reopen the Indonesian economy. However, to date since the resumption of activities and entrance into the ‘transition-phase’, the government has continued to, and on 28 August for the fifth time, extended this transition period until the 10 September. Bali was also hoping to re-open its borders on 11 September but has now officially shut its borders for international tourists until the end of 2020.3
Government’s Response and Efforts
The Indonesian government including the Ministry of Health, Finance, Trade and numerous other governmental institutions have enacted several economic and social measures through the officiations of regulations, decrees, and circulars in order to tackle and combat the negative ramifications Covid-19 has and continues to cause.
The president has recently announced that the government will be allocating Rp. 366.5 Trillion (US$24 million dollars) towards accelerating the National Economic Recovery (PEN) program in the 2021 state budget following the various economic stimulus that have been launched in 2020.4
Additionally, the Indonesian government will also distribute another Rp 22 trillion in cash assistance for micro, small and medium-sized enterprises. Dubbed Productive Aid, the program will be distributed as direct aid and not as loans, according to the Head of the National Economic Recovery Task Force Budi Gunadi Sadikin.5
The Indonesian government is also reportedly planning on issuing cash assistance to workers that are making less than Rp 5 million (around US$344) a month6. This translates to a budget approximation of Rp 31.2 trillion for some estimated 13 million Indonesian eligible for the cash assistance. This program is among several other plans announced by Finance Minister Sri Mulyani regarding an additional Rp 70.6 trillion allocated for social assistances slated to be distributed in the September to December 2020 period under the government’s National Economic Recovery (PEN) program7.
Other measures include the government offering interest-free work capital in the amount of Rp 10 million (around US$681) to Indonesian citizens who have been laid off due to the Covid-19 pandemic at the end of August, stated by the Coordinating Deputy Minister for Macro Economic Affairs and Finance at the Coordinating Minister for the Economic Affairs. The loan, dubbed super micro credit, will remain interest free until December 31, 2020, after which an interest of 6% will be applied to the loan8.
The Ministry of Finance through regulation No.44/PMK/03/2020 on Tax Incentives for Taxpayers Affected by the Covid-19 Pandemic also enables those working in thousands of sectors to enjoy tax incentives such as the extension of the time limit for tax incentive utilization9.
Evidently, there have been an abundance of regulations and incentives the government has issued and enacted in order to assist those affected by the virus.
In regards to the prevention of local Covid-19 transmissions, the government has and is continuing to further prepare new regulations consisting of penalties that may be imposed on those who violate health protocols. Where such penalties, may be in the form of fines or social work.
Conclusion
With the 3rd quarter of the financial year beginning, it is hopefully that the Indonesian economy will start to slowly pick up its pace. The government is trying its utmost to restart and re-bounce back the Indonesian economy, and some of the results are slow but sure with the World Bank upgrading Indonesia’s status to an upper middle-income country, following the increase in the country’s per-capita Gross National Income (GNI) to US$4,050 in 2019 from $3,840 in the previous year10.
Indonesia is also moving closer towards releasing a potential vaccine for Covid-19, with officials expecting a widespread public availability in the first quarter of 2021. This comes following the arrival of the potential Covid-19 vaccine developed by a China-based pharmaceutical company Sinovac, in cooperation with Indonesian state-owned pharmaceutical company Bio Farma where this has reached a late-stage human trial involving 1,620 patients in Indonesia as Covid-19 vaccine candidates11.
Whilst the government’s attempts through economic stimulus and numerous tax incentives is commendable, household spending confidence and the recovery of the economy fate is turbulent. The Indonesian economy has suffered its sharpest downturn since the 1998 Asian Financial crisis and its GDP has contracted 5.32 percent in the second quarter (lowest since the first quarter of 1999)12.
Indonesia as the world’s largest island country with over 270 million people, is severely suffering through these extremely difficult times. The people hope for the successful discovery, mass production, and eventual mass distribution of a vaccine presents itself soon – however, the world will never be the same as again. Should a successful vaccine be developed, the Indonesian government will undeniably be the forefront in ensuring heavy subsidization of the vaccine for public distribution.
- Jamie Smyth, “Bain Capital wins battle to acquire Virgin Australia” [Online] accessed through <https://www.ft.com/content/5b4ce369-6406-44f4-acf6-f08fc56f50f1> ↩︎
- https://www.worldometers.info/coronavirus/country/indonesia/ ↩︎
- Resty Woro Yuniar, “Wisata Bali: Bali tunda kedatangan turis asing sampai ‘akhir 2020’, pelaku pariwisata ‘resah’ dan ‘prihatin’ “, [Online] accessed through <https://www.bbc.com/indonesia/indonesia-53908193> ↩︎
- EKONID Insight, “Covid-19 Developments in Indonesia”, [Online] accessed through <https://indonesien.ahk.de/en/infocenter/news/news-details/covid-19-developments-in-indonesia> ↩︎
- ibid ↩︎
- ibid ↩︎
- ibid ↩︎
- ibid ↩︎
- Please refer to our article titled “Tax Incentive for Taxpayers and Its Implementation During Covid-19”. ↩︎
- EKONID Insight, “Covid-19 Developments in Indonesia”, [Online] accessed through <https://indonesien.ahk.de/en/infocenter/news/news-details/covid-19-developments-in-indonesia> ↩︎
- The Jakarta Post, “Sinovac launches late-stage trial for potential Covid-19 vaccine in Indonesia”, [Online] accessed through <https://www.thejakartapost.com/news/2020/08/11/sinovac-launches-late-stage-trial-for-potential-covid-19-vaccine-in-indonesia.html> ↩︎
- Adrian Wail Akhlas, “Indonesia’s GDP contracts deeper than expected at 5.32% in Q2”, [Online] accessed through <https://www.thejakartapost.com/news/2020/08/05/indonesias-gdp-contracts-deeper-than-expected-at-5-32-in-q2.html> ↩︎
