Economic and political recovery amid the pandemic, what’s next? | Bahasa

Indonesia.16 Jul 2020.3 min read

Bank DBS Indonesia shares insights into Indonesia’s economy and politics in 2020 through DBS Asian Insights Conference

Indonesia, 16 Jul 2020 - Bank DBS held Asian Insights Conference 2020 in collaboration with Bahlil Lahadalia, Chairman of the Indonesia Investment Coordinating Board (BKPM), Ridwan Kamil, Governor of West Java, and Masyita Crystallin, Special Advisor to the Minister of Finance (Macroeconomic and Fiscal Policy), and several other economic and political experts. The annual conference took “Economy and Politics: Recovery from COVID19 - What’s Next?” and “Fixing a Fragile World: Anticipating the Next Black Swan?” as its themes to offer the latest economic and political views and insights amid the Covid-19 pandemic. This was aimed at providing insights to help business players make decisions and determine their business directions and goals.

“The Covid-19 pandemic has caused a slowdown in the global economy, including Indonesia. A recurring question is whether Indonesia can survive the pandemic as it did the 1998 crisis. We see that Indonesia today is stronger than 20 years ago based on various economic indicators, such as the GDP, foreign exchange reserves, foreign debt, a stronger banking sector, and a more in-depth financial market. The government has launched various stimulus packages for the people to maintain financial stability. Coordination between government institutions is very good, enabling banks to serve their customers well amid the pandemic. In line with the government’s efforts to revive the economy, we bring together economic and political experts to discuss policy directions in 2020 at DBS Asian Insights Conference 2020. Bank DBS Indonesia as a leading bank in terms of business and technology insights always seeks to help business players make decisions and determine their goals,” said Paulus Sutisna, President Director of PT Bank DBS Indonesia.

Indonesia’s economic growth target, which was set at more than 5% in early 2020, is a significant challenge for Indonesia. Meanwhile, the International Monetary Fund (IMF) in early April lowered Indonesia’s economic growth projection to 0.5% from 5.1% in its early October 2019 projection. The Ministry of Finance said that Indonesia’s economy as a whole would be determined by the recovery in the third and fourth quarters. The government is still using the 2020 economic growth scenario of between -0.4% and 2.3%.

“The Covid-19 pandemic is more than just a health emergency, it is also an economic emergency, and even some countries have entered a state of social and political emergency. We are optimistic the recovery measures will help West Java’s economy grow 2-3% in December 2020,” said West Java Governor Ridwan Kamil, “In addition, we are also confident that we will be the first province in Indonesia to move on from the pandemic. We see seven economic opportunities amid the pandemic: (1) investment moving from China to “Segitiga Rebana”[1] (2) technological self-reliant and development, (3) health industry growth with domestic manufacturing of health equipment, (4) industry 4.0 implementation in the new normal, (5) digital village development through technology implementation in villages (or through technology enabled empowerment of villagers), (6) sustainable economic and industry practices, and (7) local tourism development,” said West Java Governor Ridwan Kamil.

At the same time, the central government deployed various strategies to drive the economy and restore people’s purchasing power. The strategies were complemented by various government incentives, including allowing people to delay income tax payment (articles 21, 22, and 25) for six months. In addition, the government has also relaxed the regulation on export duties for the industry sector.

Masyita Crystallin, Special Advisor to the Minister of Finance (Macroeconomic and Fiscal Policy), stated that the government has been working with the central bank to share the burden of handling the pandemic. A similar burden-sharing arrangement is also applied in all countries that rely on central banks to provide funds at a low cost.

“We should establish the norms governing the matter. Therefore, what we do is not to print money or deploy helicopter money. Our scheme is in accordance with the market and remains a monetary instrument. Should Bank Indonesia need it, it can withdraw the instrument immediately,” she said.

One of the strategies was to issue global sukuk with good yields a while back. The measure was taken to prevent an economic contraction and state budget constraints.

The government has also taken anticipatory steps to deal with the pandemic. Several incentives have been given to businesses so that the economy can continue to run. The government expected the incentives to help people and businesses resume their activities, otherwise it will be more difficult for the business sector to resume activities. Efforts should be made to prevent this from happening and affecting the people.

“We have prepared quite a long-term plan. This all depends on the policy related to the pandemic. The impact of the pandemic is also unpredictable in terms of its period and duration. We have prepared policies for the next three years,” she went on to say.

In addition to the economic stimulus packages, the government also focused on increasing investment to curb the pace of the economic slowdown, especially amid the Covid-19 pandemic. “The Indonesia Investment Coordinating Board (BKPM) prepared a strategy in the first quarter to encourage domestic investment and we have to pick the ball. I also want to explain that in terms of investment realization, the BKPM also wants quality investment realization. Quality investment is measured by, among other things, the spread of investment in Java and outside Java, which is now almost equal. Today, investment in Java accounts for 51.4% of the total investment and investment outside Java accounts for another 48.6%. We not only serve large investments but also small investments in all regions. At the moment, we are focusing on the realization of investments in import substitutes that give added economic value,” said Indonesia Investment Coordinating Board Chairman Bahlil Lahadalia.

In addition to the economic challenges faced by Indonesia, political challenges also confront President Jokowi’s government, from public rejection of the Omnibus Law to public criticism of the Covid-19 pandemic handling. Furthermore, September will see simultaneous regional elections across Indonesia. Political parties will compete to gain public support so that their candidates can win the elections. This will be a big asset for the 2024 general election. The challenges will certainly have a destabilizing effect on Indonesia’s political directions.

The DBS Asian Insights Conference embodied Bank DBS Indonesia’s commitment as a banking institution that is driven by the goal of creating economic and environmental balance. Paulus Sutisna added, “Becoming a bank that is driven by sustainable goals is the DNA of Bank DBS Indonesia. We continue to innovate to become a bank that promotes economic, social, and environmental balance through our banking products and services to facilitate customers in doing banking activities while creating social impacts through banking with us.”

Among the speakers who joined the DBS Asian Insights Conference were Piter Abdullah, Research Director, Core Indonesia; Burhanuddin Muhtadi, Executive Director of Indonesian Political Indicator; Gita Syahrani, Lingkar Temu Kabupaten Lestari; Fitrian Ardiansyah, Director, Yayasan Inisiatif Dagang Hijau; and Agus Sari, Chief Executive Officer, Landscape Indonesia.





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