Businesspeople are prepared to press on with the government’s plan to gradually reopen the economy under health protocols to establish a “new normal” amid the continued rise of confirmed COVID-19 cases in Indonesia.
On May 20, Health Minister Terawan Agus Putranto signed a set of policies on the prevention and control of COVID-19 in offices and factories.
The policies set requirements for businesses to be allowed to reopen. These include ensuring sufficient hand washing facilities, checking employees’ temperatures, requiring employees to wear masks, keeping one meter of distance between employees at work, minimizing physical interaction with customers and avoiding the formation of crowds.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Kamdani said on Tuesday that reopening – with health protocols – was necessary to help cash-strapped businesses recover. But with confirmed cases still increasing, Shinta acknowledged that employees returning to work could be exposed to the coronavirus.
“I don’t think we can wait until the pandemic is completely under control,” Shinta told The Jakarta Post in a phone interview. “We can only make an assessment based on businesses’ preparedness to implement the protocols in order to minimize the risks.”
Shinta said essential businesses had taken similar measures: requiring employees to wear face masks, disinfecting workplaces and providing hand sanitizer and hand washing facilities. However, she thought small and medium businesses might find it harder to implement the protocols.
The government has been struggling to keep the economy afloat during the outbreak, which has battered Indonesia’s economic growth to a 19-year low of 2.97 percent in this year’s first quarter. The large-scale social restrictions (PSBB) meant to contain the spread of the virus in the epicenters of Greater Jakarta and Surabaya, East Java, among other regions, have forced businesses to close and left millions without jobs.
Government Regulation (PP) No. 21/2020 requires all workplaces, except those in essential sectors, to temporarily shut down in areas under PSBB.
“However, it’s impossible to impose restrictions on workplaces forever. We should keep the wheels of our economy running,” Terawan said in a statement on the Health Ministry’s official website on Saturday. “That’s why workplaces must prepare to adapt to changes amid the COVID-19 situation, also known as the new normal.”
Terawan said the policies to handle the COVID-19 pandemic “must remain supportive of the continuity of the people’s economic activity, so, health-wise, they require prevention and control measures at offices and industry sites”.
Indonesia recorded 415 new COVID-19 cases and 27 more deaths on Tuesday, bringing the total number of cases to 23,165 nationwide with 1,418 total deaths.
Indonesian Shopping Center Association (APPBI) chairman Stefanus Ridwan said on Tuesday that shopping malls would limit the number of visitors to just half of the normal number and would maintain safe distances at restaurants in the malls.
“I think 50 percent [of the normal visitors] is fine,” Stefanus told the Post. “Moreover, it is unlikely that everyone will go to the shopping malls at the early stage as some are probably still afraid and the economy has yet to recover.”
Statistics Indonesia (BPS) data shows that household consumption, which accounts for more than a half of the country’s economy, grew by just 2.84 percent in the first quarter, down from about 5 percent in the same period last year. As of April 20, more than 2 million people had lost their jobs. Others have decided to rein in their spending.
APPBI Jakarta chapter chairwoman Ellen Hidayat said that 60 malls in the capital would reopen for business on June 5 and four others would reopen on June 8 in line with the Jakarta gubernatorial regulation on PSBB extension, which will end on June 4.
Jakarta Governor Anies Baswedan has hinted that the city administration will not extend the measure a fourth time and that Jakartans should be ready to face a “new normal”.
However, reopening the economy may not help the hotel industry as consumers will have less holiday time than they normally do and the government will have fewer meetings and conferences, said Indonesian Hotel and Restaurant Association (PHRI) vice chairman Maulana Yusran.
The government has cut its budget for such activities and has reallocated the funds towards the effort to contain COVID-19. The state budget deficit is expected to pass 6 percent this year.
“In the new normal, which will go from June to the end of the year, the government’s activities may not be optimal or may even be at a minimum,” Maulana said, projecting that the country’s hotel market might only begin recovering next year.
The occupancy rate in hotels across the country almost halved in March to 32.24 percent annually. Hotels get between 70 percent and 80 percent of their revenue, on average, from government meetings and conferences.
The government is rolling out a Rp 641.17 trillion (US$43 billion) economic recovery stimulus, bigger than previous allocations, to soften the impact of COVID-19 on micro, small and medium enterprises (MSMEs), as well as state-owned enterprises (SOEs).
Finance Minister Sri Mulyani Indrawati said the “national economic recovery” program would include a strengthened social safety net, tax incentives, capital injections into SOEs and interest rate subsidies for MSMEs, among other measures.
“The government will accelerate spending to help MSMEs and SOEs, apart from a consumer spending stimulus and tax incentives for industry,” Sri Mulyani said during a streamed news conference. “These efforts aim to stimulate the supply and demand sides for economic recovery.”
The government will revise again the 2020 state budget to accommodate the stimulus as it expects the budget deficit to further increase to 6.27 percent of gross domestic product (GDP), larger than the initial plan of a deficit amounting to 5.07 percent of GDP as stipulated in Presidential Regulation No. 54/2020.
Sri Mulyani said the widening budget deficit was warranted as government revenues may drop by Rp 69.3 trillion to Rp 1.69 quadrillion, while the government boosts state spending by Rp 106 trillion to Rp 2.72 quadrillion.
“State income will drop as a result of bigger tax incentives and weakening economic sectors and commodity prices,” Sri Mulyani told reporters. “Meanwhile, we will boost state spending to strengthen the economy against the COVID-19 pressures.”
The government is rolling out a Rp 641.17 trillion (US$43 billion) economic recovery stimulus, bigger than previous allocations, to soften the impact of COVID-19 on micro, small and medium enterprises (MSMEs), as well as state-owned enterprises (SOEs).
Finance Minister Sri Mulyani Indrawati said the “national economic recovery” program would include a strengthened social safety net, tax incentives, capital injections into SOEs and interest rate subsidies for MSMEs, among other measures.
“The government will accelerate spending to help MSMEs and SOEs, apart from a consumer spending stimulus and tax incentives for industry,” Sri Mulyani said during a streamed news conference. “These efforts aim to stimulate the supply and demand sides for economic recovery.”
The government will revise again the 2020 state budget to accommodate the stimulus as it expects the budget deficit to further increase to 6.27 percent of gross domestic product (GDP), larger than the initial plan of a deficit amounting to 5.07 percent of GDP as stipulated in Presidential Regulation No. 54/2020.
Sri Mulyani said the widening budget deficit was warranted as government revenues may drop by Rp 69.3 trillion to Rp 1.69 quadrillion, while the government boosts state spending by Rp 106 trillion to Rp 2.72 quadrillion.
“State income will drop as a result of bigger tax incentives and weakening economic sectors and commodity prices,” Sri Mulyani told reporters. “Meanwhile, we will boost state spending to strengthen the economy against the COVID-19 pressures.”
The government is planning a Rp 149.29 trillion bailout for 12 SOEs, mostly as cash compensation and working capital investments, to reduce the impact of the virus crisis. The funding includes Rp 48 trillion in compensation for electricity firm PLN, Rp 45 trillion in compensation for oil company Pertamina and Rp 8.5 trillion in working capital for flag carrier Garuda Indonesia.
“This will serve as support for SOEs affected by COVID-19 including from supply chain disruption, falling demand and operations, as well as the severe financial impact,” said Sri Mulyani. The stimulus will be targeted at SOEs with strategic roles, she added.
“We will involve the Supreme Audit Agency [BPK] and the Corruption Eradication Commission [KPK], among others, to oversee the operation and ensure the functionality of the SOEs,” the finance minister said.
The government will also provide Rp 34.15 trillion worth of loan repayment subsidies for around 60 million borrowers to cope with the pandemic. Rp 87.59 trillion will also be allocated for banks to support their loan-restructuring programs.
It is also planning to provide Rp 172.1 trillion for the social safety net, far higher than the previous plan of Rp 110 trillion, as well as increasing its tax incentives program to Rp 123 trillion from the initial plan of Rp 70.1 trillion.
The decision to increase the social safety net comes as the government expects from 1.89 million to 4.89 million individuals to fall below the poverty line. Meanwhile, 3 million to 5.23 million individuals may lose their jobs as the pandemic brings economic activity to a standstill, according to official estimates.
Sri Mulyani said the government was sticking by its forecast that the economy may grow at 2.3 percent, or contract by 0.4 percent this year in a worst-case scenario. The country’s economy grew by 2.97 percent in the first quarter this year, the weakest since 2001 and lower than consensus estimates.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Kamdani welcomed the government’s move to hike the economic stimulus, however, it still might be too little to support businesses.
“The amount falls short of our expectations of defending the economy until the virus threat subsides,” Shinta told The Jakarta Post.
The government would need Rp 400 trillion for health care, Rp 600 trillion for social safety net programs and Rp 600 trillion for economic recovery, she added.
“As the stimulus will not be enough, our projections of bankruptcies and layoffs remain high,” said Shinta.
The government should boost economic recovery spending to Rp 600 trillion (US$40.17 billion) to help businesses cope with the economic impacts of the COVID-19 crisis, as many businesses only have enough cash flow to maintain their operations for the next two months, a business lobby group has said.
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Kamdani said the current budget for the economic recovery program would be insufficient to support businesses, adding that many would run out of money by June.
“The government stimulus spending is far too small and will not be enough for businesses to survive,” Shinta said during an online discussion on Thursday. “Businesses’ ability to cope with the crisis is very limited as their cashflow will only last until June.”
The government has said that it would allocate Rp 150 trillion to fund the country’s economic recovery. However, in recently leaked Finance Ministry documents, the stated budget was Rp 318 trillion, more than double the initial plan, as the government plans to provide bailout funds for state-owned enterprises (SOEs).
President Joko “Jokowi” Widodo should boost spending to about Rp 600 trillion for economic recovery, Rp 600 trillion for social safety net programs and another Rp 400 trillion for the health system, she said.
“We need faster financial stimulus to prevent further damage, or the government could just gradually reopen the economy,” Shinta said, adding that “if the government was unable to provide a significant financial stimulus, then we should really think about an exit strategy.”
The COVID-19 pandemic has triggered massive layoffs, with around 6 million people losing their jobs, according to Kadin data. This is far higher than the between 2 million and 3.7 million people projected by the National Development Planning Board (Bappenas).
Some 1,680 hotels have been temporarily closed, while only 10 percent of transportation businesses are still operating as the outbreak has had a severe impact on the tourism and transportation industries, Shinta added.
The government issued Government Regulation (PP) No. 23/2020 on the national economic recovery program to support, maintain and strengthen businesses, stipulating state capital injections for ailing state-owned enterprises (SOEs) and loan subsidies for small businesses, among other things.
The country’s gross domestic product (GDP) fell to a 19-year low of 2.97 percent in the first quarter, as emergency measures were taken by the government to halt the spread of COVID-19 crippled almost all sectors of the economy.
In the worst-case scenario, the government expects the economy to contract 0.4 percent this year from 5.02 percent growth in 2019.
The government is mulling a plan to begin easing COVID-19 social restrictions in June to allow businesses to resume operations gradually.
However, some believe that reopening the economy would be premature, as Indonesia had yet to flatten the infection curve. The national COVID-19 task force reported on Thursday that the virus has infected more than 16,000.
Chief economist David Sumual of Bank Central Asia (BCA), the country’s largest private bank by market value, warned that reopening the economy too soon might trigger a second wave of infections, and that the government needed to be “extra careful” in easing social restrictions.
“However, prolonged social restrictions will take a greater toll on the economy,” David said recently. “We might see temporary layoffs become permanent layoffs and more people falling into poverty if the partial lockdown continues [for much longer].”
Indonesian borrowers are selling a record amount of dollar bonds, as the country’s strong fiscal track record in recent years fuels optimism on its ability to weather the COVID-19 crisis.
Including the sovereign, note sales in the US currency from Indonesia this year total more than $15 billion, a year-to-date record and almost three-times the tally for the same period in 2019. In one of the most recent offerings, state-owned miner PT Indonesia Asahan Aluminium sold $2.5 billion of notes on Monday, with demand exceeding the issuance size by six times.
Indonesia has run a small budget deficit over many years and foreign currency reserves were at a near record level at the start of 2020. That gives it some cushion amid the massive challenges all countries, and emerging markets in particular, face in the pandemic. The nation’s issuers have also benefited from a rally in credit markets in recent weeks, after stimulus from central banks around the world boosted sentiment, particularly for safer issuers.
“We are generally constructive on Indonesian assets,” said Sean Jutahkiti, a portfolio manager and director of Asian corporate research at Neuberger Berman. While citing some concerns about weaker Indonesian credits, state-owned enterprises should perform relatively well given their scale and funding access, he said.
A number of Indonesian government-backed companies are preparing to sell dollar bonds, said Indonesia’s State-Owned Enterprises Minister Erick Thohir last week. State-owned PT Bank Rakyat Indonesia for one is targeting a $1 billion bond sale in the third quarter.
Indonesia’s state-owned or state-backed companies should not have a problem tapping the offshore bond markets as long as they are willing to pay up, according to Nicholas Yap, an analyst at Nomura Holdings Inc.
Dollar securities from the Indonesian sovereign and quasi-sovereign notes have returned about 9% since markets globally bottomed around March 23, though on a year-to-date basis they have lost almost 4%, a Bloomberg Barclays index shows.
Of course, the unprecedented global health crisis is challenging all government finances, and risks remain for Indonesia. The country has had a cap of 3% on its budget deficit since 2003, though it removed that recently to fund economic measures to combat the virus impact. Indonesia saw the outlook on its BBB investment-grade rating revised to negative from stable last month by S&P Global Ratings.
“We don’t expect Indonesia to be downgraded to junk from the rating agencies,” said Artur Piasecki, a portfolio manager at BlackRock Inc. “We do expect some spread volatility due to broader EM sentiment, flows volatility and higher supply from sovereign and quasi-sovereign in coming quarters” but Indonesian sovereign credit should perform well in the medium term, he said.
Bank Indonesia (BI) has bought up to Rp 173.1 trillion (US$11.24 billion) worth of government bonds from primary and secondary markets in a bid to stabilize rupiah and support the government’s financing needs.
BI Governor Perry Warjiyo said the central had bought Rp 166.2 trillion worth of government bonds from foreign investors in the secondary market since early this year amid the decline of the rupiah against the US dollar.
He said the Rp 2.3 billion worth of government debt papers were purchased during the government’s regular auction on Tuesday. This is in addition to Rp 1.72 trillion worth of bonds bought by BI in a regular auction on Tuesday last week and Rp 2.93 trillion bought by the central bank in a “greenshoe option” on Wednesday last week.
“We see that the government’s financing needs will be fulfilled by the market,” Perry told reporters in a virtual press conference on Wednesday, adding that bond investors should not bet on Indonesia selling debt at higher yields, as the amount to be raised for the rest of the year will be manageable and the inflow of foreign funds would push yields lower.
The government on Tuesday raised Rp 16.62 trillion, below the target of around Rp 20 trillion to Rp 40 trillion, despite total incoming bids of Rp 44.4 trillion as investors bid yields that were too high.
“The market will see, at the beginning they bid for yields that were too high, thinking the sum to be raised would be large,” Perry said, suggesting that investors had bet the government would pay higher yields as it would need a large amount of funds to finance the extra spending for COVID-19 mitigation efforts.
The country’s budget deficit is expected to widen to 5.07 percent of GDP this year as the government would have to increase its gross issuance of debt to Rp 1.4 quadrillion this year to finance the COVID-19 mitigation and rescue program, according to Perry.
However, Perry says, the central bank sees only Rp 425 trillion in bond offerings for the rest of 2020 as the government maximizes spending from other sources, including its own cash, as well as loans from development banks, among others.
The government plans to provide another Rp 35.3 trillion in new tax incentives for 18 sectors, including those hardest-hit by the COVID-19 pandemic, such as tourism and the food and beverage sector.
This is on top of the Rp 436.1 trillion stimulus packages previously announced by the government to strengthen social safety nets, boost healthcare spending and for economic recovery programs.
The government raised another Rp 62.62 trillion from government debt papers on Monday and seeks to secure $750 million in loans from development banks, according to Finance Minister Sri Mulyani Indrawati and Finance Ministry data.
Previously, Indonesia had raised $4.3 billion in dollar-denominated bonds, including the longest-dated 50-year dollar bond ever issued by an Asian nation, earlier this month. It also sold around Rp 14 trillion in sharia sovereign bonds last week.
By early May, BI will have injected a total of Rp 503.8 trillion in additional liquidity to banks and the financial system to help cushion the economic impact of the virus outbreak and to strengthen the rupiah as part of its quantitative easing measures.
The rupiah gained against the greenback over the last few weeks, strengthening to Rp 15,394 per dollar as per 11 a.m. on Wednesday from this year’s low of 16,625 per US dollar, according to Bloomberg data.
The currency has depreciated as much as 18 percent this year before bouncing back to the current level as the central bank moved to support the rupiah by buying government bonds from foreign investors as they dumped Indonesian assets over fears related to COVID-19.
Homegrown decacorn Gojek has secured Rp 14.5 billion (US$963,297) in fresh capital injection from seven investors during the last four to five months, paving the way for the company ‘s “super app” expansion plans while attracting new investors.
Currently valued at $10 billion, the company raised a combined total of Rp 1.4 billion in its series P funding round from three new investors: Rp 1.2 billion from Jakarta-based East Ventures, Rp 97.5 million from Mandiri Capital Indonesia and Rp 113 million from Silicon Valley-based Fenox Venture Capital, kontan.co.id reported.
Earlier in February, PT Pusaka Citra Djokosoetono also purchased 5,941 shares in the series P funding worth Rp 2.9 billion. The company is the majority shareholder of the Blue Bird Group, the holding company that operates Blue Bird taxi, Gojek’s erstwhile rival.
Also in February, PT Aplikasi Karya Anak Bangsa, the company that owns the Gojek brand, acquired 4.33 percent shares in the Blue Bird taxi company from Pusaka Citra Djokosoetono, worth Rp 450 billion, as reported by Bloomberg.
The acquisition was widely viewed as part of Gojek’s strategy to manage competition with its primary rival, Singapore-based ride-hailing company Grab Holdings, while expanding its food delivery and digital payment businesses.
Gojek’s existing investors have also increased their investment through the series P funding this year, with tech giant Google Asia Pacific purchasing 11,883 additional shares worth Rp 5.9 billion. The latest acquisition increases Google’s ownership in Gojek to 8.69 percent, from 2.59 percent in the series I round of funding and 5.24 percent in the series M round.
Meanwhile, SMDV II SG, the Sinar Mas Group’s Singapore-based venture capital arm, has invested Rp 1.4 billion in the company through the series P funding this year. In November 2019, Unilever Swiss Holdings acquired 5,530 shares in Gojek worth Rp 2.77 billion.
Gojek released 45,552 shares for the first part of its series P funding round in June 2019, which were acquired by the United States’ Visa International Service Association and Japan’s Mitsubishi UFJ Lease and Finance at Rp 500,000 per share for a total value of Rp 22.8 billion.
The ride-hailing company has issued 1.7 million shares in funding rounds from series A to series P, with paid-up capital totaling Rp 689.87 billion. The company has around 130 institutional and individual investors listed as registered shareholders in its updated articles of association dated April 23, 2020. (eyc)
On December 3rd, 2019, Royal Thai Embassy, Jakarta held an event to celebrate the Thai National Day and the 70 years of Thailand – Indonesia diplomatic relations. The Ambassador of Thailand, H.E. Mr. Songphol Sukchan & Madame Piyachanid, The Permanent Representative of Thailand to ASEAN, H.E.Ms. Phasporn Sangasubana were hosting the event at Grand Ballroom, AYANA Midplaza Jakarta 7.00pm-9.00pm.
On 20 November 2019, TBCI held Dinner Talk about Business Opportunities and Challenges in Indonesia 2020-2024 at Royal Thai Embassy Jakarta. This event opened by speech from The Ambassador of Thailand, H.E. Mr. Songphol Sukchan.
The panelists on this event are: – Gidion Hasan as the Vice President Commissioner of PT United Tractors Tbk and Director of Astra International – Rino Donny Donosepoetro as Vice Chairman of ASEAN and Chairman of Standard Chartered Indonesia – Aaron Nio as Director of Plug and Play Indonesia – Noory Okthariza as Researcher at CSIS Indonesia – Centre for Strategic and International Studies – Pathama Sirikul as Moderator from PT. SCG Indonesia
This event receive tremendous support from Royal Thai Embassy, Jakarta and sponsored by PT Indo Tambangraya Megah, Tbk, PT SCG Indonesia, Thai Airways International, PCL, Bangkok Bank, PTT Group, PTTEP, and PT Charoen Pokphand Indonesia.
Today at Royal Thai Embassy Jakarta, Fortis company conducted “Fortis X : The Expansion Program” that brought 7 Thai Startup Companies to Indonesia from September 30th until October 4th 2019.
The purpose of this event is to introduce those startup company from Thailand to the potential partners in Indonesia, creating networks between Indonesia corporates and investors with Thailand startup company, support the exchange of ideas and facilitate collaboration, especially in the digital aspect.