Economy: The level of Indonesia’s crisis management protocol has been raised to one notch below “crisis”. Finance Minister warned that should COVID-19 pandemic persisted; economic growth could fall to between 0%-2.5%. According to the minister, the baseline scenario was for GDP growth at above 4%, but that if the coronavirus outbreak lasted three to six months, global trade slumped, and Indonesia went into lockdown, the result could be no growth. Meanwhile, Bank Indonesia’s growth outlook for 2020 is 4.2%-4.6%. The minister’s conveyed her warning after the falling of rupiah by 1.9% to Rp16,200 a US dollar, its weakest rate since June 1998 when the Asian financial crisis. The Indonesia’s composite stock index also touched its bottom in nearly seven years, while bond yields jumped.

The minister asserted that the government and central bank will conduct a number of actions to maintain financial market stability, despite heavy pressure. The measures would be the same as during the 2008 global financial crisis, though with some modification. She did not explain what authorities might do. But the protocol covers authorities’ response to swings in government bond yields, the rupiah exchange rate, the main equity index and the proportion of foreign ownership in bonds. In this case, the government may start buying back bonds from the secondary market or postponing auctions, with the protocol’s ‘standby’ level the second to highest, just below ‘crisis’. Bank Indonesia (BI) Governor revealed that the central bank had pumped 300 trillion rupiah (US$18.58 billion) into the money market and the banking system.

Fiscal: President Joko Widodo on March 20 conveyed instruction to the relevant ministers to focus the state budget on health care, social aid and economic stimuli to alleviate the COVID-19 pandemic and its impact to the economy. The president asked ministers to focus the budget on three things: health care to mitigate the pandemic, the social safety net through social aid and incentives for businesspeople and small and medium businesses. On the same day, Finance Minister Sri Mulyani publicly informed the plan to reallocate state expenditures under APBN 2020 worth Rp62 trillion for alleviating the pandemic and minimizing its economic impact. The reallocated expenditure is notified in the expenditure of ministries and government expenditures in central and local governments.

Out of Rp62 trillion, approximately Rp38 trillion will be reallocated to various activities in health, education, and social safety net. The distribution of pre-employment cards worth in total Rp10 trillion is set aside as an anticipation of employees laid offs and temporary termination to providing direct assistance through training. The ministry of social is identifying the numbers of recipients for cash transfer and non-food cash program, to possibly increase from 10 million to 15 million recipient families. A fund worth Rp6.1 trillion is being prepared as insurance or compensation for frontline medical forces to treat and alleviate Covid-19. The budget worth Rp3.3 trillion for National Disaster Body as the task force in the pandemic alleviation will be continued and subject to regular evaluation.

Trade: Indonesia has launched an anti-dumping investigation into imports of some hot rolled coil steel from China after a complaint by a state-controlled steelmaker. The investigation had begun after a complaint was lodged by Indonesian state-controlled steel maker PT Krakatau Steel. Indonesian business groups last year urged the government to hike tariffs on Chinese steel to rein in cheap imports, after Krakatau said it has to restructure and lay off 30 per cent of its workers through 2020. The Indonesian Trade Security Committee has been conducting an anti-dumping investigation which began on March 9 on imports of hot rolled coil of other alloy steel products originating from China.

PT Krakatau Steel claimed that it had put forward enough evidence for the committee to initiate an investigation, including allegations that the company is suffering losses due to imports of the product from China. The petition, submitted on behalf of the Indonesian Iron and Steel Industry Association (IISIA), was part of an effort to control imports of the product, which can be used as a replacement for carbon steel. Imports of carbon-akin alloys like boron steel have disrupted the performance of local steel companies because the product is often used as a substitute for the carbon steel produced by many local players. As a result, steel imports rose to 3.2 million tons in 2019 from 1.4 million tons in 2015.

Industry: Nissan Motor Co will end vehicle manufacturing at its plant in Indonesia as the struggling Japanese company tries to improve profitability. The end of vehicle production is part of an optimization plan that includes rightsizing, production optimization and reorganizing of business operations. Nissan opened a second factory at Purwakarta, Indonesia, in 2014, for an investment of 33 billion yen, which boosted total production capacity to 260,000 units a year. The plant now produces three finished models — Datsun GO, Datsun GO+ and Datsun Cross — although production was halted in late January. Datsun sales have slumped in particular and propping it up would take a lot of time and money.

Nissan has two production lines in Indonesia. One line was used to produce a Nissan car, the other for the halted Datsun production. The new model of Livina has been transferred to the Mitsubishi Indonesia plant in Bekasi. Meanwhile, for other models sold in Indonesia such as X-Trail models, Terra and Serena are imported as Completely Built Up (CBU) or whole imports. Mitsubishi Motors Corp, which is in a global car making alliance with Nissan, already has a strong presence in Indonesia. Over 2019, the retail sales of Nissan cars in Indonesia was 12,570 units, accounted for only 1.2% of total car sales and rank at the 10th after the newcomer Chinese car Wuling at the 9th rank (21,112/2.0%) and before Datsun at the 11th rank (7,749/0.7%). Mitsubishi Motors was at the 4th (118,936/11.4%) and Mitsubishi Fuso at the 6th rank (41,735/4.0%).

Finance: The Indonesian Stock Exchange (BEI) launched a relaxation on the rule of obligation to submit financial reports of publicly listed companies. The relaxation includes the extension of report submission up to two months. The policy is part of effort to lessen the adverse impact of emergency situation related to Covid-19 pandemic in Indonesia. The publicly listed companies are allowed to submit two months after the deadline of 2019 annual and first quarter 2020 reports through SPEIDXnet. It is part of the follow up of a letter from the Chairman of Financial Services Authority (OJK) on 19 March 2020. The BEI will adjust the special notation of “L” for the listed companies.

Previously, BEI has adopted some policies to hold the freefall of Indonesian Composite Stock Index (IHSG) triggered by the issue of Covid-19 pandemic. The policies include the implementation of “trading halt” on the stock exchange since 10 March. It is a temporary pause for 30 minutes if the indexes dropped above 5 percent, and reimplemented if the indexes further fell 10 percent. A trading suspend is enforced if the indexes plunged 15 percent. BEI also change the upper threshold of auto rejection from 10 percent to 7 percent started on 13 March. Previously since 10 March the threshold had been reduced from 20-35 percent to 20 percent. The index has dropped sharply from 5,220 on 10 March to 4,194 on 20 March.

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