Economy: Capital worth US$7.9 billion has been flight out from Indonesia’s financial market so far this year – one of the worst capital outflows the country has ever seen – as the Covid-19 pandemic continues to stoke fears in investors’ mind. According to Bank Indonesia (BI), the flow of foreign capital out of Indonesia this year had exceeded Rp125 trillion (US$7.9 billion), as foreign investors sold holdings in government bonds worth Rp112 trillion and in stocks Rp9.2 trillion. “The majority of the outflow occurred in March, as much as Rp 104.7 trillion,” according to the Governor of Bank Indonesia on Tuesday.
BI governor said that liquidity in the markets was still “more than enough,” and BI would remain in the market to avoid any liquidity crunch. BI has injected liquidity into the money market and banks, up to nearly Rp300 trillion. The injection included government bond purchases from foreign investors in the secondary market worth more than Rp168 trillion. The central bank also got involved in repo transactions with local commercial banks of around Rp55 trillion. Reduction of the reserve requirement for local commercial banks in BI, effective from April, would add Rp75 trillion to the market liquidity. The central bank will continue to increase the intensity of its triple interventions to keep the rupiah’s exchange rate in line with its fundamentals and the market mechanism.
Finance: Bank Indonesia (BI) changes its currency trading hours to 9 a.m. to 3 p.m. (0200-0800 GMT) from previously 8 a.m. to 4 p.m. BI also adjust the interbank transaction settlement and clearing system period. “BI will continue coordinating with the government and other related authorities in taking collective steps to monitor, assess, and to conduct prevention and mitigation against the spread of COVID-19,” BI spokesman said in the statement. The change will come into effect on Monday, 30 March and applied until 29 May, which is the latest date of the government’s emergency response period on Covid-19 pandemic.
The Financial Services Authority (OJK) also decided to cut short trading hours on the Stock Exchange and Alternative Market Operation System (SPPA) and shorten the reporting time at the Receiver of Securities Transaction Report (PLTE). Trading hours at the Stock Exchange from Monday to Friday for session I will be from 9 a.m. to 11:30 a.m. local time while session II will be from 1:30 p.m. to 3 p.m. local time. The trading time of the SPPA will be from 9 a.m. to 3 p.m. local time, while the operational hours of the PLTE will be from 9:30 a.m. to 3:30 p.m. local time. OJK also urged PT Kliring Penjaminan Efek Indonesia (PT KPEI) and PT Kustodian Sentral Efek Indonesia (PT KSEI) to adjust the time of settlement process. The adjustment of trading and settlement hours will come into effect from 30 March.
Trade: The Ministry of Trade has issued an import license of 150,000 tons of onions and 11,000 tons of them has now entered Indonesia. The imports are to stabilize the recent escalating price of onions in Indonesia. For this reason, according to the direction of President Joko Widodo, all steps needed to meet the basic needs of the community must be taken by each ministry. Onion is among the major spices consumed by the majority of Indonesian people in their daily meals. Meanwhile, due to the climate factor Indonesia is only able to produce small quantity of onion.
The government finally decided to relax or facilitate licensing the import of garlic, including onions whose price is also expensive. Trade Minister had previously announced to free the import permit application. This exemption means that the businessman does not need to submit an Import Licensing Certificate (SPI) for garlic and onion, nor does it need to submit a Horticultural Product Import Recommendation (RIPH) to the Ministry of Agriculture. The exemption is valid from 26 March to 31 May 2020.
Business: Covid-19 pandemic has weakened aviation industry in Indonesia. For this reason, The Indonesia National Air Carriers Association (INACA) requested tax relief and other incentives can be immediately provided by the government to save the airlines from greater losses. The airline expects the delay in payment of income tax, suspension of import duties on spare parts, suspension of airport fees and navigation managed by State-Owned Enterprises, implementation of discounts on airport fees managed by the Ministry of Transportation, and an extension of the period of time for simulator training, and health checks for flight crew members. ,
During March 2020 the number of passengers dropped dramatically, and all airlines reduce flights up to 50 percent than the normal frequency. It is predicted that the prolonging Covid-19 pandemic will make uncertainty to worsening aviation industry lead to bankruptcy. If there is no quick positive response from the government, it is certain that temporary or permanent layoffs will be executed as a rescue effort. The impact is not only on aviation industry itself but also for its supporting industries in downstream and upstream such as aircraft repair shops, ground handling, and travel agents involved.
Industry: The impact of the corona virus completely hit domestic toy industry. Toy importers have stopped operating, while local producers reduce production due to shortage of raw materials and sluggish sales. According to Indonesian Toys Association (AMI), Covid-19 pandemic could be an opportunity for local producers to increase production and sales when importers could not supply goods. Unfortunately, local manufacturers are constrained by the depletion of spare parts and components, which make it difficult to increase production. The weakening of rupiah against the US dollar lately causes the escalating price of raw material for toys. The majority of companies used the assumption of rupiah exchange rate at the level of Rp14,500 per US dollar. At present, the rupiah has depreciated to the level of above Rp16,000.
The potential losses have made importing companies stopping their business for a while Not only because the price of imported toys getting more expensive, but also the consumers prioritize the fulfillment of basic needs, especially foods, during the pandemic. At the same time, local producers manufacturing toys by utilizing the currently available stock of components. They are forced to reduce working hours due to lack of raw materials and absorption of toys on the market has been very low. There has yet any attempt to lay off workers, although working hours have been cut from two shifts to one shift.