Economy: Uncertainty on the end of Covid-19 pandemic has caused the World Bank conveyed its pessimistic views on the Indonesian economy. The World Bank estimates that the Indonesian economy in 2020 might experience zero growth. One reason is because of Large-Scale Social Restrictions (PSBB) to break the chain of transmission of Covid-19 which makes stagnation economic activity. This PSBB policy is implemented in regions as the economic centers of Indonesia. This projection also takes into account the massive global economic slowdown in both developed and developing countries, as well as falling commodity prices which have a major impact on the Indonesian economy.
The World Bank also projects that household consumption will slow down. This is due to the massive layoffs in various economic sectors, the decline in economic activity, and the decline in the Consumer Confidence Index . In addition, the investment growth in the country will also slow down due to the uncertainty about spread of infection and containment of the COvid-19, weak economic activity, low commodity prices, and a slowdown in the global economy. Meanwhile, export and import performance this year, is predicted to fall. Imports will decline faster than exports. This reflects the slowdown in the domestic economy which is also evident in the balance of payments. As for the World Bank’s worst scenario, if the PSBB policy is implemented for four months in a row, then Indonesia’s economic growth this year could experience a negative level of 3.5%.
Industry: Large-scale Social Restrictions (PSBB) has affected PT Indocement Tunggal Prakarsa as the cement producer had to close around seven factories and cut the salaries of the board of directors and commissioners to maintain financial condition amid the Covid-19 pandemic. The company’s business continuity in general was actually not directly disrupted by Covid-19, but it expects to experience a decrease in revenue due to the impact of the PSBB implemented in several regions in Indonesia. The pandemic had an impact on the operational shutdown of some of the company’s factories and operating units of subsidiaries due to the decrease in domestic demand. It is expected that the period of termination and operational restrictions applied by the company will last between 1-3 months.
To date, the contribution of revenue from the closed factories reached approximately 25 percent of total revenue (consolidation) in 2019. Yet, Indocement has so far not done layoffs for its employees, while the Board of Commissioners, Directors and management staff voluntarily make salary cuts gradually. The Company and/or its subsidiary entities do not have material legal issues, there is no cancellation of material contracts and / or call or legal claims due to default caused by the pandemic. Since the beginning of the pandemic, Indocement has carried out efficiency strategies in various fields, including distribution cost efficiency by optimizing the delivery of cement from terminals spread across various regions. Besides only operating the most efficient factories, Indocement also optimizes the use of alternative fuels and raw materials.
Business: The Indonesian government will gradually open shopping malls, restaurants and entertainment sites from June in an attempt to reactivate the pandemic-hit economy, even as the cases of positive Covid-19 continue to increase. The reactivation will be prioritized in regions called as green zones with Covid-19 reproduction rate below 1. The number of such green zones currently is 100 cities across eight provinces, including the country’s capital Jakarta. A reproduction rate of 1 means that 10 infected people are estimated to infect an average of around 10 others. The COvid-19 has taken the lives of 1,520 people in Indonesia, the highest in Southeast Asia. New cases have more than doubled in May, with the total reaching 25,216. The resumption of activities in several West Java areas that are close to Jakarta is important as they contribute significantly to the economy. West Java, with its many industrial estates, is listed as the third-biggest contributor to the economy in the first quarter. In the first phase set to be implemented on 1 June, only shops selling health equipment or products will be allowed to operate. Stores selling other goods can operate in the second phase, scheduled for 8 June. Hair salons, spas, museums and other places of entertainment will follow on June 15, while restaurants, bars and cafes will come next on July 6. The government expects to have all economic activities resume by early August.
Tourism: Indonesia’s Ministry of Tourism and Creative Economy informed that protocols for the tourism sector in the new normal will focus on hygiene, health and safety in conducting businesses. The ministry would ensure that tourism and creative economy actors would be ready to welcome the new normal by applying protocols focusing on the aspects of hygiene, health, and safety. Particularly for the tourism sector, the application of the new normal protocols aims to make visiting tourists feel safe and comfortable because tourism facilities are improved following the standards of cleanliness, health, and safety.
The protocols are expected to improve hygiene, health, and safety standards in the tourism sector, as well as to increase digital innovation to advance Indonesia’s creative economic sector so that they could rise up and compete in the global market. Earlier, the minister was upbeat about Indonesia’s tourism industry recovering sooner than expected or less than five years to return to normalcy. The closure of tourist destinations owing to the pandemic should be viewed as an opportunity to evaluate and rearrange the locations, so operators can improvise services and facilitate sustainable tourism development. “We have to work towards ensuring faster recovery of the tourism sector. We fully understand that tourism is the backbone of the economy,” the minister highlighted adding that the tourism sector has significantly contributed to creating jobs, boosting foreign exchange and investment, and bolstering development of other sectors.