Economy: The relaxation of Large-Scale Social Restriction (PSBB), to facilitate economic recovery, in some regions would help reducing massive layoffs. According to the Ministry for National Development Planning (Bappenas), relaxing PSBB will boost economic activities, and the wave of layoffs is expected to decline within the next few months. However, the economic capacity might not yet fully return to normal akin to the pre-pandemic, and the chances of layoffs will still be looming.
Bappenas projects the number of unemployment in 2020 to increase by 4 to 5.5 million people, while in 2021 the number is expected to rise by 10.7 to 12.7 million. Trade, manufacturing industry, construction, company service, accommodation, food and beverage, are among sectors that will cut jobs. Bappenas has designed the strategy for a policy to reduce unemployment during the COVID-19 pandemic. The strategy involves the recovery of manufacturing industry, tourism, investment, and entrepreneurship, as well as the development of basic infrastructure in villages under labor intensive program.
Industry: The Investment Coordinating Board (BKPM) guaranteed that some multinational companies will commence construction of their investment in July 2020. The companies have fulfilled the requirements, and BKPM facilitate them in terms of the investment location. They are part of seven companies from various countries, including Japan, the United States, and South Korea, that confirmed in June to relocate their plants to Indonesia, with investment totaling US$850 million, or some Rp11.9 trillion. Some other 17 foreign companies are also intensively communicating with the Indonesian government over their factory relocation plan. The procedure to procure an investment license will be completed in 2020.
The seven companies include the US-based solar-powered lights manufacturer Alpan Lighting (PT CDS Asia), Japanese electronic component manufacturer Sagami Electric (PT Sagami Indonesia), and Japanese automotive spare parts industry Denso (PT Denso Indonesia). Four others are Japanese electronic goods manufacturer Panasonic (PT Panasonic Manufacturing Indonesia), South Korean electronic goods manufacturer LG Electronics (PT LG Electronics Indonesia), audio and video equipment maker Meiloon, and tire manufacturer Kenda Tire.
Finance: President Joko Widodo signed a decree to give the Deposit Insurance Agency (LPS) a bigger role in supervising cash-strapped banks. The decree is aimed at providing safeguards to limit the risk of the Covid-19 causing a financial crisis. Under the new decree, LPS is allowed to assist the Financial Services Authority (OJK) in supervising a bank after OJK puts the bank under an “intensive supervision” status. LPS is allowed to inject cash into such a bank to help the lender handle a liquidity or solvability problem.
The decree also allows LPS to raise cash through several means, including using its holdings of government bonds in repurchase transactions with the central bank, outright sale of such bonds to the central bank, issuing its own rupiah or foreign currency bonds and, if necessary, borrowing from the government. Before the pandemic, LPS’s main jobs were to insure retail deposits and either to liquidate or save a failing bank. LPS collects annual fees from commercial banks for its services of deposit guarantee.
Environment: The Government of Norway will for the first time pay up to Rp812.86 billion or 530 million NOK to Indonesia for being able to reduce emissions from deforestation. The money was result-based payment as agreed in cooperation in REDD+ (reducing emissions from deforestation and forest degradation plus). Indonesia and Norway have established cooperation in the environmental affairs over the last 10 years. The Norwegian Government considered Indonesia as an important partner in the efforts to slow down the climate change impact and to cut greenhouse gas emissions which have triggered global warming.
Under the REDD+ cooperation agreement in 2010, Norway agrees to allocate funds amounting to six billion NOK or some RP9.2 trillion for Indonesia if successful in reducing carbon emissions. This is the first time Norway pays for Indonesia’s results in emission reductions. Emissions from deforestation and forest degradation in Indonesia were lower in 2016-17 than in the preceding decade. An independent third party has verified Indonesia’s results for the forest year 2016-17. The report confirms that Indonesia – home to the world’s third largest rainforest – has reduced emissions amounting to approximately 17 million tons of CO2. Recently published reports from the Indonesian government indicates that deforestation has stayed at the same level or lower in 2017-18 and 2018-19.