Economy: Indonesia’s efforts to support its economy through the coronavirus crisis were being hampered by the slow disbursement of a US$50 billion stimulus plan. Meanwhile, millions more people risk being plunged into poverty amid the pandemic, as data showed the economy shrank for the first time since 1999 in the second quarter. Five months after its launch, only 22.4% of the stimulus had been spent. The package had been split between health and economic recovery programs ranging from corporate tax exemptions to food and cash aid for households.
However, to date only 39 percent of Rp 2,739 trillion (US$189 billion) state budget, which includes the stimulus, was spent in the first half of 2020, down from 42 percent at the same time last year. The World Bank has welcomed Indonesia’s COVID-19 social programs, about a third of the stimulus, but said minimal leakage and swift implementation was needed to curb the risk of 5.5 million to 8 million new poor being created. Around 25 million of Indonesia’s 267 million people currently exist below the national poverty line and were living on around US$1 a day, the World Bank said.
Travel: The Indonesian government announced its travel corridor arrangement for essential business trips with South Korea. The arrangements cover business and official trips, but not tourism, with strict health protocols to be implemented. “This arrangement is expected to facilitate visits by the private sector and essential business (travelers) who will continue investment projects between the two countries, so that economic activities will go on,” foreign minister said. Indonesia’s new arrangement with South Korea, its first with an Asian country, follows that with the United Arab Emirates that took effect late July. Similar talks are progressing with Australia, China, and Singapore.
Indonesia is also seeking to create a “travel bubble” with Japan, one of its top business partners. However, Indonesia has not been included in the list of 10 Asian countries — including Singapore, Malaysia and Myanmar — Japan was seeking to reopen business travel with. Separately, resort island Bali is seeking to reopen to international visitors on 11 September, after it welcome domestic tourists back in late July. However, the central government have issued conflicting statements over whether they support Bali’s plan.
Retail: Retail sales in Indonesia fell 17.1 percent year-on-year in June, marking a slight improvement when compared with an even greater contraction recorded in May (20.6% y-o-y), according to a recent Bank Indonesia (BI) survey. Compared to the preceding month, June saw improvements in the purchase of vehicle fuels, food, beverages and tobacco, as well as information services, among other categories, according to the survey. “The improved retail sales performance was driven by reopening of retail stores during the shift from the PSBB [and to the adoption of] new habits,” said the central bank. “The retail sales performance is expected to improve further in July despite still being in a contraction phase.”
The central bank estimates that sales in July were down 12.3% y-o-y, which would be a further easing in the severity of the contraction, thanks to higher sales of food, beverage, and tobacco as well as household equipment. However, according to a survey conducted by the Demographic Institute of the University of Indonesia (UI) in collaboration with ride-hailing firm Gojek, the recovery of retail sales cannot come soon enough for small businesses. The survey found 77 percent of “social sellers” – entrepreneurs who use social media and other online platforms to market their products to their consumers – expect their revenue to remain under pressure for the next three months despite high hopes of recovery in the long run.
Infrastructure: Indonesia needs US$47 billion in investment to develop ports across the country, according to an official of Transportation Ministry. Based on the master plan for national ports (RIIPN), Indonesia needs US$47 billion to develop ports from Sumatra to Papua. The development of ports in Sumatra will require an investment of US$12.9 billion, Java US$15.3 billion, Bali and Nusa Tenggara US$2.4 billion, Kalimantan US$4.6 billion, Sulawesi US$3.9 billion, and Papua US$7.9 billion. Nearly 32 percent of the investment will be derived from the government budget and the remaining 68 percent from corporate financing.
The development of ports has faced challenges in terms of investment and geographical standpoints. From the investment standpoint, limited state budget funds and lack of private participation have remained a problem. From the geographical standpoint, the development of ports has been obstructed due to dependence on sea transportation, poor access due to higher number of remote areas, difference in characteristics between one area to another, and imbalance of growth centers. Due to the limited state budget funds, the ministry has been ordered to tap as much investment as possible from third parties through several cooperation schemes. The schemes include government-corporate body cooperation (KPBU), concession cooperation, utilization cooperation, and rent. Moving ahead, the government will encourage a greater chunk of private investment, including regional government’s investment through port corporate bodies. For the 2021-2030 period, the total investment for the development of ports in the country is projected at US$22.5 billion, comprising US$6.3 billion (28 percent) from the government and US$16.2 billion (72 percent) from the private sector.