Economy: The government has prepared several strategies to sustain a national economic recovery. The first is continuing with the national economic recovery (PEN) program as the main instrument for economic growth in 2021. The second is accelerating the free COVID-19 vaccination program, which started in January 2021, and aims to cover 181.5 million of the population to build herd immunity. The third is continued provision of government incentives to strategic sectors and several other incentives to drive economic growth in the second quarter of 2021. The incentives include the government-borne luxury sales tax (PPnBM) for the automotive industry, and the government-borne value added tax for the property sector.
The Indonesian government is optimistic the economy will grow positively this year with indications of an improvement emerging amid the pandemic and containment measures, which have plunged the global economy into a deep contraction. After Indonesia recorded its first coronavirus cases in March, 2020, economic growth spiraled to minus 5.32 percent in the second quarter to reach minus 3.49 percent in the third quarter and minus 2.19 percent in the fourth quarter of last year. Overall, the Indonesian economy shrunk 2.07 percent year-on-year (yoy) in 2020, a figure that is considered better than several other countries. In the first quarter of this year, the country saw a significant improvement, with the economy recording a smaller contraction of 0.74 percent as the Retail Sales Index, Consumer Confidence Index, and manufacturing Purchasing Managers’ Index strengthened. A rise in car sales, electricity consumption, and cement production also provided a positive impetus to Indonesia’s economic recovery.
Investment: The newly created Ministry of Investment is tasked by President Joko Widodo to bring in Rp1,200 trillion (eq. US$84.5 billion) in investment in 2022. The target is 30 percent higher than this year’s target of Rp900 trillion. The target is part of the 2020-2024 strategic plan prepared by the Ministry of Investment. Despite the COVID-19 pandemic, the flow of foreign direct investment (FDI) into Indonesia has improved, increasing 51-52 percent year-on-year to Rp19.7 trillion in the first quarter of 2021. In addition, the Indonesian government planned to develop a region-based investment sector. Under the plan, nickel industry for batteries and fisheries will be developed in Sulawesi, while Papua encourages fertilizer development, and West Papua requires the construction of smelters, and nutmeg plantations. Kalimantan will focus on developing downstream bauxite and coal gasification sectors. Meanwhile, in Sumatra, the palm oil, paper, pulp, rubber, and tire industries are prioritized.
The Ministry of Investment (Indonesian: Kementerian Investasi) is a new government ministry formed by the Indonesian government in 2021. The ministry responsible for investment affairs and facilitating easiness of investment in Indonesia. Presidential Decree No. 31/2021, the ministry headed by Minister of Investment. The minister post is a concurrent post in which the minister also acted as Head of Indonesia Investment Coordinating Board. As the ministry is an upgrade of the previous Indonesian Investment Coordinating Board, the ministry retained the previous organizational structure of the board, which mainly based on Presidential Decree No. 90/2007. The new Investment Ministry is expected to lure investments into the country and create jobs. Indonesia has been working to boost growth to around 5 per cent this year through direct investment, among other things. The government has introduced a slew of economic reforms to streamline overlapping and confusing regulations.
Finance: A messaging app Line Corporation will launch a digital banking platform in Indonesia this month. This means Japan-based Line Corp. will offer banking services in three of its biggest overseas markets: Indonesia, Thailand and Taiwan. Line Corp.’s Indonesian banking platform is the result of a partnership the company struck in 2018 with PT Bank KEB Hana Indonesia, a subsidiary of South Korea’s Hana Bank. Line Corp. agreed to acquire 20% of PT Bank KEB Hana Indonesia, making it the bank’s second-largest shareholder, and said it would work on online banking services, including deposit accounts, microcredit products and remittance and payment services.
According to a report by Momentum Works, downloads of digital banking apps in Indonesia grew 7% in 2020, with apps from established banks like BTPN Jenius, OCBC Nyala and Permata leading. But Momentum Works also observed that “many Indonesian digital bank users tend to download multiple digital bank applications and explore around,” so a dominant player has not emerged yet. Major tech companies like Sea Group, Grab and Gojek are also working on their own neobank services. Line introduced banking services to its Thai users last October as part of a joint venture with Kasikorn Vision Company, a subsidiary of Kasikorn Bank. In Taiwan, its subsidiary Line Bank Taiwan was granted a banking license earlier this year by the Financial Supervisory Commission.