Economy and Business

Jobless Sign Up for Online Training

More than 8.6 million Indonesians signed up for a government program offering cash allowance and online training as the coronavirus pandemic continued to render scores without jobs. The pre-employment card program will offer selected applicants a monthly allowance of 600,000 rupiah ($39) for four months and require them to sign up for one or more of the 2,000 online training courses. The plan, mooted by President Joko Widodo last year to up-skill the nation’s workforce, is now being expanded to shield the poor from the fallout of the pandemic. Indonesia has one of the biggest work-forces in the world, which at 127 million is larger than the combined populations of Italy and the U.K. But 56% of people with jobs, about 70 million, are in informal employment with little or no safety net, leaving them severely exposed in an economic crisis.(Bloomberg)

Indonesian Economists’ Recession Worries

Indonesia’s economy may enter a recession and experience a much longer recovery than other countries in Southeast Asia if the government’s management of the COVID-19 pandemic remains “slow” and “amateurish”, economists have warned. University of Indonesia senior economist Faisal Basri voiced concerns over the government’s handling of the health crisis, adding that with the current containment measures, the country could see an economic contraction of up to 2.5 percent, or 0.5 percent growth in a best-case scenario. “The sophisticated economic policy taken by the government will be in vain if the government’s COVID-19 containment measures remain amateurish,” Faisal said during an online discussion on Friday. “The trajectory of Indonesia’s economy is very hard to predict right now, as the government has been late to ban mudik [exodus] while the large-scale social restrictions have not had much of an impact,” he said, warning that the country’s economic recovery would take much longer and incur higher costs.The government’s Idul Fitri mudik ban will remain in place until May 31 with travel restrictions to be enforced in COVID-19 red zones. The ban comes after the government resisted calls from health experts since late last month.

Low Oil Prices a Double-Edged Sword

Indonesia produces in the neighborhood of 700,000 barrels per day of crude oil — some of which it sells abroad but must import 800,000 bpd of gasoline and other fuels as it lacks adequate refining capability. Low prices will help Indonesia’s current account deficit but could hurt state revenues and the development of more local production fields. “We are going to be hit from many angles,” economist Enrico Tanuwidjaya of Singapore-based United Overseas Bank (UOB) told The Jakarta Post on Tuesday. Contrary to other Southeast Asian countries, Indonesia’s fuel prices have not budged since the crash and local stakeholders have not signaled a discount any time soon, citing multiple reasons. State-owned oil company Pertamina, which operates over 90 percent of gas stations in the country, frequently says that Indonesia’s falling demand undermines the need for cheaper fuel. Pertamina, with 90% of the downstream market, has experienced a 25% drop in sales since March due to social restrictions. It has made huge cutbacks in its refined fuels output and rented 3 tankers –and is seeking a fourth– to store cheap gasoline. Pertamina’s President, Nicke Widyawati said that, going forward, the company would not purchase more storage space because tanker rental prices were soaring as many other countries implement similar hoarding strategies. Fuel pump prices have not yet dropped due to a previously imposed price ceiling, currently under review by the government.

We import crude and fuel in huge volumes – around 800,000 barrels per day – but with such low prices then the import value of that crude and fuel becomes very cheap,” said energy economist Fahmy Radhi of Gadjah Mada University (UGM) on Wednesday. However, Fahmy said that falling crude prices also risked derailing the value of Indonesia’s other commodity exports such as metal ores and coal, whose international trade prices are tied to oil prices, among other variables. (Jakarta Post)

Factories at 33% Capacity

Factory activity has collapsed with only one third of manufacturing companies and workers operating at present, a high-ranking official has said. Coordinating Economic Minister Airlangga Hartarto said on Thursday that 15,000 manufacturing companies were still operating at present out of a total of 40,000 in normal times. Meanwhile, 4.7 million workers in the manufacturing sector are still working out of the usual 17 million in the sector, which contributes around 20 percent of the country’s gross domestic product, the minister added. “We hope companies will be back in operation when the situation returns to normal,” Airlangga told an online briefing on Thursday, referring to the COVID-19 pandemic. As COVID-19 continues to batter the Indonesian economy, 70 percent of textile and textile product (TPT) companies face permanent closure as a result of plunging domestic and export demand, an industry group has warned. At the moment, 80 percent of textile companies have halted operations temporarily while facing cashflow issues, so financial support from the government is urgently required according to the Indonesian Filament and Fiber Producers Association.

Indonesian Airlines Hit Hard

Finance Minister Sri Mulyani Indrawati has said only 70 flights are still operating of a total of around 79,000 before the virus outbreak. “The airline industry lost income of Rp 207 US$13.65 million between January and February alone”, she said.