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Indonesia Corona Virus Update #34 October 19, 2020
Overview
Travel/Tourism
Economic
- Omnibus Job Creation Bill: Ongoing demonstrations- some deteriorating into riots- continued over the past week. So far, President Jokowi is holding firm on all elements of the bill despite the stiff opposition from labor, environmental, and human rights activists. Although the bill passed Parliament, the President has yet to sign it, and several versions are not in circulation causing some confusion. Many of the differences are matters of punctuation, spelling, grammar, and clarity, however, those that have looked at the texts closely have identified some meaningful differences, especially regarding changes to the 2003 Labor Law. AICC is planning a mid-November on the bill, when a final version will have been submitted to the President. Its clear that after passage, the bill will undergo challenges in the Constitutional Court.
- President Jokowi’s Statements: The government released a Youtube video of President Jokowi’s comment to the press about the law: (excerpt provided by Reformasi Weekly) “There is a need for this law to promote employment generation, especially in the labor-intensive sectors. The Job Creation Law intends to provide employment as broadly as possible for job-seekers and the unemployed. It also helps the ability of micro, small and medium enterprises to generate employment as the law will facilitate these firms in obtaining permits. Overlapping regulations and convoluted procedures are cut down, business permits for micro and small enterprises are no longer needed – they merely need to register. The process is very simple”. And- “I have seen demonstrations that, in essence, are fueled by disinformation regarding the substance of the law and hoaxes on social media.”
- Exports Are Up: According to Statistics Indonesia (BPS), Indonesia booked its highest exports in six months, driven by rising shipments of agricultural and manufactured goods in September. Exports jumped 6.97 percent month-to-month (mtm) in September to US$14.01 billion, the highest recorded since March, before the pandemic took a great toll on the country’s economy. The figure, however, remained 0.5 percent lower than in September last year. Imports rose 7.7 percent mtm to US$11.57 billion in September due to rising incoming deliveries of raw materials and capital goods, but they are still almost 19 percent lower annually, as household spending remains well below pre-pandemic levels. As a result, the country booked a US$2.44 billion trade surplus in September, bringing the total surplus so far this year to US$13.51 billion.
- BI Rate Unchanged: Bank Indonesia (BI) will hold its benchmark interest rate in the fourth quarter at 4 percent until the end of 2021 as the central bank focuses on maintaining a stable currency amid the COVID-19 induced uncertainty.
- Budget Deficit: Indonesia’s budget deficit was estimated at 682.1 trillion rupiah ($46.56 billion) in the January-September period, equivalent to 4.16% of gross domestic product, Finance Minister Sri Mulyani Indrawati said on Monday (10/19). The government has forecast a fiscal deficit of 6.34% of GDP for 2020, the widest in decades, due to increased spending on the COVID-19 pandemic response.
- Islamic Banking Merger: SOE Minister Erick Thohir announced that the Islamic banking (Syariah) units of 3 of Indonesia’s state-owned banks would be merged into a single unit with $14.5 billion in assets. While conventional banks charge interest on loans, Islamic lenders use various profit- or burden-sharing schemes to bear the lending risk together with their customers. The new bank could allow Islamic finance to better compete with traditional institutions and meet a growing demand among Indonesian consumers.
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