Indonesia Coronavirus Update #14     June 1, 2020

Number of reported cases: 26,940 (as of June 1) 1641 Deaths 7637 Recoveries 

Rupiah to US$ 14,733

Jakarta Stock Exchange Index: 4753

  • Moving into a “New Normal” (NN):President Jokowi has used the English phrase, “new normal”, in his remarks about returning to work and reopening the economy in phases after June 1. Government officials, however, are not all speaking from the same script with some saying it’s a policy and others saying it’s a conceptual proposal.  Indonesia’s police and military have been mobilized to ensure that malls, markets, parks, and public transportation will be at 50% capacity and that people are wearing masks. The President and Jakarta Governor, Anies Baswedan, continue to have somewhat differing views. The Governor did not immediately endorse the “new normal”, saying he wanted to look more closely at the transmission data and may extend social distancing rules until June 4.  Similarly, Surabaya’s mayor Rismaharini pushed back on Jokowi’s announcement that the city is part of the “new normal”, saying that tight restrictions were still necessary until June 7 (or later) in light of a spike in COVID-19 cases. East Java’s Governor Khofifah also dismissed talk of a “new normal” given the province’s transmission rate.  In many areas of the country, Indonesia’s public –beginning with last week’s Idul Fitri celebrations—may have already passed into the new situation. For example, motorcycle taxi drivers, limited to only transporting goods since April, have prepared for the NN by creating a plastic partition, which is easy to clean, carried like a backpack by drivers. The partition is equipped with a hand grip to avoid direct physical contact between driver and passenger.
  • Infection Rate is Flat: Misleading Media Reports With the exception of East Java (Surabaya is its largest city), Indonesia’s rate of infection continues to be arithmetic (“flat”) not exponential. International media reports, including a story in the NY Times headlined “It’s Too Late”, have been misleading. It labeled a test of 11,555 Surabaya residents for antibodies – which had a 10% positive rate—as evidence of “runaway transmission”. The Times story mistakenly called the test random when it was actually targeted to areas of known infections and as a means to test front line health, security, and logistics workers. Furthermore, as pointed out by Reformasi Weekly, an independent analysis of Indonesian politics and policies, the presence of anti-bodies can be an indicator of exposure that happened weeks or months in the past.  “In fact, subsequent molecular testing determined that fewer than half of those who had tested positive for antibodies in Surabaya actually carried active infections”.
  • Vaccine Development: Although Indonesia has allocated resources to develop its own COVID-19 vaccine (including the reagents and other supplies for manufacturing) it is unlikely it can do so in sufficient quantities.  International cooperation will also be necessary. Minister for State-Enterprises, Eric Thohir, announced discussions with the Chinese company Sinovac and CEPI (Coalition for Epidemic Preparedness). “Don’t let us just wait around saying, ‘later, when a vaccine exists’- we must prepare for a new ‘normal’ “.  The competition for vaccine deployment could become fierce and it is too early to predict when and where a mass-produced vaccine will be available. Current likely candidates are India and China.  Note: CEPI (formed by WHO, India, Norway, Australia, Belgium, Canada, Denmark, Ethiopia, Finland, Germany, Japan, the Kingdom of Saudi Arabia, the Netherlands, Norway, the UK and Switzerland) does not include the US or Indonesia. It began funding COVID-19 vaccine research in January 2020.
  • Widening Fiscal Deficit: Finance Minister Sri Mulyani reported that contracting revenues would widen the 5.1% deficit to 6.3% of GDP. Indonesia’s central bank is preparing to purchase treasury notes, a policy that has been avoided for decades now allowed as a result of a recent Presidential Decree-In-Lieu-of-Law. According to the Minister the debt-to-GDP ratio of 30.2% (2019) will rise to 37.6% (2020) and 38.3% by 2023.
  • More Stimulus: The government announced an additional spending package of $44 billion aimed at banks, private sector small/medium enterprises.  Included in the payments are funds for 12 key state enterprises, including Garuda (air transportation), BULOG (food supplies), Hutama Karya (construction), Krakatau (Steel), Bahana (finance), PLN (electricity) and Pertamina (gasoline), to compensate them for losses due to prolonged subsidies. Critics in the private sector have questioned the efficiency of using the SOE’s as the prime vehicle for economic stimulus.