Workers at the Citra Abadi Sejati garment factory in Bogor, West Java. (Antara Photo/Yulius Satria Wijaya)

What About Us?: Indonesia's Private Employers Demand More Stimulus

BY :ANSELMUS BATA, ABDUL MUSLIM, DIANA MARISKA

MAY 21, 2020

Jakarta. Indonesia's powerful business lobby, which includes some of the country's largest employers, has criticized the government's $44 billion Covid-19 stimulus package for packing too much emphasis on state-controlled companies and small-medium enterprises and leaving big corporations virtually alone to ward off the economic impact of the pandemic. 

Under its so-called National Economic Recovery program, the government will spend Rp 641 trillion ($44 billion) on healthcare, social safety net and business incentives during the pandemic. 

Gita Wirjawan, the deputy chairman of the Indonesian Chamber of Commerce and Industry's (Kadin) advisory council, pointed out almost Rp 400 trillion from the stimulus package would go to finance debt restructuring for state-owned enterprises. 

Meanwhile, only Rp 34 trillion has been set aside for SMEs and corporations to restructure their bank debts.

"It would be unfortunate if the private sector, one of the country's economic drivers that has helped boost Indonesia's fiscal space by 15 times in the past 20 years, is seen as capable of helping itself [during the pandemic]," Gita said in a statement on Wednesday.

"This is perilous logic that could result in paralysis of our production capacity, competitiveness and our ability to increase the fiscal space in the future," he said. 

Big corporations and SOEs contribute around a third of Indonesia's annual tax revenue. 

Gita said the growth of these corporations had played a significant part in boosting the country's state budget from Rp 116 trillion in 2000 to Rp 1,786 trillion last year. 

Shinta Kamdani, the deputy chairwoman of the Indonesian Employers' Association (Apindo), agreed with Gita's remark, pointing out that while businesses are grateful for the government's various tax cuts, they would be meaningless if the companies can't generate any income in the first place. 

"We need more than tax cuts. We also need subsidies and debt relief or restructuring," Shinta said on Wednesday. 

Kadin has proposed to the government to boost its Covid-19 stimulus to Rp 1,600 trillion this year, with Rp 400 trillion for healthcare and Rp 600 trillion each for social safety net and business incentives.

As it stands now, Indonesia only spends 2.7 percent of its gross domestic product (GDP) for economic mitigation against the Covid-19 pandemic.

In comparison, Malaysia spends 18 percent of its GDP, Singapore 11 percent and Japan 20 percent.

Erwin Aksa, Kadin's deputy chairman for construction and infrastructure, said businesses also expect a speedier distribution of the stimulus to save the economy.  

"Speed and accuracy in making policies for the business sector are paramount in these challenging times," Erwin said on Wednesday.

"The government should not let the coronavirus spread out of control, halting many construction projects and leaving millions of workers out of jobs," Erwin said. 

Industry Minister Agus Gumiwang Kartasasmita said ensuring businesses, particularly the manufacturing industry, can get back on track as soon as possible is one of the government's priorities. 

"We want our industries to quickly rebound post-pandemic. We will provide a comprehensive stimulus package based on what each sector needs," Agus said in a statement on Wednesday.

Finance Minister Sri Mulyani Indrawati has said the government is likely to make up to Rp 87.6 trillion available through banks for SMEs' debt restructuring and another Rp 1 trillion in guarantees for working capital loans.

But according to Agus, "almost all companies can request a credit restructure, not only small and medium enterprises." 

Apindo Chairman Hariyadi Sukamdani welcomed the minister's commitment to providing assistance for the manufacturing industry. 

"The government needs to act soon to help the manufacturing industry since it makes a significant contribution to our GDP," Hariyadi said. 

Manufacturing contributed 20 percent of Indonesia's GDP in the first quarter of this year, more than any other sector, according to data from the Central Statistics Agency (BPS). 

Total investment in the sector reached Rp 64 trillion in the three months, up 45 percent compared to the same period last year.

It also made up 30 percent of all investment in the period.

 

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