THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA Faisal Basri, Udi H. Pungut, Gatot A. Putra The Strategy To Tackle Economic And Social Impacts Of The Covid-19 Crisis In Indonesia Faisal Basri, Udi H. Pungut, Gatot A. Putra Published by: Friedrich-Ebert-Stiftung(FES) Kantor Perwakilan Indonesia Jalan Kemang Selatan II No. 2 A, Jakarta 12730 – INDONESIA Website: www.fes.or.id 1 st Edition, December 2020 To quote, duplicate part and/ or all of the contents of this article without the written permission of the publisher is prohibited. Not for sale. Contents Introduction.......................................... 2 The COVID-19 Pandemic Handling in Indonesia and Some Countries .... 3 Economic and Social Impacts.............................. 12 :KR LV DơHFWHG WKH PRVW"............................... 12 ,PSDFW PHDVXUHPHQW.................................. 13 Government’s Policies Related to the COVID-19 Plague............ 17 +HDOWK SROLF\....................................... 17 SROLF\................................... 20 5HRUJDQL]LQJ(ơRUWV WRZDUGV D 1HZ(UD ...................... 24 6RFLDO VHFXULW\ IRU ZRUNHUV DQG VRFLDO SURWHFWLRQ UHIRUP............ 24 7KH UROH RI ORFDO JRYHUQPHQW DQG VRFLHW\..................... 25 6WUHQJWKHQLQJ WKH UROH RI WKH VWDWH......................... 27 $ 8QLYHUVDO+HDOWK 6\VWHP............................... 28 7KH 6XSSRUW RI+HDOWK 6\VWHP............................ 33 Recommendations..................................... 34 Refrences........................................... 36 %RRNV DQG-RXUQDOV................................... 36 2QOLQH 0HGLD....................................... 37 List of Abbreviation.................................... 40 3URƢOH RI:ULWHUV...................................... 42 Friedrich-Ebert-Stiftung Indonesia- 2020 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA Faisal Basri, Udi H. Pungut, Gatot A. Putra • A t the time when most of the countries managed to control the COVID-19 pandemic, there has yet been any convincing sign to mark the decline of the virus spread in Indonesia. On the contrary, the COVID-19 case has achieved beyond one million number of cases on January 26, 2021, as the number of active cases has increased sharply since December 19, 2020 and the number of deaths has consistently go up. The decision-makers need to show ƢUPQHVV DQG FRQVLVWHQF\ LQ PDQDJLQJ WKH SDQGHPLF EDVHG RQ VFLHQWLƢF DSSURDFK DQG DFFXUDWH HơHFWLYH organisation and command system, as well as all recovery steps to strengthen the foundation of the nation’s resilience. • T he impacts of the COVID-19 are highly determined by the success in controlling the plague of the COVID-19. Thus, the outline and timeline to tackle the crisis 1 DUH GHSHQGHQW RQ KRZ HơHFWLYH WKH government can control this plague. 7KH ƢUVW ZDYH KDV \HW WR ZKLOH the transitional Large-Scale Social Restrictions( Pembatasan Sosial Berskala Besar/PSBB) has not followed the best practices as recommended by the WHO, and thus the plague will be more GLƤFXOW WR$V the plague has become evidently more severe in the transition period, which drove the Provincial Government of DKI Jakarta to tighten the PSBB starting from September 14, 2020. Until the end of January 2021, DKI Jakarta was still the plague epicentre with the highest number of cases (more than 250.000). The change of naming from PSBB to PPKM(Pemberlakuan Pembatasan Kegiatan Masyarakat/ Enforcement of Restrictions on Community Activities) VHHPHG WR QRW DơHFW WKH FRQGLWLRQ betterment . THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA • The inconsistent and unfocused SROLFLHV RFFXU GXH WR WKH FRQƣLFW between controlling plague and maintaining economic activities. The government decided to choose“living alongside the COVID-19” by: providing opportunities to citizens to carry out economic activities upon compliance with the health protocol. While the virus transmission keeps spreading and increasing, this decision poses high risks both from health and economic sides, and in turn a longer period of economic recovery. • The Government of Indonesia has been ranked the fourth-worst globally in terms of COVID-19 handling, thus needs to increase the trust of national and international publics by decreasing the number of COVID-19 infection cases through mass testing, tracking, tracing, isolation, physical distancing, handwashing, and face mask usage programs that will enable faster containment of the plague. In this case, the economy can also be recovered faster. As results, the perception of national and international publics will improve, and more countries ZLOO RơHU WUDYHO EXEEOHV RU FRURQD corridors with Indonesia. • The COVID-19 crisis is a golden moment to formulate a new development strategy as well as to reform the social security and protection system. These will strengthen Indonesia’s economic and social resilience so that the country can recover from a big crisis and disaster rapidly in the future. Introduction T he coronavirus(COVID-19) has become the worst global pandemic in the last century as it has spread to 219 countries and territories in all continents except the Antarctic. On January 26, 2021 the accumulated number of cases in the whole world has reached 100 million cases. In Indonesia, all provinces have been infected and only four out of 514 regencies/cities are free from the COVID-19. Although WKH QXPEHU RI FRQƢUPHG DQG GHDWK FDVHV are lower than the Spanish Flu occurring D FHQWXU\ WKH KDV DơHFWHG more severely almost all aspects of life in a global scale due to hyper-globalization and neoliberalism practices(Rodrik, 2020). The impact of the COVID-19 on the global economy has been extremely severe; worst after the Great Depression (1929-1939) that reached its peak in 1933. The global economic order was forced to ƢQG D QHZ$OO FRXQWULHV QHHGHG to revisit the relationship pattern between the community, the country, and the market. An economic approach only is far from enough to tackle the health and economic crisis that have emerged simultaneously. The sophisticated weaponry and economic power could not control the COVID-19 plague, along with the economic contraction and unemployment explosion that followed it. All standard economic policies have been implemented by many ERWK ƢVFDO RI the State Budget( Anggaran Pendapatan 2 Friedrich-Ebert-Stiftung Indonesia- 2020 dan Belanja Negara WKH stimulus package, and the social safety net programs) and monetary(decrease of the interest rate, the quantitative easing, and the banking reserve requirement), as well as a set of standard regulations in tackling the crisis such as the trade policy, the credit restructuring, and the businesses recovery. However, those are not enough. :KDW GLơHUHQWLDWHV WKH FXUUHQW FULVLV LV the human life factor. There is a purer dimension: saving human life. Not trading Rơ EHWZHHQ HFRQRP\ DQG KHDOWKŝ saving lives is saving the economy. Therefore, the multidimensional crisis management requires an interdisciplinary approach and multistakeholder engagement. It should not be based on intention and assumption, EXW VFLHQWLƢF EDVLV DQG GDWD The high cost of the COVID-19 crisis must be paid through a fundamental change of national and state living, by presenting new norms and not the “new normal” in terms of recovery to the condition before the pandemic outbreak. The COVID-19 Pandemic Handling in Indonesia and Some Countries T KH ƢUVW FDVHV RI WZR SHUVRQV JHWWLQJ infected by the COVID-19 were announced by President Joko Widodo on March 2, 2020. At that time, around 50 countries KDG UHSRUWHG FRQƢUPHG FDVHV RI The Expert Team from the Public Health Faculty of the University of Indonesia ( Fakultas Kesehatan Masyarakat Universitas Indonesia /FKM UI) considered that case QRW WKH ƢUVW 7KH\ HVWLPDWHG WKDW WKH COVID-19 had entered Indonesia since the third week of January 2020(Detikcom, 2020). This assumption is quite reasonable as according to the Central Statistics Agency ( Biro Pusat Statistik/BPS), the number of tourists from China entering Indonesia in January 2020 reached 181,300, the secondlargest after Malaysia. 1 Until January 27, 2021, the number RI GDLO\ FRQƢUPHG FDVHV DQG GHDWK NHSW increasing, and even resulted on new records for daily cases and death. Although the number of healed patients has increased consistently, it is usually less than the increase of daily cases, as starting from the second week of November 2020, the number of actives cases has increased unstoppably. Since WKHUH KDV\HW QR VXƤFLHQWO\ FRQYLQFLQJ signs that show the peak of the curve, the KDQGOLQJ JHWV PRUH GLƤFXOW GXH to the limit of health facilities and devices as well as the loss of health workers due to COVID-19 $OWKRXJK WKH*RYHUQPHQW RI ,QGRQHVLD KDG WHPSRUDULO\ IUR]HQ DOO ƣLJKWV IURP ,QGRQHVLD WR&KLQD DQG YLFH VLQFH)HEUXDU\ DV PXFK as 11,800 and 4,300 tourists from China entered Indonesia in February and March 2020 respectively. 3 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA &RQƢUPHG FDVHV DQG GHDWKV Total confirmed cases and deaths Daily cases and deaths 30,000 15,000 350 1,050,000 300 900,000 25,000 12,000 250 750,000 20,000 600,000 9,000 200 15,000 450,000 150 6,000 10,000 300,000 100 3,000 5,000 150,000 50 0 0 0 0 2 Mar 17 1 Apr 1 1M 6 ay 16 15-J31 un 1 3 5 0 Jul 14 30 A ug 13 S29 ep 13 O28 ct 12 28 N ov 12 27 D ec 1 2 1 7 Jan 26 2 Mar 17 1 Apr 1 16 May 16 1 3 5 1 -Jun 30 15 Jul 1 3 4 0 Aug 1 2 3 9 Sep 1 2 3 8 Oct 1 2 2 8 Nov 1 2 2 7 Dec 1 2 1 7 Jan 26 Total confirmed cases Source: covid19.go.id Total deaths-RHS Even if the number of active cases has decreased consistently in a quite long period, there is no guarantee that the COVID-19 has been contained successfully. The experience of Iran could present a valuable lesson. Iran had entered the second wave since May 4, 2020 due to a rushed relaxation, which was marked by a record-breaking burst of daily cases as much as 3,574 on June 4, 2020. The SUHYLRXV UHFRUG ZLWKLQ WKH ƢUVW ZDYH ZDV lower at 3,186 cases on March 30, 2020. It took longer to re-contain the plague. Daily cases 14 per. Mov. Avg.(Daily cases) Daily death 13 per. Mov. Avg.(Daily death) 7KH FRQWDLQPHQW HơRUWV KDYH\HW WR IXOO\ succeed as the number of active cases has increased again starting from August 11, 2020. The third wave took even longer time to reach the peak on December 6, 2020. After enforcing drastic act through lockdown in 100 cities, the plague seemed to be under control, as the number of active daily cases and deaths has decreased ,QGRQHVLD KDV\HW to show signals of reaching the peak of the ƢUVW EXW WKH FRQGLWLRQ KDV JRWWHQ worse compared to Iran. $FWLYH FDVHV DQG GDLO\ GHDWKV LQ ,QGRQHVLD DQG ,UDQ Indonesia Iran 175,000 350 260,000 500 150,000 300 400 195,000 125,000 250 300 100,000 200 130,000 75,000 150 200 50,000 100 65,000 100 25,000 50 0 0 0 0 2 Mar 1 1A 7 pr 1 M16 ay 16 15-Ju31 n 15 J30 ul 14 30 Aug 13 29 Sep 13 28 Oct 12 No28 v 12 De27 c 11 27 Jan 26 19 Feb 1 Mar 12 23 3 Apr 14 25 6 May 17 28 8 Jun 19 30 11 Jul 2 2 A 2ug 13 24 4 Sep 15 26 7 Oct 18 9 2 N 9ov 20 1 Dec 12 23 3 Jan 14 25 Active cases- LHS Daily death 14 per. Mov. Avg.(Daily death) Active cases-LHS Daily death 14 per. Mov. Avg.(Daily death) Source: covid19.go.id and ourworldindata.org 4 Friedrich-Ebert-Stiftung Indonesia- 2020 A s of September 18, 2020, the case fatality rate(CFR) due to the COVID-19 in Indonesia reached 3.991 percent, higher than the average global rate of 3.168 percent. Compared to European countries such as the United Kingdom (UK), France, and the Netherlands that reached dozens percent, the fatality rate in Indonesia is relatively lower, yet remains the highest among ASEAN countries and the fouthhighest in Asia. 2 Singapore Malaysia Thailand India Bangladesh Philippines Iraq Pakistan World Myanmar Vietnam Indonesia Iran Afghanistan China 0.049 0.369 0.541 &DVH IDWDOLW\ UDWH SHUFHQW 1.439 1.509 1.994 2.117 2.121 2.144 2.226 2.261 2.814 4.179 4.362 5.208 Source: Worldometer, downloaded on January 25, 2021, 05:50 AM The number of cases correlates strongly with the amount of testing. Until May 2020, the number of cases in Indonesia was relatively low, even compared to Singapore. After the government targeted two-fold testing to 20,000 per day, the increasing number of daily cases often reached 1,000. Mass testing is very helpful in accelerating the COVID-19 handling. Even with the target of 30,000 specimens per day, the amount of testing per one million population remains considerably low. Among countries with cases exceeding 100,000, the amount of testing per million in Indonesia was only higher than four African countries(Nigeria, Egypt, Ethiophia, and Kenya,), as well as an Asian country(Bangladesh). To defeat the speed of the COVID-19 spread, the amount of WHVWLQJ PXVW EH LQFUHDVHG VLJQLƢFDQWO\ DQG followed by contact tracing in accordance with WHO standard. 2 The fatality due to the COVID-19 in Indonesia only covers the death of positive cases based on the laboratory test result. Meanwhile, the Person Under Supervision( Pasien Dalam Pengawasan/PDP), the Person in Surveillance( Orang Dalam Pemantauan /ODP), and the person with undetected infection but showing clinical symptoms similar to coronavirus who passes away is not recorded as death due to COVID-19. $FFRUGLQJ WR WKLV:+2 RQ-XO\ WKH IDWDOLW\ UDWH DFFRXQWHG WR PRUH WKDQ SHUVRQV RU IRXU WLPHV RI WKH QXPEHU DQQRXQFHG RQ WKDW GD\ E\ WKH JRYHUQPHQWşV VSRNHVSHUVRQ DV PXFK DV 8VLQJ WKLV:+2 RQ-XO\ WKH Indonesian CFR was 21.4 percent, which placed Indonesia at the second-highest after Yemen. 5 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA 7HVWLQJ LV YHU\ FUXFLDO WR FRQWURO Notes: 1) Covers only countries with more than 100,000 cases. Countries with cases over 1.1 million and tests over 700K are not listed on the display but included in calculations. 2) Tests for Algeria, Sudan, Democratic Republic of Congo, Tajikistan, and Syria are not available, so they are not included in the calculation. Source: Worldometer, downloaded on January 27, 2021, 02:51 AM. the COVID-19 plague in Indonesia will end. President Joko Widodo has announced the WDUJHW RI LQIHFWLRQ SHDN WR GHƢQLWHO\ WDNH place in May 2020(Permana, 2020). However, until now the numbers of infection and death cases, as well as active cases, have been showing an increasing trend. After the Islamic Holiday Idul Fitri, the challenge had become tougher as the spread of the COVID-19 entered the second phase(not the second wave since the number of cases has yet to reach the curve peak), where additional cases have been reported shifting from urban areas to villages. This shift is depicted by all provinces and 99.2 percent of regencies/cities that DUH DơHFWHG E\ WKH The limited healthcare facility in villages HQWDLOV D QXPEHU RI QHZO\ FRQƢUPHG DQG death cases due to the COVID-19 not being tracked. In some villages, the number of new cases can be controlled due to the high level of villagers’ awareness or local wisdom by tightly screening visitors from outside of the village(micro-lockdown). To tackle the COVID-19 crisis, the JRYHUQPHQW KDV HQFRXQWHUHG D FRQƣLFW between health policy(saving lives) and economic policy(saving livelihood to maintain economic activities and ensure SHRSOHşV 7KDW GLƤFXOW FKRLFH has also been faced by people from poor households and the working-class level, who do not have the privilege to work from home(WFH). They tend not to comply with the restriction regulation for the sake of survival. The government’s policy should be aimed to focus on ending the plague to enable a faster economic recovery, while KHOSLQJ WKH PRUH DơHFWHG DQG YXOQHUDEOH groups. 6 Friedrich-Ebert-Stiftung Indonesia- 2020 The increasing number of new cases in early of the second week of June was the result of the exodus(locally known as “ mudik”) wave and the temporary restriction to use transportation means starting from April 24, 2020, but a new sanction was enforced only two weeks afterwards. Almost at the same time, there was a push-and-pull about controlling the exodus. Eventually, the exodus restriction was announced on April DQG VWDUWHG WR WDNH HơHFW RQ$SULO 24, 2020, only two weeks before the Islamic Holiday Idul Fitri. In early July 2020, the increasing number of new cases has recurred due to the PSBB relaxation since June 4, 2020. The ongoing relaxation, added with the long holiday in mid-August 2020, triggered the acceleration of increasing number of cases up to over 3,000 per day starting from end of August 2020. The subsequent wave KDSSHQHG DV WKH HơHFW RI FRQFXUUHQW ORFDO elections, collective leave day, as well as Christmas and New Year holidays. The government faced a dilemma between human cost and economic cost. The high number of fatality was the governmentchosen policy and not merely the impact of the COVID-19. The policy choice has narrowed down between how many death cases the government can suppress and how fast the government can recover the economy. A half-hearted policy between controlling the pandemic and restarting HFRQRPLF DFWLYLWLHV UDVKO\ŝDQG ZLWKRXW HQVXULQJ ZRUN VHFXULW\ŝZLOO FDXVH D KLJKHU number of fatality and infected victims. The policy to restart community’s activities rashly has evidently worsened the plague spread. šRQOLQH@$YDLODEOH*]J];U6QMI, IHDWXUH Time T he Wuhan case presents an example where implementing lockdown with high discipline could eliminate the plague VHYHUDO cases have recurred after the lockdown was terminated or relaxed. To prevent the second wave, the Government of China KDV PDGH DQ HơRUW RI PDVV WHVWLQJ IRU the whole 11 million citizens of Wuhan. However, the publics need to keep on alert towards the quality of information from China. According to the study conducted by the University of Harvard, the plague had started in August 2019 (Foreign Policy, 2020). Until now, China is unwilling to provide data of the virus to the WHO. 7 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA This closedness has entailed a very serious implication to the virus spreading out of the borders of China and to the cooperation with China to develop the COVID-19 vaccine. There is a concern that the to-beGHYHORSHG YDFFLQH ZLOO EH OHVV HơHFWLYH IRU Indonesians if it is based on the type of WKDW EURNH RXW ƢUVWO\ LQ The Government of Indonesia needs to consider cooperating with countries which data are accessible by the WHO(The Guardian, 2020a) . T he history shows that timeline and outline of the solution to come out from a crisis due to pandemic depends on how HơHFWLYH WKH SODJXH FDQ EH GULYHQ ,Q 1918, prior to the existence of vaccine like nowadays, various cities institutionalized social distancing steps; including school closure, public meeting restriction, and face mask usage. However, the policies were often made belatedly, and only a few cities in the United States of America(USA) implemented those policies for a long time. A study by the National Academy of Sciences in 2007 found that the success of cities in the USA in decreasing the fatality rate was often limited due to the belated intervention and early retraction(Frankel, 2020) . 0 oreover, the intervention in public health was not enforced as long as it was supposed to be. San Francisco decreased WKH IDWDOLW\ UDWH E\ DW OHDVW SHUFHQWŝWKH highest among the US cities. But, instead of strengthening commitment with an intervention, this success had driven the city to terminate the restrictions in November 1936, which caused a more deathly second wave of infection in December 1936 and January 1937. Had San Francisco enforced the social restrictions longer, the National Academy of Sciences predicted that the city could decrease the fatality rate to 95 percent. The political leaders at that time had also terminated economic VWLPXOXV WRR HDUO\ŝWKH VHFRQG PLVWDNH that could cause the recession shaping the W-letter, the form representing a recovered situation that sinks again before it even fully recovers. That termination of social restriction in 1936-1937 in the USA showed how the mistake in policymaking had caused greater impacts. However, the policymakers might be able to orchestrate a recovery into a U-form. In such scenario, certain economic segments would be reopened; employees would be physically distanced, and if possible divided into shifts temporarily. By doing so, the economy would not be crashing until the health crisis could be controlled and all economic sectors could restart production activities, which will enable the commencement of full economic recovery (Frankel, 2020). T his scenario forces the country to ensure free testing on a large scale. Technically, it is feasible at least for high-income countries, although the mismanagement occurring in many countries like the UK and the USA has hampered the implementation(OECD, ,I WKH WHVW FDQ EH HơHFWLYH IRU the development of antibody and the connection between antibody and immunity against the COVID-19 is WKH UHVWDUWLQJ RI HFRQRPLF activities is more likely to be achieved. 8 Contact tracing that has helped control the virus spread in some Asian countries like Singapore and South Korea also needs to be considered. If testing is not carried out on a large scale, the economic recovery will potentially shape a W-letter. Meanwhile, it is even worse if there is no connection between the antibody and immunity against the COVID-19, which will cause the economic recovery to shape a L-letter. C hina’s ambition to achieve the economic recovery in the form of V-letter by enforcing the lockdown of one city only (Wuhan) and letting other cities not to ban Chinese tourists to travel abroad have been followed by a tremendous spread of the virus infection. Within China, there is another area that followed the Wuhan lockdown like Shulan. According to the local government’s WeChat account, on May 2, 2020, the Shulan health authority reported that in the last three weeks of April 2020, 308 Shulan citizens had returned from Russia via Suifenhe and Manzhouli Ports. Eight persons were quarantined in the Jilin Hospital for infectious diseases and 300 others were isolated in Shulan City(The Guardian, 2020). The media of Government of China, CGTN, reported that the authority had ordered a temporary closure for all public places in Shulan including sports facility, cinema, and library, as well as the citizens to stay at home except under šDEQRUPDO 7KH ƢQDO \HDU students of junior high and high school will return to online studying. No taxi is allowed to leave the city and the operations of all public transportation are suspended(The Guardian, 2020) . Friedrich-Ebert-Stiftung Indonesia- 2020 T he local media reported that the source of infection chain in Shulan had remained a mystery. The health commission of Jilin Province claimed that the virus spread was originated from a 45 years old woman who had no history of living or travelling beyond the provincial border and no history of contact with people returning from abroad or the main provinces. With this condition, the pattern of Chinese economic recovery may potentially transform from the form of V-letter to U or W. The COVID-19 cannot disappear by itself and as long as the vaccine or DQ HơHFWLYH SURSK\OD[LV PHGLFLQH LV WKH PDLQ IDFWRU WKDW DơHFWV the magnitude of the second wave of infection is the current pandemic control. The current number of active cases of infected persons or the so-called human reservoirs will determine the size and speed of the second wave of infection. Limiting the current number of infection will decrease the number of infection in the following wave. The latter will also depend on the possibility of discovering a suitable vaccine as well as people’s attitude in limiting the virus spread. A lockdown is the second-best instrument after the vaccine, but it is still KLJKO\ 7KH SODJXH FDQ HQG DQG people can carry out normal activities VDIHO\ RQO\ LI WKH IROORZLQJ ƢYH FUXFLDO practices are carried out:(1) mass testing, (2) infected person isolation,(3) contact tracing, (4) such contact quarantine, as well as(5) national and simultaneous enforcement of those four practices. These THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA ƢYH SUDFWLFHV GHSHQG RQ D ELJ LQYHVWPHQW RI ƢQDQFLDO DQG KXPDQ ,QFUHDVLQJ the number of mass testing for the highest priority group and other interventions will potentially cost billions of dollars since implementing a thorough contact testing system requires the deployment and training of 100,000 people(Cherukupalli and Frieden, 2020). Unfortunately, the Government of Indonesia ignored such capital intensive activities. Contact tracing is costly, time-consuming, and labour intensive because it requires speedy work and trust-building to keep privacy yet maintain the main intention of virus spread control. Many governments of the low-income countries carried out routine contact tracing much better than Indonesia such as Vietnam. Indonesia has tested 0.39 per thousand citizens while Vietnam 2.68 per thousand(The Jakarta Post, 2020) . T he national strategy to tackle the SODJXH FDQ EH FODVVLƢHG LQWR three categories: elimination(New Zealand), natural immunity(Sweden), and eradication(the USA and Europe except Sweden) until the vaccine or cure is discovered(Johnson and Boone, 2020) . (OLPLQDWLRQ is proven to be the PRVW GLƤFXOW WR 1HZ=HDODQG had claimed to successfully implement that strategy(BBC, 2020) and Australia expected to follow suit. This strategy will most likely succeed if it is implemented in relatively rural areas with a low level of interaction with other areas, such as North Canada that has reported zero number of cases (Johnson and Boone, 2020). %\ UHO\LQJ RQ š QDWXUDO LPPXQLW\ ”, PRUH SHRSOH ZLOO JHW 0RVW RI WKHP ZLOO VXUYLYH DQG EHFRPH LPPXQH VR WKDW WKH LQIHFWLRQ VSUHDG FDQ EH 6ZHGHQ LPSOHPHQWHG WKLV VWUDWHJ\ WR WDFNOH WKH ,W DSSHDUHG WKDW WKH IDWDOLW\ UDWH RI 6ZHGLVK SRSXODWLRQ GXH WR WKH ZDV KLJKHU WKDQ WKH DYHUDJH RI 6FDQGLQDYLDQ FRXQWULHV -DSDQ FRPELQHG QDWXUDO LPPXQLW\ ZLWK OLPLWHG ,Q WKH-DSDQ LPSOHPHQWHG D ORFNGRZQ EHFDXVH LQ VHYHUDO FDVHV WKH FRQWDFW WUDFLQJ ZDV GLƤFXOW WR EH ,Q WKH FRPELQDWLRQ RI QDWXUDO LPPXQLW\ DQG OLPLWHG ORFNGRZQ VWUDWHJLHV LV UHJDUGHG DV šYHUWLFDO PRVW FRXQWULHV LQ WKH 0LGGOH DQG /DWLQ$PHULFD DSSHDUHG WR LPSOHPHQW D VLPLODU ,I WKH QXPEHU RI EDVLF UHSURGXFWLRQ OHYHO LV WKHQ SHUFHQW RI WKH SRSXODWLRQ LQ WKRVH FRXQWULHV QHHGV WR JHW LQIHFWHG DQG VXUYLYH WR DFKLHYH QDWXUDO 7KH WKLUG VWUDWHJ\ LV VXSSUHVVLQJ WKH SODJXH as long as possible. This strategy was implemented by the USA, most of Canada, and Europe(except for Sweden). In several of those countries, by enforcing random lockdown, the number of new cases could be decreased. South Korea and China showed that through social cooperation and strict monitoring, new FDVHV FRXOG EH LGHQWLƢHG DQG FRQWDFW tracing could be done quickly; as well as through quarantine of the infected persons(Johnson and Boone, 2020). W ithout the vaccine, the government faces a dilemma. The 10 Friedrich-Ebert-Stiftung Indonesia- 2020 economic and social costs of lockdown are extremely high. According to the OECD, each month the economy of developed countries will sink as much as 2 percent due to restrictions related to the pandemic. The economy of France, Germany, Italy, Spain, the UK, and the USA has sunk more than 25 percent in a year. The unemployment rate soared to the highest level that had never happened since 1933. It triggered a serious political reaction and potentially deepened social disintegration. Therefore, the lockdown QHHGV WR EH FDUULHG RXW HơHFWLYHO\ WR avoid the potential emergence of the next wave of infection post-lockdown. Conducting a partial lockdown caused the second wave of infection in other areas, as what happened in China. The lockdown should be carried out at a national scale and simultaneously so that R0, as well as the economic FRXOG EH VXSSUHVVHG Terminating the lockdown too early will also trigger the second wave as what occurred in California in 19361937, which was followed by a much bigger economic loss compared to other areas that carried out a highlydisciplined lockdown with no recurring infection spread. In mid-May 2020, several new cases reappeared in Wuhan. Six new cases were UHSRUWHG IRU WKH ƢUVW WLPH LQ GD\V LQ D row. None of those cases was imported from abroad, which triggered the concern that infection could still spread within the FLW\ RI WKH ƢUVW YLUXV $ SDUWLDO lockdown with low-quality test pack caused the virus to reappear in Wuhan. To tackle this plague, the Wuhan authorities carried out nucleic acid testing throughout the city within 0 days for its 11 million population. The temptation for Indonesia to terminate the PSBB became even stronger when more countries had started to reopen people’s and business activities in mid-May 2020. If Indonesia did it too early before the infection rate among the society had declined substantially and consistently, the transmission rate could potentially EHFRPH KLJKHU ZLWKLQ WKH ƢUVW ZDYH DQG the second wave could potentially emerge. The COVID-19 plague has threatened Indonesia’s achievements to maintain the one-digit poverty level that was achieved last year. Only within two months, the QXPEHU RI FRQƢUPHG FDVHV KDV increased to more than 12,000 persons (even bigger if massive testing was conducted). Both formal and informal VHFWRUV ZHUH DơHFWHG E\ WKH crisis, especially those that could not adapt to the social distancing policy. To tackle the impacts of the pandemic, the government KDV LVVXHG D ƢVFDO VWLPXOXV SDFNDJH E\ expanding the social aid despite its highly GRXEWHG LI WKH pandemic continues until the end of the year. When the public attention and energy are focused on a clear common enemy, it is relatively easy to convince the government to invest more on public health as it will decrease the fatality rate and speed up the recovery. A bigger challenge ahead is WR FRQYLQFH WKH JRYHUQPHQW IRU ƢQDQFLQJ 11 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA the program that increases the readiness that are appointed based on regulating of the government and citizens toward laws. But ironically, the SOE that had future pandemic. The government needs received bailout according to PP No. to invest through policies to decrease the 23/2020 like PT Garuda Indonesia (Tbk) infection, such as paid leave 3 and one carried out the termination of employment that helps maintain or obtain access to (PHK). This indicates that PP No. 23/2020 healthcare. The government also needs to has failed to achieve its objectives. invest in policies that dampen economic shocks, such as unemployment insurance, wage increase 4 , and program that enables companies to continue employing workers Economic and (Cherukupalli and Frieden, 2020). In the context of Indonesia, the government has Social Impacts LQFUHDVHG EHQHƢWV IRU GRFWRUV DQG QXUVHV T he disease plague caused by the despite the relatively low realization due COVID-19 will bring out massive impacts to bureaucratic hindrances. on the economy. Baldwin& di Mauro The Government Regulation ( Peraturan Pemerintah /PP) No. 23/2020 5 aims to protect, maintain, and increase the people’s entrepreneurship to survive through the tough times and avoid the termination of employment ( Pemutusan Hubungan Kerja /PHK). The government KDV LVVXHG VHYHUDO DLG WKH national capital participation( Penyertaan Modal Negara /PMN) to State-Owned Enterprises/SOEs ( Badan Usaha Milik Negara /BUMN) that were appointed to enhance companies’ capacity or to carry FODVVLƢHG WKH LPSDFWV RI on the economy into three channels. First, medical shocks: the decreasing production caused by people not working due to illness or taking care of the ill family members. Second, the decreasing economic activities due to policy implementation to reduce WKH GLVHDVH IDFWRU\ RU RƤFH quarantine, travel ban, and others. Third, expectation shocks: economic actors tend to suspend expenditures and wait until the situation returns to normal(wait-and-see mode). out particular assignments from the government. Second, the government has injected funds to support the liquidity of 15 healthy banks with the greatest assets to conduct credit restructuring or provide additional working capital loans. Third, the government has provided investment and guarantee through the business entities :KR LV DơHFWHG WKH PRVW" T he COVID-19 plague can cause an economic shock on the households of infected persons in form of income loss due to illness, care of ill family members, or death. When the economy slows down, 3 Currently, the coverage for paid leave or salary protection due to COVID-19 is regulated in the Circular of Minister of Manpower of the Republic of Indonesia Number M/3/HK.04/III/2020 concerning protection of workers/laborers and business continuity in the context of preventing and overcoming COVID-19. 4 Canada plans to increase the wage for frontline workers in some sectors including food and health. 5HJDUGLQJ LPSOHPHQWDWLRQ RI WKH 1DWLRQDO(FRQRPLF 5HFRYHU\ SURJUDP LQ VXSSRUW RI WKH VWDWH ƢQDQFLDO SROLF\ IRU KDQGOLQJ WKH FRURQDYLUXV GLVHDVH SDQGHPLF IDFLQJ WKUHDWV WKDW HQGDQJHU WKH QDWLRQDO HFRQRP\ ƢQDQFLDO V\VWHP VWDELOLW\ DV ZHOO DV UHVFXH RI WKH QDWLRQDO 12 Friedrich-Ebert-Stiftung Indonesia- 2020 the impact of decreasing income will not remain only on the households of the infected persons but it will spread out. The direct impact of the COVID-19 SODJXH LV VXơHUHG E\ WKH KRXVHKROGV which family members are infected. To lighten the burden, the government has implemented several policies that include waiving of healthcare costs, consumption aid for the quarantined family members, and donation for the deceased patients to reduce economic shocks on the households VXơHULQJ IURP WKH ORVV RI SURGXFWLYH IDPLO\ members. It is not easy to identify the households and business entities that are indirectly DơHFWHG E\ WKLV 7KH GHFOLQLQJ economic activities have occurred not only in the areas that carry out the PSBB, but it might be the case where certain households or business entities outside RI WKH 36%% DUHD KDYH EHHQ PRUH DơHFWHG than the ones within. On the other hand, the COVID-19 plague has become a blessing for several businesses such as producers of sanitizer raw materials and items, masks, medical equipment especially the Personal Protective Equipment/PPE( Alat Pelindung Diri/APD), gloves, and others. But generally, this plague has negatively DơHFWHG WKH HFRQRPLF OLYHV RI DOPRVW HYHU\RQH RQ D GLơHUHQW ,W LV EHOLHYHG that the government policies to reduce WKH SODJXH VSUHDG ZLOO VLJQLƢFDQWO\ DơHFW the businesses in industry and service sectors (especially transportation, trade, and nonessential services). The COVID-19 pandemic had caused declining prices of the commodity in the global market, which burdened the growth of the agricultural and mining sectors. Besides those undergoing the termination of employment(PHK), in the short term, workers in any formal sector are safer than those in the informal sector. The latter(family or non-permanent, selfemployed, and professional workers) are the most vulnerable ones in this era of crisis. If the plague goes on for a long time, there is a possibility that the number of employments being terminated increases so that the majority of workers including those in the formal sector become more susceptible. Woman, young(especially those seeking employment), and oldaged(senior) workers belong to the GHPRJUDSKLF JURXSV WKDW VXơHU IURP D greater pressure because of this crisis. The targets of the social security system should be directed at those segments of worker and demographic groups. ,PSDFW PHDVXUHPHQW I Q WKH ƢUVW TXDUWHU RI ,QGRQHVLDşV economy had only grown by 3 percent, PXFK ORZHU WKDQ WKH JURZWK LQ WKH ƢUVW quarter of 2019(5.1 percent). The declining growth happened on all components of domestic demand: household consumption, government’s spending, and investment (formation of gross domestic capital). The national economic growth that had been supported by household consumption all this time lost its power LQ WKH ƢUVW TXDUWHU RI 7KH JURZWK of household consumption had fallen 13 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA sharply so that its role as the source of growth became lower. The contraction of spending on clothes or footwear became the main reason for the declining growth of household consumption. The spending on clothes for the Islamic Holiday Idul Fitri 2020 was much less compared with that of last year. The contraction also occurred in spending on transportation and communication. The PSBB implementation by local governments has triggered real impacts on the decline of household consumption, especially on clothes and transportation. Meanwhile, the spending on food and beverages consumption has remained growing, including the ones for dining out. The COVID-19 plague also caused a sharp decline in investment growth. Industry actors tended to suspend the expansion of business activities as the growth of demand had been predicted to be disturbed by the plague. The declining LQYHVWPHQW JURZWK DơHFWHG WKH LQFUHDVH of production capacity, which would later implicate the long-term economic growth. If the plague continues for a long time, the production capacity will decrease, which in turn will harden the economic recovery after the plague disappears. As long as the plague continues, the declining economic growth is predicted to keep going and most probably the economy will undergo a contraction for a couple of upcoming quarters. Based on the government’s projection when setting the 2020 budget adjustment, the national economic growth will undergo a sharp decline to 2.3 percent, with the worst scenario of 0.4 percent contraction. It can almost be ascertained that this government’s target will not be achieved. We predicted that this year the Indonesian economy will undergo around 2 percent contraction. How deep and long the recession lasts depend on how long and wide the plague has infected and how the government has responded toward it. The declining economic activities decrease or may even eliminate households’ incomes and slay 7KH OD\ Rơ DQG WHUPLQDWLRQ of employment(PHK) have befallen on formal workers, while the opportunities for informal businesses have become even more limited or nonexistent. According to the estimation of the Ministry of Employment, until early May 2020, more than one million formal ZRUNHUV KDG EHHQ ODLG Rơ DQG DURXQG 377,000 workers had undergone termination of employment. The number RI ZRUNHUV DơHFWHG E\ WKH crisis had reached three million, including candidates of migrant workers, internship returnees, and informal sector workers. That estimation might have as well been too low. According to the data of the Survey of National Workforce( Survei Angkatan Kerja Nasional/Sakernas) in August 2019, there were 24.7 million informal workers in the trade, transportation, as well as accommodation and food& beverages (F&B) sectors; from which 6.7 million reside in the urban areas. If half of those XUEDQ ZRUNHUV DUH DơHFWHG E\ WKH 36%% implementation, only three sectors account to over 3 million. 14 Friedrich-Ebert-Stiftung Indonesia- 2020 1XPEHU RI ZRUNHUV DơHFWHG LQ WKH HDUO\ SKDVHV RI WKH RXWEUHDN 1.)RUPDO ZRUNHUV ZKR ZHUH ODLG Rơ 2. Terminated formal worker 3.$ơHFWHG LQIRUPDO ZRUNHUV 4.$ơHFWHG IRUPDO DQG LQIRUPDO ZRUNHUV 5. 3URVSHFWLYH ,QGRQHVLDQ PLJUDQW ZRUNHUV 6. ,QWHUQV ZHUH VHQW KRPH 7.$ơHFWHG ZRUNHUV 8. Others Total(4+5+6+7+8) Source: Ministry of Manpower. 1.034.618 377.386 316.501 1.728.505 34.179 465 5.547 1.262.257 3.030.953 T he COVID-19 crisis has not only brought negative impacts on workers in urban areas. The declining prices of commodities in the global market have DơHFWHG WKH UHVSHFWLYH producing farmers. The amount of the DơHFWHG SRSXODWLRQ DQG WKH LQWHQVLW\ RI impacts on each business and household are hard to be estimated. As an illustration, from 126.5 million workers, 24.6 million are informal workers RI WKH PRVW DơHFWHG VHFWRUV transportation, as well as accommodation and food and beverages services). As a whole, informal workers reach 55.7 percent of the total number(70.5 million). 0LWLJDWLQJ WKH DơHFWHG RQHV UHTXLUHV D ORQJ WLPH DQG FRPSOLFDWHG whereas the salvation is urgent. Thus, the safety net program to help those groups is quite costly. The COVID-19 crisis is predicted to cause a fairly sharp decline of economic activities; it might as well be the sharpest one since the Great Depression. The plague is still ongoing and the measurement of impacts cannot be calculated with high precision in line with the unpredictable development of the COVID-19, yet the impacts have been sensed clearly. The medical shock due to the COVID-19 plague might have not impacted the economy too much. The great impact emerged mainly due to the implementation of policies on economic sectors to reduce that plague spreading. The closures of stores, factories, entertainment, and recreation centers, as well as the termination of transportation means operations, have FDXVHG OD\ RơV DQG HYHQ WHUPLQDWLRQ RI employment. Many business units in the PRVW DơHFWHG VHFWRUV OLNH WRXULVP DQG nonessential services encounter a great 7KH GHFOLQH RI GHPDQG and the disturbance of the supply chain have caused a sharp drop in manufacture ,Q WKH HơRUWV WR FRQWDLQ WKH spread of COVID-19 have been followed by GHFOLQLQJ SURGXFWLRQ RQ GLơHUHQW OHYHO LQ majority of economic sectors. 15 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA I Q WKH ƢUVW TXDUWHU RI QRQH RI WKH VHFWRU VXơHUHG IURP D SURGXFWLRQ downturn. All sectors enjoyed a positive growth; three of them even enjoyed an increased growth. The PSBB implementation in the early April directly hit almost all sectors in the second quarter of 2020. Ten sectors underwent a contraction or negative growth and six sectors run into a growth slowdown. Only one sector, the information and communication, enjoyed an increased growth that even reached two-digit FRPSDUHG WR 7ZR VHFWRUV VXơHUHG from the worst hit, namely the transportation and warehousing with the contraction of 30.84 percent, as well as accommodation and F&B with the contraction of 22.02 percent. Similar RXWORRN RFFXUUHG LQ WKH ƢUVW VHPHVWHU RI 2020. It can almost be ascertained that the economic contraction will continue in the second quarter of 2020, so the recession cannot be avoided. 6 The GDP WKURXJKRXW LV DOVR SUHGLFWHG WR VXơHU from a negative growth. What can still be done is to make the contraction as small as possible so that the recovery can be accelerated although the economy cannot immediately return to the level before the pandemic. *'3 JURZWK E\ VHFWRU SHUFHQW Information and communication 10.4 Health and social activities 9.9 Water, sewage, waste mgt. 5.1 Finance and insurance 3.6 Education 3.1 Real estate 2.7 Agriculture Public adm., defense, social securities Electricity and gas GDP Mining Construction Manufacturing Trade, vehicle repair Other services Business services Accomodaation and food services Tranportation and storage Source: ,QGRQHVLD 15.6 10.7 1.4 2.0 2.2 2.4 2.9 3.7 3.8 4.9 1.5 0.6 6 Recession will occur when the level of output of economy(GDP) undergoes a downturn or negative growth for two quarters in a row. 16 Government’s Policies Related to the COVID-19 Plague I n general, the government’s policies related to the COVID-19 crisis consist of health policy and economic policy. The health policy is aimed to save lives by decreasing the disease spread and lower the fatality rate. Meanwhile, the economic policy is targeted to save livelihood, ZKLFK LV WR SUHYHQW SHRSOH VXơHULQJ IURP poverty, hunger, and even death due to the declining economic activities as a consequence of the plague spread and the following containment policies. +HDOWK SROLF\ ,QWHUYHQWLRQ YHUVXV KHUG LPPXQLW\. I n general, the plague can be eliminated through the following strategies: herd immunity and containment. The former contains the disease not to spread widely since most of the population is immune to it due to the previous infection or vaccine. The disease spread can also be contained through the government’s intervention by isolating the infected persons to avoid further transmission to others. Without the government’s intervention, vulnerable individuals will act prudently to avoid getting infected. The herd immunity will be achieved once around 60 percent of the population becomes immune, either due to getting previously infected and recovered or Friedrich-Ebert-Stiftung Indonesia- 2020 getting a vaccine. The vaccine for the COVID-19 is predicted to be available the soonest after one year so that the herd immunity will be achieved if most of the population is infected. Therefore, in the long term, the risk of getting infected will remain high, and this strategy will entail a sharp decline in economic activities as well as a slow recovery. On the contrary, an optimum government’s intervention can eliminate the disease plague faster. If infected persons FDQ EH WKH\ FDQ EH LVRODWHG DQG quarantined; while a light restriction can be carried out on vulnerable persons like the senior citizens. The infected persons FDQ EH LGHQWLƢHG WKURXJK PDVV HơHFWLYH FRQWDFW WUDFLQJ DQG individual isolation must be conducted so that the disease transmission to other persons including their family members can be contained. By doing so, this plague can be ended faster and in turn, economic activities can also recover more rapidly. 7KHUH DUH WZR FKDOOHQJHV LQ ƢJKWLQJ the COVID-19 plague. First, only a small number of infected individuals show symptoms, but they potentially transmit the disease to other persons. The number of Person Without Symptoms(OTG) is estimated to reach 50 percent of the total number of infected persons. Second, the long incubation period of the COVID-19 (14 days) complicates the contact tracing. Those challenges are worsened by the fact that many governments worldwide face GLƤFXOW\ WR LQFUHDVH WKH FDSDFLW\ RI UDSLG testing. Nonetheless, this strategy is proven 17 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA to be applicable and quite successful like in Singapore. There is an opinion stating that this strategy can be applied more easily in small countries, but it has been applied quite successfully in a big country like China. 1DWLRQDO'LVDVWHU. W hen the ƢUVWO\ KDG VWDUWHG WR VSUHDG LQ Wuhan, the Government of Indonesia LPPHGLDWHO\ VWRSSHG DOO ƣLJKWV IURP DQG to China, as well as repatriated Indonesian citizens from Wuhan and quarantined them before allowing them to return to their respective home. Indonesia belongs to the countries that issued a travel ban since the early stage to contain the COVID-19 transmission from China. The ban from and to China had been imposed since February 5, 2020. The COVID-19 transmission to Indonesia might have not been imported from China directly, but from other countries. In the beginning, the government was TXLWH FRQƢGHQW WKDW WKH ZRXOG QRW VSUHDG LQ 7KH FRQƢGHQFH was implied by the statement of Minister of Health that Indonesia was immune to the virus. The government was also viewed as ignorant toward experts’ warnings mentioning that the virus had entered Indonesia. The Minister of Health even regarded the research result stating that the virus had entered Indonesia as an “insult” (The Jakarta Post, 2020). In several occasions, the Government of Indonesia stated that the country was in high alert condition, but the healthcare infrastructure especially related to the monitoring was QRW SUHSDUHG VXƤFLHQWO\ WR IDFH WKH ZRUVW case. Conversely, the government issued incentives to stimulate the slow tourism VHFWRU DQG JDYH ƣLJKW WLFNHW 7KLV SROLF\ ZDV GHƢQLWHO\ LUUHOHYDQW ZKHQ WKH COVID-19 started to spread widely within the country. On April 13, 2020, when the number of infection cases reached over 4,500, President Joko Widodo declared COVID-19 as a national disaster through the Presidential Decree ( Keputusan Presiden/ Keppres) No. 12/2020. Previously, the President also issued the decree to form a COVID-19 Handling Task Force that is spearheaded by the National Disaster Mitigation Agency( Badan Nasional Penanggulangan Bencana/BNPB). 7 With the national disaster status, the government owns the authority to deploy all necessary resources, allocate and mobilize the State or Regional Budget(APBN/APBD), as well as funds obtained from the society to be used for the COVID-19 handling. In that framework, the central government had proposed a revision of the 2020 State Budget by allocating additional funds of Rp405.1 trillion for the COVID-19 impacts handling. 8 /DUJH 6FDOH 6RFLDO 5HVWULFWLRQV 3HPEDWDVDQ 6RVLDO%HUVNDOD%HVDU/ T o avoid a wide-spread transmission, on March 31, 2020, the government had unveiled a policy to provide an opportunity for the local governments to implement the PSBB. The PSBB implementation is 7 The Presidential Decree(Keppres) No. 7/2020 on the COVID-19 Response Acceleration Task Force, or simply addressed as the COVID-19 Task Force. 8 The complete timeline of COVID-19 handling can be seen on EKONID’s(2020). 18 regulated in the Government Regulation ( Peraturan Pemerintah /PP) No. 21/2020. The technical regulations covering requirements of PSBB implementation by the local government is stipulated in the Ministry of Health Regulation. 9 PSBB was implemented for the areas with an increasing rate of cases or fatality due to the GLVHDVH VSUHDGLQJ VLJQLƢFDQWO\ DQG TXLFNO\ to several areas, or where epidemiological linkage with similar incidents in other areas or countries exists. As the name suggests, PSBB restricts citizens’ activities in a particular area, in such a way that the spread of COVID-19 can be contained. The restrictions include the closure of school and working spaces, limitation of religious activities, as well as those in public facilities. Exceptions are given to healthcare services and facilities, as well as markets, shops, and supermarkets. PSBB belongs to the local government’s policy, while the central government only HQGRUVHV$W WKH FHQWUDO WKH HơRUW to contain COVID-19 spread is conducted through restricting movements between regions, including the exodus due to Islamic Holiday Idul Fitri. The restrictions of movements between regions and countries are carried out by terminating and limiting the operations of public transportation facilities and means. Friedrich-Ebert-Stiftung Indonesia- 2020 7KH&RPPLWWHH IRU+DQGOLQJ DQG 1DWLRQDO(FRQRPLF 5HFRYHU\. T he ambition to accelerate economic recovery in the middle of plague spreading that has not reached its peak is UHƣHFWHG IURP WKH 3UHVLGHQWLDO 5HJXODWLRQ (Perpres) No. 82/2020 issued on July 20, 2020. Through this regulation, the Task Force that used to report to the President directly became the subordinate of the Chief Executive that also serves as the Vice Chairman of the Policy Committee. This VWUXFWXUH LV GRPLQDWHG E\ RƤFLDOV IURP economic sector and management of the Indonesian Chamber of Commerce( Kamar Dagang Indonesia /Kadin). Until now, there has been no comprehensive strategy to tackle the pandemic, not even a testing and contact tracing strategy. What often uttered by this committee were the vaccine development SURMHFW DQG YDULRXV HơRUWV IRU HFRQRPLF recovery. 9 The Ministry of Health Regulation No. 9/2020 on Guideline of the Large Scale Social Restrictions(PSBB) in the context of Accelerating of the Handling of Corona Virus Disease 2019(COVID-19). THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA &RPPLWWHH RQ+DQGOLQJ DQG 1DWLRQDO(FRQRPLF 5HFRYHU\ 3UHVLGHQWLDO'HFUHH Budget/Fiscal policy T he budget policy during the occurrence of disease plague is aimed for three targets: to reduce the disease WUDQVPLVVLRQ WR DVVLVW households and businesses avoiding poverty and bankruptcy (disaster relief), and to push the economy for production approaching its potential level (support of aggregate demand). Besides for the economic policy, the budget allocation also includes health policy. To tackle the COVID-19 crisis, the Government of Indonesia has added the VSHQGLQJ DQG ƢQDQFLQJ RI WKH 6WDWH Budget in the amount of Rp405.1 trillion with detail as follows: Rp75 trillion for health sector spending, Rp110 trillion for social protection, Rp70.1 trillion for tax incentives and People’s Business Loans ( Kredit Usaha Rakyat /KUR) stimulus, as well as Rp150 trillion for economic recovery (credit restructuring, business guarantee DQG ƢQDQFLQJ HVSHFLDOO\ IRU and Medium Enterprises/MSMEs). The budget allocation for the COVID-19 handling in Indonesia reached 2.32 percent of GDP. The amount of budget support for the COVID-19 handling varies between countries. Malaysia, for example, allocated RM6 billion(0.4 percent of GDP), while Singapore S$4.4 billion(10.9 percent of GDP). The important matter of the budget allocation is its usage. Even though its percentage of the total allocated budget LV QRW WRR WKH DOORFDWLRQ IRU LQIHFWLRQ ƢJKWLQJ VKRXOG EHFRPH WKH main priority. The second priority should be safety net to rescue households and businesses(especially MSMEs) that are DơHFWHG E\ WKH LPSOHPHQWHG SROLFLHV WR contain the COVID-19 transmission. 20 +HDOWK%XGJHW. T he government’s HơRUWV WR ƢJKW WKH YLUXV infection are portrayed among others through the health budget allocated to eliminate the plague. In the 2020 State Budget, the Government of Indonesia has allocated Rp75 trillion for health budget(0.43 percent of GDP). That budget allocation includes Rp3 trillion for the addition of contribution subsidy for the Social Insurance Administration Organization ( Badan Penyelenggara Jaminan Sosial /BPJS), Rp5.9 trillion for PHGLFDO VWDơV DQG ELOOLRQ IRU WKH VXEVLG\ IRU GHFHDVHG PHGLFDO Meanwhile, the budget allocated for health management reaches Rp65.8 trillion that includes the provision of health equipment (PPE, test kit, reagent, and others), the provision of health facilities and means, as well as human resource support. If divided by the number of population, only as much as Rp250,000 per person of the government’s budget is available for the COVID-19 health management. With more than 260 million population, a massive amount of budget is needed to contain the spread of the COVID-19 plague. Thus, that amount of population requires at least 400,000 tests per day with urgency for the highest-priority groups. The contract tracing calls for at least 300,000 WUDLQHG$OO RI WKRVH HQWDLO KLJK Unfortunately, the testing carried out by Indonesia is relatively small. Whereas many administrations in other low-income countries conduct routine contact tracing better than Indonesia, such as Bangladesh and Vietnam. Friedrich-Ebert-Stiftung Indonesia- 2020 To contain the plague spreading is not an easy matter. The government must PDNH HơRUWV WR NHHS WKH SHUFHQWDJH RI infected persons as low as possible. Beside the quarantine or lockdown policy, the JRYHUQPHQW QHHGV WR DOORFDWH VXƤFLHQW budget for the provision of ventilators, PPE(APD), and other medical equipment, as well as testing for even more people. Moreover, an amount of budget needs WR EH DOORFDWHG IRU DGGLQJ PHGLFDO VWDơV and training them, as well as additional incentives for them. The success in this DUHD LQƣXHQFHV WKH LPSDFW RI SODJXH RQ households and the economy, as well as the budget necessary for the social safety net and economic recovery programs. 6RFLDO VDIHW\ QHW. T he government’s policies to contain the plague spread including the PSBB implementation have brought about many households and EXVLQHVV XQLWV VXơHU IURP GHFOLQLQJ LQFRPH or even a complete loss of income. Some of WKHP KDYH QR VDYLQJ RU VXƤFLHQW UHVHUYH WR ,W LV PDQGDWRU\ WR KHOS WKH DơHFWHG KRXVHKROGV WR IXOƢO WKHLU SULPDU\ And it is also vital to assist businesses, especially the MSMEs, to somehow survive. The safety net program should be directed not only at the households, but also the business units. Many approaches can assist the DơHFWHG KRXVHKROGV DQG among others: suspending or waiving tax payment, increasing the unemployment support, providing cash direct assistance ( Bantuan Langsung Tunai /BLT), distributing credit, and others. The problem lies in the 21 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA GLƤFXOW\ WR GHWHUPLQH WKH DơHFWHG Often we heard the news about disorderly distribution of BLT and other aids. Either implementation approach taken, it is better to allocate bigger rather than smaller budget. The budget needed for this program will be even bigger than the one for the health program. 6RFLDO SURWHFWLRQ LV SDUW RI 1DWLRQDO(FRQRPLF 5HFRYHU\ 3URJUDPV To protect the poor and the vulnerable as the most impacted group during pandemic (IDR234.33 trillions): • Conditional Cash Transfer Program • Non Cash Food Assistance • Social Assistance • Pre-Working(unemployment benefit) • Electricity Discount • Cash Transfer through Village Fund • Internet Subsidy Source: %DQN ,QGRQHVLD “Without emergency social assistance, COVID-19 could push millions into poverty.” A more detailed explanation of social assistance can be found in World Bank publication“Indonesia Economic Prospects: The Long Road to Recovery,” July 2020,[online] Available at: https://openknowledge.worldbank.org/handle/1098 6/34123 T o reduce the impacts of COVID-19 crisis, the government has provided an additional budget allocation for safety net program in the amount of Rp110 trillion; including Rp25 trillion as reserves IRU IXOƢOOLQJ EDVLF QHHGV DQG PDUNHW operations, as well as Rp20 trillion as education budget adjustment. The total budget distributed to households only reached Rp34.2 trillion. The assistances are provided in form of cash for the Family Hope Program ( Program Keluarga Harapan/PKH), 10 aids for nine kinds of basic needs ( sembilan bahan pokok /sembako), electricity cost discount and waive, aids for housing, and aids for employment seeker. The details are as follows: • The subsidy for contribution and %3-6 WDULơ DGMXVWPHQW WR PLOOLRQ population consisting of 14 million workers as non-wage recipient workers ( bukan penerima upah /BPU) and shift of 16 million to the non-wage recipient workers group. • The additional distribution of PKH to PLOOLRQ KRXVHKROGV DV The distribution frequency has been amended from once every three months to every month, so that from $SULO WR-XQH HDFK EHQHƢFLDU\ receives this aid two times . • The non-cash Sembako program has been expanded by 4.8 million 10 The target of Family Hope Program has been added by 1.8 million families, totalling to 10 million families. 22 EHQHƢFLDULHV PLOOLRQ WR PLOOLRQ)RU QLQH months, the monthly cash aid has been increased by Rp50,000 to Rp200,000 per month. • Additional pre-employment card. The pre-employment program has been expanded by 5.6 million informal workers/MSMEs practitioner. The aids are given in the form of training fee support in amount of Rp1,000,000, and a post-training incentive for 4 months in amount of Rp600,000 per month . • F ree electricity or 50 percent of HOHFWULFLW\ WDULơ IRU WKUHH PRQWKV IRU low-income households. •)RRG IRU PLOOLRQ DơHFWHG households in Jakarta and urban areas, which targets microenterprises, seasonal creative workers, and other LQIRUPDO ZRUNHUV WKDW GR QRW EHQHƢW from the PKH or Sembako programs. T he safety net program has mainly been targeted to households and yet to UHDFK 060(V WKDW VXơHU IURP In terms of industrial aids, the government has allocated an additional budget of Rp64 trillion, which includes tax incentives consisting of Rp52 trillion for expansion of the government-borne income tax facilities(income tax article 21 and Value Added Tax/VAT incentives) and Rp12 WULOOLRQ IRU DQ H[SDQVLRQ RI LPSRUW WDULơ exemption (borne by the government), as well as Rp6.1 trillion as the stimulus for People’s Business Loans (KUR)(suspension Friedrich-Ebert-Stiftung Indonesia- 2020 of payment for the main loan and interest RI DOO.85 VFKHPHV WKDW DUH DơHFWHG E\ the COVID-19 in 6 months). The industrial support program could only be enjoyed by MSMEs that got the KUR. T KH HơHFWLYHQHVV RI JRYHUQPHQWşV DLGV IRU WKH DơHFWHG KRXVHKROGV DQG EXVLQHVV units depends on the total budget and the aids distribution policy. Even within the PSBB area, the aids have not been provided to all households. Selecting the households WR EHFRPH EHQHƢFLDULHV LV D FUXFLDO Without an accurate basis of data, it is unsurprising that the aids distribution to households has got many complaints. (FRQRPLF 5HFRYHU\ 3URJUDP. I n the 2020 State Budget, the government KDV DOORFDWHG WULOOLRQ WR ƢQDQFH the National Economic Recovery (PEN) Program. It targets ultramicro enterprises but there has been no clarity regarding the GLVWULEXWLRQ VFKHPH RI WKDW ƢQDQFLDO 'XULQJ WKH SODJXH ƢJKWLQJ the infection and distributing disaster relief should become the main priorities. A recovery program is required if the situation has returned to normal. Whether HơRUWV WR SXVK WKH DJJUHJDWH GHPDQG DUH needed or not can be decided once the plague has subsided or the situation has returned to normal. ,Q D QRUPDO D ƢVFDO LQFHQWLYH is the most appropriate way to save the economy from recession. While the plague is still ongoing and people still has concerns towards the disease, the output level will remain lower than its actual potential. 23 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA The incentives to push the aggregate GHPDQG ZLOO RQO\ UDLVH$V ORQJ as the output potential remains stagnant, LW LV XQƢWWLQJ WR LQFUHDVH WKH DJJUHJDWH demand beyond the needs of disaster relief . 5HRUJDQL]LQJ(ơRUWV WRZDUGV D 1HZ(UD T he health and economic crisis that is highly costly should be compensated by correcting errors in the past and reformulating the strategy and direction of development toward a more inclusive one. 6RFLDO VHFXULW\ IRU ZRUNHUV DQG VRFLDO SURWHFWLRQ UHIRUP T he informal sector businesses and workers are extremely vulnerable to a crisis. These two groups need safety net programs to avoid being crushed easily by the crisis. Particularly for workers, a decent social security system will not only protect them but also present a high potential to become the backbone of the development ƢQDQFLQJ WKURXJK FROOHFWHG The social security for workers has existed through four schemes: Working Accident Protection( Jaminan Kecelakaan Kerja/JKK), Death Protection( Jaminan Kematian /JKM), Old-age Protection ( Jaminan Hari Tua/JHT), and Healthcare Protection( Jaminan Kesahatan 7KH ƢUVW three schemes are managed by the Social Security BPJS ( BPJS Ketenagakerjaan), while the last one by the Healthcare BPJS( BPJS Kesehatan). Starting from July 1, 2015, another program of Pension Protection ( Jaminan Pensiun) has been mandated to the Social Security BPJS. The COVID-19 crisis has become the moment to strengthen the social security system for workers in order to create a tougher economy. The key is to raise the contribution with the spirit of mutual aid (popularly known as“ gotong royong”). Post-COVID-19, the total contribution should be raised at least from the range of 9.24-10.75 percent to around 15 percent. If the Community Housing Savings ( Tabungan Perumahan Rakyat /Tapera) is included, the total contribution will be 18 percent. The Tapera for private-sector workers should be integrated under the management of Social Security BPJS. 24 Friedrich-Ebert-Stiftung Indonesia- 2020 6PDOO FRQWULEXWLRQ RI VRFLDO VHFXULW\ -DPLQDQ KDUL WXD GD\ -DPLQDQ NHFHODNDDQ NHUMD DFFLGHQW -DPLQDQ NHPDWLDQ 3HPXODQJDQ SHQVLXQ 7RWDO Total post COVID-19(suggestion) (PSOR\HH (PSOR\HU 7RWDO 2% 3,7% 5,7% - 0,24%- 1,74% 0,24%- 1,74% - 0,3% 0,3% 1% 2% 3% 3% 6,24%- 7,74% 9,24%- 10,75% 5% 10% 15% T he adjustment will be implemented gradually until at the latest in 2022. Starting from this year until next year, the LQFRPH WD[ WDULơ IRU WD[SD\HUV ZLOO EH reduced from 25 to 22 percent; and starting from 2020 to 20 percent. A part of WKH SULYDWH VHFWRUşV SURƢW VKRXOG EH diverted to the workers. The contribution by workers should also be raised by imposing a smaller proportion and by implementing it gradually aligned with the salary increase. The collected additional funds should EH VLJQLƢFDQW WR VHUYH DV WKH ƢQDQFLDO source for development through the acquisition of government bonds so that the dependence on foreign funds can be reduced, which in turn will reduce the macroeconomic shock. Experiences from the 1998 crisis, the JOREDO ƢQDQFLDO DQG WKH PRVW current crisis have proven that the social protection package is still patchy and undergoes ups-and-downs. Each crisis has unveiled more packages managed by horizontal or vertical institutions. To integrate these packages, the existence of a single identity number needs to be accelerated. By doing so, data updating can be conducted automatically and RYHUODSSLQJ EHQHƢFLDULHV FDQ EH An economic crisis, as well as natural and non-natural disasters such as the health disaster that we currently experience, will continue recurring in the future. There should be an institutional reinforcement to handle crises and disasters, especially for the most vulnerable groups of the society, which will eventually help reduce economic and social losses and speed up their recovery. 7KH UROH RI ORFDO JRYHUQPHQW DQG VRFLHW\ T he experience from the COVID-19 crisis handling has taught us about the importance of roles of local government and society as the front-liners. Indonesia is 25 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA not a homogenous entity. Each region has its own social and cultural characteristics. The local society knows their region’s issues best. Moreover, there are diverse geographic, infrastructure, and natural resources conditions to be considered. With these varying backgrounds, a single QDWLRQDO SROLF\ ZLOO EH the central government is responsible for increasing regional capacity and capability to solve its own issues. Unfortunately, the spirit to develop regional capacity and capability could barely be seen in the COVID-19 handling. The budget allocation for transferring funds to regions was cut. The support for local government amounted to only Rp15.1 trillion, much smaller than the National Capital Participation( Penyertaan Modal Negara /PMN) for SOEs in the amount of Rp25.27 trillion. Compare it with the budget of Ministry of Defense that had only been cut by Rp9 trillion, making the total remaining budget of Rp122 trillion. With this, the Ministry of Defense is the only ministry with the budget exceeding Rp100 trillion. Strengthening the regions is the mandate of reform. Unfortunately, within the last couple of years, some regional autonomies have been cut and withdrawn to the central government. The draft of the Omnibus Law on Job Creation that is under deliberation in the House of Parliament( Dewan Perwakilan Rakyat/ DPR) presents one of vivid cases. Anything that is considered hindering investment including the regional autonomy was cut. By strengthening the regions, it is expected that the development will be more evenly distributed. However, the pendulum that tends to move towards the central area has made Java becoming even more dominant. The contributions of Sumatra and Kalimantan in the national pie(GDP) creation decline, while Papua and Moluccas, as well as Nusa Tenggara, remain stagnant. Beyond Java-Bali, only Sulawesi presents a rising contribution. Provinces and/or islands outside of Java that possess vast natural resource undergo D QHW UHVRXUFH Indonesia is an archipelagic country consisting of over 17,000 islands with LWV VHD VWUHWFKLQJ DURXQG RI the total area, while the rest is relatively enormous land. The population density of Indonesia is much higher than most ASEAN countries including Malaysia, but still lower compared to the Philippines, Thailand, and Singapore. However, the population is distributed extremely unevenly. More than half of Indonesian citizens(56.2 percent) reside in Java Island, which land area covers only 6.8 percent of Indonesia’s total area. This makes population density in Java Island reaches 1,177.8 per km 2 . In Jakarta City only, the population density is as high as 16,031.4 per km 2 , two-fold of the total population density level of the country of Singapore. Related to the COVID-19, Java Island is the epicenter of the pandemic . 26 Friedrich-Ebert-Stiftung Indonesia- 2020 77KH WDUJHW RI HTXLWDEOH UHJLRQDO GHYHORSPHQW EDVHG RQ 'HYHORSPHQW 3ODQW 53-0 6XPDWHUD Jawa %DOL 1XVD 7HQJJDUD Kalimantan 6XODZHVL Maluku and Papua 6WDUWLQJ SRLQW 2013 23.8 58.0 2.5 8.7 4.8 2.2 7DUJHW 24.6 55.1 2.6 9.6 5.2 2.9 5HDOL]DWLRQ 21.3 59.0 3.1 8.1 6.3 2.2 Source: 53-0 DQG%36 6WDWLVWLFV ,QGRQHVLD 6WUHQJWKHQLQJ WKH UROH RI WKH VWDWH T he most obvious challenge of the COVID-19 crisis might have been about how to build the state capacity to protect DQG VHUYH LWV SHRSOH PRUH DQG to ensure resource allocation as much as possible for people’s welfare and justice. As Mariana Mazzucato, a respected economist that supports a new idea and approach in economic poliy, once stated, the country must utilize the power in its grasp to direct DOO HơRUWV IRU KDQGOLQJ D JUHDW FKDOOHQJH LQ our horizon, and not only for a short-term recovery(Wittenberg-Cox, 2020). The government must formulate a new economic strategy by placing the productive sector to spearhead the employment creation. In other words, Indonesia must conduct a total conceptual change regarding what to produce, how WR DQG ZKR ZLOO EHQHƢW IURP WKDW policy. The workforce market policy is designed to increase workers’ skills and their employment absorption through partnerships with companies, as well as to explicitly target the growth of quality and decent work. The industrial and regional policies that currently focus on tax incentives and investment subsidies must be immediately replaced with the revised service policies and business facilities aiming to facilitate a maximum employment creation. In other words, WKH HFRQRPLF SROLF\ must begin to be oriented towards a maximum employment creation(Rodrik and Stancheva, 2020). The readiness in countering the pandemic is an investment to face future 2IWHQ LW LV GLƤFXOW IRU XV WR VSHQG money for future needs. The pandemic will keep recurring, and the expenditures to improve the readiness to counter it become a valuable investment. Besides 27 THE STRATEGY TO TACKLE ECONOMIC AND SOCIAL IMPACTS OF THE COVID-19 CRISIS IN INDONESIA strengthening the basic healthcare system to become part of an early warning system and preparing the healthcare resource’s ability for an immediate mobilization in time of pandemic, the readiness also includes social safety net system to save WKH JURXSV DơHFWHG E\ WKH The COVID-19 crisis should drive the government to improve the system and implementation of the social safety net program. Besides the one funded by the State Budget, the government also needs to develop a social safety net system based on insurance for workers and small entrepeneurs including farmers. Strengthening the social safety net system can enlighten the state’s burden in times of plague or disaster. $LGV ZLOO EH RSWLPDOO\ EHQHƢFLDO LI WKH\ are distributed to the right targets and in an appropriate form. 11 The availability of an accurate database on citizens and business units is very crucial to ensure the aids distribution to the proper targets. These RI WKH SURJUDP PXVW be determined structurally (following a set of particular criteria) by an independent institution. The distribution must also be conducted by an independent institution, because the distribution through various institutions can cause“overlapping” targets. $ 8QLYHUVDO+HDOWK 6\VWHP O ne of the greatest challenges for Indonesia to avoid the middle-income trap is the improvement of human resource quality. This health crisis has revealed the importance of accelerating health development. To create superior and productive individuals, investment must be conducted from an early age since one is in the womb to toddlers. The coverage of immunization against measles as well as diphtheria, pertussis/ whooping cough, and tetanus/lockjaw (DPT) for one-year-old children in Indonesia ranks the lowest among ASEAN countries. Added with the highest-number of prevailing stunting among the ASEAN-6, it has awoken us to take immediate steps to create superior individuals, as stipulated in the vision of Jokowi-Ma’ruf administration so that it becomes the main capital of raising workers’ productivity in particular and national productivity in general. 11$ IRU LV HơHFWLYH WR RYHUFRPH WKH LVVXH RI LQFUHDVLQJ XQHPSOR\PHQW GXH WR D GHFOLQH LQ HFRQRPLF As an example, a supplementary food program at school is needed to reduce malnutrition. 28 Friedrich-Ebert-Stiftung Indonesia- 2020 6RPH EDVLF KHDOWK LQGLFDWRUV Immunization against Immunization measles among against DPT among children of 1 year child 0f 1 year old,%, 2019 old,%, 2019 Prevalence of stunting(% of Children under 5), 2018 Incidence of tuberculosis (per 100,000 pop.), 2018 Incidence of malaria (per 1,000 pop.), 2018 Singapore 95 96 4.0 39 0.0 Brunei 97 100 0.0 59 0.0 Malaysia 88 102 20.7 79 0.1 Thailand 96 99 10.5 153 0.1 Vietnam 94 94 23.8 131 0.1 Myanmar 84 90 29.4 338 0.3 Cambodia 84 92 Philippines 80 65 32.4 30.3 326 4.0 330 0.0 Indonesia 67 83 30.5 214 0.8 Lao PDR 69 68 33.1 175 7.8 Source: $6($1$VHDQ 6WDWLVWLFDO