In order to maintain the stability of the Indonesian financial system, President Joko Widodo issued Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Financial System Stability for the Mitigation of the Corona Virus Disease 2019 (COVID-19) Pandemic (Perppu 1/2020), which came into force on March 31, 2020. Perppu 1/2020 grants additional authority to the Central Bank of Indonesia (BI), the Indonesia Deposit Insurance Corporation (LPS), and the Indonesia Financial Services Authority (OJK). These three institutions, along with the Ministry of Finance, are the main institutions that comprise Indonesia’s Financial System Stability Committee (KSSK), which was established in 2016. The authorities thus provide the KSSK with more powers to handle financial system stability issues stemming from the COVID-19 pandemic. These powers, as stipulated by Perppu 1/2020, are: Central Bank of Indonesia (BI) Grant short-term liquidity loans or short-term liquidity financing based on sharia principles to systemic and non-systemic banks. Granting Special Liquidity Loans to systemic banks that are experiencing liquidity crisis and do not meet the requirements for providing short-term liquidity loans or short-term liquidity financing based on sharia principles. Purchase long-term Government Bonds and / or Government Sharia Bonds within the primary market for handling financial system problems that endanger the national economy, including Government Bonds and / or Government Sharia Bonds issued for specific purposes, especially in the context of the co-19 pandemic. Purchase/repurchase of state securities owned by the LPS for the cost of handling the solvency problems of systemic and non-systemic banks. Regulating the obligation to receive and use foreign exchange for residents, including provisions concerning the transfer, repatriation and conversion of foreign exchange in order to maintain macroeconomic and financial system stability, which will be regulated by a BI regulation (PBI). Providing funding access to corporations / private entities through the repurchase of government bonds or state sharia securities owned by corporations / private sector through banks. Indonesia Deposit Insurance Corporation (LPS) Preparations for the handling of the crisis and increasing the intensity of joint-preparations with the OJK for handling bank solvency issues. Taking action: Sale / repurchase of Government Securities owned by the BI; Issuance of debt securities; Issuance of loans to other parties; and or Issuance of loans to the Government, in the event that the LPS is expected to experience liquidity crisis for handling failed banks; Making a decision to make or not save a bank other than a Systemic Bank (failed bank) by considering, among others, economic conditions, the complexity of the bank’s problems, the need for handling time, the availability of investors, and / or the effectiveness of handling bank problems and not only considering the estimated costs as the lowest (least cost test). Making a decision to make or not save a bank other than a Systemic Bank (failed bank) by considering, among others, economic conditions, the complexity of the bank’s problems, the need for handling time, the availability of investors, and / or the effectiveness of handling bank problems and not only considering the estimated costs as the lowest (least cost test). Formulating and implementing a deposit guarantee policy for a group of customers by considering the source of funds and / or deposit allocation, as well as the amount of value guaranteed for those groups of customers that is regulated by the Government Regulation. Further provisions regarding the implementation of the authority of the LPS in the framework of implementing measures to deal with financial system stability issues are to be regulated by a Government Regulation. Perppu 1/2020 further grants the Government the authority to provide loans to the LPS, which may be carried out in the event that the LPS experiences liquidity problems that endanger the national economy and financial system as a result of the COVID-19 pandemic. Indonesia Financial Services Authority (OJK) Provide written orders to financial service institutions to conduct mergers, consolidations, expropriations, integration and / or conversions. Determine exemptions for certain parties from the obligation to carry out the transparency principle within the capital market in the context of preventing and handling financial system crisis. Set the provisions regarding the use of information technology in holding General Meeting of Shareholders or other meetings based on the provisions of the legislation that must be carried out by financial service industry players. Further provisions regarding the implementation of the authority of the Financial Services Authority in the framework of implementing financial system stability policies are regulated by an OJK Regulation (POJK). Any activities violating the authority of the OJK as mentioned above will be subject to criminal sanctions, as follows: For individual persons: Minimum terms of imprisonment of four years and maximum fines of IDR 10 billion or minimum terms of imprisonment of 12 years and maximum fines of IDR 300 billion; and For corporations: Minimum fines of IDR 1 trillion. The powers granted to the KSSK as a whole allows the government to maintain the stability of the financial system by injecting liquidity as needed to the market. Finance Minister Sri Mulyani already mentioned in a recent remote press conference that the economic impact of the COVID-19 pandemic would be substantial, with Indonesia’s GDP projected to slow down to the -0.4 - 2.3% range. “Extraordinary times require extraordinary policy and action. That is why we need extraordinary action and policy, or actions and policy that we wouldn’t think about taking on otherwise normal situations,” she warned. It should be noted that while a Perppu is legally binding at the time of issuance, the government must still submit the Perppu to the Parliament for it to become law. The Parliament has the power to reject the Perppu and force the government to retract it. In this regard, the Perppu has been handed over to the Parliament on April 2, 2020, and, as of the time of writing, is still being deliberated by lawmakers.
On March 31, 2020, the Ministry of Trade issued Trade Minister Regulation Number 34 of 2020 on the Second Amendment to Trade Minister Regulation Number 23 of 2020 (Trade Minister Regulation No. 23/2020) on the Temporary Export Ban for Antiseptic, Mask Raw Material, Personal Protective Equipment, and Masks (Trade Minister Regulation No. 34/2020). The second amendment stipulates that the Minister of Trade can determine an exemption to the provisions in this regulation, carried out in coordination with the relevant ministries or non-ministerial government institutions. In order to obtain an exemption, the exporter must submit an application electronically to the Director General of Foreign Trade through http://inatrade.kemendag.go.id. This regulation has come into force on April 1, 2020, and is retroactively effective since March 18, 2020. Through regulation No. 34/2020, the Indonesian government is anticipating the secured supply of such goods as many local industries have ramped up the production of face masks, sanitizers and PPEs. Sinar Mas Group, one of Indonesia’s largest conglomerates, is reportedly preparing to produce 1.8 million masks domestically. Minister of State-owned Enterprises Erick Thohir has pledged to have state-owned enterprises produce masks continuously to combat the COVID-19 epidemic. Meanwhile, Minister of Cooperatives and Micro-small-and-medium-sized Enterprises (MSMEs) Teten Masduki has urged MSMEs to produce PPEs to also help combat COVID-19. Below is the list of goods banned from being exported as stipulated by Trade Minister Regulation No. 23/2020, which had already been previously amended by Trade Minister Regulation No. 31/2020 on the amendment to Trade Minister Regulation No. 23/2020 on the Temporary Ban for Antiseptic, Mask Raw Material, Personal Protective Equipment, and Masks: Tariff Post Description of Goods A 22.07 Non-denatured ethyl alcohol with an alcohol content of 80% or more by volume; ethyl alcohol and other alcohols, denatured at any level. 2207.10.00 Non-denatured ethyl alcohol with an alcohol content of 80% or more by volume 2207.20 Ethyl alcohol and other alcohols, denatured at any level 2207.20.11 Ethyl alcohol with an alcohol content exceeds 99% by volume 2207.20.19 Etc. 2207.20.90 Etc. B 30.04 Medicine (not including goods of tariff post 30.02, 30.05 or 30.06) consist of mixed products or not for therapeutic or prophylactic purposes, prepared in certain doses (including in the form of a transdermal distribution system) or in the form or package for retail sale. 3004.90 Etc. Ex.3004.90.30 Antiseptic hand rub, hand sanitizer and the like which are alcohol based C 38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant growth regulators, disinfectants and similar products, prepared in the form or package for retail sale or as preparations or goods (for example ribbons, wicks and candles processed with sulfur, and fly paper ). 3808.94 Disinfectant Ex.3808.94.10 Hand rub, hand sanitizer and the like contain a mixture of coal tar and alkali acids Ex.3808.94.20 Hand rub, hand sanitizer and the like in aerosol packaging Ex.3808.94.90 Hand rub, hand sanitizer and the like other than those containing a mixture of coal tar and alkali acids, and not in aerosol packaging D 56.03 Nonwovens, whether or not impregnated, coated, covered, laminated or not. Ex.56.03.11.00 Non-woven meltblown nonwoven fabric is made from artificial filaments weighing not more than 25 g / m2 Ex.56.03.91.00 Non-woven meltblown nonwoven fabric made from materials other than artificial filaments weighing not more than 25 g / m2 E 62.10 Garments, made from fabrics of tariff post 56.02, 56.03, 59.03, 59.06, or 59.07. 6210.10 Made from fabrics of tariff post 56.02, 56.03 Ex.6210.10.19 Medical protective clothing F 62.11 Track suits, ski suits and swimwear; other garment 6211.43 From man-made fibers: 6211.43.10 Surgical Wear. G 63.07 Other finished goods, including clothing patterns. 6307.90 Etc: 6307.90.40 Surgical mask. Ex.6307.90.90 Other masks of nonwoven material, besides surgical masks. The temporary ban against exporting these goods is valid until June 30, 2020. Exporters who violate the provisions will be subject to sanctions in accordance with the prevailing regulations. However, exporters obtaining a permission from the Minister of Trade are able to export the goods without breaking the law.
On March 16, 2020, the Indonesian Financial Services Authority (OJK) had issued OJK Regulation (POJK) No. 11/POJK.03/2020 concerning the National Economic Stimulus as a Countercyclical Policy Impact of the Spread of Coronavirus Disease 2019 (POJK Stimulus Impact COVID-19). This regulation states that the development of the spread of the Corona virus disease 2019 (COVID-19) has a direct or indirect impact on the performance and capacity of debtors, including micro, small and medium business (MSME), which could potentially disrupt banking performance and the stability of the financial system, which may further affect economic growth. Therefore, in order to encourage the optimization of the banking intermediary function, maintaining financial system stability, and supporting economic growth, an economic stimulus policy is needed as a countercyclical impact of the spread of COVID-19. The regulation effectively extends the deadline and reduces the interest rate of loans of debtors affected by the COVID-19 pandemic. Examples of such debtors include those who are affected by the closure of transportation and tourism routes to and from China or other countries that have been affected by COVID-19 and the travel warnings of several countries, or those who are affected by the significant decline in the volume of import and export due to supply chain and trade links with China or other countries that have been affected by COVID-19. The method of credit / financing restructuring is carried out as stipulated in OJK regulations regarding asset quality assessment. Banks can provide credit/financing/provision of other new funds to debtors who have received special treatment in accordance with this POJK by determining the quality of credit/financing/provision of other funds carried out separately from the quality of credit/ financing/provision of other previous funds. This POJK applies to Conventional Bank (BUK), Syariah Bank (BUS), Syariah Business Venture (UUS), Rural Credit Bank (BPR) and Syariah Rural Credit Bank (BPRS). Banks can implement policies that support economic growth stimulus for debtors affected by the spread of COVID-19, including MSME debtors, while still observing the precautionary principle. The policy has taken effect since March 16 and applies until March 31, 2021. By OJK’s account, the banking sector is still holding well against the COVID-19 pandemic. The Head of the OJK Banking Supervisory, Heru Kristyana, said Indonesian banks have the support of a strong capital and quality credit lines. “The capital adequacy [of our banks] is still good at 22.42%. The liquidity of major banks, as measured by the LCR [Liquidity Coverage Ratio] is still above 200%, which means that it’s still okay... the gross ratio of troubled credit is still at 2.79%, while net ratio is 1% per,” he said, as quoted by Bisnis Indonesia.
The Directorate General of Customs and Excise (DJBC) of the Ministry of Finance, together with the National Disaster Management Agency (BNPB), have set a joint Standard Operational Procedure to accelerate the import of goods in response to the COVID-19 pandemic. The regulation, BNPB Decree Number 01/ BNPB/2020 and DJBC Decree Number 113/BC/2020, came into force on March 20, 2020, and will last until the end of the emergency situation as determined by the government. The ease of the import of goods relating to COVID-19 countermeasures is in the form of exemption from import customs and excise, Value Added Tax (PPN) and/or Sales Tax on Luxury Goods (PPnBM), 22 Import Income Tax (PPh 22), and also import procedure (Tata Niaga Impor) for individuals/private companies that import for commercial activities. Goods related to COVID-19 countermeasures are all items recommended by BNPB including - as mentioned by Minister of Finance Mrs. Sri Mulyani Indrawati in a press conference held on March 18, 2020 - medical devices, Personal Protective Equipment, masks, and hand sanitizer. The Ministry of Finance, which in this regard is acting as the secretary to the government-mandated COVID-19 task force, has established schemes to allow the State Government, Local Government (Pemda), Public Service Agency (BLU), foundations or non-profit institutions, as well as individuals/private parties to use the facilitation. Following those schemes, the Ministry of Trade has further issued a regulation that allows certain goods to be imported without the provision of a Surveyor Report (LS) in the country of origin or the port of loading. This relaxation, stipulated under Regulation of the Minister of Trade No. 28/2020 concerning the Eighth Amendment to the Regulation of the Minister of Trade No. 87/M-DAG/PER/10/2015 regarding Provisions on Importation of Certain Products, will be available until June 30, 2020. The types of goods that are excluded from the LS provision are: Room air freshener preparations containing disinfectants or not; Paper and tissue, impregnated or coated with deodorizers or cosmetics; Antiseptic products containing soap or not; Stocking for varicose sufferers, from synthetic fibers; Medical protective clothing; Clothing used for protection from chemicals or radiation; Surgical clothing; Examination gowns made from man-made fibers; Surgical masks; Other masks made of nonwoven material, other than surgical masks; Infrared thermometer; and Sanitary towels, sanitary tampons, baby diapers and similar articles of material other than textile, paper or pulp for disposables. This regulation is a follow up to the issuance of Presidential Decree No. 9 of 2020 on Amendments of Presidential Decree No. 7/2020 on the COVID-19 Task Force, which also stipulates the acceleration of goods import required to combat the COVID-19 pandemic. As Indonesia does not produce enough of these goods locally on its own, nor does it produce any for some of the aforementioned goods, such as COVID-19 testing kits, the Indonesian government aims at ensuring that there is enough in supply for both the government’s effort in fighting the pandemic, as well as for the local market.
Late on April 7, 2020, in a press conference, Jakarta Governor Anies Baswedan has declared a citywide status of PSBB (Pembatasan Sosial Berskala Besar or Large Scale Social Restriction). The declaration followed the approval from Health Minister Terawan Putranto on the city’s administration request for the status, as stipulated in Health Minister Decree HK.01.07/MENKES/239/2020 issued on April 7. The declaration followed weeks of anticipation from the Jakarta city administration as well as Jakarta residents who are living in what is by far the worst hit city in all of Indonesia. Out of the nearly 3,000 reported cases of COVID-19 infection in the country, half of them are found in Jakarta. Further complicating matter is the intertwining nature of the city, which has always shared its demographic with the neighboring cities of Bogor, Tangerang, Depok and Bekasi (altogether of which has been given the moniker Jabodetabek). The total population of this massive urban conglomeration is estimated to be over 30 million people - more than the population of the whole of Australia - living in an area just half the size of the London Metropolitan region. While no official guidelines have been released by the city administration, Governor Baswedan stressed that many of the restrictions, to be enforced by the time the PSBB goes official, has been taken. These include the urging to stop all public gatherings, including work, school as well as social and religious activities - with exceptions. The PSBB status thus further allows the city administration to take actions against those violating the stipulated restrictions, including by imposing fines or even jail time. He said the main points of the guidelines to be issued by the city administration will stipulate: That the PSBB status will be enforced starting April 10 until April 24, with possible extensions if deemed necessary. That gatherings of more than 5 (five) people are forbidden. That residents can expect the already implemented social distancing and physical distancing measures, such as the ban on public social and religious activities, to continue. On the subject of public and private transportation, Mr. Baswedan provided these remarks: That all public transportations will only operate from 6am to 6pm. That public transports may only carry half of each of its designated capacity. That the number of public transports operating daily will be reduced. That private vehicles are still allowed in the city so long as the number of passengers adhere by social and physical distancing practices That the decision on banning online motorcycle taxis from carrying passengers is yet to be taken. On the subject of workplaces, Mr. Baswedan said all work activities are to cease with the exception of these 8 sectors: Health (hospitals, clinics) Staple goods Energy (water, gas, electricity, fuel stations) Communication (communication services and communication media) Finance and banking, including the stock market Logistics / distributor of goods Retail Strategic industries located in the capital Finally, Mr. Baswedan further announced that the city administration will be assisting the central government in delivering social aid to the city’s poor and most vulnerable starting April 9, Thursday, adding that the official regulation and guidelines of the implementation of the city’s PSBB will be released as soon as possible.
On March 31, 2020, President Joko “Jokowi” Widodo announced that he has signed Presidential Regulation in Lieu of Law (Peraturan Presiden Pengganti Undang-Undang or Perppu) on State Financial Policy and Financial System Stability in the handling of COVID-19. The Perppu, number 1 of 2020 (Perppu No. 1/2020), proposes a lifting of the state budget deficit cap of 3%. This will allow President Jokowi to allocate Rp 405.1 trillion (roughly US$24.6 billion) - an amount he announced alongside the Perppu - from the state budget for various programs designed to safeguard the nation’s economy during, and after, the COVID-19 pandemic. Should the Perppu gain Parliament approval, President Jokowi is looking at an estimated state budget deficit of 5.07%. At a separate teleconference with the media held in the morning of April 1, 2020, Finance Minister Sri Mulyani laid out the reasons why the government has allocated that amount. Out the Rp 450.1 trillion, Rp 75 trillion would be used as incentives for doctors, nurses and other medical professional, as well as to procure medical devices. Another Rp 110 trillion would be used expand the government’s social safety net programs such as the Family Hope Program and the Staple Food Program. As much as Rp 70.1 trillion would be spent to support industries via tax reliefs and loan deferments. Lastly, the remaining Rp 150 trillion has been earmarked to support economic recovery programs. Description Amount (in Rp trillion) Explanation Healthcare 75 - Subsidies for premiums for the national healthcare insurance program BPJS. (Rp 3 trillion) - Incentives for doctors, nurses and other medical professionals. (Rp 5.9 trillion) - Compensation for healthcare workers who died in the line of duty. (Rp 0.3 trillion) - Purchase of healthcare equipment such as test kits and ventilators. (Rp 65.8 trillion) Social Safety Net 110 - Additional funds for 10 million families in the Family Hope program as well as 20 million families in the staple food program. (Rp 19.2 trillion) - Additional funds for the pre-employment card program. (Rp 10 trillion) - Exemption and discount of electricity bills to some 31 million homes (Rp 3.5 trillion) - Other social safety net programs as well as reserved funds (Rp 77.3 trillion) Industry Support 70.1 - Income tax and import tax exemptions to be borne by the government for specific sectors (Rp 64 trillion) - Stimulus for micro-business loans (Rp 6.1 trillion) Economic Recovery Program 150 - Credit restructuring and financing for micro, small, and medium enterprises (MSMEs), as well as other economic recovery programs. (unspecified) Source: Ministry of Finance The move has been lauded by economists, many of whom attributed the necessity of the decision in light of the extraordinary circumstances spurred by the COVID-19 pandemic. Indeed, Indonesia is not the only country to siphon a not an insignificant amount of funds from its coffers in response to the COVID-19 pandemic. Australia allocated A$189 billion or 9.7% of its GDP to support households and businesses and to ensure the flow of credit in the economy. Germany allocated EUR 156 billion or 4.5% of its GDP on healthcare equipment, expanded access to short-term work (Kurzarbeit), as well as for grants to small business owners and self-employed persons. See table below for comparisons. Australia A$189 billion (9.7% of GDP) Net cumulative over FY2024. Includes support for households and businesses, as well as balance-sheet support to ensure the flow of credit in the economy. Canada $138 billion (6% of GDP) Includes increased testing, vaccine development, medical supplies, mitigation efforts, and greater support for Indigenous communities; direct aid to households and businesses, including tax deferrals and wage subsidies. France EUR 45 billion (2% of GDP) plus EUR 300 billion (13% of GDP) includes streamlining and boosting health insurance for the sick or their caregivers; increased spending on health supplies; and state guarantees for bank loans to companies. Germany EUR 156 billion (4.5% of GDP) plus EUR 822 (24% of GDP) Includes spending on healthcare equipment, hospital capacity and R&D; expanded access to short term-work (“Kurzarbeit”); and an expansion of volume and access to public loan guarantees for firms of different sizes. Italy EUR 25 billion (1.4% of GDP) Includes funds to strengthen the Italian health care system and civil protection; as well as measures to support credit supply (€5.1 billion) aimed to unlock about €350 billion (20% of GDP) of liquidity for businesses and households. Malaysia RM 6 billion (0.4% of GDP) plus RM 0.62 billion (0.1% of GDP) Includes increased spending on medical equipment and personnel; electricity discounts and temporary pay leave. A second stimulus package is expected. Saudi Arabia $18.7 billion (2.7% of GDP) Includes the suspension of government tax payments, fees, and other dues. Reduce spending in non-priority areas of the 2020 budget by SAR 50 billion (1.9% of GDP) to accommodate some of the new initiatives within the budget envelope. Singapore S$54.4 billion (10.9% of GDP) Includes funds to contain the outbreak and support to households and businesses. On March 26, a supplementary budget worth over S$48 billion was announced. The package includes, an expansion of wage subsidies, and enhancement of financing schemes and setting aside loan capital of S$20 billion. United States $2.1 trillion (10.5% of GDP) Includes transfers to households; extended unemployment insurance; incentives for firms; loans and grants for businesses; funding for hospitals and health care infrastructure and deferral of payroll tax obligations, as well as 60-day suspension to Federal student loan obligations and delayed deadline for tax filing. Source here Whether the amount allocated is enough to buoy Indonesia’s economy is still anyone’s guess. Without a cure or a vaccine in sight, there is no certainty as to when the pandemic will end. The government’s most immediate concern is to ensure that the proposal passes through the Indonesian parliament without too much delay. In this regard, Parliament speaker Mrs. Puan Maharani, who held the position of Coordinating Minister of Human Development and Cultural Affairs during Jokowi’s first term, has expressed support. Nonetheless, businesses will still have to wait before any impact from the stimulus can be felt.