Thoughts and Preparations for Post-Covid-19 Strategy
Covid-19 has stopped social activities in the world. If we look at all the countries that exist, all are fighting and providing their utmost to save their people, their country’s economy and their way of life.
DATO' SRI TAHIR
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Covid-19 has stopped social activities in the world. If we look at all the countries that exist, all are fighting and providing their utmost to save their people, their country’s economy and their way of life. Some do quantitative easing, reduce taxes, restructure credits, and so on.
All-out efforts are needed to guarantee liquidity, but let us think about the basic functions of money. One function of money is as a store of value. When we have more money in the world, value will be diluted around the entire world. We do not see inflation happening because we are entering or are in a recession, a condition in which consumption does not really happen because people do not spend money. Real value has declined worldwide because of the outbreak. That is the difficult economic situation we are facing.
Increasing liquidity can be likened to giving a blood transfusion to save the life of an emergency room patient. It is a life-saving measure that must be taken. Governments around the world must do increase liquidity in this very crucial time. After the Covid-19 crisis ends, they will all have a lot of debt. But governments everywhere must first save the economy: stimulus today and fiscal prudence tomorrow.
Learning from the experiences of SARS and MERS, Covid-19 may not be the last pandemic, so the government needs to ready a pile of money to counter and mitigate the potential impacts of a probable future crisis.
After Covid-19 subsides, the politics and the process of reducing the budget deficit do not need to be excessively competitive. All will need more spending in the near future to increase consumption. Spending to improve medical service quality is one area that needs to be prioritized. Learning from the experiences of SARS and MERS, Covid-19 may not be the last pandemic, so the government needs to ready a pile of money to counter and mitigate the potential impacts of a probable future crisis.
The Indonesian condition and opportunities
Before Covid-19, the world feared hyperglobalization and loss of distance. There was also fear of free trade and of robots that could take over human jobs. As a result, there was a lot of push for various protectionist policies.
Some industrial policies that barely toed the line of trade agreements were implemented. However, Covid-19 has eliminated globalization, and distance has returned. And this distance has created a natural barrier that can reduce the pressure of competition. We can and need to take advantage of this fundamental change.
Taking advantage requires five conditions: a large population, large territory, technological superiority, widespread local demand, and the availability of natural resources. Indonesia meets several of these conditions. However, Covid-19 has also exposed our weaknesses. For example, many factories had to shutter operations altogether. This indicates that we lack the advantage in technology.
Data on the availability of robots (source: International Robotics Federation) points to countries that possess the technological superiority of Industry 4.0. Industrial robots can be controlled automatically
and remotely. Some also have the learning capability to improve the precision and accuracy of the tasks they perform. Robots are also unaffected by the coronavirus that causes Covid-19.
In this case, China has emerged as one of the countries with a very large stock of industrial robots.
In this case, China has emerged as one of the countries with a very large stock of industrial robots. Thus, while workers stay at home during the outbreak, some level of productivity can still be maintained. Faster recovery is also not impossible because workers do not have to start from scratch when they return to the factory.
What Indonesia can do
Covid-19 is a public health crisis, but in it are lessons and also opportunities for self-improvement. The most important thing is that the even has made us aware of our weaknesses, providing a strong reason to rise immediately to overcome these shortcomings. We should not waste the opportunity to restructure the economy. We can and must pursue technological progress. Otherwise, we will not only lose years of economic growth, but we will also be poorer in the coming years, even if we are lucky and no other outbreak occurs.
Poverty is a cyclical trap. The world has learned from the 2008-2009 global financial crisis (GFC) that caused poverty and increased unemployment. We have witnessed the emergence of populism in several countries as a result. The real danger is the existence of unwise parties that resort to populism, even though it harms not only themselves, but also everything else in the long run. And now, Covid-19 could see some economic sectors experience a tenfold decline or even more detrimental impacts than the 2008-2009 GFC.
We need to relax the rules that have bound our hands and feet. I met with the Cambodian investment minister, and that government always moved to cut self-defeating regulations and they have managed to maintain 7 percent growth for more than 20 years.
We must attract investment from countries that have the money, but lack the resources that we have. Of course, profit sharing must be fair.
At present, the Purchasing Manager’s Index in Indonesia has reached record lows within a short time. Reform is badly needed if we truly dream of becoming a rich country by 2045. We must attract investment from countries that have the money, but lack the resources that we have. Of course, profit sharing must be fair. So we need to put our resources and our best efforts forward to overcome technological backwardness.
It will not be easy. Maybe it will be more difficult than before, because all countries will be competing to attract investment.
Overcoming backwardness will become much more important after Covid-19. Several kinds of government development bonds may be issued only to Indonesian buyers to fund the structural transformation needed to overcome this lag. We need to think far ahead, be visionary, and be prepared to rise again from the impacts of Covid-19.
Dato’ Sri Tahir, Mayapada Group founder; Presidential Advisory Council member