Growth Map
The Covid-19 pandemic has been a game changer. Growth maps, both for global and domestic economy along with their related sectors will undergo change after the pandemic.
The Covid-19 pandemic has been a game changer. Growth maps, both for global and domestic economy along with their related sectors will undergo change after the pandemic.
The geographic map of growth will also change a lot, both at the global, regional and domestic levels. A serious effort is , therefore, needed to redesign the map of domestic growth amid these global changes.
Statistics Indonesia (BPS) announced recently that Indonesia’s economy suffered a 2.07 contraction in 2020. The economy saw negative growth in three consecutive quarters, namely minus 5.32 percent in the second, minus 3.49 in the third quarter; and minus 2.19 percent in the fourth quarter. Even though economic growth has declined, a reversal of the economic cycle has begun.
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The performance of almost all economic sectors in 2020 was worse than that in 2019, except for the health services sector and social activities, as well as the information and communication sector. The performance of these two sectors continued to improve in the past three years. The information and communication sector grew 7.02 percent in 2018, 9.42 percent in 2019, and 10.58 percent in 2020, respectively. Meanwhile, the health services and social activities sector grew 7.15 percent in 2018, 8.69 percent in 2019 and 11.60 percent in 2020, respectively.
The pandemic has actually caused these two sectors to grow by double digits. In contrast, the transportation and warehousing sectors fell sharply. In 2020, this sector suffered a 15.04 percent contraction, or a significant drop compared to 7.05 percent in 2018 and 6.39 percent in 2019. Other sectors, such as the manufacturing, mining, construction and trade industries, also shrank by between 1 and 3 percent by 2020.
Geographically, Java and Sumatra remained dominant and both contributed 80 percent of the national economy. Virtually, nothing has changed in the last few years.
How does the Covid-19 pandemic have the potential to change the map of industrial growth and geography?
Changes on the map
The global economic map before the pandemic was formed due to the intensive mobility of economic resources. The pandemic has completely and suddenly halted such mobility. It seems that a long-running pandemic will change the pattern of mobility that may lead to a change on the global map (growth). Due to the pandemic, the economic (growth) map will no longer be the same as before.
The movement of goods and capital flows has shaped the global supply chain. The special edition of The Economist (10/10/2020) highlights the impact of the pandemic on global trade and supply chains. The pandemic will not stop globalization but will rearrange it.
Countries that rely on global tourism will experience a major impact in the long term. Its secondary sectors, such as restaurants, food and beverage, and transportation, will undergo drastic changes. The manufacturing sector, which greatly benefits from easy access to raw materials, will globally change its logistics lines.
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The pandemic will change the landscape of the global manufacturing and service industry. The use of technology such as three-dimensional (3D) printing will help provide many components currently imported from many countries around the world. Industry will be more local (and regional) and more intensive in the use of technology.
In short, both at the national level and industrial sector level, the pandemic will determine which countries and industrial sectors will be able to survive and which will not. In this way, the general pattern of economic recovery will be in the form letter "K" (K-shape) , some up, some down.
The industrial map in Indonesia is quite clear. Two sectors, namely the information and communication sector and the health services sector and social activities, will continue to grow in the future. Meanwhile, the transportation and warehousing sectors will find it difficult to recover as before the pandemic. Its industrial nature can no longer survive.
With such a prediction, anticipation is needed. First, a post-epidemic domestic industry road map is needed. There are many sectors that are no longer relevant, but there are some sectors that become more relevant. The post-pandemic industrial road map will help businesses transform.
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Second, there should be incentive policies for future industries so that there will be natural migration of business actors to future industries. Third, there should be a regulatory framework that facilitates the development of various new industrial sectors. Fourth, there should be a support to prepare the ecosystem, such as the availability of a workforce with skills in infrastructure that will allow new industries to accelerate.
The factor of resource mobility, which has been very flexible, will undergo fundamental changes in the future. Thus, a regional approach and local mapping are needed so that growth can be optimized.
For example, the economy of Bali which has been relying on foreign tourists, must change its orientation by optimizing domestic and local tourists. Of course, local and domestic tourists will not be able to replace foreign tourists. However, there will be an opportunity to develop community-based local tourism so that the tourism industry does not always have to involve large (foreign) investors.
A PRASETYANTOKO, Rector of Atma Jaya Catholic University of Indonesia.
This article was translated by Hendarsyah Tarmizi.