Supporting Economic Recovery Through Business Sector

The government policy’s implementation has not run smoothly. As a result, business actors are still struggling amid the pandemic.

KOMPAS/JUMARTO YULIANUS

Visitors pay attention to handicraft products in the Banua-Go Digital MSMEs Show at the Atrium Duta Mall, Banjarmasin, South Kalimantan, Saturday (6/3/2021).

JAKARTA, KOMPAS - The government has created a policy to capitalize on the competitive advantages of domestic industries in supporting the national economic recovery.

However, the policy’s implementation has not run smoothly. As a result, business actors are still struggling amid the pandemic.

This grim condition was raised in a virtual discussion, hosted by Kompas, with the theme “Optimizing Economic Recovery Stimulus” on Thursday (18/3/2021).

The discussion, which was moderated by Kompas Senior Editor Ninuk Mardiana Pambudy, presented keynote speakers Deputy Finance Minister Suahasil Nazara, Indonesian Chamber of Commerce and Industry deputy chairman for international relations Shinta Kamdani, University of Indonesia Faculty of Economics and Business lecturer Muhamad Chatib Basri and M Bloc Space co-founder Handoko Hendroyono.

Suahasil said the pandemic had begun to slow down economic activity immediately in the first quarter of 2020 as the business sector still had to cope with bank payments.

"As the business sector was struggling to pay credit installments to banks, bad credit increased. This being the government’s main concern, the economic policy was directed to start to strengthen the business sector and financial institutions," he said.

HUMAS KABUPATEN SIDOARJO

Sidoarjo residents queue to get social assistance from the Ministry of Social Affairs at the Lebo Village Hall, Tuesday (19/5/2020).

Since 2020, the government has tried to ease the credit burden of the business sector, especially micro, small and medium enterprises (MSMEs), through subsidizing the microcredit program (KUR). The government has increased the KUR interest subsidy by 3 percent until June 2021 and raised its ceiling in 2021 to Rp 253 trillion.

According to data from the Office of the Coordinating Economic Minster, as of Dec. 21, 2021, the augmented KUR interest subsidies has been channeled to 7.03 million borrowers, with the debit totaling Rp 187.5 trillion.

Postponement of principal installments for a maximum of six months was given to 1.51 million borrowers for a debit of Rp 48.18 trillion.

Also read: Politics of MSME Development

To ensure smooth liquidity distribution from banks to the business sector, the government appointed PT Jamkrindo and PT Askrindo, both providing guarantees on working capital loans disbursed to MSMEs.

"The government pays half of the guarantee service fee to Jamkrindo and Askrindo and banks cover the other half," Suahasil said.

Shinta Kamdani said the quantitative easing policy launched by the Financial System Stability Committee (KSSK) to increase liquidity was running well. However, in 2020, liquidity flowing to business players was still limited.

Also read: Transformation of MSMEs and Cooperatives

KOMPAS/KARINA ISNA IRAWAN

Shinta Kamdani

She said credit restructuring had been initiated for 7.3 million borrowers, consisting of 5.82 million MSMEs and 1.44 million non-MSMEs, with loans totaling nearly Rp 900 trillion.

Tens of millions of other business players affected by the pandemic have been managing their cash flows cautiously against possible bankruptcy.

The program of banking liquidity distribution for the real sector appears to be struggling, with banks reluctant to take the risk of increasing their non-performing loan (NPL) ratio.

Also read: MSME, the Savior

Last year the banking sector lowered loan interest rates but not enough to reduce business risks in the midst of the pandemic.

"Even though the direction of government policy is appropriate, it has had no concrete impact on the field," Shinta said.

Handoko Hendroyono said the development of a business ecosystem was important to encourage the progress of MSMEs. The mindsets of business actors and the government need to be changed so that they see the local business climate as a collaborative driving force for a new ecosystem, instead of merely business competition.

DOKUMENTASI PRIBADI

Musa Hubeis, Professor of IPB University, is often a guest speaker for the development of MSMEs in Indonesia. During the Covid-19 pandemic, the fate of MSMEs became a byword. Musa was often asked to be a guest speaker at a webinar program about MSMEs.

Pledges of support for local brands should not be just empty. Instead, they must form a continuing movement to create a new trend of buying local products. The active participation of the public and MSMEs is important so that MSMEs can build strong bargaining positions in collaborating with the government.

“The government is poor in ideas, while the public has many ideas. The government has a lot of funds and assets, while the public is poor in funds and assets. This gap must be realized together when developing the MSME ecosystem,” he said.

Limited room

According to Chatib Basri, it is not easy to formulate a stimulus policy during a crisis because the government must move in a limited space. On the one hand, the government is expected to be aggressive to accelerate the recovery, but on the other hand, it is obliged to maintain good governance.

In the midst of these limitations, the government needs to wisely regulate state spending priorities.

Fiscal design must address the problem, including gender inequality, considering 70 percent of women work in the informal sector.

"The key is priority in designing state spending. The question is: Can we design the APBN in accordance with priorities?” he said.

The government must be able to identify those who are most affected by the pandemic, who according to Chatib are workers in the informal sector, who do not have a fixed income, and the lower-to-middle class who are struggling to survive the crisis because they do not have savings.

Also read: Why Indonesia Must Recover Faster

One problem that will arise is social discrepancies. "Fiscal design must address the problem, including gender inequality, considering 70 percent of women work in the informal sector," Chatib said.

This article was translated by Musthofid.