Indonesian Government to the Rescue: COVID-19 Economic Relief Packages
By Stephen Igor Warokka and Hanna Yovita Onggano
The ongoing COVID-19 public health crisis has strained not only Indonesia\'s healthcare infrastructure, but also the economy, placing an even heavier burden on the Indonesian people.
In response, President Joko Widodo\'s administration announced a 405.1 trillion rupiah (about US$26 billion at current exchange rates) relief package to support healthcare infrastructure and facilities, incentivize medical workers, shore up the country\'s social safety net, and provide economic relief for businesses and impacted communities. This amount is divided into 75 trillion rupiah for healthcare infrastructure, 110 trillion rupiah for the social safety net, 70.1 trillion rupiah in industrial support and 150 trillion rupiah for the National Economic Recovery Program. This relief package was put in place through Government Regulation in Lieu of Law No. 1 of 2020 concerning State Financial Policy and Financial System Stability in Response to Coronavirus Disease 2019 (\"Perpu 1/2020‚Äù).
This article discusses the legal measures already implemented or being contemplated by the Government to allocate the relief package budget.
Import Facilities and Exemptions
President Widodo issued Presidential Decree Number 9 of 2020, whereby the head of the National Agency for Disaster Mitigation (Badan Nasional Penanggulangan Bencana/ \"BNPB‚Äù) is authorized to provide exemptions for licensing procedures in the trade and import sector. The President subsequently issued Presidential Regulation Number 58 of 2020 dated April 8, 2020, which serves as an overarching regulation stipulating the relaxation of licensing procedures for imports of:
- essential goods and foodstuffs;
- foodstuffs for government food reserves;
- raw materials or supporting materials;
- goods and raw materials for disaster prevention and mitigation; and/or
- other goods as stipulated by the government.
As of April 21, 2020, only goods imported for COVID-19 prevention and relief have been further regulated in detail through ministerial regulations and/or circular letters, namely:
- Minister of Trade Regulation No. 28 of 2020 regarding the Amendment of Minister of Trade Regulation No. 87/M-DAG/PER/10/2015, dated March 20, 2020, regarding Imports of Certain Products, which exempts companies from the application of the provisions of the regulation itself for medical equipment under 17 Harmonized System (\"HS‚Äù) Codes. This exemption is in place until June 30, 2020.
- Minister of Trade Regulation No. 31 of 2020 regarding the Amendment of Minister of Trade Regulation No. 23 of 2020, dated March 24, 2020, regarding the Temporary Prohibition on the Export of Antiseptic, Mask Raw Materials, Protective Gear and Masks, which stipulates that goods falling under 14 HS Codes cannot be exported from Indonesia until June 30, 2020.
- Minister of Trade Regulation No. 37 of 2020 regarding the Second Amendment of Minister of Trade Regulation No. 118 of 2018, dated March 31, 2020, regarding Imports of Non-New Capital Goods, which exempts companies from the application of the provisions of the regulation itself, including the requirement for Import Approval and a Surveyor Report for used capital goods in the form of medical equipment that falls under two HS Codes, therapeutic respiratory apparatus and other medical respiratory equipment and gas masks. This exemption is in place until June 30, 2020.
- Joint Circular Letter of the BNPB and Directorate General of Customs No. 01/BNPB /2020 and No. KEP-113/BC/2020 (\"BNPB DGC Circular‚Äù), which provides the standard operating procedure for import facilities and exemptions from trade regulations for the following three categories: (a) central/regional governments and public service agencies; (b) yayasan/foundations and non-profit organizations; and (c) individuals/private parties acting in a non-commercial capacity.
Individuals and private parties acting in a commercial capacity are ineligible for the exemptions, but they may still submit their Import of Goods Notice through the BNPB pursuant to Section C, Item 7 of the BNPB DGC Circular.
While details on the trade regulations for which eligible parties will receive exemptions have not been specified, the following areas were discussed in a Ministry of Finance press conference on April 1, 2020, on the exemptions and facilities:
- Simplification and reduction of prohibitions and restrictions on 749 HS Codes;
- Simplification and reduction of prohibitions and restrictions on certain commodities, including manufacturing support goods, food, and health and medical equipment;
- Acceleration of the export-import process for reputable traders; and
- Acceleration and increase of export-import services through the National Logistics Ecosystem.
Further details on the proposed measures above shall be subject to Minister of Trade regulation. At present, no other Minister of Trade or Minister of Industry regulation targeting economic recovery for businesses has been issued. The implementing regulations currently in place are focused on providing the medical care necessary to protect public health.
Credit Assistance Relief for Businesses
On the banking side, Financial Services Authority (Otoritas Jasa Keuangan/‚ÄùOJK‚Äù) reports indicate that there is no liquidity issue for Indonesian banks. However, with respect to businesses, especially micro, small and medium enterprises, or MSMEs, loan repayment may become an issue in the near future as indicated by the volume of businesses implementing redundancy plans, resorting to unpaid leave or simply closing.
i. OJK allows banks to grant credit relaxation
The OJK issued Regulation No. 11/POJK.03/2020 concerning National Economic Stimulus as Countercyclical Policy to the Coronavirus Disease 2019 Outbreak. This regulation allows banks to take certain measures to relax the credit requirements or to restructure loans. Based on the OJK Announcement on Credit Relaxation or Restructuring, dated March 31, 2020, public banks are free to set their own terms for implementing relaxation measures.
According to the OJK FAQs on Credit Relaxation and Restructuring, accessible on the OJK website (www.ojk.go.id), credit relaxation or loan restructuring due to COVID-19 may, for example, be granted to debtors:
- significantly affected by the reduction of import-export volume due to supply chain dependence and trade with China or other countries impacted by COVID-19;
- affected by the suspension of infrastructure construction projects due to the halt in the supply of raw materials, manpower and machines from China or other countries impacted by COVID-19; and/or
- affected by travel warnings or the closure of transportation routes and tourism to and from China and/or other countries due to COVID-19.
These categories include, but are not limited to, MSME debtors with a credit ceiling of 10 billion rupiah.
ii. Bank Indonesia (\"BI‚Äù) allows banks to grant credit relaxation
To ensure the liquidity and solvency of financial institutions, Article 16 of Perpu 1/2020 authorizes the Indonesian central bank, BI, to:
- Provide short-term liquidity loans or short-term liquidity financing under shariah principles to Systemic Banks or banks other than Systemic Banks; and
- Provide special liquidity loans to Systemic Banks experiencing liquidity issues that are unqualified to obtain short-term liquidity loans or short-term liquidity financing.
Article 17 of Perpu 1/2020 provides that the OJK and BI shall jointly conduct a solvency assessment to determine whether a short-term liquidity loan or short-term sharia liquidity financing may be granted. Article 16(2) of Perpu 1/2020 states that this matter shall be further regulated in a Bank Indonesia regulation.
Direct Cash Aid
In addition to providing aid for the supply of raw materials, working capital adequacy for businesses and liquidity for banks, the government aid package also contemplates providing direct cash aid for the most vulnerable portion of the population in order to maintain purchasing power. The regulatory framework for this measure has yet to be confirmed as of this writing, but the President has reportedly said the amount provided to each family shall be Rp 600,000 per month for a period of three months.
The Minister of Villages, Development of Disadvantaged Regions and Transmigration issued Regulation No. 6 year 2020, dated April 13, 2020, to allocate 22.4 trillion rupiah from the Village Fund (Dana Desa) budget for direct cash aid disbursements to residents of villages. Under this regulation:
- Villages receiving 800 million rupiah or less from the Village Fund may allocate a maximum of 25% of their Village Fund aid for direct cash aid disbursements;
- Villages receiving between 800 million and 1.2 billion rupiah from the Village Fund may allocate a maximum of 30% of their Village Fund aid for direct cash aid disbursements; and
- Villages receiving more than 1.2 billion rupiah from the Village Fund may allocate a maximum of 35% of their Village Fund aid to direct cash aid disbursements.
Families living in poverty will be identified and determed by mutual discussion, or musyawarah, at the village level, after which the village head will report to the regional government for confirmation.
This measure is intended to supplement pre-existing programs under the Ministry of Social Affairs such as the cash assistance PKH program and non-cash food assistance, as well as employment training programs for laid-off workers and those employed in the informal sector.
Regarding employment training, the Coordinating Ministry for the Economy issued Press Release No. HM.4.6/45/SET.M.EKON.2.3/04/2020 concerning the launch of Pre-Employment Cards. This program provides funding assistance and incentives for workers in the informal sector, job seekers, and micro and small enterprises. This program has a quota of 164,000 participants per week until the fourth week of November 2020. However, as of April 12, 2020, just in the first wave of registrations, the Pre-Employment Card program had already received 1.4 million applications.
Each recipient of the Pre-Employment Card is entitled to a benefit package of Rp 3,550,000.- in total, consisting of:
- Training assistance of Rp1 million to purchase various trainings on partner digital platforms.
- Incentives that will be transferred to the participant\'s bank account or e-wallet LinkAja, OVO or GoPay. These incentives consist of two parts:
- Incentives provided after the completion of the first training of Rp 600,000 per month for four months (Rp 2,400,000).
- Incentives provided after completing evaluation surveys of Rp 50,000 per survey for three surveys (Rp 150,000).
Participants can choose the training they want on the digital platforms of the official partners of the Pre-Employment Card program. These digital platforms are Tokopedia, Skill Academy by Ruangguru, Maubelajarapa, Bukalapak, Pintaria, Sekolahmu, Pijarmahir and Sisnaker. The assistance expires after 30 days of receipt if the Pre-Employment Card has not been used for training.
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