Economic recovery strategy: Regions must have a keen eye in reading situation
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia: Strategi pemulihan ekonomi: Daerah harus jeli membaca arah
26 August 2020
By: Farodillah Muqoddam,Ashari Purwa, and Peni Widarti
Bisnis, Semarang – Regional governments reckoned that now was the right time to prepare themselves to welcome investment opportunities that are believed to flood Indonesia after the Covid-19 pandemic.
Central Java Governor Ganjar Pranowo said that the Covid-19 pandemic had caused investment, especially foreign investment, to be hindered. The main causes are goods distribution and passenger traffic that are still limited.
“If [SOE (State-Owned Enterprise) Minister] Erick Thohir said that the vaccine would be ready by February 2021, I think that February will be the starting line. If February is the starting line, then we are now in a preparation phase,” Ganjar said when he met the West Java-Central Java-Yogyakarta Investment Exploration team of Bisnis Indonesia at his office on Tuesday (25/8).
The preparation that has been done to welcome the momentum includes preparing infrastructures and our feasibility for investment. Central Java is preparing several mainstay areas to absorb investment, such as special economic zones, industrial estates, and industrial allocation areas.
“We have prepared several industrial estates in Brebes, Batang, Kendal, Demak, Rembang, Kebumen, and Cilacap. New areas have been prepared and existing areas have been expanded. I imagine that they will all be ready by February,” he continued.
The support infrastructures that will be prepared include Semarang-Demak and Solo-Yogyakarta toll segments of Trans-Java toll road that will start construction in 2021 and Semarang-Kendal route of Semarang Harbour Toll Road that will start construction in 2022.
Existing airports and ports will also be developed. Train tracks that go around Central Java will also be maximised to support distribution.
Another preparation includes ensuring the availability of capital and support materials required by industry players in Central Java so that they can be more prepared in welcoming the investment momentum after the pandemic.
While preparing, the Central Java Provincial Government is employing a survival strategy by utilising existing opportunities. Domestic investment in Central Java is still growing excellently.
The data from the Central Java Capital Investment and One Stop Service (DPMPTSP) shows that investment realisation in the first half of 2020 reached Rp27.82 trillion, dominated by domestic investment that reached Rp18.81 trillion and foreign investment that reached Rp9.01 trillion.
Ganjar also affirmed that collaboration and synergy among regional governments was required to secure investments.
“I will not compete with West Java and East Java as we are a team. We choose to establish synergy and collaborate as we want to compete with Vietnam. We will attack Vietnam. Land is free in Vietnam, what are we supposed to do?”
West Java
Meanwhile, West Java Governor Ridwan Kamil admits that recovering the economy amid the Covid-19 pandemic was not an easy task.
According to him, the West Java Economic Recovery Task Force is creating a road map with three stages, which are rescue, recovery, and normalisation.
The rescue stage will focus on the workforce of several business sectors and the revival of MSMEs (Micro, Small, Medium Enterprises) that are affected by Covid-19. The recovery stage will focus on absorbing the workforce of several business sectors, opening businesses and investments, and opening major industries.
“The normalisation stage will focus on continuing the recovery program and making other economic sectors normal again,” he said on Tuesday (25/8).
He admits that cooperation among all parties is required so that Indonesia can rise from the economic slowdown. Ridwan Kamil is optimistic about his efforts producing positive results.
In the investment sector, Kamil said that securing foreign investment was not easy as Indonesia must compete with other countries. Hence, solid cooperation between central and regional governments is required.
For example, the central government will provide a fiscal incentive, while regional governments will provide lands and workforce. Hence, investment will boost the economy and absorb many workers.
Hence, healthcare optimisation and economic recovery in the last three years will determine Indonesia’s economy to not decline in the third quarter of 2020.
The West Java Provincial Government has submitted several suggestions to the central government so that the manufacturing industry in West Java can recover and drive the national economy. One of the suggestions to recover the manufacturing sector is for the government to buy its products.
“Or, we can hire laid off workers of the manufacturing industry to work in sectors that are absorbed by local citizens, such as food or agriculture products,” he said.
Recover MSMEs
Moreover, the East Java Provincial Government is integrating various social aids from central and regional governments to rebuild the economy, especially in villages through MSMEs.
The East Java Provincial Government is also overseeing and observing the productivity of the processing industry, which is the economic pillar of East Java.
“This August, I will identify which industry sectors can support the economy of East Java as the economic recovery process must be followed by activities from ultra-micro, micro, small, medium, and large enterprises,” he said.
He said that, in the last few days, his agency had visited the assembly factory of Polygon, the livestock processing factory of Charoen Phokpan Indonesia and its chocolate processing and cultivation factory, as well as the factory of PT Indofood CBP Sukses Makmur Tbk.
“Our processing industry has always been the strength of East Java, so we want to make sure that everything can run excellently, productivity can be maintained, employees can be prosperous, and health protocols can be implemented during the Covid-19 pandemic,” he said.
He hopes that, as East Java Provincial Government is overseeing and observing the industry, investment in East Java can improve in the future.
Despite being in a pandemic, East Java posted that their investment performance has grown above the national average. In the first half of 2020, investment in East Java surpassed Rp51 trillion or grew 59.2% compared to last year.
From that realisation, Rp12.5 trillion came from foreign investment and Rp38.4 trillion came from domestic investment.
