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Experts, business players urge COVID-19 response team to evaluate fiscal stimulus

Jakarta Post - July 30, 2020

Riska Rahman, Jakarta – Experts and a business player association are urging the newly established COVID-19 response team to re-evaluate the government's fiscal stimulus and boost its effectiveness amid the continuous rise in the number of cases.

Institute for Development on Economics and Finance (Indef) senior economist Faisal Basri said that the newly established National Economic Recovery and COVID-19 Response Team should focus on disbursing more funds to regional administrations to fight the pandemic in their areas.

"The funds to fight the coronavirus has been heavily centered on the central government, but regional administrations actually need more funding than the government does, as they are the front guard in fighting this virus," he said in a webinar on Tuesday.

Faisal further argued that the pandemic had hit provincial, regency and city administrations' revenue, which in turn reduced the administrations' COVID-19 response funds amid the continuous surge in cases.

The total national case number reached 104,432 on Wednesday.

As the crisis impacted car sales, administrations would collect less revenue from vehicle ownership transfer fees, while the slump in tourism would affect tax revenue from lodging, restaurants and entertainment centers, Faisal added.

The government has allocated Rp 10 trillion (US$688.7 million) in government loans to administrations from the overall stimulus package worth Rp 695.2 trillion for the COVID-19 response to boost the cooling economy and strengthen the healthcare system. It has also been working to expedite the disbursement of the funds for social assistance, business incentives and more, as it has only spent 19 percent of the total as of July 22.

The government approved on Monday a Rp 16.5 trillion loan for the Jakarta and West Java administrations, which will be disbursed gradually, to revive the provinces' economic activity during the pandemic.

However, Faisal suggested that the government should increase the allocation for regional administrations and transfer the funds instead of lending them.

Meanwhile, Indef executive director Tauhid Ahmad urged the team to reduce the allocations for the five government and agencies with the biggest budgets and use those funds instead to increase cash transfers to those affected by the pandemic.

"Those ministries and agencies should sacrifice their budgets so that we can reduce our debt, because the fight against the coronavirus will last for the next few years," he said.

In the 2020 state budget, the Defense Ministry has the biggest allocation of all ministries at Rp 127.4 trillion, trailed by the Public Works and Housing Ministry, the National Police, Religious Affairs Ministry as well as the Social Affairs Ministry.

From the total of stimulus package, Rp 203.9 trillion have been earmarked for social safety nets, including the Family Hope Program, the staple food card program and cash transfers.

Tauhid suggested that the government increase the monthly cash transfers from currently Rp 600,000 per family to Rp 1.5 million per family, which accounts for around 70 to 80 percent of the average monthly spending.

"More people are experiencing job and salary cuts as the pandemic continues. The increase in cash transfers could help to reduce their burden during this trying time," said Tauhid.

The government expects 4 million people to fall below the poverty line and some 5.5 million to lose their jobs this year, as the pandemic is ravaging the economy.

Indonesian Chamber of Commerce and Industry (Kadin) chairman Rosan Roeslani said on Tuesday that the government should focus on incentivizing labor-intensive industries during the pandemic.

Rosan proposed for additional six-month working capital stimulus for the private sector affected by the pandemic, which Kadin estimates to reach around Rp 303.76 trillion.

"This is an estimate from various industries that have been greatly impacted by the virus," he said.

The figure includes Rp 141.5 trillion stimulus for the textile and textile products industry, Rp 100 trillion for the food and beverage industry, Rp 40.5 trillion for the footwear industry, Rp 21.3 trillion for hotel and restaurant industry as well as Rp 407 billion for the electronics and home appliances industry, according to Rosan.

Source: https://www.thejakartapost.com/news/2020/07/29/experts-business-players-urge-covid-19-response-team-to-evaluate-fiscal-stimulus.html