Sep 29, 2020 / 10:51

What Indonesia does to mitigate impacts of Covid-19 pandemic?

The Hanoitimes - Jakarta has imposed a wide range of support to fulfill a range of 1.1% contraction to 0.2% growth for 2020.

The Indonesian government has taken numerous measures to respond to the Covid-19 pandemic to help business mitigate the impacts.

 Adhi Lukman, Chairman of the Indonesian Food & Beverages Association (GAPMMI)

1. President Joko Widodo has issued President Regulation No. 82/2020 on the creation of a committee for the handling of Covid-19 and National Economic Recovery. This committee will be led by Coordinating Minister for Economic Affairs Mr. Airlangga Hartarto.

The regulation further stipulates the creation of two task forces that will be coordinated by his Ministry. The Covid-19 Task Force, chaired by the Head of the National Disaster Mitigation Agency (BNPB) Doni Monardo. The national Economic Recovery Task Force, chaired by the Deputy Minister of State-Owned Enterprises (BUMN) Budi Gunadi Sadikin.

The regulation further appoints State-Owned Enterprises (BUMN) Minister Erick Thohir as the Chief Executive of the task forces. His task is to coordinate the efforts of both task forces in ensuring their effectiveness in implementing the government’s policies in mitigating the Covid-19 pandemic while maintaining the course for economic recovery.

2. The Ministry of Industry has reopened its Machine Restructuring program for micro and small-sized enterprises (IKM). The program allows IKM to apply for reimbursements for the purchase of local machines of 30% of the machine’s price, or 25% of the machine’s price if it’s an imported machine with a minimum cut of IDR5 million (US$335) and a maximum cut of IDR300 million (US$20,142). The Ministry of Industry has earmarked IDR6.5 billion (US$436,363) for this program. Applications would be accepted until October 11, 2020.

3. The government has officially launched its Loan Guarantee for Small-and-medium-sized-enterprise (UMKM) Program as regulated under the Indonesian National Economic Recovery (PEN) effort in mitigating the economic impact of Covid-19. As much as IDR123.46 trillion (over US$8.29 billion) have been set aside to fund this program.

4. The Ministry of Trade has issued Circular No. 12/2020 on Restoring Trade Activities during the Covid-19 Pandemic and the New Normal. The circular lays out the guidelines and protocols that must be followed by operators of trade hubs such as malls and entertainment centers that are reopening their businesses as part of the government’s New Normal campaign.

5. The government will hand out a total of IDR123.01 trillion (US$8.25 billion) in tax incentives for businesses as part of its National Economic Recovery (PEN) program. As quoted from Finance Minister Sri Mulyani, the tax incentives include discounts on income taxes, import taxes for raw materials, as well as early retribution for value-added tax.

6. Taxpayers who are engaged in 1,013 certain business sectors, companies that get import facilities for export purposes, and companies in bonded zones are entitled to an additional deduction of article 25 income tax installments from the previous 30% reduction from the amount of installments that should be payable to a reduction of 50%.

7. Individual income tax is borne by the government for taxpayers with an income of up to IDR200 million (US$13,417) a year.

8. Exemption of import tax (Pph 22) for businesses in certain classifications, companies with import facilities for export destinations, and bonded zones.

9. The Ministry of Manpower has issued Circular No. M/7/AS.02.02/V/2020 on Ensuring the Sustainability of Business while Facing the Covid-19 Pandemic and Protocols to prevent Covid-19 infection in Companies. The circular lays out the various preparations companies shall make in preventing more possible spread of Covid-19.

10. The government has issued Government Regulation No. 29/2020 on Income Tax Facilities in the Effort to Mitigate Covid-19. The regulation stipulates that any individual or companies that are helping the effort to mitigate Covid-19 by participating in any category of five activities listed in the regulation, which include producing medical devices and/or Household Health Items related to the effort to mitigate Covid-19 (Health Mask, hand sanitizers, etc.) and/or buying back shares from shareholders to stabilize the stock market, are eligible for tax cuts. This regulation took effect on June 10, 2020.

11. The government has issued Government Regulation No. 49/2020 on the adjustment to the Social Security Program for Manpower (BPJS TK) premiums throughout Covid-19 Pandemic period. Employers and workers registered with BPJS Manpower are given several leniency with regard to paying the monthly premium fees for the program’s Accident insurance (JKK), Life Insurance (JKM), Old-Age Benefits (JHT), and Pension Fund (JP). These leniency are a later deadline, monthly fees of up to 99% less, and the postponement of the payment obligation.

12. The government provides subsidies to formal workers who pay BPJS TK contributions with a fund of IDR600,000 per month per person for 5 months until December 2020. Funds are provided for 15.7 million workers.

13. The government provides working capital funds for companies with subsidized loan interest and guarantees from the guarantee institution (provided up to IDR100 trillion (US$6.71 billion) for working capital above IDR10 billion (US$670,547)).

Company strategies include (1) implementing health protocols to accelerate stopping the spread of the Covid-19 pandemic, (2) securing the company's cash flow, (3) making efficiency of adjusting market demand, and (4) accelerating automation in manufacturing in order to achieve efficiency and comply with the requirements of maintaining physical distancing in health protocols.

Adhi Lukman is chairman of the Indonesian Food & Beverages Association (GAPMMI). GAPMMI is a supporting organization for Industrial Transformation ASIA-PACIFIC 2020.