28.04.2020

Indonesia: A late shift in re-balancing economic and health priorities

The most populous country in South-East Asia was initially slow to respond to the COVID-19 pandemic. Now the government has stepped up travel restrictions and eased limits on public spending to fight the crisis. Observers hope such measures will come on time.

Photo: Mudik, or Pulang Kampung, is an Indonesian term for the activity where migrants return to their hometown during major holidays especially Lebaran (Eid al-Fitr). © istock / Georgina Captures

A slow wake-up call

In the early stages of the COVID-19 pandemic, Indonesian authorities seemed less responsive than in other countries in acting decisively to curb the spread. As late as February, President Joko Widodo (Jokowi) was still saying that he would offer discounted travel to Indonesia in a bid to attract more tourists. In March, after only a handful of cases were officially identified, the government was publicly debating the causes of Indonesia’s apparent immunity rather than actively seeking to track the spread of the disease.

The health minister said diligent prayer had warded off contagion and encouraged Indonesians to eat well. The home affairs minister urged citizens to eat more bean sprouts and broccoli, while the president vaunted the merits of traditional herbal drinks. Another minister argued that the virus cannot survive in the country’s tropical climate. The lack of widespread testing as a possible cause for the low number of reported cases was not debated.

On 14 March, the World Health Organization urged Indonesia to take more serious measures to fight the spread of the coronavirus, including a national state of emergency. This marked the beginning of a turnaround for the national and local governments.

That day, the Jakarta administration was the first to announce it would close schools across the capital. The next day, the president recommended social distancing and urged all people in Indonesia to work, study and pray at home. On 31 March, Jokowi declared a national health emergency, effectively removing some autonomy from regional administrations and forcing them to comply with central government policies. On 3 April, the borders were—with a few exceptions—closed to foreigners. And in mid-April, Jokowi called for greater transparency in how the nation handles the outbreak, apparently reversing his approach in March and admitting to holding back some information to avoid a public panic.

 

Fighting blindfolded 

Testing has been a challenge. Health services have struggled with limited time and material. Only 36,000 people had been tested by mid-April. On 13 April, President Jokowi instructed the health minister to test 10,000 people per day. With a population of 270 million, this still leaves authorities almost blind to the real number of cases, especially with many people not seeking hospital care.

Testing kits have been a limiting factor, but the national task force has been able to secure 50,000 from South Korea, with another 495,000 having started to arrive around the time of writing.

Leaving aside the matter of infection rates, the number of deaths from COVID-19 has been among the highest in Asia. This, and a spike in overall deaths in March, compared with the same period in previous years, as reported by Reuters and others, has led several observers to estimate that the real prevalence is much higher than the official figures.

Making any forecast is hard, given the challenges with data and the uncertainties around transmission. According to one estimate by task force adviser Professor Wiku Adisamito, as well as Indonesia´s national intelligence agency, infections might peak at some point in May or early June before declining, leaving a total number of cases at around 95,000. Another model by the University of Indonesia´s Faculty of Public Health has warned that there could be more than 140,000 deaths and 1.5 million cases across the country by May, unless authorities take tougher actions.

 

Vulnerable health care infrastructure

Indonesia introduced universal health care coverage in 2014, responding to campaigns by trade unions and civil society. By February 2020, it covered 82.7 per cent of the population. But hospital resources are insufficient to face the potential spike in the number of patients. The country still only has around 1.2 hospital beds per 1,000 people, compared with 12 or 14 beds per 1,000 people in Japan and South Korea. Hospitals across the archipelago have slightly more than 8,000 ventilators. And there are only 132 referral hospitals for COVID-19 patients in the whole country, which Ombudsman Alamsyah Saragih has warned will not be enough. "We need more than economic programs to counter the impact of the epidemic. We can't neglect health and social security," he told the Jakarta Globe earlier this month.

 

Balancing economic and health risks

The difficult state of the economy, budget and exchange rate has sharpened the government’s dilemma. Since the outbreak, the International Monetary Fund has revised its projection for the growth in Indonesia’s GDP this year, down to 0.5 per cent from the original projection of 5.3 per cent. President Jokowi has said the economy could even contract, down to a growth figure of minus 6 per cent. Indonesia´s current account, already in deficit, has been further hit hard, while the exchange rate dropped as investors sold off nearly 148.8 trillion rupiah (USD 9.04 billion) in Indonesian assets and global commodity pricing slid downward.

Despite the worrying economic indicators, the government has rebalanced its initial approach by responding to the health imperative as well as the social collateral damage and lifted the cap on the budget deficit, previously at 3 per cent of GDP for 2020–2022, to give policymakers more spending flexibility. The government has used this ammunition to budget around 405 trillion rupiah to deal with the COVID-19 crisis.

The extra spending represents 2.3 per cent of GDP and is set to expand the fiscal deficit for 2020 to nearly 5.1 per cent of GDP. The new money is to be allocated across four sectors as follows: health—75 trillion rupiah, social protection—110 trillion rupiah, tax incentives—70.1 trillion rupiah and economic recovery—150 trillion rupiah.

 

The mudik dilemma

Mudik, or exodus, is an annual tradition whereby up to 20 million people travel to visit their families for the Muslim holy month of Ramadan, mostly going from cities out into the provinces. This year, around 1.3 million people were projected to travel from Greater Jakarta alone, where it is estimated that two-thirds of the country’s COVID-19 cases are. Such a migration has the potential to intensify the spread of the virus in all parts of the archipelago, including many areas with far worse health care systems than Jakarta.

For President Jokowi this presented a dilemma. He refrained for weeks from banning mudik, most likely in a bid to avoid another setback for the economy or due to allegations by political opponents that he would be favouring or attacking certain groups. Or he feared social unrest triggered by people who lost their livelihoods in the city and wanted to return to the countryside. But on 21 April, the Indonesian president finally pulled the ripcord and officially banned mudik travel, suspending all inter-city public transport. Now the most important question, which has to be answered within the next two months, is which instruments could substitute the large-scale social restrictions after lifting them.

 

Sergio Grassi is the Director of the FES Indonesia Office. He is also responsible for the work of FES Malaysia. He spent several years working for FES in Beijing and sub-Saharan Africa. He studied economics and sinology in Berlin and Beijing. 


The views expressed in this blog series are not necessarily those of FES.

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