JAKARTA – With widespread social restrictions in effect across most of Indonesia, President Joko Widodo is belatedly starting to acknowledge the massive twin public health and economic crises he now faces. The leader’s signals increasingly betray a sense that he has few good options to respond.
Monday’s announcement decreeing Covid-19 a national disaster is both confusing and tardy, particularly after two months of mixed messages and misleading narratives from the presidential palace, the Health Ministry and the National Disaster Coordination Agency (BNPB), all of which point to a government loathe to level with its citizens.
Meanwhile, the vast majority of Indonesia’s 134 million workers face a looming new threat: the economic blowback of Covid-19’s death and massive loss in productivity.
A US$25 billion economic relief package announced earlier this month has landed with minimal impact and caused tremendous confusion about who stands to benefit.
Now more than ever Indonesia must rapidly enhance its national crisis management capacity and staff it with experienced professionals that know how to simultaneously deal with a national disaster and economic crisis.
With the vast majority of Indonesia’s 134 million workers either living in absolute poverty, hailing from low income families, or comprising a fragile aspiring middle class, Indonesia’s economy still relies on its “battlers” who struggle to make ends meet.
For people comprising the working poor and their families living across Indonesia, struggling to get by and inadequate health care have become a form of co-morbidity.
Indonesians can’t “unforget” certain slogans and stories, narratives that frame the national consciousness. One of the most treasured of these is a story about a peasant-farmer named Marhaen who independence hero Sukarno met in West Java almost a century ago.
Sukarno realized that people like Marhaen had the means of production but were still living under colonialist oppression. In typical fashion, he coined a jingoistic ideology, Marhaenism, and placed the peasant-farmer at the center of his anti-capitalist revolutionary struggle.
Sukarno understood that the building blocks of his movement were the working poor.
Reimagining Marhaen’s story in a contemporary context, he might still be a peasant-farmer living in the countryside, but it’s much more likely that he would be living in a city, possibly working on a construction site, perhaps even riding a motorbike and performing errands on an app like Grab or Go-Jek.
A hundred years ago, Indonesia was less than 10% urbanized; now nearly two-thirds of the population live in cities or towns. Today’s Marhaen is most likely still paying off his motorbike (80% of motorcycle buyers use financing services), but he owns his mobile phone – that’s how he stays in touch with family and friends.
He earns around 75,000-100,000 rupiah a day, or approximately $4.50 to $6.00 at current exchange rates. Come Idul Fitri (Eid-al-Fitr) late next month, Marhaen will return to his village, regardless of what the president says about staying put – although he probably voted for Widodo both in 2014 and 2019.
It’s the whole point of working; so you can go home with gifts for loved ones and spend time with everyone together during the Islamic holiday season.
The situation facing Marhaen is typical of 60% of Indonesia’s workforce who work in the informal sector; they are not included in Finance Minister Sri Mulyani Indrawati’s tax base or adequately monitored by the government.
It’s hard to imagine Indrawati sparing a thought for Marhaen – she is, after all, a political appointee with a proven ministerial track record who owes her job to Widodo, not to voters like Marhaen.
It is, however, much easier to imagine Widodo ruminating very carefully over someone like Marhaen. The reason for this is simple: Indonesia’s working poor voted for him as a man of the people.
Widodo isn’t naive to the risks of the current twin crises. Quite aside from the escalating public health emergency, the magnitude of which remains unclear, he realizes that Covid-19 will crater Indonesia’s “real” economy.
This is demonstrably different from past economic crises like the 1997-98 Asian financial crisis and the 2008 global recession that affected the financial part of the economy.
The prevailing economic sentiment in Indonesia since the Covid-19 outbreak is palpably negative. Equity markets have nosedived by 40% in the past three months, yield curves on bonds and debt securities look like cliff faces, and the currency has devalued by 20%.
Corporate layoffs have only just begun and unemployment is soaring across the country. Meanwhile, Indonesia’s overweening, state-owned enterprises are listing violently under the questionable leadership of Indonesia’s wunderkind Erick Thohir, former owner of the Inter Milan Italian football club and son of the late billionaire businessman Teddy Thohir.
Widodo realizes that he is confronting a huge loss of productivity and that he has limited fiscal capacity. His $25 billion economic relief package has so far had a muted impact. Trying to conjure up an image of fiscal probity, Indrawati reassured wary markets by saying “we must be very careful to avoid moral hazard.”
Such reassurances sound dubious coming at the same time as new regulations that give policymakers a blanket immunity from criminal charges when issuing policies deemed necessary to safeguard the economy.
At the very least, Indrawati’s assurances offer a cautionary reminder of past scandals where public bailout funds were later found to have been embezzled by bent politicians and officials.
Susi Pudjiastuti, the outspoken former minister from Widodo’s first-term cabinet, complained about the absence of a sense of urgency in relation to the labor market and Covid-19 while speaking to Asia Times.
“We need to safeguard our labor market by protecting people – proper protection, tools, at the very least enough food to survive. We cannot waver. We must change our budget allocations and ensure people are protected. This cannot be done without government assistance. We cannot shut down. We have to be firm and flexible,” urged Pudjiastuti from her home in West Java, one of the epicenters of the Covid-19 epidemic.
Widodo’s current second-term cabinet reflects a Faustian bargain between his acquisitive political ambitions and the political parties forming his oversized ruling coalition.
Ministers like Airlangga Hartarto (Coordinating Minister for Economic Affairs) and Terawan Putranto (Health Minister) reflect Widodo’s preference for career politicians and retired military officers with limited useful professional experience or any kind of track record in dealing with economic crises.
Widodo’s dominance over the political arena and his canny ability to deny oxygen to any kind of opposition are epitomized in a ministerial line-up that now appears inadequate to the task of confronting these twin national crises. It’s times like these when he needs ten or more technocrats like Sri Mulyani or Foreign Minister Retno Marsudi.
Widodo is thus confronted with a make or break Covid-19 dilemma. The country’s health infrastructure has been on life support for decades, notwithstanding the modest gains made by expanding the coverage of what has become the world’s largest single payer health care insurance system.
The civil service remains a massively corrupt and confusing assortment of overlapping agencies, unclear mandates and inconsistent regulations. The Indonesian bureaucracy’s acute levels of incompetence are spread evenly across all 34 ministries.
There is no doubt that Covid-19 is a black swan event for Indonesia, none more so than for the working poor and their families. And it has blindsided an insular presidential administration that is far more focused on its internal machinations and public image than on creating jobs and economic opportunities for Indonesia’s 270 million people.
Widodo’s prescriptions for economic change too often get stuck in the political spin cycle and are behind the times, despite modern-sounding e-learning, e-commerce and one-stop service slogans.
Yet his actual performance against key economic metrics is very much in the vein of his predecessors, reinforcing a growing middle class but doing little to address inequality or the relationship between an aspiring middle class and the poor quality of social services.
Covid-19 and the new population movement restrictions Widodo has implemented will inevitably cause deep economic pain for the working poor, people whose hands and muscles earn them money, people for whom “working from home” isn’t possible.
The World Bank has already forecasted the possibility of large numbers of low-income households and informal workers slipping back into poverty in the event of economic shocks which are already starting to be felt.
It is entirely predictable that Covid-19’s economic impact will be most felt by those with the least assets and savings, the working poor. Significantly, Widodo’s government does not have a strong track record for targeting welfare or addressing inequality for this most vulnerable segment of the population.
His current cabinet, with very few notable exceptions, are arguably not up to the challenge of the twin crises. It may seem like the ink is barely dry on Widodo’s politically accommodating “Indonesia Onward” cabinet, but he now needs seasoned professionals with experience dealing with national disasters and economic calamities.
The April 13 announcement of a “national disaster” is a mere change in terminology; Widodo needs to go much further.
James P Bean has worked for various humanitarian organizations on crises in Indonesia, Uganda, Libya, and Thailand. The views expressed are his own.