Hard hit by pandemic

Strict measures: A pedestrian crosses a shopping mall at a deserted street in Semarang, Central Java. Indonesia is currently using a four-level movement restriction strategy that varies from city to city. — Bloomberg

JAKARTA: Feeling the pinch of recently extended nationwide activity curbs to combat a second wave of Covid-19, businesses have urged the government to provide help, including a wage subsidy, to alleviate their burden.

Indonesian Shopping Centre Association (APPBI) chairman Alphonzus Widjaja said the pandemic had hit them hard as they were forced to operate below capacity and even close malls during certain periods. The latest extension of the emergency public activity restrictions (PPKM Darurat) had worsened their financial situation.

Should the emergency curbs remain in place, APPBI members would be unable to pay their workers, forcing them to put staff on unpaid leave, or worse, cut jobs, Alphonzus said.

“We hope the government can subsidise around half of our employees’ wages in order to avoid layoffs,” Alphonzus told reporters, adding that the association also demanded tax and electricity relief.

The government recently extended the PPKM Darurat by five days to July 25 but promised to ease the rules once cases declined. Indonesia saw the number of new daily cases rise sharply to 56,757 on July 15. The number has since come back down, falling to 33,772 yesterday, but that is still far above the government’s short-term target of fewer than 10,000 new daily infections.

Other business associations backed the APPBI’s plea about wage subsidies through a joint statement, namely the Indonesian Employers Association (Apindo), the Indonesian Chamber of Commerce and Industry (Kadin) and associations representing various industries, such as ceramics, textiles, footwear, cosmetics, electronics, plastic, cement as well as food and beverage.

Aside from wage subsidies, the joint statement also demands looser workplace restrictions.

Should Covid-19 cases rise again in such a scenario, the workplace occupancy cap could be selectively lowered again, the associations suggested.

In non-essential sectors, they demanded that at least 50% of employees be allowed to work on premises, and at least 25% in auxiliary roles.

Currently, businesses in nonessential sectors are to apply a 100% work-from-home (WFH) regime. Furthermore, the demands include looser restrictions in essential sectors, allowing them to operate at full capacity, like the critical sectors.

Currently, a 50% WFH mandate applies.

Kadin chairman Arsjad Rasjid said he would talk to the government regarding those demands. He said the stimulus could help alleviate the burden on both workers and businesses.

“The government must listen to what we (businesses) want, so that there is a balance (between the economy and health),” Arsjad said.

Apindo chairman Hariyadi Sukamdani went further by asking the government not to extend the PPKM Darurat beyond July 25, warning that businesses could not bear the situation any longer. He said many companies had already been forced to give employees unpaid leave, and some had terminated contract employment. This situation, he admitted, was slightly better than in 2020 but could worsen again.

“If the rules are not relaxed immediately by July 25, hopefully there will be no mass layoffs,” Hariyadi said.

Fiber Producers Association (APSyFI) secretary-general Redma Gita Wirawasta added that prolonged restrictions could be burdensome for their members. He said many companies would be forced to lay off employees, especially those working on temporary contracts.

“We are asking for the government’s cooperation so that the PPKM are not extended,” Redma said.

The government appears to have an open ear for these concerns.

Finance Minister Sri Mulyani Indrawati said the government was expecting to finalise in a matter of days a plan to subsidise wages.

“The preemployment card is focused on workers facing layoffs,” Sri Mulyani said.

“With the additional 10 trillion rupiah (RM2.9bil), we can add 2.8 million recipients, so we can add those facing layoffs or pay cuts.”

While businesses are struggling, consumers too are under financial strain.

According to the Financial Services Authority (OJK), the nonperforming financing (NPF) ratio in the multifinance industry has reached 4.05%, the highest level so far this year.

The OJK said the rise was caused by financial stress on many borrowers, which lowered their ability to repay consumer loans, as quoted by Kontan.

At the same time, economic uncertainty has made borrowers more reluctant to apply for loans. Center of Reform on Economics (Core) researcher Yusuf Rendy Manilet warned the NPF ratio would continue to rise over the next few months as activity restrictions were likely to remain in place.

“I expect many consumers and businesses will still have trouble paying their loans,” Yusuf told The Jakarta Post.

The same trend was seen in banks’ nonperforming loan (NPL) ratio, which has reached 3.35% most recently, the highest so far this year.

Moody’s Analytics mentioned Indonesia in a July 20 report among other emerging markets that would see a rise in problematic loans due to new waves of virus infections hampering economic recovery. By the end of the year, Moody’s estimated, Indonesia’s NPL could reach 3.5%, increasing the asset risk at banks across the country. — The Jakarta Post/ANN

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