UKABC Political and Economic Update on Indonesia

Owen Jenkins, British Ambassador to Indonesia and Joel Derbyshire, DIT Country Director, will join Baroness Neville-Rolfe DBE CMG, Chair UKABC, for a conversation on the latest political and economic developments in Indonesia.

Fitch Solutions has forecasted the Indonesian economy to contract by 1.3% compared to its previous projection of 2.3% growth. Indonesia is likely to see a slower recovery and remain under lock-down for a prolonged period. As of 14 May, Indonesia reported over 16,000 cases with 1,043 deaths.

Indonesia’s year-on-year GDP grew 2.9% in Q1 as household spending and investment slowed due to the pandemic according to Statistics Indonesia. The central bank had projected 4%. Given the late response to the crisis, the Q1 figures do not fully reflect the impact of the coronavirus on the economy. The government has also put on hold infrastructure projects and the Investment Coordinating Board (BKPM) has reported that FDI has fallen 7% in Q1, the combination of which will have a strong impact on the economy. The Centre for Indonesian Policy Studies has pointed out that Indonesia should use this moment to further reform its investment regulations, going beyond the Omnibus Bill, to attract FDI that is moving from China to its neighbours in Southeast Asia.

With businesses facing cash flow challenges Rosan Roeslani, Chairman of the Indonesian Chamber of Commerce and Industry (KADIN), said most had liquidity to last between July and September. KADIN also said that 6 million people have either lost their jobs or been asked to stay home.

The Indonesian government has announced a five-step plan to open up the economy to ‘business as usual’ by the end of July. As with other countries around the world, Indonesia faces a balancing act of containing the virus and keeping the economy going.  One major difference though is that as a developing country the longer the economy is closed the greater the increase in poverty. One study has projected that 8.5 million people will fall below the poverty line bringing the total to 33.2 million or 12.3% of the total population, a figure not seen since 2009.

President Joko Widodo, on 31 March, announced an economic stimulus package of £20 billion to handle the COVID-19 outbreak along with regulations to soften the impact. The budget deficit is estimated to reach 5.1% of GDP (compared to the current ceiling of 3% which the government is seeking to lift).

UK – Indonesia total trade was £2.9 billion in 2019 while UK-ASEAN trade in 2019 was £40 billion.

Areas of discussion

• What is the current coronavirus situation in Indonesia?
• What is the economic outlook for the short and medium-term?
• What should UK companies be considering for their longer-term strategy?
• What is happening with the omnibus bill?

Owen Jenkins – Biography
Owen Jenkins is the British Ambassador to Indonesia and Timor-Leste. He took up his post in July 2019.

Before his appointment as Ambassador, Owen was the British Prime Minister’s Special Representative for Afghanistan and Pakistan, responsible for engaging at the highest levels in the region and internationally on issues such as the Afghan peace process, cooperation on counter-terrorism and bilateral relations. He was also the Director at the UK Foreign and Commonwealth Office (FCO) responsible for South Asia and Afghanistan.

A career diplomat, Owen joined the FCO in 1991. He has served in British missions in Turkey, Argentina, Brussels (at the UK’s representation to the EU) and India, where he was based at the UK government’s development arm, DFID. He has worked on diverse issues, from the Balkan wars of the 1990s to climate change and economics, with a consistent interest in international security, emerging markets and the links between prosperity and sustainability.

Joel Derbyshire – Biography
Joel Derbyshire is the Director of Trade at the British Embassy Jakarta and has been working in Indonesia for nearly four years.  His team are focused on renewable energy, waste management, infrastructure, defence and security, healthcare and education.   He previously worked in London to support multinational foreign companies invest in the UK and help Canadian companies export to the UK.

Further Reading

Govt plans to reopen economy by Q3 as experts caution against COVID-19 ‘second wave’. Jakarta Post.

Pandemic hits Indonesia’s push for inclusive growth: Bappenas. Jakarta Post.

As homelessness rises, Indonesia debates how to ease coronavirus restrictions and restart economy. South China Morning Post.

Regulatory reform needed to anticipate shift in global trade: Experts. Jakarta Post.

Indonesia prepares COVID-19 ‘exit strategies’ to reopen parts of the economy. Channel News Asia.

Indonesia Government and institution measures in response to COVID-19. KPMG.

This event is for UKABC Partners and invited guests.