The study on the competitiveness of 34 sub-national Indonesian economies by ACI is committed to tracking the country’s diverse progress. This objective has been fundamental in light of the COVID-19 pandemic that has affected the archipelagic nation in different ways.
Indonesia’s economy received an unprecedented shock because of the COVID-19 pandemic. Prior to the pandemic, Indonesia’s economic growth had steadily hovered around 5 percent. The country’s economic stability was upended in 2020 with GDP growth plunging to the country’s lowest since the Asian Financial Crisis, at -5.32 percent. The pandemic’s impact reverberated through the labor market, with unemployment rates increasing from 4.94 percent in February 2020 to 7.07 percent in August 2020. Poverty also rose from 9.78 to 10.19 percent from March to September 2020. While the number of COVID-19 cases continues to rise in the country, surpassing 1 million in January 2021, the economy saw some improvements in Q4 2020, with growth increasing by 3.13 percent to -2.19 percent.
The book provides a key guide to the various COVID-19 policies employed by the government to strike a fine balance between protecting public health and sustaining the economy. For international onlookers, the findings and recommendations are valuable in gauging the aid afforded by the government to different demographics and sectors and, therefore, the opportunities available for them in the New Normal.
The annual competitiveness ranking update has seen a significant number of shifts this year. This is a welcomed change in the nation’s bid to redistribute economic development outside the economic center of Jakarta and the Java region. East Kalimantan’s progress is most salient, in part because it was slated to be Indonesia’s new capital city by President Joko Widodo in 2017. As the prospective capital, infrastructure preparations underway before the pandemic resulted in a 14-rank jump for the provide from 22nd to 8th, under the Government and Institutional setting environment and a four-rank improvement from 8th to 4th, under the Financial, Business and Manpower Conditions environments.
This iteration of the competitiveness update has also utilized the What-If simulation method to assess the early efficacies of the Palapa Ring Project. Completed in 2019, the national project sought to connect all regions of Indonesia with basic internet access. The case study affirmed that the infrastructure project would elevate the connectivity of border provinces of Indonesia. North Maluku presented the largest improvement, and other outermost provinces like North Sumatra, Maluku, and West Kalimantan followed closely.
The industry-differentiated impacts have also highlighted that some industries, like information and communication technologies, healthcare and finance stand to gain from the new economic landscape. Others, like tourism and their related service sectors do not have such an optimistic outlook considering the unpredictable return of travel.
ACI ultimately acknowledges that the complexity of Indonesia’s economic recovery depends on policies that appropriately respond to each province’s specific needs, and has facilitated meaningful dialogue between government officials, academics, and business representatives over the past year through its webinar series.
By ZHANG Xuyao, Doris LIEW Wan Yin, Clarice HANDOKO