The Covid-19 Impacts on Investment in Indonesia

Believe it or not, the COVID-19 epidemic has many severe impacts on almost all nations around the globe, including Indonesia. The consequences not only run onto one sector, but also to most of the activities. One aspect gaining more attention during the COVID-19 outbreak is an investment. The restrictions had commonly been activated in many countries due to Coronavirus. As a result, economic activities go down significantly.

Will investment activities be disturbed?

Indonesia’s Investment Coordinating Board (BKPM) admits that the Coronavirus or COVID-19 is a serious threat, sooner or later will affect the country’s economic stability. Rizal Calvary Marimbo, a member of BKPM’s Investment Committee for Communication and Information, says that the impact for investment value will be apparent by looking at the trade relations between the COVID-19 centric countries, including People’s Republic of China (PRC)..

Due to restrictions and lockdown in several countries, trade activities have been affected and dealt with a tremendous loss of profit. The activities involve all sorts of fields and sectors related to China’s goods and materials, either from export or import business.

Possible Overview in April

The impacts of the COVID-19 on the investment activities in Indonesia cannot be calculated right now. According to BKPM, the investment realization value can be measured after the release of the 2020’s first-quarter investment realization value, in April. On the other hand, Bahlil Lahadalia, the chairman of BKPM, says that the investment value in Indonesia cannot be counted right after the outbreak began. Especially when COVID-19 started spreading to more than 100 countries all over the globe.

Last January, BKPM had not yet identified the significant changes in Indonesia’s investment activities since the COVID-19 impact had not yet been seen in Indonesia. It started changing at the beginning of March when several COVID-19 cases were discovered in Indonesia, resulting in restrictions on economic activities.

BKPM argues, the economic influence will be on the surface either at the end of March or the beginning of April. This influence has definitely been occurring, since PRC has the second largest foreign investment realization value in Indonesia by last year. In 2019, China’s investment value in Indonesia was not less than USD 4,7 million. The amount is as same as almost 17% of Indonesia’s foreign investment values in total.

The Impacts Reach Hundreds of Trillion Loss

Based on the total investment value mentioned above, the COVID-19 impacts for investment in Indonesia can be up to trillions of rupiahs. According to the Institute for Economics and Finance (INDEF), the COVID-19 outbreak will lead to a loss up to IDR127 trillion. The fantastic amount appears due to the primary factor: investment prospects and growth are continuously down.

This prediction is straight in line with the statements from the government; 1 % of China’s economic decrease will affect 0,3% of Indonesia’s economic downturn. As the situation grows larger, it is not entirely impossible that there could be a 5% decline on PRC economic state in 2020.

Impacts for Industries, Who’s Most Affected?

Ida Fauzia, Indonesia’s Minister of Labour, says, the tourism sector is in the lowest condition since Indonesia and other countries began to restrict their borders from foreigners by closing international airports. This affects the declining number of tourists visiting several objects in the country. Central Bureau of Statistics stated that there is a 7.62% decline in foreign tourists during January of 2020 when the COVID-19 outbreak started threatening several countries. As a result, according to the Minister of Labour, many hotel owners in Bali and Batam were forced to do massive layoffs.

Moreover, the International Labour Organization (ILO) predicts more than 20 million people will lose their job due to the Coronavirus outbreak. These situations bring us back to the global economic crisis in 2008-2009, in which the number of unemployed reached 22 million people.

From the analysis, investors need to keep their business up and always get the latest information about the spread of the COVID-19. By having the right strategy and calculation, the risk of loss and adverse impacts can be minimalized as small as possible.