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Editorial: The economics of Idul Fitri
Manpower and Transmigration Minister Erman Suparno was quoted by the Indonesiaarab
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Manpower and Transmigration Minister Erman Suparno was quoted by the Indonesiaarab. wordpress.com as saying last Tuesday that over the past few weeks alone, Indonesian workers overseas, notably maids in Singapore, Hong Kong and the Middle East, have sent Rp 4 trillion (US$428 million) in remittances to parents or relatives in their home villages.
Those remittances, which were much larger than the usual amount for the same period and quite a significant sum given the country’s per capita income of only $1,600 were made especially to welcome this year’s Idul Fitri which begins on Wednesday.
Since the middle of this month, Bank Indonesia (the central bank) has daily deployed several armored trucks, each filled with Rp 2.5 billion in cash, to dispense small bills and coins to people in the Greater Jakarta area in light of the upcoming Lebaran festivities.
The central bank estimates people across the country will need a total of Rp 66 trillion in cash during the weeklong Idul Fitri celebrations because banks will close from Tuesday to Friday. That amount is equivalent to what the nation requires for three months during ordinary times.
The weeklong cessation of banking services, however, is only one economic element of the traditional Idul Fitri celebrations.
Idul Fitri is the time of year when millions of people in urban areas across the country make their home-sweet-home journey to celebrate the post-fasting month with their parents and relatives. This moment is culturally so sacred to Muslims, who make up the majority of Indonesia’s 230 million people, that they join the mudik (exodus) so they are able to share their wealth and the fruits of their hard toils in the cities with their relatives back home.
To the migrants street vendors, hawkers, maids, construction workers and even officials, corporate executives and professionals mudik is an annual opportunity for retrospection, to rejuvenate family relationships and to once again feel the warmness of family they all miss while working amid the hurly-burly of the cities.
The annual exodus back to hometowns or villages also reflects the impact of the country’s transformation from a largely agricultural, rural-based economy into a modern, urban-based one as the population in urban areas is now almost 55 percent.
Tens of trillions of rupiah will be pumped into the countryside’s economy during the one week of Idul Fitri festivities as millions of Idul Fitri revelers enjoy their holidays in their villages and city folk share their earnings with family members and show off their material achievements.
Mudik thus also serves as a means to redistribute income to the rural areas where most of the absolutely poor people live.
The exodus out of Jakarta and its satellite towns began last Friday, as can be seen in the long lines for trains and buses, by the number of people with backpacks jumping into any overloaded transportation vehicle they can find and motorists getting stuck for hours in traffic jams along the Cikampek toll road.
Those who cannot comprehend the religious, social and cultural philosophy of the mudik may find it hard to understand as to why people go into so much haggling, pain and inconvenience just for a few days of vacation in their home villages. But for Idul Fitri revelers all the pains and inconveniences are nothing but insignificant rigors of the home-sweet-home journey.
The almost 30 percent increase in fuel prices last May and the strong inflationary pressures this has generated have affected the purchasing power of people on a fixed income, but most analysts estimate consumer spending during this year’s Idul Fitri festivities will still be much larger than last year’s due to the fairly robust economic growth (6.3 percent).
This is really good news for department stores, supermarkets and producers of consumer goods because their sales during the fasting month and the weeklong Lebaran holidays usually account for more than 55 percent of their annual sales.
Some may argue that the holiday, though a boon to private consumption which, in addition to exports and investments is one of the key drivers of our economic growth may be too long for an economy as Indonesia’s which still needs to expand in order to absorb the millions who are jobless.
Nevertheless, besides fueling greater private consumption, the spending spree and merriness during the weeklong Idul Fitri will surely provide a psychological boost to the public’s perception of our economic outlook amid global economic and financial uncertainties.
