The Jakarta Post
The government’s new preemployment card program, a mix of cash aid and training subsidy for unemployed workers, needs to be converted to full-fledged cash aid that will be more relevant for laid-off and furloughed workers, experts say.
Perbanas Institute economist Piter Abdullah told The Jakarta Post that preemployment card recipients would find it difficult to find jobs after the completion of their training within the program. Many enterprises, especially in non-essential sectors, have decided to let employees go because the COVID-19 pandemic has hit their finances hard, he added.
“The choice that laid-off workers face is not whether to look for a new job with improved skills,” Piter told the Post in a phone interview on Monday. “Instead, they clearly need cash assistance to cover their living costs.”
Some 9 million candidates have applied for the program since its April 11 launch, as 2.2 million people have lost their jobs according to data last updated on April 20 by the Manpower Ministry. Recipients of the program get Rp 3.5 million (US$ 231.65) over four months, including Rp 1 million for training made available by eight partner platforms and the rest is cash assistance.
“They need additional income to survive,” said Piter, formerly an economist at Bank Indonesia. People hit hardest by the outbreak were living paycheck to paycheck and thus did not have much power to survive the pandemic since they might not have adequate savings, he added.
Indonesian consumers’ purchasing power shows signs of weakening in April as inflation stagnates at 0.08 percent, the weakest ever during Ramadan, the month-long Muslim fasting period that together with the subsequent Idul Fitri celebration are the peak consumption period in Indonesia’s domestic spending-reliant economy.
“This is unusual because usually there is a higher demand for goods and services during the Ramadan month,” Statistics Indonesia (BPS) head Suhariyanto told a news conference.
The large-scale social restrictions (PSBB) implemented in “red zones” across Indonesia are resulting in a slowdown in economic activities and weaker purchasing power, Suhariyanto said. The government expects economic growth to reach a 21-year low of 2.3 percent this year, with a possible 0.4 percent contraction in a worst-case scenario.
Institute for Development of Economics and Finance (Indef) executive director Tauhid Ahmad said providing cash aid to people affected by the outbreak might help them to buy basic needs, thereby preventing demand from falling even further.
“If [people were given] cash aid, the funds could create aggregate demand, which could help propel economic growth from the consumer side,” said Tauhid.
The preemployment card program aims to provide relief for workers and small business owners hit by the COVID-19 pandemic, allocating Rp 20 trillion from the 2020 state budget to 5.6 million eligible recipients.
The program previously came under fire over a potential conflict of interest as it partnered with Ruangguru, owned by a former member of President Joko “Jokowi” Widodo’s expert staff, Adamas Belva Syah Devara. He later resigned from the staff position following the controversy.
Negative sentiment dominates public discourse on the preemployment card, according to Indef research between March 27 and April 25. Out of 38,000 conversations online, 81 percent were negative with keywords including “conflict of interest” and “leaked budget”.
Panji Ruky, the program management’s director of communication, partnership and ecosystem development, said the government maintained the online courses component in the program because it was covering the people’s staple needs with other social assistance.
“This is conditional assistance complimentary with other social aid programs,” Panji told the Post. “The Presidential regulation mandates improved competence, with a portion of incentive that can be allocated into cash assistance.”
The government is providing, among other forms of assistance, the Family Hope Program for 10 million eligible recipients and Staple Food Card program with a Rp 200,000 monthly benefit for nine months for 20 million eligible recipients. For small businesses, which report a more than 57 percent decline in demand according to government data, the government is subsidizing loan interest payments and relaxing loan repayments for up to six months.