Impact of the Trade War for Indonesia : Strengthening Internally, Facing Global Uncertainty

A Scenario Planning : Impact of the Trade War for Indonesia

Strengthening Internally, Facing Global Uncertainty

By : Kardi Pakpahan *

One of the effects of trade war between “Negeri Paman Sam” (US) and the “Negeri Tirai Bambu” (Chinese People's Republic), most likely is the problem of global uncertainty or recession, especially those that are increasingly apparent and felt at the end of 2019 and entering 2020, both at the second side of the State involved in trade wars, and trade wars can also attract countries in certain regions, such as the European region experiencing uncertainty or slowdown, especially countries that have high levels of trade with the United States and China.

Due to uncertainty / slowdown or weakening external conditions, from the internal side of Indonesia, some changes are needed. If the aforementioned changes are not made then it is possible to trigger a slowdown in domestic economic activity, and potentially lead to a recession. Possible internal changes, some of which are put forward in the following description.

First, financial service providers, both banking and non-banking, need to avoid business models that are too concentrated in certain fields that can lead to an escalation of concentrated risk. Aside from continuing to explore the existing market potential, financial service providers need to remain consistent in carrying out governance and carrying out overall risk control. In the meantime, the business of financial providers needs to continue to support the financing of export commodities that are feasible to be financed.

Second, trade. To overcome the deficit in trade transactions, while adequate commodities are available domestically, it is necessary to avoid imports. Changes in export orientation also need to be made, especially to countries or to new regions. Representatives of the Indonesian government, such as embassies or consulates in foreign countries, should be proactive in formulating various commodities that become export markets.

Third, management of the government budget. Management of government budgets, both at the APBD and APBN levels, needs to be managed healthier with a very minimal level of abuse. At the APBD level, allegedly the financial statements of the Regional Government (Pemda) can be rated WTP (Fair without exceptions), but sometimes corruption is suspected to still occur. In view of this, the BPK (Audit Board of the Republic of Indonesia) audit has really been able to continue to improve the quality of its audit or audit. In an audit activity, for example, do not focus too much on finding out who is wrong, but really examine or audit what is wrong and build commitment on how to correct it, so that it does not recur over the next audit process.

Fourth, investment conditions are increasingly conducive. To strengthen internal conditions, it is necessary to prioritize conducive investment conditions, such as in licensing services, export trading systems, and others. Conducive investment activities, both for domestic orientation and for export purposes, aside from being able to improve the trade balance deficit, can also overcome current account deficits or Current Account Deficit.

Fifth, politics. To strengthen internally, political stability is needed. Therefore, differences in political attitudes among the components of the nation, especially between political parties, it should be resolved through the mechanism of the constitution or legislation in force. Opposition camps should make corrections or criticisms positively and constructively, lest anything is destructive.

Sixth, security. To strengthen Internal in facing the possibility of global uncertainty, the level of internal security should always be maintained in all regions. For this reason, every existing security institution needs to be proactive in taking action, both in preventing and overcoming every security threat. In the meantime, every social disease in the community, such as the problem of drug distribution, gambling, etc., needs to be fully anticipated by law enforcement institutions.

Seventh, food security. Related institutions need to prepare more for domestic food security policies and less dependence on imported food commodities.

Eighth, tourism. The domestic tourism market must continue to be driven, and at the same time create a tourism program that can attract foreign tourists to visit domestic. To attract tourists from the Middle East region into the country for example, can open direct flight access to tourist destinations that still have opportunities, such as to the Southeast Southeast Nusantara / NTB region or other tourist destinations in the country.

Ninth, positive sentiment. Positive sentiment or news should continue to be rolled out to encourage economic activity, especially in supporting investment and new economic growth. For example, some time ago the Labuhan Bajo area, the Lake Toba region, was relatively not very busy, now with positive news being rolled out, this region and several other regions have been throbbing in economic activity.

The plan to relocate the capital of the Republic of Indonesia to the East Kalimantan region, initiated by President Jokowi, needs to be responded positively, especially in preparing the regulation side of each related institution. Many positive effects of the planned relocation of the capital region, such as creating equity and equity in development, creating new areas of economic growth, encouraging investment and capital flows because the newly announced capital region development model requires private participation.

Tenth, transportation. To strengthen the internal side, in the face of slowing global economic growth, all transportation routes need to be improved so that they are more efficient and do not become drivers of higher inflation. Air transportation routes, which were once expensive, need to be modified in new business models, so that they are more affordable to the general public and can support the throbbing economic activities throughout the archipelago.

Eleventh, domestic product care program. In a condition of global slowdown, a program to care for domestic products, both goods and services, needs to be done. In the field of education service products, for example, it is necessary to put forward policies that can improve national education services, both in short-term and long-term educational programs.

Twelfth, from infrastructure to HR. The use of APBN (State budget) funds, even under certain conditions, such as the Current Account Deficit, but is also used for infrastructure development and HR development does not always have a negative impact, because the results will be positive in the next period or period. Therefore, including in facing global uncertainty, the infrastructure development that has been proclaimed by President Jokowi needs to be continued with the next articulation on human resource development, so that it can trigger the increase in national productivity and more and more Indonesian human resources can work abroad in a good position .

In all of that, hopefully the scenario planning is that the trade war of “Paman Sam” (US) with the “Negeri Tirai Bambu” (China) will quickly subside, and increasingly create a more positive level of global and internal certainty. However. although faced with increasingly high uncertainty, it is necessary to continue to be optimistic with relevant changes in actions. It is said so, because in every crisis there are also opportunities, each company is formed with opportunity, everyone is born with opportunity, every country, including the Republic of Indonesia - is established or proclaimed with opportunity.

(* The author is an Advocate and Trainer, FH-UI alumnus, WA = 0813-2895-0019)