Covid-19 impact and responses: Indonesia

Updated on: 22 June, 2020

What is the current situation?

General information

As of 22 June 2020, there were 45,891 confirmed cases of Covid-19 in Indonesia, of which 2,465 were fatalities and 18,404 persons recovered.

The prediction of economic growth by the Government is -3.8%, lower than the prediction by Bloomberg and Moody’s which was -3.1%. An ILO survey shows that 2 out of 3 companies in Indonesia have stopped operations. The Indonesia Chamber of Commerce stated that the dismissals could reach 15 million people across all sectors. The data from Indonesia Textile Association said about 2.1 million workers in the garment and shoes sectors have been impacted. Data from social security (BPJS) shows that the claim of ‘old age security (JHT)’ from January-May 2020 reached 791,050 most of which are claims by dismissed workers.

Both domestic and international flights have resumed with limited capacity. Passengers (both domestic and international) arriving in Jakarta, Surabaya and Denpasar should provide a health certificate with a non-reactive rapid test or negative polymerase chain reaction (PCR)/Swab test result. The other documents needed are a travel endorsement from a company/institution, a travel statement letter in accordance with Covid-19 control in Indonesia and DKI Jakarta Entry/Exit Permit Letter (SIKM). Kindly see here for detailed information.

Subject to safety measures, the government applies restrictions based on the level of coronavirus transmission in a certain area. People who are living in the green zone can do normal activities, including going to the mosque or church. ‘Green zone’ means that there have been no new cases in that area. Restrictions remain in the yellow, red and black zones. ‘Black zones’ are the most severely affected areas. Schools are planning to reopen on 13 July 2020.

The government just issued a new Government Regulation Number 25/2020 on the Implementation of Public Housing that will deduct 2.5% of workers’ wages, plus a contribution from employers of 0.5%. The trade unions said that the policy was announced at the wrong time, since workers currently have lost their income and jobs. Trade unions are negotiating a lower percentage to be deducted from workers salary.

The situation with factory production

More than 2.5 million workers are employed in the Indonesian garment industry, most of which are women. Many orders have been cancelled due to the lockdowns of importing countries and the closure of retail outlets. (Source: Interview with Indonesia Textile Association, 27 March 2020) The Association also reported that 80% or 2.1 million of garment and shoes workers have been sent home. The utilisation of the factory has been declining to below 20%. The employers prefer to close the factories due to running out of cash flow.

The factories that apply safety measures can operate. However, due to physical distancing and lack of orders, the factories tend to implement working shifts where the workers only get 50% payment (or less) while they are at home. Trade unions also reported that job security is decreasing since the factories tend to apply short-term contracts or a ‘no work, no pay’ system. (Source: Discussion with Garteks about the latest situation in Cakung industrial zone, 31 May 2020)

What are the government policies to support local businesses?

As an economic stimulus, the government prepared four types of tax relief for employers for the period of April – September 2020 with the value of IDR 22,97 trillion or EUR 12.93 billion. The four tax reliefs are as follows :

  • Salaries with a maximum of IDR 200 million of workers in manufacturing will not be taxed (PPh 21);
  • No import taxes for the 19 manufacturing industries (PPh 22) and zero corporate tax (PPh 25);
  • Value added tax restitution for exporting (PPN) and non-exporting companies (PPh 25);
  • Postponement of tax payment.

The Financial Service Authority has issued a regulation to support small-medium enterprises which have loans of less than IDR 10 billion. The creditor can receive credit restructuring including a reduced interest rate, longer credit term, less penalty and credit conversion. The local government of Jakarta is providing tax incentives and is reducing state tax. It will provide social support to workers impacted by Covid-19.

(Source: Regulation Number 33/2020 on ‘The Implementation of High Scale Social Restriction in Corona Virus Handling in Special Region of Jakarta Capital City’ 9 April 2020.)

Electricity for the 24 million households with 450 VA will be free. Seven million households with 900 VA will receive a 50% discount. This policy aims to support the small and medium enterprises that are hit by the coronavirus for the period April-June 2020.

What are the government policies and regulations to protect employees – the workers?

The government has waived the payment of BPJS for the next 3 months. As a way to pay BPJS, employers contribute about 10% of the worker’s basic salary plus fixed allowance. While the workers shall contribute 4%. Therefore, in total, 14% of worker’s basic salary plus fixed allowance shall be paid to BPJS.

The Ministry of Manpower has issued two Circular Letters related to the pandemic, namely: 

  1. Circular No. M/3/HK.04/III/2020 on Worker/Labor Protection and Business Continuity in the Context of Prevention and Control of COVID-19. 
  2. Circular No. M/67/HI.00.0-1/V/2020 on the Religious Holidays Allowance (THR) for 2020 During the COVID-19 Pandemic. 

The two circular letters have been challenged by trade unions since it has allowed the normative stipulations to be negotiated at company level.

The Government also allocated a budget of IDR 20 trillion for a ‘Pre-Working Card’ that gives a dismissed worker training and cash. The priority beneficiaries are informal workers and daily workers who are working in tourism and transportation industry. Workers who have the BPJS card will receive IDR 1 million per month for a maximum of 4 months. For those without a BPJS card, they will get IDR 600,000 per month for a maximum of 4 months. In addition to that, the workers will receive IDR 150,000 in cash for participating in the survey, plus IDR 1 million as an in-kind cost for completing online training. For comparison, the lowest minimum wage in Java and Bali is IDR 1,705,000 per month.

However, trade unions say that the Pre-Working Card is difficult to access by the workers who do not have IT capacity and an Android smartphone. While the workers can register online, the server often freezes, so many workers have failed to register. Trade unions believe that the Pre-Working Card should be reviewed since the policy was made before pandemic. Dismissed workers are not people who need training since they already have years of experience. Regarding the training materials, trade unions said that it is not fit for the current needs.  The need of workers is cash to survive.

(Source: Discussion result of Gender Network Platform Zoom meeting, 8 May 2020, organised by Fair Wear Foundation.)

The government has increased the budget for recipients of the ‘Cheap Basic Needs’ cards from IDR 150.000 to IDR 200.000 per family. The government also added 25% extra to the budget for supporting disadvantaged families through Family Hopes Program (PKH).

The Ministry of Manpower labour inspector’s reports and warning letters are encouraged to be published online. The labour inspector may visit the workplace only for important tasks, including checking the impact of Covid-19, subject to a safety protocol that the inspector must follow. (Source: Letter Number 5/228/AS.03.00/IV/2020 from the Directorate General (DG) of Labour Inspection and Occupation Health and Safety Creation sent to the Head of Provincial Manpower Office in regard to ‘The Implementation of Labour Inspection in Covid-19 Pandemic’ on 8 April 2020)

What are local stakeholders doing to lobby their government?

Trade unions tried to lobby the government to postpone the Job Creation Bill (Omnibus Law) in parliament. From the government’s perspective, the Omnibus Law can cut the bureaucracy and policies that hamper the investment climate. While the trade unions see the bill as a setback to labour rights (since there is more flexibility in the contract, working hours, etc.) a national tripartite has sent letters to the President and local government, either to the governors or mayors, to urge them to follow the instructions of the Minister of Health and Minister of Manpower. Trade unions can also submit complaints in the provincial manpower office if they face industrial relation issues.  

What are local organisations doing to support and protect workers?

Some trade unions have managed to provide basic needs to their members, especially those who have lost their jobs. They also received support from communities and government organisations. The Minister of Women Empowerment and Child Protection for example, facilitated by Fair Wear Foundation, has distributed 239 goody bags for dismissed garment women workers in Jakarta.

What have been the responses and requests of business associations to support the industry?

The Indonesia Textile Association asked the government to provide tax relief, including the postponement of paying tax for 90 days, and to allow employers to postpone electrical and gas bills. The Association added that many employers have not received a loan relaxation from the banks.

What are international brands doing to support the suppliers and protect the workers?

Brands have shared best practices from other production countries on how to deal with safety measures. No suppliers have reported on production-related support from brands.

Relevant links for more information

Indonesia National Board for Disaster Management (BNPB)
Ministry of Health
Government of Jakarta
Government of Yogyakarta
Government of Central Java
Government of West Java
Government of Banten
Government of Bali
Ministry of Manpower
Travel Policy for Indonesia The Coronavirus Effect on Work, Life and Feelings