Indonesia has negative quarterly GDP growth for the first time since 1999
Indonesia recorded its first negative quarterly growth since 1999, as consumption and investment declined due to the action restrictions implemented by provincial governments and a reduction in business activity as a result of the Corona scare, which was more than the negative 5.08% predicted in advance by Finance Minister Sri Mulyani.
— やまぞう (@yamazou) August 6, 2020
Indonesia's recession is often compared to the recession that started with the 1998 currency crisis, but at the time, Indonesia's foreign exchange reserves ran out due to short selling by hedge funds (selling contracts without cash), which led to a crash in the rupiah market. The recession is accompanied by a temporary suspension of economic activity in the midst of the country's current economic downturn, which means that textbook central bank stimulus measures to lower interest rates and campaigns to support the travel and transportation industries, which have been badly affected by migration restrictions, will be implemented.
After suspending the reception of domestic and international tourists for five months, Bali has resumed accepting domestic tourists on July 31, provided they bring a negative PCR test certificate issued at least 14 days prior to the start of migration, and will resume accepting international tourists on September 11.
The PCR test is now more than 3.5 juta, which is more expensive than the ticket price at the hospital in Indonesia, so it will be limited to the wealthy people who can travel to Bali for the time being, but the resumption of domestic tourists is good news for the tourism industry as they used to account for more than 60% of the tourists to Bali in 2018.
Investment Environment in Vietnam and Indonesia
With the news of SARS in 2003, bird flu in 2005, swine flu in 2009, the new coronavirus in 2020, and the recent deaths of seven people from the Bunya virus, there is a constant stream of incomprehensible viruses and the bodies of Indonesian sailors in the sea The Chinese consulate will instigate rioting demonstrations to take advantage of Black Lived Matter, and send unknown seeds to the U.S. and Japan, and with this much commotion around the world, the de-Chinaization of industry will indeed accelerate. As a result, manufacturers from many countries are competing with Thailand and Vietnam to attract companies to relocate to Indonesia.
However, Vietnam has the geographical advantage of being located on the Malay Peninsula with easy access to neighboring countries, and northern Vietnam belongs to the Chinese cultural sphere with Chinese characters and Confucianism due to the influence of a long period of rule by Chinese dynasties.
— やまぞう (@yamazou) August 5, 2020
Indonesia's average land price of Rp. 3.17 million per square meter is much more expensive than Thailand's Rp. 3.03 million and Vietnam's Rp. 1.27 million, and although the wage level is almost the same as Thailand's, it is much more expensive than Vietnam's, so all countries are trying to attract cheap land and minimum wages to win the competition. There is a common movement in the provinces to develop industrial parks.
The Indonesian government considers labor costs and low land prices to be important factors in an attractive investment environment for foreign companies, and has recommended Batang Industrial Park in Central Java as the most important candidate site. However, if you look at the map, it is close to Semarang, which is an international trade port, and it will be an important base for the Northern Java Automotive Industrial Belt Initiative proposed in Making Indonesia 4.0.
There is no doubt that Indonesia's biggest attraction for investors is "a thick domestic consumer market that will continue to grow," and with Vietnam's population of 96.21 million in 2019, close to 100 million, it is already forming a huge domestic market, and Indonesia cannot rely on domestic demand in the competition to attract foreign investment.