Looking at the composition of the economic team in the Jokowi second term cabinet, it seems that Jokowi needs a very clear economic road map to build the foundation of national economic fundamentals towards Indonesia 2045 that was envisioned in his speech at the inauguration of October 20, 2019. Supervised by Airlangga Hartarto, whose track record is not so good in the process of preventing national deindustrialization in the past five years, Jokowi’s hopes to improve the industrial and service sectors, the manufacturing industry, will be difficult to overcome.
Being asked as minister of industry, Airlangga took many questions about the strategy of increasing the industrial sector in the National GDP, thus encouraging the manufacturing sector to continue to increase, even slipping to 19 percent. Until 2018, the contribution of manufacturing reached 19.86%. However, if look at the trends that occur, it is agreed that manufacturing in the Indonesian economy continues to decline. In fact, it is estimated that under 20% is the first time this year has occurred since 1990. The largest contribution ever made by the manufacturing sector amounted to 31.9% in 2002.
Since then, manufacturing has only been able to contribute an average of 20% to GDP and has continued to decrease compared to the national economic growth. With a large contribution, the manufacturing sector grew below the overall growth average. The current condition began in 2005 where the manufacturing sector corrected a slowdown with growth of 4.5% while the Indonesian economy was still growing at 6.01%. In fact, the previous year manufacturing was able to grow 6.38% when the economy grew 5.03%. Since then, the manufacturing growth trend has always been below average and continues to this day.
Comparatively, in Southeast Asia, Indonesia has a relatively small share of manufacturing compared to other countries. Referring to World Bank data for 2017, Malaysia and Thailand have a higher portion, which are around 22% and 27% of GDP, respectively. Indeed, Indonesia is still superior to the Philippines and Vietnam which recorded 19.6% and 15.3%. So however, it is very understandable why the improvement of the manufacturing industry sector is one of the important keywords in Jokowi’s speech last year to increase overall economic growth. Unfortunately, the selection of figures to sit in the position of the Coordinating Ministry for Economic Affairs is somewhat far from Jokowi’s ideals, considering that Airlangga has not succeeded in breaking the deindustrialization trend that has occurred for years back.
And unfortunately, at the time pandemic comes, his ministry issued pre-employment card that become controversy later on. Seeing how it works, the pre-employment cards launched by the government are more like shopping cards, with the stipulation that some of the funds must be spent on products in the form of videos and materials provided by all designated start-ups, after which they can receive incentives. The problem here, government allocated special budget as part of pre-employment incentives to buy videos which is unnecessary for unemployed at the pandemic. Some even see it as corruptive policy benefiting some of start ups in constitutionally.
Meanwhile, for finance ministry, Sri Mulyani has been surviving with her procyclical and austerity style, efficiency in terms of expenditure and expansion in pursuing tax revenue, and opening wide opportunities for global financing institutions to patch up the national fiscal deficit, even though he doesn’t admit it. This is very understandable, considering the efficiency of spending and the intensification-extensification of tax revenues are the main requirements to get the ease of global debt. It’s just that Sri Mulyani’s style will make the national economy more conservative. Economic growth will remain perched at 5 percent, which incidentally will be difficult to provide a fundamental foundation for Jokowi’s ideals who want to get out of the middle income trap. And amid pandemic, as predicted, Sri Mulyani actually never cut the budgets in massive portion, but widening the budget deficit to open wider space for national depth
In the field of industry and trade, Jokowi has not been able to avoid the politics of accommodation because it must be occupied by two figures whose political background is thick rather than the background of competencies related to their respective fields. They are Agus Gumiwang Kartasasmita for The Ministry of Industry and Agus Suparmanto for The Ministry of Trade. As a result, it is estimated that these two ministries will not give too much change to the facts of Indonesia’s industry and trade going forward, moreover in the middle of pandemic . The symptoms of de-industrialization are expected to be in the previous trend, as well as the condition of the trade deficit that will continue to be swayed between enlargement or reduction of imports, not widening national exports.
Then the presence of Teten Masduki in the Ministry of Cooperatives and SMEs is also quite far from the fire, background and track record of Teten is somewhat unrelated to the field being handled. Inevitably, until this moment, it is unclear where the cooperative sector and SMEs will go. In the pandemic pressures, it is different from the monetary crisis in 1998 where MSMEs actually supported the economy – even exports rose by 350% -, but the impact of the Covid-19 pandemic greatly hit SMEs today. In addition, social restrictions to break the chain of transmission of viruses that spread rapidly among humans also limit the business activities of MSMEs. But the steps taken by the government to increase MSMEs’s endurance are late, not so effective and not really measurable.
It is also not so different with Wisnutama’s presence in the Ministry of Tourism and Creative Economy which is a bit disappointing. Wisnutama’s policy platform as well as its competence so far, is no different from the previous minister, Arief Yahya, who played more with tourism imaging such as branding, promotion, and sales. While today, what is needed by the tourism sector is the touch of developing international-class destinations and comprehensive-integrated plan to mature the national tourism ecosystem, so that the tourism sector is integrated with the national economic ecosystem, which is able to increase foreign exchange reserve, increase tourism’s contribution to national GDP, and expand employment opportunities. And in pandemic, this ministry is looked like lost in tourism devastative decreases
So in short, specifically for the economic team, it seems Jokowi is slightly deviated from the ideals he delivered in his inauguration speech. With the composition of the personnel of the second term economic team, Jokowi is not expected to present the achievement of a booming national economic figure. That’s why Indonesia is not really ready dealing with pandemic. While what is needed to deal with demographic bonuses, to get out of the threat of middle income traps, to get out of pandemic pressures right away, it is not enough just to achieve the usual. Normally, Indonesia needs an economic growth rate in progressive percentage to get out of the threat of a middle income trap with the support of fairly high investment growth as well. And now, after plumented economic of first quarter this year, it will really be harder. Therefore, before it is too late, Jokowi really needs to move faster with the right economic team to be out of negative pandemic cycles. And certainly, cabinet reshuffle will not be bad option.
Digital Futures: Driving Systemic Change for Women
Authors: Erin Watson-Lynn and Tengfei Wang*
As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them.
Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.
Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.
Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.
Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.
A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.
In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.
While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.
These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.
*Tengfei Wang, Economic Affairs Officer
This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP
Empowering women-led small businesses in Nepal to go digital
Authors: Louise Anne Sophie Lavaud and Mitch Hsieh*
Throughout the years, Laxmi Shrestha and her husband saw the opportunities that opening an online shop could bring to her family business.
“Looking at the trend of TikTok and other sites, we thought selling online could help us but we weren’t technically sound,” said Laxmi, the owner ofLaxmi Hastakala Store, in Banepa, Nepal, and part of a family of artisans.
As she learned about selling online, she picked up on how to market her shop digitally and, according to Laxmi: “It has surely given our business a push we always wanted. Recently we started selling our products online and we also receive payments online.”
Laxmi Hastakala Store is among the 1,800 women-led micro, small and medium enterprises (MSMEs) in Nepal being trained on digital and financial literacy by Sparrow Pay – one of the winners of the Women Fintech MSME Innovation Fund launched in 2019 by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Capital Development Fund (UNCDF).
Sparrow Pay has created a local digital marketplace where women-led MSMEs can offer products and services to its existing 800,000+ digital payment service users. Additionally, Sparrow Pay is supporting these women entrepreneurs in adopting digital payments and creating a payment history to support access to additional financial services.
MSMEs are a vital source of employment and a significant contributor to a country’s GDP. However, more than 45 per cent of MSMEs in Asia and the Pacific are constrained from accessing finance and other support for their businesses. Socio-cultural norms mean women-led enterprises have to overcome gender-specific barriers to access institutional credit and other financial services.
ESCAP and UNCDF aim to encourage easy access to digital finance for MSMEs in Asia and the Pacific, break the financial barriers surrounding women-led enterprises and support entrepreneur-centric growth and inclusiveness throughout the region. Initiatives by the 10 winning fintech companies are currently supporting more than 9,000 women-led MSMEs in Bangladesh, Cambodia, Fiji, Myanmar, Nepal, Samoa and Viet Nam.
Just like Laxmi, these women business owners plan on successfully growing their companies in the digital area.
The Women Fintech MSME Innovation Fund is part of a regional programme “Catalyzing Women’s Entrepreneurship: Creating a Gender-Responsive Entrepreneurial Ecosystem,” which seeks to support the growth of women entrepreneurs in Asia and the Pacific by enabling a policy environment for such business owners, providing them with access to finance and expanding the use of ICT for entrepreneurship.
*Mitch Hsieh Chief, Communications and Knowledge Management Section
Is It Possible to Lift Sanctions Against Russia? — No
Every conflict sooner or later ends in peace. Such is the conventional wisdom that can often be heard from those who, amid the current situation of the sanctions tsunami and confrontation with the West, are trying to find hope for a return to “normality”. The logic of such wisdom is simple. At some point, the parties will cease fire and sit down at the negotiating table. The end of hostilities will lead to a gradual reduction in sanctions pressure on Russia, and our businesses will be able to return to work with Western partners.
We have to disappoint those who believe in such a prospect. Sanctions against Russia, for the most part, will not be lifted even in the event of a ceasefire in Ukraine and a peace agreement. There will be no return to “pre-February normality”. Instead of remembering a lost past, we will have to focus on creating a new future in which Western sanctions remain a constant variable.
Why is the lifting of Western sanctions on Russia extremely unlikely? There are several reasons.
The first reason is the complexity of the conflict between Ukraine and Russia. It has every chance of being prolonged for a long time. There may be pauses in active hostilities. The parties may conclude temporary truces. However, such truces are unlikely to remove the political contradictions that gave rise to the conflict. Currently, there are no parameters for a political compromise that would suit all parties. Even if an agreement between Moscow and Kiev is reached, its sustainability and feasibility are not guaranteed. The experience of Minsk-2 shows that the mere appearance of agreements does not automatically resolve political problems and does not lead to the lifting or easing of sanctions. The Ukrainian problem can smoulder and flare up again for decades, partly because both sides are limited in the possibilities of a decisive military victory and complete surrender of the enemy. Relations between Russia and Ukraine are at risk of entering the ranks of long-term conflicts, similar to relations between India and Pakistan, or North and South Korea. The complexity and longevity of the conflict guarantee Western sanctions for the long term.
The second reason is the stable nature of the contradictions between Russia and the West. The conflict in Ukraine is part of a larger Euro-Atlantic security palette. An unstable system of asymmetric bipolarity has formed in Europe, in which the security of Russia and NATO can hardly be indivisible. Russia has no way to crush the West without doing unacceptable damage to itself. However, the West, despite its colossal superiority, cannot crush Russia without incurring unacceptable losses. Containing Russia is the best strategy for the West. Ukraine is doomed to remain one of the areas of containment. For Russia, the strategy of asymmetric balancing of Western superiority remains optimal. It is possible that part of such a strategy will be a course towards a radical territorial redistribution of Ukraine, tearing away from it the eastern and southern parts. But in itself, such a redistribution will not remove the problems of Western sanctions.
The third reason is the institutional features of the sanctions policy of the initiating countries. Experience shows that sanctions are relatively easy to impose but very difficult to lift. Thus, with regard to Iran, a whole “web of laws” has formed in the United States, which significantly limits the administration’s ability to lift sanctions. Even if the sanctions are not enshrined in law, their cancellation or mitigation still requires political capital, which not every politician is ready to spend. In the US, such steps will cause criticism or even opposition in Congress, and in the EU – disagreements among member states. Of course, individual restrictions are lifted or relaxed in the interests of the initiating countries themselves. The experience of sanctions pressure on the Republic of Belarus shows the existence of the “sanction remissions” when restrictions are eased. However, the legal mechanisms of sanctions themselves remain and can be used at any time.
The fourth reason is the quick reversibility of the sanctions. Often, their abolition is accompanied by political demands, the implementation of which is a complicated process. For example, the Iranian nuclear deal required several years of complex negotiations and significant technological decisions. However, the return of sanctions can be carried out overnight. There is an asymmetry in the fulfilment of obligations. Fulfilling the requirements of the initiators requires significant changes, while the return of sanctions requires only a political decision. Rapid reversibility breeds distrust among target countries. It is easier for them to continue to live under sanctions than to make extensive concessions and risk receiving new sanctions. Historical experience shows that the initiators of sanctions tend to play the game of “finishing” the opponent. After the concessions come new, more radical political demands and the threat of new sanctions. The “Pompeo 13 Points” – a list of US demands on Iran beyond the limits of fulfilling the terms of the nuclear deal – have already become a textbook example. The Iranian lesson, apparently, was well learned in Moscow. Iran itself is actively working to achieve its goals in the field of nuclear arms. Ultimately, this shows the ineffectiveness of sanctions in terms of influencing the political course of the target country. But questionable effectiveness does not negate the fact that sanctions continue to be applied and enforced.
The fifth reason is the ability to adapt. Without a doubt, Russia will suffer enormous damage from the restrictive measures which have been introduced. However, the possibility of it adapting to the sanctions regime remains high. Russia has the chance, first, to partially make up for the shortfall in supplies from abroad with the help of its own industry, although this will require political will and the concentration of resources. Second, it has access to non-Western markets, as well as alternative sources of goods, services and technology. The key conditions for solving this problem will be the creation of reliable channels for financial transactions that are not related to the US dollar, the Euro, or Western financial institutions. Such a task is feasible both technically and politically, although it will also require time and political will. Iran’s experience shows that sanctions have seriously hit the country’s development opportunities. However, they did not interfere with the development of agriculture, industry and technology. The modernisation of the Soviet Union also proceeded under severe Western sanctions. The ability to adapt reduces the motivation for concessions to the demands of the initiating countries, especially given the risk of playing for “finishing”.
These reasons make the prospect of lifting or significantly reducing sanctions pressure on Russia extremely unlikely. The US, EU and other initiators have already introduced the most severe restrictions on Moscow. But the upward wave of sanctions escalation has not yet been exhausted. In addition, the achievement of the ceiling of the applied measures is unlikely to mean the abolition of those already introduced. However, the sanctions also do not mean the “end of history” of the Russian economy. It found itself in new conditions that will require adaptation and the search for new opportunities for development and growth.
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