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Go Back       IAR Journal of Business Management | IAR J Bus Mng, 2021; 2(1): | Volume:2 Issue:1 ( Feb. 10, 2021 ) : 108-112
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DOI : 10.47310/iarjbm.2021.v02i01.016       Download PDF       HTML       XML

Economic Strengthening Measures as A Impact of Covid-19 in Indonesa


Article History

Received: 03.01.2021, Revision: 14. 01.2021, Accepted: 31. 01.2021, Published: 10. 02.2021

Author Details

Untung Lasiyono

Authors Affiliations

Lecturer at the Accounting Study Program, Faculty of Economics and Business, University of PGRI Adi Buana Surabaya

Abstract: This article describes the impact of the COVID-19 pandemic on Indonesia's economic life. As it is known that this pandemic has an impact on the health and even the safety of human souls. The Indonesian government is facing this pandemic by adopting a policy aimed at saving human lives in Indonesia with a policy of limiting large-scale activities on all lines including those containing economic activities. As an impact on economic life, there is a closure of industrial or production activities, there are restrictions on economic activities that involve direct human contact and the like. This is what causes economic life to be disrupted; there are many unemployed people, the people's purchasing power decreases, which in turn cause the national economy to decline. Facing these problems, so that economic life continues to run based on the people's economy, what must be done is three things first, strengthening micro, small and medium enterprises that involve the community, especially the middle and lower levels, second, activating cooperative business forms that involve the community's level. Middle to lower also, and third, strengthening the mastery of information technology in micro, small and medium enterprises and cooperatives so that they can carry out virtual transactions or market activities.

Keywords: COVID-19 pandemic and economic strengthening.

Background

The economy in a country is important, therefore the economy must be maintained so that the national economy remains stable and prosperity is created for the entire nation. There are always obstacles in terms of the economy, both internal and external, including obstacles that cannot be predicted, namely the COVID 19 pandemic.

Indonesia as a country located in the ASEAN region is certainly not spared from the economic constraints caused by the COVID 19 pandemic. The Indonesian government has taken policies related to the pandemic, namely the main thing is to save human lives. Therefore, in relation to the pandemic problem, government policy is carried out by imposing large-scale social restrictions and other policies with the aim of breaking the chain of spread of the COVID 19 pandemic.

From a health perspective, this government policy has a positive impact because it can reduce the spread of the virus and even break the chain of the virus, but from an economic point of view, this policy has an impact on weakening economic life. The weakening of economic life is due to the fact that many industries that absorb labor are forced to stop their production activities so that many workers are no longer working and have an impact on the loss of their income.

In connection with this, namely the COVID 19 pandemic and so that in this pandemic condition economic life continues, steps are needed as a solution so that the economy continues to run even though it is facing a pandemic. Based on several descriptions of the problem of increasing economic resilience, especially during the COVID-19 pandemic, because the economic system and its implementation have not been maximally based on the constitution, meanwhile, if the economic system and its implementation are implemented optimally, prosperity in Indonesia will be realized through the people's economy for ensure the continuity of national development and the survival of the nation and state based on Pancasila and the 1945 Constitution of the Republic of Indonesia. Pancasila economy is an economic system based on popular power, which should avoid the following: a) Free competition system, b) Ethical system, and c) Forms. Monopoly, so that what is realized is an economy that involves all components of the nation for justice and equity.

Furthermore, economic development should be carried out as a joint effort on the basis of kinship under the supervision of community members, as well as motivating and encouraging active community participation. Efforts must be made for linkages and partnerships between actors in the framework of economic activity, namely the government, state-owned enterprises, cooperatives, private enterprises and the informal sector to achieve equitable growth and economic stability. Equitable development and equilibrium in the economic structure carried out for the utilization of its products are always carried out through a balance and harmony of development between regions and between sectors as well as a balance between the agricultural, industrial and service sectors.

Competitive capabilities both nationally and globally should be grown in a healthy and dynamic manner in maintaining and enhancing the existence and independence of the national economy by optimally utilizing national resources with appropriate science and technology facilities in dealing with every problem and still paying attention to job opportunities. The government has taken steps related to the COVID-19 pandemic, namely five policies, namely: (1) Carrying out massive spending to reduce economic contraction due to the COVID-19 pandemic, (2) The government forming a Covid-19 and Recovery Committee National economy, (3) government gave aid low-interest credits, and prepare a variety of programs to Micro small and Medium Enterprises, (4) The government put the funds in banks in order to turn the wheels of the economy, (5) The government credit guarantee working capital for the corporation. However, the five steps have not yet focused on the interests of the middle and lower class of society whose economies are more disturbed due to the impact of the pandemic.

Overview of Economic Development

One indicator of the success of economic development can reduce unemployment, poverty or inequality. When there are still many economic lives below the poverty line and many unemployed, it means that economic development has not been successful. In economic development, it does not only focus on the development of real national income, but also on the modernization of economic activities. Economic development is a low-income national economy transformed into a modern industrial economy. In general, this term is used to describe changes in a country's economy that involve both qualitative and quantitative improvements. In the theory of economic development, how primitive and poor economies can develop into a sophisticated and relatively prosperous. It is very important for underdeveloped countries, and it is usually in this context that the issue of economic development is discussed. Economic development first became a major concern after World War II. When the era of colonialism ended, many former colonies and other countries with low living standards were then referred to as underdeveloped countries, in order to differentiate their economies from developed countries. As the standard of living in most of the poorest countries began to improve in the following decades, they were named developing countries.

Developing countries are usually categorized on the basis of per capita income criteria, and economic development is usually considered to occur when per capita income increases. A country's per capita income (which is almost identical to output per capita) is the best available measure of the value of goods and services available, per person, to society per year. In the book Economic development vortex by Rustan (2019), economic development is a process of increasing total income and per capita income by taking into account population growth and accompanied by fundamental changes in the economic structure of a country and equal distribution of income for the population of a country. Economic development cannot be separated from economic growth. Economic development encourages economic growth and conversely, economic growth will accelerate the process of economic development. In economic development, the community plays a role as the main actor and the government becomes the guide and support for the course of economic development.

Economic growth is an indicator of successful development. The higher the economic growth, usually the higher the people's welfare. Economic development is a process of change towards improvement that is carried out consciously and planned to improve the standard of living of the community. Elements of economic development Economic development can be defined as a process that causes income per capita of the population to increase in the long run. The following are three important elements related to economic development: (1) Development as a process Development as a process means that development is a stage that must be undertaken by every society or nation. (2) Every country must undergo the stages of development of a condition that is just, prosperous and prosperous, (3) Development as an effort to increase per capita income This is an active action that must be taken by the state in increasing per capita income. So participation by all state parties must be good. Because per capita income is a reflection of the good of people's welfare. The increase in per capita income must take place in the long run. The economy is said to be developing if the income per capita increases. So with an increase in economic activity every year, per capita income can continue to rise even though there are temporary disruptions (Kompas.com, 2020).

Pancasila economic system

Pancasila economy is the notion of the economic system, the economic philosophy that refers to the idea of the founders of the nation as the state. So, anything related to economic development should be based on the fundamentals of this country (Mubyarto, 1997).  In the Constitution NRI 1945 for example has been explained that when this country's independence, the purpose of this country was built was to protect all the people of Indonesia. It is the basis for economic development in Indonesia (Lemhannas RI, 2020). If you look at the journey from 1945 to the present, the economy that this country wanted to build when it became independent was the antithesis of the previous economy. Previously, Indonesia's economy was an economy that was under the confines of the colonialists, so that when this country was built, there were serious efforts to develop an economy that was otherwise,

An independent economy, a sovereign economy. Likewise, the theory of Political Economy and Development (Damanhuri 2010) also explains that economic strength lies not in the power of capital alone but in the power of the people who are able to move to run economic endeavors. This is what supports why empowerment of micro, small and medium enterprises need to be done in Indonesia.

History struggle began since independence until now, a tug of war between the economy that in view of the history, the colonists had not happy to hand, it is evident from the various negotiations that happened earlier to occur of the Round Table that of information There are also many negotiations that still recognize Dutch Law, including those negotiations that foreign companies are still allowed to invest in Indonesia. This means that the tug of war between domestic and foreign interests continues. And the condition until now remains like that, even during the old order, the new order, the reformation order, the conditions were like that. Then, since the reformation until now, this important event that has driven the Indonesian economy has a tendency to be more open, more liberal. There are efforts to liberalize, endeavored to be as widely open as possible, economic policies, one example of world trade. How to see, if we use the market mechanism as a way to see, can say planning is not necessary, market is what a right do by itself (Republika.co.id, 2020).

Data and Facts

The Central Statistics Agency (2020) released Indonesia's economic growth figures in the second quarter of 2020. As predicted by many, the Indonesian economy contracted by -5.32 percent (year on year). The contraction was deeper than predictions the previous finance minister, which Minister of Finance wishful predicts economic growth in the second quarter would contract with the range of minus 3.5 to 5.1 percent. Negative numbers in the quarter both adds to the poor record of economic growth in 2020. In the first quarter, growth economy Indonesia recorded at 2.97 percent, where achievement was lower than a previous prediction of 5 percent. The economic growth in the first and second quarters, which tends to decline, cannot be separated from the influence of the corona virus (COVID-19) pandemic which has lasted more than the last four months.

Since it was first announced on March 2, 2020 to August 6, 2020, the number of positive cases COVID-19 in Indonesia reached 118 753 people. Economic growth in the first and second quarters of 2018-2019 is around 5 percent. The decline started this year when the pandemic began. Growth in the first quarter of 2020 was recorded at 2.97 percent. If calculated against the same quarter in 2019 of 5.07 percent, it means that there is a difference of minus 2.1 percent, the difference in the second quarter, meanwhile, is greater. If calculated between the first quarter of 2020 of -5.32 percent against the second quarter of 2019 of 5.05, there is a difference of -10.37 percent. Data is different than it would be "normal" or pre COVID-19. When comparing the first and second quarters of 2019 against 2018, the figures tend to be stable with a fairly small difference. The difference between the first quarter / 2019 when compared to the first quarter of 2018 was 5.06 percent, an increase of 0.01 percent was recorded. If you compare the second quarter of the two same years, the difference is minus 0.22 percent. 

Compared to neighboring countries in the ASEAN region, the difference or change in Indonesia's economic growth is not the worst, however, Indonesia is one of the countries with a decline in economic growth by a double digit difference in the second quarter of 2020. Trading Economics noted that six countries in ASEAN experienced an economic decline in the second quarter of 2020 when compared to the same period last year. As many as three of them, experienced a decrease of more than 10 percent. Malaysia recorded the smallest decline of 3.80 percent with economic growth in the second quarter of 2020 of 0.70 percent. Thailand and Vietnam experienced economic downturns of 4.70 percent and 6.37 percent, respectively. Indonesia is in third place with an economic decline of minus 10.37 percent. The decline in the Indonesian economy at the double digit level is not surprising given the absence of a sector that forms the backbone of the domestic economy. In Indonesia, there is no one sector that is the leading sector. Singapore, which announced earlier economic growth figures for the second quarter, also experienced an economic decline of 12.80 percent. This decline was also influenced by the characteristics of the Singapore economy, which relies on foreign trade and international finance. The Lion country has technically entered a recession when the initial figures for the second quarter of economic growth were announced. In the second quarter of 2020, Singapore's economy contracted by 12.60 percent. Previously, in the first quarter, Singapore's economic growth also decreased to minus 0.3 percent. A brief note, a recession is a condition when a country's economic growth contracts in two consecutive periods. The Philippines became the country with the largest economic decline in the second quarter of 2020. Based on the difference in economic growth in the second quarter of 2020 against the same period in 2019, an economic decline of 22 percent was recorded. The Philippines is technically experiencing a recession after the first quarter also contracted by 0.7 percent. The record of economic contraction in two consecutive quarters was influenced by the implementation of a strict lockdown in the country (Tirto.id, 2020).           

STEPS AS A SOLUTION TO THE IMPACT OF THE COVID-19 PANDEMIC

Empowerment of Micro, Small and Medium Enterprises 

Micro, small and medium enterprises have an important role in the economy in Indonesia, and even the Indonesian Government considers it important where Micro, Small and Medium Enterprises, and as proof, micro, small and medium enterprises along with cooperative has receptacles specifically under the Ministry of Cooperatives and Small and Medium Enterprises. (RI Law 20/2008). Role Micro, Small and Medium Enterprises, important first is as a means of alleviating the small communities out of poverty. The main reason is, the high rate of employment by micro, small and medium enterprises. This is evident in the data belonging to the Ministry of Cooperatives and MSMEs, which states that more than 55.2 million, micro small and medium enterprises are able to absorb around 101.7 million people. This figure has increased to around 57.8 million units of micro, small and medium enterprises with a total workforce of 114 million people. Micro, small and medium enterprises also have a very important role in the economic distribution of society. In contrast to large companies, micro, small and medium enterprises have locations in various places. Even in areas far from the reach of times. The existence of micro, small and medium enterprises in 34 provinces in Indonesia reduces the economic gap between rich and poor. In addition, small people do not need to go to the city in droves to get a decent living. The next, no less important role of micro, small and medium enterprises is to provide income for the country in the form of foreign exchange. Currently, Indonesia's micro, small and medium enterprises are already very advanced. Its market share is not only on a national scale, but internationally. Data from the Ministry of Cooperatives and micro, small and medium enterprises in 2017 showed high foreign exchange from actors that micro, small, and medium. The figure is very high, reaching IDR88.45 billion. This figure has increased up to eight times compared to 2016.

Strengthening Cooperative Business Entities 

In accordance with the definition of cooperatives that cooperatives are economic activities based on kinship, the main objective is to increase the welfare of its members (RI Law 12/1992). With the existence of cooperatives, the small people are free from loan sharks who provide loans with high interest. In addition, rural people are free from middlemen who buy crops at low prices. In the end, they can manage finances or crops in a mutual cooperation and based on family principles. The condition of the COVID-19 pandemic is a big challenge for cooperatives to exist and run their business. The role of cooperatives as a forum for business actors and a source of capital is faced with tough challenges. Minister of Cooperatives and Small and Medium Enterprises said, there were 1,785 cooperatives affected by the pandemic. Pandemic conditions have an impact on cooperative business activities, decreased sales, lack of capital, and hampered distribution. However, the COVID-19 pandemic can also be a momentum for cooperatives to prove their role as a buffer for the national economy. Cooperatives can become "economic heroes" amidst the economic uncertainty caused by the pandemic.

In addition to digitizing cooperatives, liquidity, and product innovation, the challenge for cooperatives to survive in the midst of a pandemic is the ability of Human Resources. Digitization cooperative course requires human resources who control the Information Technology and Telecommunication. As well as maintaining liquidity, it also requires accounting experts. Product innovation also requires human resources who master marketing, packaging and branding. Therefore, cooperatives need to upgrade the capabilities of Human Resources who master various things. Increasing Human Resources is certainly not an easy thing. This effort requires the intervention of the central government and local governments to provide training and guidance to all cooperatives under its guidance. Required program synergy between the Ministry of Cooperatives and Micro and Small Enterprises, provincial governments, local government districts/cities, universities, and other stakeholders.

Improving Information Technology for MSMEs and Cooperatives 

The development of technology for everyday human life has many benefits because with the development of information technology, the most important benefits are for the world of education, industry, and various other businesses. With technology that has experienced quite rapid development in the last few decades. In the business world, or at the level of small and medium enterprises such as micro small and medium enterprises to large companies, the use of technology is very important and dominant as a means of communication to convey information and do business. The era of globalization which eliminates the boundaries of time and space has also resulted in the emergence of new industrial sectors, which take advantage of technological developments by combining communication, information and service entertainment through computer networks. This causes economic movement from physical exchange of goods to exchange through technological media. economic movements that occur indirectly contribute to economic growth. at the macro level, technological developments promote economic development and contribute to economic growth.

Information and communication technology is the most rapidly developing technology globally marked by the emergence of various innovations, and this technology has become part of the infrastructure for various sectors of life. All countries in the world will not be able to avoid bias from information and communication technology. Both developed and developing countries, including Indonesia, have positioned Information and Communication Technology as one of the main drivers of economic growth.

Information technology can change the village economy to be even better in quality in the agricultural, livestock, and plantation sectors in particular to improve the national macro economy by looking for very important information related to these problems. The presence of technology has had a considerable influence on human life in various fields, such as politics, economy, social, culture, defense, security and so on.

The role of technology in the economy on a macro scale can be seen from the many business opportunities or new businesses in today's economy. In general, technological advances provide the following suggestions: (1) Help map potential areas for the economy, both in the territory of the country and those outside the territory of the country; (2) Helping equality, with the information system obtained, we can find out areas that have excess labor and send them to areas that require a lot of labor and (3) Media for public welfare control with information systems, the country can find out areas that are high level. high or low welfare so that the country determines the amount of subsidies or assistance budgeted for the area.

Conclusion

Based on the current problems, namely the COVID-19 pandemic and its effects, so that the economy continues to run, there are three main things that must be developed, namely:

  1. The increase in the inclusion of Micro, Small and Medium Enterprises needs to be increased in various types of businesses so that people continue to carry out economic activities both individually and in groups;

  2. The model of economic enterprises in the form of cooperatives needs to be further improved so that all levels of society, especially the lower middle class, have a business role that is accommodated by cooperative business entities;

  3. Increased mastery of information technology in micro, small and medium enterprises as well as in cooperative business entities, so that in conditions that do not allow direct transactions with the mastery of information technology, they can still carry out bail economic activities via the internet, social media and the like

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