Economists Reveal Pandemic To Change Business World, Strong To Dominate Markets

JAKARTA - The Indonesian economy has decreased significantly due to the impact of the COVID-19 pandemic.

Based on data in the second quarter of 2020, 5.32 percent contracted year on year (yoy) to Gross Domestic Product (GDP).

This figure is lower when compared to the same period in 2019, which is 5.07 percent.

The decline continued in the third quarter of 2020 with a contraction of 3.49 percent, which ci is at the same time positioning Indonesia in the first recession that has been experienced since the Asian Financial Crisis in 1998.

The sectors that contribute to minus growth are household consumption, investment, and exports.

Economist and Financial Practitioner Hans Kwee said the COVID-19 pandemic has also triggered capital outflows from Indonesia's financial markets, where many foreign investors attract investment from the bond market and equity.

This situation certainly adds to the pressure on the financial market and weakens the value of the rupiah.

According to Hans, the decline in liquidity in the financial market makes it difficult for banks and financial institutions to provide new loans or support debtors who are experiencing difficulties.

As a result, the ratio of non-performing loans (NPL) increased from 2.5 percent in January 2020 to 3.1 percent in the middle of the year.

Hans said this increase reflects the difficulties experienced by many companies and individuals in fulfilling their debt obligations.

Although loan restructuring offers little assistance, the long-term impact of the pandemic has the potential to worsen the financial situation.

"Companies with high debt are also in a very vulnerable position. With a significant decrease in income, many have difficulty paying off debts, causing a decrease in domestic economic activity," he said in his statement, Thursday, November 21.

Hans said the current situation was still being carried away by the impact of the COVID-19 pandemic.

Many businesses have been forced to close due to prolonged impacts.

Despite debt restructuring efforts to help companies rise, he said, many are still struggling to get additional capital to return to operation.

"People's purchasing power also disappeared, and many entrepreneurs suffered losses so they could not return to operation," he said

Hans gave an example of the textile company Sritex, which used to be very good but is now less competitive in the market.

This is also due to the impact of the decline in the market due to the COVID-19 pandemic.

People's purchasing power has also decreased to a significant factor. Hans noted that the micro, small and medium enterprises (MSMEs) sector has slowed from last year to this year, which caused the government to step down too quickly in providing the COVID-19 stimulus.

According to Hans, this creates challenges for businesses to compete, especially for small businesses that need more support from the government.

"In the health aspect, the government may be able to step down, but it can't," he stressed.

Another impact from the pandemic is also related to changes in company ownership or company acquisitions because they are looking for investors to survive.

He gave an example, such as changes in owners that occurred during the COVID-19 pandemic came from PT Global Digital Niaga Tbk alias Blibli.com by acquiring 51 percent of shares owned by PT Supra Boga Lestari Tbk on September 30, 2021.

"Changes in company ownership or acquisitions can also be seen in cases of investors looking for a tough business, as well as owners who want to leave certain businesses," he explained.

Hans gave another example of indirect ownership changes also occurred in PT Tridomain Performance Materials Tbk (TDPM), where its majority shareholder, DH Corporation Ltd, was acquired by Xing Wang Group.

DH Corporation, which was previously owned by the Sridjaja Attendance, was taken over by Xing Wang Group as part of their business expansion strategy in Indonesia.

This step is in line with his plan to divest a synthetic resin business.

Meanwhile, TDPM itself at the Extraordinary General Meeting of Shareholders (EGMS) on March 28, 2024 approved the name change to PT Tianrong Chemical Industry Tbk, as approved by the Ministry of Law and Human Rights.

"This is a natural thing. Companies with large capital and strong teams will usually dominate the market," he concluded.