Jakarta. When China sneezes, Indonesia better prepares for the cold.
The Indonesian government has said it would provide at least $744 million in subsidies for workers, airlines, hotels, tourists and regional governments in Indonesia's major tourist destinations to counter the economic slowdown expected as a fallout from the Covid-19 outbreak wreaking havoc in China.
The Chinese were the second-largest group of foreign tourists visiting Indonesia last year, and the loss of their business could cause local establishments to lose a total of $500 million in tourism revenue per month.
Regions most vulnerable to such a blow are Chinese travelers' favorites Bali, North Sulawesi and the Riau Islands.
On Tuesday, President Joko "Jokowi" Widodo called a meeting with his economic ministers to come up with solutions for the expected downturn in visitor numbers.
"We all know we're facing pressures because of the decline in tourist arrivals from China," Jokowi said.
Disruptions caused by the outbreak in China, one of the leading suppliers of machinery and raw materials for Indonesian manufacturers, is also expected to create a supply shock here.
Finance Minister Sri Mulyani Indrawati even raised the prospect that Southeast Asia's largest economy may expand by only 4.7 percent in the first quarter of this year, the slowest pace it would grow since the 2015 commodity crunch.
Coordinating Minister for Economic Affairs Airlangga Hartanto said the government has prepared incentives to counter the decline in foreign tourist arrivals.
"We will also provide [economic] stimuli to maintain people's purchasing power, which will help minimize the impact of the outbreak on our economy," Airlangga said.
The minister said the government decided to draw up a stimulus package worth at least Rp 10.3 trillion ($744 million) in subsidies, tax cuts and accelerated cash-transfer and unemployment benefit programs in Indonesia's major tourist destinations.
"The president wants to launch the pre-employment card early in Bali, North Sulawesi and Riau Islands," Airlangga said.
He was referring to President Jokowi's flagship unemployment benefits program that provides fresh graduates and recently laid-off workers with a card to access free skill-training and monthly benefit payment for a limited period.
Airlangga said the program should be ready to launch in the three provinces next month and would be expanded to cover two million workers nationwide by the end of this year.
Second, the government will increase the amount of social benefits for low-income families to Rp 200,000 per family per month, from Rp 150,000 currently. Airlangga said the extra money would be available starting next month until August, costing an additional Rp 4.6 trillion from the 2020 state budget.
Third, first-time homebuyers will also get a total of Rp 1.5 trillion in additional subsidies. Airlangga said the new funding would allow 175,000 more homebuyers to get state-subsidized mortgages this year, from 155,000 people in the initial plan.
Influencers, Discounts, Tax Cuts
The government will also set aside Rp 99 billion in subsidies for airlines and travel agencies, allowing them to discount tickets or travel packages for foreign tourists.
Then there will be Rp 103 billion in extra funding for tourism promotion, Rp 25 billion for tourism events and Rp 72 billion for social media influencers to woo back tourists to Indonesia.
"[These are] additional incentives aimed at foreign tourists," Airlangga said.
Indonesia attracted 18 million foreign tourists last year, missing the 20 million target set by Jokowi at the beginning of his first term.
For domestic tourists, the government will provide a 30 percent discount on flights to 10 tourist destinations. But it comes with a caveat: the deal will only apply to 25 percent of seats available in March, April and May. "But if the program is successful, we're not going to rule out extending it," Airlangga said.
These prioritized tourist destinations are Lake Toba, Bali, Yogyakarta, Malang, Manado, Mandalika, Labuan Bajo, Bangka Belitung, Batam and Bintan.
Airlangga said the government would shift Rp 97 billion currently not earmarked in the government's special regional transfer account to the above regions as grants.
On top of that, hotels and restaurants in these ten destinations would not need to pay hotel and restaurant taxes to the local government as the central government has set aside Rp 3.3 trillion to foot the tax bills, Airlangga said.
Airlines flying to these destinations could also expect a 20 percent discount in airport fees from state-owned airport operators Angkasa Pura I and Angkasa Pura II, Airlangga said. The government has made close to Rp 266 billion available for the airport subsidy, Airlangga said.
State energy company Pertamina would also cut jet fuel prices in nine destinations for three months starting in March. Airlangga said it would cost Pertamina Rp 267 billion to provide the discount.
"We have more incentives in store, maybe for early or end of April, depending on the progress of the coronavirus outbreak and how it impacts our economy," Airlangga said.