The government Indonesia is providing support for corporations involved in labor-intensive projects in the form of working capital loans - Photo by MoF Office

JAKARTA (TheInsiderStories) – The government Indonesia is providing support for corporations involved in labor-intensive projects in the form of working capital loans. The support was carried out with an assignment scheme to the Indonesian Eximbank and the Indonesian Infrastructure Guarantee Fund.

“The working capital credit guarantee scheme will be given to credit with a ceiling of Rp10 Billion to Rp1 Trillion and is targeted to create Rp100 trillion (US$6.89 billion) working capital Credit until 2021,” senior economic minister, Airlangga Hartarto, said at the signing of the Corporate Guarantee Program in the framework of National Economic Recovery (ERP) program on Wednesday (07/29).

He added, the implementation of this program was carried out through modalities for Placement of Funds to Banking, Guaranteed Working Capital Loans, Participation of State Capital, Government Investment, and support for state expenditure. The implementation of the five ERP program modalities continues to be accelerated so that the business world can immediately feel the benefits.

“From the program, something has been carried out namely the guarantee of MSMEs (micro, small and medium enterprises) through PT Jamkrindo and PT Askrindo. Then PT SMI (Saran Multi Infrastructure) has also signed with various BPD (Regional Development Banks),”  said Hartarto.

He explained, the spread of the COVID-19 outbreak had not shown signs of slowing down. Global economic activity will not return to normal as it was before the pandemic. Various international institutions estimate the Indonesian economy will contract in 2020 in the range of -4.9 to -7.6 percent.

As experienced by most countries in the world, the country’ economic growth in the first quarter of this year slowed to 3 percent. In the second quarter, the economic pressure is projected to be heavier and contracting. And, at the end of the year he hopes to get out of a crisis or negative zone. he adds.

In order to avoid a recession, he asserted, the government must take an extraordinary steps to encourage economic recovery in the third and fourth quarters of 2020. Massive government spending will be encouraged so that domestic demand increases and businesses are moved to invest. Therefore, the support for the business world must be accelerated immediately.

“Government spending is encouraged as one of the drivers and levers of the economy so that in the second half of 2020, we can improve economic growth from minus to zero or positive,” continued the senior minister.

Meanwhile, chairman of the Financial Services Authority, Wimboh Santoso, added that in 2021, an additional working capital credit for corporations worth Rp51 trillion is needed. Interest rates for the corporate loans are estimated at around 7 percent.

Then, minister of finance, Sri Mulyani Indrawati stated, this work loan has a term less than one year. He hopes that by providing this guarantee interest to borrow from banks will increase again and can help the recovery of the Indonesian economy.

In accordance with Presidential Regulation Number 43 of 2019 and Minister of Finance Regulation Number 16 of 2020, the guarantee facility for the corporate loans is aimed at corporate businesses that have export-oriented and / or labor-intensive businesses with a minimum of 300 employees.

In the corporate loan guarantee scheme, the guarantee portion is 60 percent of credit, but for priority sectors the guaranteed portion is up to 80 percent of credit. The priority sectors include tourism (hotels and restaurants), automotive, textiles and footwear, electronics, processed wood, furniture, and paper products as well as other business sectors that meet the impact criteria of COVID-19 are very heavy and have a high multiplier impact to support growth future economy.

Indrawati said, the government bears payment of guarantee services as much as 100 percent on loans of up to Rp300 billion and 50 percent for loans with a ceiling of Rp300 billion to Rp1 trillion. The guarantee scheme is planned to last until the end of 2021.

US$1: Rp14,500

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