Introduction

1. Background

Covid-19 pandemic is certainly the biggest surprise that was brought into 2020 and has affected people from all socioeconomic backgrounds. The Indonesian government has taken measures to navigate through this crisis to ensure reduction of transmission by conducting Large-Scale Social Restriction (commonly known as PSBB). However, PSBB also restricts economic activities, thus leading to plummeting of the country’s economy.

It requires extraordinary measures from the government to keep the economy up and running. Since the GDP growth has decreased by 5.02% from last year, people’s earnings have decreased, as such they choose to reduce spending. In addition to less income taxes, there is also less corporation taxes received by the government, which will decrease their earnings from taxes overall.

Moreover, the government has increased this year’s state spending to include increased healthcare expenditure, financial aids for small and medium businesses as well as tax incentives. This undoubtedly puts a strain on the government’s finances. Despite the numerous stimuli given by the government, it is quite difficult to improve the current economic conditions without contributions from the citizens.

2. Problem Formulation

• Why are actions of citizens important in the course of a country’s economy?
• How can citizens contribute in resuscitating the economy?

3. Objectives

This paper is written in order to:

• Educate the citizens about the impact of each individual to the country’s economy.
• Specify the contributions that citizens of Indonesia could make in order to revive the country’s economy

Discussion

1. Impact of Citizens to the Economy

1.1. As an indicator of how foreign investors perceive Indonesia

Citizens play an important role on generally reflecting Indonesia’s condition and how appealing it would be for investors to invest in Indonesia.

For example, recently on 6th to 8th October, many people went down to the streets and conducted anarchic protests against ‘Omnibus Law’.

In Jakarta alone, 5000 university students and workers joined in the action, heading towards the state palace.

When interviewed, many of these students do not understand the essence and objectives of the ‘Omnibus Law’. This gives the impression that Indonesia’s human capital quality is poor, given that university students can be pressured to join the violent protests without understanding what the protest’s purposes are.

Road blockages prevent normal trade activities thus reducing citizens spending. In the current economic slump, decreased domestic spending is never a good idea because it prevents money from moving around, keeping the economy up and running.

This phenomenon was also covered in the worlds biggest international news portals, causing Indonesian stocks to plunge. Moreover, many investors become reluctant to invest in Indonesia because the demonstrations give a sense that the country is in an unstable condition.

1.2. Increasing Indonesia’s gross domestic product

Entrepreneurship is one of the keys to a positive economic development. When entrepreneurs innovate and produce new technologies and/or products for their businesses, they break though existing income ceiling and increasing employment due to creation of new markets, resulting in the growth of the country’s gross domestic product. Higher employment rates and higher incomes result to higher contributions to the country’s tax base, allowing government to increase spending on large projects, such as infrastructures, in order to support and stimulate further economic growth.

1.3. Prevents economy from shrinking

Consumer domestic spending is one of the biggest driving forces in the economy of a country. This is the reason that most of the governments efforts to end recession focuses on stimulating spending.

In the uncertainty of current situation, it is understandable if households tend to hold back their spending. This might look like a wise decision in the short-run, but what most people do not realize is the fact that this might prolong the economic recession. If no one spends, businesses would fall into bankruptcy and the government would not be able receive corporation taxes. People would also lose their jobs, resulting in further reduction of government income from taxes.

2. Contributions to revive the country’s economy

a. Travel Domestically

With the almost non-existent revenue from international tourists, regions which rely on tourism as the main income has received the biggest hit. This causes airlines, hotels and restaurants to struggle in covering their expenses. Responding to the budget spent by the government for stimulating the tourism industry, as citizens it is crucial for us to support the scheme and travel domestically while strictly keeping to health protocols to help struggling industries survive, thus indirectly contributing taxes to the country.

b. Buy local products

It cannot be denied that demands for necessities still remain even though nonessential spending has decreased significantly. When buying needs such as food or household products, try to opt for local products. Buying local products would support small to medium businesses as well as local manufacture workers and prevent entrepreneurs from laying off employees. This would maintain business earnings thus contributing to tax, so government can allocate their budgets to tackle other persistent problems.

c. Build new businesses

Many big corporations start as small businesses which was founded during times of economic recession. Data shows that compared to other ASEAN countries, the number of entrepreneurs in Indonesia is much lower despite the fact that Indonesia has one of the largest population size in the world, and therefore possesses a huge domestic market.

Opening a small business requires relatively small start up capital, lower average cost and will help the country decrease unemployment. During difficult economic situations, small businesses collectively contribute significant proportions to the country’s gross domestic product and the country’s tax earnings. These tax earnings can be utilized by the government to assist the small businesses to further thrive and resuscitate the economy.

Conclusion

While the situation of Indonesia’s economic recession seems shocking and bleak, eventually every recession will pass. However, as citizens of Indonesia it is crucial to cooperate hand in hand with the government to shorten the recession period. Although being wise about personal budget is vital, people of Indonesia should also understand the impact that their collective individual spending bring to the economy is the key to our country’s economic restoration. Given the tax incentives and relief measures that the government has provided, it has become our duty to give some back to the government through spending earnings domestically in order to help each other and ensure that everyone survives this recession, so that our economy will heal and emerge stronger in the future.

Disclaimer:

Artikel ini merupakan karya pemenang lomba karya tulis Pajakku bulan November 2020. Isi tulisan sepenuhnya menjadi tanggung jawab penulis.