Macro Update Ground check on malls re-opening: Alive but sort of dead Finally, malls in Jakarta start to re-open This week marks a new era for Indonesia in its fight against COVID-19. Since June 15, 82 malls in Jakarta have started to re-open, after previously witnessing their operations curbed from April to mid-June due to the enactment of large-scale social distancing. Meanwhile, malls in Greater Jakarta areas, such as Bekasi and Macro update Tangerang, began to re-open on June 8. June 19, 2020 Was it a correct call? In our view, the decision by Governor Anies to push back the re-opening of PT.Mirae Asset Sekuritas Indonesia Jakarta’s economy was a correct call as, looking at May’s data, we found no conclusive evidence to justify the re-opening of Jakarta’s economy in early June. From the perspective of daily new cases, at a glance, Jakarta, indeed, seems to Anthony Kevin have flattened the curve at that point. However, we found that the lower number Economist [email protected] of daily new cases was side by side with the lower number of people being tested. +62-21-5088-7000 Not a guarantee for a significant jump in GDP figure Learning from the experiences of other countries which have flattened the curve and re-opened their economy, it becomes clear that COVID-19 changes the way people live their life not only during the outbreak but also post-outbreak. Take a look at China, which, despite its rather fruitful effort to flatten the curve, has been struggling for quite some time to regain its footing. Although we have, indeed, seen some sort of life on the supply side, i.e. industrial production rise of 3.9% YoY in April (vs. consensus of 1.5% YoY), retail sales fell by 7.5% during the same period, pointing that domestic consumption has yet to pick up to the previous level before COVID-19 hit. In April, China’s imports fell by more than 14% YoY, thus affirming that domestic consumption has yet to pick up to the previous level before COVID-19 hit. Moving on to May, China’s imports fell even further, by 16.7% YoY, while retail sales declined by 2.8% YoY. What should we be looking for? In our opinion, the most important thing to look at during the ground check is the purchasing power of low-middle income people as the people from this income segment account for more than 50% of Indonesia’s economy. While we don’t have standalone data detailing the income of Indonesian people, we conclude that most of our economy is shaped by people from that income segment. Ground check results Alive but sort of dead. This is what we thought when visiting several malls in Jakarta and Bekasi area as we found that people are still holding back from visiting malls. Meanwhile, those who showed up were only hoarding items at F&B merchants while avoided visiting durable goods stores. In stark contrast to the minimum-to-no visit to durable goods, besides F&B stores, people are still rushing to supermarkets to buy basic necessities, while staying vigilant to maintain their health by purchasing vitamins at drug stores. Relatively minimal contribution to GDP growth After visiting various malls during 3 days of ground check, we conclude that the re- opening of malls and general economic activities won’t bear much of a positive result to Indonesia’s GDP figure as people remain defensive by significantly avoiding durable goods. Combined with the fact that the cure for COVID-19 is unlikely to be ready in the near future (end of 2020 at the earliest, perhaps 1Q21 for Indonesia), then Indonesian people might continue maintaining their defensive stance for the rest of 2020. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. June 19, 2020 Macro Update Finally, malls in Jakarta start to re-open This week marks a new era for Indonesia in its fight against COVID-19. Since June 15, 82 malls in Jakarta have started to re-open, after previously witnessing their operations curbed from April to mid-June due to the enactment of large-scale social distancing (Pembatasan Sosial Berskala Besar/PSBB). Meanwhile, malls in Greater Jakarta areas, such as Bekasi and Tangerang, began to re-open on June 8. Actually, the re-opening of malls in Jakarta was planned to take place on June 5 by the central government. However, Anies Baswedan, the governor of DKI Jakarta, decided to push back the re-opening date as he remained cautious about the handling of the COVID-19 crisis in Jakarta. Statistically, according to Governor Anies, Jakarta was in a good condition to ease the large-scale social distancing, based on social distancing easing scores; the headline figure consists of three constituents, namely epidemiology, public health, and healthcare facilities. During a press conference held on June 4, the day when large-scale social distancing was initially set to end in Jakarta, the epidemiology section was attributed a score of 75 out of 100, while public health and healthcare facilities got a score of 70 and 100, respectively, bringing the cumulative score to 76. Of a note, a headline figure within the range of 70-100 means that social distancing measures could be gradually eased, while the administration should remain vigilant about any jump in the number of new cases. Figure 1. Social distancing easing score Figure 2. Explanation of social distancing easing scores Headline figure 76 Epidemiology 75 Public health 70 100 Healthcare facilities 0 20 40 60 80 100 (pts) Source: Jakarta Provincial Government, Mirae Asset Sekuritas Indonesia Research Source: Jakarta Provincial Government, Mirae Asset Sekuritas Indonesia Research To push back the re-opening of malls, which the central government was so enthusiastic to execute, Governor Anies relies on the so-called “transition phase”, effective from early June to as long as it’s deemed necessary. Throughout the transition phase in June, the regional government of Jakarta will ease social distancing measures very gradually, slower than what the central government has been pushing for. For example, in the first week of June, the regional government only eased restrictions for praying in houses of worship, group prayers, outdoor sports facilities, as well as mobility using own vehicle, mass transportations, and taxis at a maximum capacity of only 50% from the normal condition. If all goes well, Governor Anies stated that the easing of social distancing measures for broader economic activities would follow suit. Mirae Asset Sekuritas Indonesia Research 2 June 19, 2020 Macro Update Table 1. Jakarta’s transition to new normal - Phase 1 June 5-7 June 8-14 June 15-21 June 22-28 Activities Fri Sat-Sun Mon-Fri Sat-Sun Mon-Fri Sat-Sun Mon-Fri Sat-Sun Routine worship activities 50% 50% 50% 50% 50% 50% 50% 50% Worship Group activities (< 25 persons) 50% 50% 50% 50% 50% 50% 50% 50% Offices 50% 50% 50% 50% 50% 50% Restaurants (stand-alone) 50% 50% 50% 50% 50% 50% Industries 50% 50% 50% 50% 50% 50% Warehouses 50% 50% 50% 50% 50% 50% Shops/retails/showrooms 50% 50% 50% 50% 50% 50% (stand-alone) Provincial government Workplace and 50% 50% 50% 50% 50% supported SMEs business Markets, shopping centers, 50% 50% 50% 50% malls (non-food) Supporting services (workshop, 50% 50% 50% 50% 50% 50% photocopy centers, etc.) Indoor recreational parks 50% 50% 50% Outdoor recreational parks 50% 50% 50% Zoos 50% 50% 50% Outdoor sport activities 50% 50% 50% 50% 50% 50% 50% 50% Museums, galleries 50% 50% 50% 50% 50% 50% Social and culture Libraries 50% 50% 50% 50% 50% 50% activities Parks, RPTRA 50% 50% 50% 50% 50% Beaches 50% 50% 50% 50% 50% Private vehicle (for family can be 50% 50% 50% 50% 50% 50% 50% 50% 100%) Human mobility Mass public transportation 50% 50% 50% 50% 50% 50% 50% 50% using transportation Taxis (conventional & online) 50% 50% 50% 50% 50% 50% 50% 50% Motorbikes (online & 100% 100% 100% 100% 100% 100% conventional) Source: Jakarta Provincial Government, Mirae Asset Sekuritas Indonesia Research Table 2. Jakarta’s transition to new normal - Phase 2 Location and activities Schedule Worship activities Worship activities with mass gathering Pre-primary schools Primary schools Secondary schools High schools School and educational institution Universities Courses Day care Etc. Beauty clinics Hairstylists and barbershops Meeting halls (MICE, auditorium, etc.) Unspecified, tentative based on the evaluation Wedding, circumcision on phase-1 transition Business, trade, and industry Movie theaters Recording studios, movie production houses Night life, karaoke, etc. Boutiques Etc. Indoor sport activities (gym, swimming pool, etc.) Human mobility using Festivals transportation Night markets Floating markets Etc. Source: Jakarta Provincial Government, Mirae Asset Sekuritas Indonesia Research Mirae Asset Sekuritas Indonesia Research 3 June 19, 2020 Macro Update Table 3. Minimum protocol required to be implemented by selected business sectors Sector Protocol Number of visitors/users/employees at max. 50% capacity Food & beverages business Food serving is a la carte (not buffet) Encourage cashless payment method Number of visitors at max. 50% capacity Provide facilities to support prevention of COVID-19 outbreak Market Encourage cashless payment method Operational hours from 8 am to 2 pm Separated entry and exit doors Number of employees at max. 50% capacity Industry Required to have referral clinic or hospital Number of visitors at max. 50% capacity Shopping center, retail, and Tenants are required to do body temperature check before visitors enter the stores store Tenants allowed to operate should be in accordance with the ones in phase I Source: Jakarta Provincial Government, Mirae Asset Sekuritas Indonesia Research To assess the impact of malls re-opening on Indonesia’s economy, we conducted ground checks at several malls.