Idul Fitri: Potential for economic growth

Idul Fitri: Potential for economic growth

Bahtiar Arif, Center for Indonesian Reform Lecturer at the
University of Pancasila, Jakarta, bahtiararif@yahoo.com

Idul Fitri, or lebaran, is an annual tradition in Indonesia.
Not only do Muslims celebrate it, but non-Muslims also
participate in the festivities, making it a national holiday. The
government has extended the Idul Fitri holiday this year and
workers are entitled to have six days off.

There are certain traditions that have become associated with
lebaran. First, there is the exodus of people returning to their
hometowns, usually in rural areas. Second, people usually buy new
shirts, clothes and shoes, which will be worn on that day. Third,
people are in a giving mood before the holidays and they give
more money to those less fortunate, especially their relatives.
Fourth, people prepare special dishes and beverages. Finally,
after holiday celebrations are over, they usually bring
something, or someone, in terms of relatives or servants, back to
the city with them.

These rituals may have an impact on the national economy. The
government has to prepare infrastructures, such as roads and
bridges, provide reliable transportation for those returning
home, and make basic commodities, such as rice, sugar, wheat,
eggs and butter, readily available. This means that the
government has to allocate money for these public expenditures.

The government and the central bank have to control inflation,
which usually tends to rise at this time. People withdraw money
out of their bank accounts to spend on celebrations. Prices for
most commodities will increase, such as transportation, garments,
shoes, sugar, wheat, eggs, butter and so on. If demand surpasses
supply, prices will also increase. On a large scale, it may cause
a decline in foreign reserves because most of the basic
commodities are imported, while exports are still minuscule.

Urban and regional governments face the problem of
urbanization annually. After the celebrations, people return to
the cities bringing with them their relatives, friends or
servants. The government cannot control the influx of newcomers,
fueling fears of a rise in crime and a housing shortage.

The annual national event may prove very costly. However,
there may be advantages for the economy if the government and
people manage the event well. Those following the efforts and
policies may see the potential to gain from the annual national
event.

First, the government has to make a policy empowering the real
sector, in particular, the production of basic needs, such as
rice, sugar, milk, eggs, palm oil and textiles. Most of them are
imported. This policy may have implications on other policies.
For example, interest rates may fall, and banks should allocate
credit to these industries. In addition, the government may
impose measures on the import of these products.

Second, although a reliable infrastructure has to be provided
by the government, the private sector would be enthusiastic to
participate, provided that the principles governing transparency
and competitiveness are established. Adequate public
transportation should be supplied by the private sector. The
government's responsibility is in the regulation that maintains
fairness in competition.

Third, regional governments have to be well-prepared for
welcoming the people returning to their hometowns. They usually
bring with them a lot of money to spend at home. This would be
useful in distributing money brought from the big cities to rural
areas. The bulk of money is unquestionably centered in large
cities, such as Jakarta and Surabaya. Without any cost, the
government could take advantage of this distribution of income,
but it depends on the regional governments and their residents to
provide local goods and services for the returnees.

Fourth, state-owned companies, such as the national railway,
the post office and the national airlines, providing public
services relating to the festivities could see large profits.
Tickets for trains and planes are totally booked, and even the
respective companies have added additional services. People also
buy stamps to mail their greeting cards. It would be unbelievable
if these companies failed to make a profit at this time.

Idul Fitri may encourage economic growth because of the
increase in consumption and investment. This would give the
economy a much-needed boost, provided that the opportunities are
managed properly.