Illustrated By Marsha

The Russian-Ukraine conflict has reached a new phase in recent weeks. Russian President, Vladimir Putin, has deployed the military personnel into Ukraine’s territory in order to implement what is being called a “demilitarization” and “liberalization” action for some of the Ukrainians. Instead of gaining military support from NATO (North Atlantic Treaty Organization), Ukraine President, Volodymir Zelensky, questioned the commitment of NATO members and also the US to support Ukraine to defend its territory, especially militarily. Hence, it is interesting to examine the unwillingness of NATO and the US to support Ukraine to defend its territory militarily and choose to utilize economic sanctions such as banning Russia’s access to SWIFT (Society for Worldwide Interbank Financial Telecommunication) and freezing Russia’s central bank assets.

Aside from the humanitarian, geostrategic, and security issues that are debated in this conflict, the energy trade relationship, particularly the gas trade relationship, between Russia and European Union countries cannot be overlooked from the discussion of the Russia-Ukraine conflict considering the majority of  European Union members are NATO (North Atlantic Treaty Organization) members which rely on Russian gas supplies.

The dependency of European countries, particularly those who are members of NATO and the European Union, on Russia’s gas supply is quite large which accounts up to one-third of the security pact members' consumption. According to the data, Germany, considered one of the powerful states in NATO, depends more than its 50% national gas supply from Russia (Wilkes et al., 2022). Besides Germany, France and Italy also rely on Russian gas supplies to import 25% and 45% of their total national gas consumption. Furthermore, countries such as Bulgaria, the Czech Republic, Estonia, Hungary, Poland, and Slovakia import 75% to 100% of their gas supply from Russia.

The topic of energy security, notably gas supplies from Russia to several NATO members, becomes significant in addressing both sides' relationships. Unlike petroleum resources, the cost of transporting gas by tanker is high. As a result, supplying through pipelines is more efficient and less expensive. Therefore, changes in the selling prices to the cessation of natural gas supply by the primary gas supplier, Rusia, will cause distress to the consumers such as countries in Western Europe to switch to other energy sources. According to Cohen and Reed, the dependency on Russian gas become one of the main challenges for NATO to impose severe sanctions on Russia (Cohen & Reed, 2022). The supply of natural gas that continues to flow to NATO nations, when the Russian army entered Ukraine, may lessen the impact of the US-led economic retaliation to stop President Putin from aggression against Ukraine. On the other hand, NATO members must guarantee that decreasing or even canceling Russia's gas supply does not have a worse impact on European Union countries. 

The crisis between Russia and Ukraine demonstrates another key aspect of comprehending international relations. Instead of strengthening relations between the two parties, European Union and Russia, in accordance with dependency theory which argues that economic interdependence can reduce mutual distrust, the parties' reliance on energy supplies does not appear to be improving their relationship. Krickovic further contends that, in addition to perpetuating the region's security challenge, the energy trade might be used as a weapon to acquire each party's benefit (Krickovic, 2015).

Understanding the relationship of both parties, energy trade becomes political leverage to gain their interest. The European Union's dependency on energy from Ukraine becomes one of the most influential aspects in determining the security policy and response to Russia’s attack on Ukraine territory. On the other side, Russia is also depending on the income from exporting gas to European Union states. More than 70% of its gas export is transferred through the gas pipelines to European countries. Therefore, although these parties' energy trading connection is arguably advantageous economically, the reliance of certain NATO members on energy provides Russia with greater political leverage to exert its interest in the region vis-à-vis NATO.

According to Baran, the amount of energy dependence on Russia causes some of the NATO member's foreign policy to be not independent because it provides a large portion of the calculation of energy dependence on Russia (Baran, 2007). On several occasions, Moscow frequently utilizes the energy leverage as its political leverage, particularly to compel its neighboring countries to act in Russia's best interests. If its neighboring nations fail to meet Russia's interests, Russia will utilize numerous arguments connected to energy supply failure to halt energy flow to the neighboring countries and also sometimes seem manipulative as it did to the Balkan countries. Arguably, it is worrying for some NATO countries to act harshly over the Ukraine attack.

In response to Russia's military war on Ukraine, Germany has halted the critical Nord Stream 2 pipeline project, which was officially announced by Germany's Chancellor, Olaf Scholz (Eddy, 2022). Nord Stream 2 project was approved by the German government in 2018 and is scheduled to be operated in early 2022. According to many observers, the realization of this project would undoubtedly enhance not just the countries’ reliance on Russian gas supplies, but may also fracture political unity in responding to Russian aggression. For Germany, halting the implementation project is also perceived as a daring decision for a nation that depends almost on its half of energy supply from Russia.

However, some observers argue that the termination of the Nord Stream 2 project is inadequate to stop the Russian attack on Ukraine. Despite imposing economic penalties on various aspects, such as excluding Russia from SWIFT and international trade, NATO countries' reliance on Russian energy supplies compels them not to restrict Russia in the energy sector, which is one of the sectors that might harm Russia's economy more severely. It will be too risky for sanctioning Russia in the energy sector which might imperil the European energy supply and security. Therefore, in the context of developing conflict in Ukraine, it is not impossible for President Putin to exercise its energy leverage to achieve his interest and counter the sanctions made by the West on Russia's economy, even though this strategy has not been used.

Seeing some of NATO members' energy vulnerability towards Russia, it is arguably the utmost interest of these nations to reduce the energy supply dependency from Russia. Besides seeking other parties, these nations might accelerate renewable energy to fulfill the energy demand in the foreseeable future. This is expected to provide a wider space for NATO countries in carrying out their foreign policy. The development of renewable energy in European Union and NATO members have accelerated incrementally over the past decades yet still unable to fulfill the energy demand in the region.

In sum, it is crucial for the NATO members to diversify their energy suppliers and accelerate the alternative energy resources to reduce the dependence on Russian energy. According to Krickovic, diversifying the energy resources and suppliers might benefit NATO members to shape its foreign policy and strategy more independently vis-à-vis Russia's aggression in Ukraine. However, as NATO Secretary-General Jens Stoltenberg stated, the transition to renewable energy will take some time and propels the countries to increase the fund for accelerating the transition to renewable energy but it should be done immediately (Maclellan & Rodionov, 2022).

References

Baran, Z. (2007). EU Energy Security: Time to End Russian Leverage. The Washington Quarterly, 30, 131–144. https://doi.org/10.1162/wash.2007.30.4.131

Cohen, P., & Reed, S. (2022, February 25). Why the Toughest Sanctions on Russia Are the Hardest for Europe to Wield. The New York Times. https://www.nytimes.com/2022/02/25/business/economy/russia-europe-sanctions-gas-oil.html

Eddy, M. (2022, February 22). Germany Responds to Russia, Halting Nord Stream 2 Pipeline. The New York Times. https://www.nytimes.com/2022/02/22/business/nord-stream-russia-putin-germany.html

Krickovic, A. (2015). When Interdependence Produces Conflict: EU–Russia Energy Relations as a Security Dilemma. Contemporary Security Policy, 36(1), 3–26. https://doi.org/10.1080/13523260.2015.1012350

Maclellan, K., & Rodionov, M. (2022, January 30). NATO concerned over Europe’s energy security amid standoff with Russia. Reuters. https://www.reuters.com/world/nato-calls-europe-diversify-energy-supply-amid-standoff-with-russia-2022-01-30/

Wilkes, W., Dezem, V., & Delfs, A. (2022, March 5). Germany Faces Reckoning for Relying on Russia’s Cheap Energy. Bloomberg.Com. https://www.bloomberg.com/news/articles/2022-03-05/germany-faces-reckoning-for-relying-on-putin-for-cheap-energy

The erratic weather has poorly affected the dynamics of agriculture in Indonesia. A number of conventional farmers––who rely on chemical inputs, especially pesticides and chemical fertilizers––in several parts of Indonesia, one of which is in Gorontalo Province, have to lament the fate of crop failure losses because they cannot determine and predict when it is dry and when it rains (2/2/22). Apart from farmers in Gorontalo Province, several farmers in Pangandaran Regency also complained about poor harvests. One farmer from Cileuncang, Suryaman (45), complained about the quality of his rice harvest with very small and abnormal grains as a result of his rice fields being frequently flooded (6/2/22). The extreme rain was also complained about by a farmer from Cijulang, Wawan Kurniawan (38), who received poor yields (6/2/22).

With uncertain conditions, these farmers had to delay planting and experience crop failures. Currently, conventional farmers are faced with a lack of information on weather forecasts and technological stagnation which then contributes to the losses they experience. Conventional farmers are used to relying on astrology to determine their farming activities, but with climate change troubles them to predict the weather. The inability to determine the weather then results in the death of horticultural crops and corn and the possibility of pest attacks. Apart from horticulture and maize, the main food sector, such as rice, was also negatively affected.

The extreme weather and crop failures experienced by the farmers have a negative impact on food prices which are increasingly soaring. According to the Head of Research Centre for Indonesian Policy Studies (CIPS) Felippa Ann Amanta, climate change can disrupt food availability and threaten food security. Reduced production levels can lead to an increase in food prices which has an impact on food access, affordability, and utilization. One of the increases in food commodities was found in Makassar, especially for cayenne pepper and shallots. In the case of cayenne pepper, the selling price of the commodity reached Rp. 70.000,00 per kilogram, with an increase of Rp. 20,000.00 since the previous week (9/2/22). Meanwhile, shallots are sold at a price of Rp. 40,000.00 per kilogram, with an increase of Rp. 5,000.00 per kilogram in the previous week (9/2/22). In addition, in January 2022, the price of rice on a national scale increased. The average price of premium quality rice in the mills reached Rp. 9,824.00 per kg, an increase of 1.57 percent compared to the previous month, while the medium quality rice in the mills reached Rp. 9,381.00 per kg, an increase of 2.77 percent. The low harvest in November to December 2021 and the hydrometeorological phenomenon in early 2022 were the causes of the increase in rice prices.

Seeing this spike, the National Police's Food Task Force (Satgas) predicts that the prices of basic necessities––including red chili peppers and shallots––will increase ahead of the month of Ramadan and the celebration of Eid al-Fitr. Apart from the surge in demand for imported commodities, bad weather also contributes to the decline in supply. To deal with this, as quoted from the Chairman of the Association of Indonesian Chilli Champion, Tunov Mondro, the government must take concrete steps and interventions to overcome the skyrocketing food commodity prices.

Illustrated By: Marsha

As per report made by The White House's official website, on March 9, 2022, the United States (US) President, Joe Biden, signed an executive order relating to the phenomenon of the circulation of cryptocurrency as a digital asset. In the warrant, Joe Biden directed the US government to study the characteristics of cryptocurrencies, further examine the risks and benefits of these currencies to the economy, and then formulate regulations and policies to monitor the trading activities of these digital assets. At the present time, at least more than 40 million US citizens invest in digital assets, including cryptocurrency. Therefore, it’s about time for the US Government to establish policies that have sufficient power to regulate trading activities of cryptocurrency. With the issuance of this executive order, the US government has provided support for transactional activities related to cryptocurrency assets that are increasingly in demand by the public in the digital era.

This news reaped various positive responses from experts and also cryptocurrency trading enthusiasts from the US. These people perceived the executive order from President Biden as one of the prominent upgrades in the realm of digital asset trading the government can establish. According to Investopedia, cryptocurrencies or “crypto” are virtual currencies that are secured by a cryptographic system, which makes it almost impossible to counterfeit or duplicate, and all transactions will be recorded on the blockchain as a data storage ledger. Currently, most cryptocurrencies are not issued by any central authority, making them theoretically immune to government interference or manipulation.

The phenomenon of the skyrocketing popularity of using cryptocurrency in the digital era is still relatively new, therefore the public is extremely enthusiastic about welcoming the government's participation in the cryptocurrency sector which can bring various benefits into it. In the US, numerous cryptocurrency users have already made advanced use of this virtual currency as a tool for casual transactional activities as in the initial function of physical dollars. Some of the noted positive effects from President Biden's executive order that can possibly occur in the future include:

1.Increase in Cryptocurrency’s Price and Value

Biden’s decision to sign the executive order concerning the cryptocurrency trading activities has made a visible impact at this present time. Reporting from Channel News Asia on Thursday, March 10, 2022, the price of Bitcoin rose dramatically to 9.1% after the issuance of the order. This dramatic increase has reached its apotheosis, higher than most peaks made from February 28, and managed to reach US$42,280 or equivalent to IDR 605,978,100. The same thing happened to Ethereum which experienced a price increase of 6.32% to US$ 2,715.47 and also other cryptocurrency assets that experienced price increases simultaneously.

The escalation in the price of cryptocurrency assets will automatically affect their value. With a significant increase in cryptocurrency prices, these digital assets will gain a strong reputation in the community as a high-potential commodity. As a result, people will grow attentiveness gradually in the activity of trading cryptocurrency assets. Investors and other related parties who are actively involved in cryptocurrency trading activity are the ones who will gain the most advantage, concerning their possibly thriving incomes in the future.

2. Maximizing Protection and Risk Mitigation

Through the executive order issued, Biden directly urged the Financial Stability Supervisory Board to identify the financial risks that may occur in cryptocurrency trading activities and consider the risk mitigations to minimize the occurrence of dangers. Supervision of digital currency transactional activities will also be enforced in order to create a space for safer trading activities so that all consumers, investors, and other parties involved can have more convenience in conducting transactions. The agency also got directed to minimize the occurrence of embezzlement and laundering of funds with crypto assets by irresponsible parties. Enforcing regulations for future transactions will protect customers and crypto investors from fraudsters and cyber-attackers who can cause them to lose large amounts of assets.

3. Promoting Technological Growth in Financial Matters

In this all digitally driven era, the US Government strives to continue carrying out innovations on digital technology in various sectors to a greater extent, specifically in the financial sector. The existence of digital currencies signifies the advancement in technology destined for the financial sector. By conducting further research on cryptocurrency trading, the US Government has made a prodigious milestone to develop the financial sector’s supporting technologies. The US government is expected to have the capability to establish a digital trading environment that escalates the country’s competitive values in order to compete with other first-world countries and be capable of becoming a pioneer in digital asset trading technology.

The development of technology in the financial sector by the US Government is also crucial for security and convenience enhancements in cryptocurrency transactional activities in the digital realm. Blockchain technology is a perfect epitome of technological upgrades, which have the capability to store transactional data that are unalterable and customizable for public visibility. With the existence of blockchain, the reprobates who often embezzle their financials through digital currencies will have to think twice when carrying out their maneuvers. Consequently, cases of embezzlement and fraud in digital transactions may be drastically reduced.

Beside the positive impacts, there are potential challenges for the development of cryptocurrency in the US to be faced in the future. In formulating policies that regulate the digitalized currencies' transactional traffic, the US Government is expected to think about all challenges that have possible occurrences in the future. One of them is social inequality that can be caused by digital currency transactions in the present time and in the future. In an executive order by Biden, equality of access and easy financial services at affordable prices is one of the discourses that they aspire to be realized, despite being contradictory to the skyrocketing price of cryptocurrencies. The high price of some digital currencies, such as Bitcoin, also makes it inaccessible to people from the lower middle class and makes it only accessible to the upper-middle class. This will concerningly form a perception between the rich and the poor in the community, where people will perceive that only the riches can have the access to cryptocurrency and could happen otherwise.

In addition, another upcoming challenge is the security of the personal data of users of the digital asset trading platform that are vulnerable to numerous risks. According to Epiq Discovery, trading activities in the digital realm require users' personal data inputs so that transactional activities can run smoothly. Moreover, blockchains can be concerning as they have records of all traces of users’ transactions alongside their personal data. Their nature that can be visible to the public can put the personal data of users at risk of being leaked at any time. Furthermore, the risk of data theft in the blockchain by hackers is still possible even though there are claims that the blockchain system is very difficult to hack. Therefore, the security of personal data and privacy must be guaranteed by the government after the policy is formulated.

Monday (28/2/22), the Russian currency, the Ruble, was observed to have fallen drastically. The ruble plunged into 106.01 per dollar in Moscow and closed Wednesday (2/3/2022) at 106.02 after hitting a record intraday low of 118.35, recording a drop of more than 10% on the day. This decline is a result of the war that occurred between Russia and Ukraine, where countries in the world impose economic sanctions on Russia. A series of sanctions in the form of blocking major Russian banks from the international payment system or the Society Worldwide Interbank Financial Telecommunication (SWIFT)––a system that migrates billions of dollars from thousands of banks and other financial institutions around the world––comes from large and superpower countries, such as the United States and Europe. The impact of this blocking has prompted old Russian investors to seek new investment asylum to new safer zones, namely the yen and the US dollar.

In addition to the Ruble's fall, shares in major Russian banks also slumped as a result of sanctions imposed by western countries. Share price of Sberbank––Russia's largest lender––down 95% on the London Stock Exchange on Wednesday (2/3/22) to trade at $0.01. This fall marked the lowest point in Sberbank's share price which led to its withdrawal from the European market. A spokesman for Sberbank stated that it, in particular its European subsidiaries, had experienced abnormal cash outflows following the Russian invasion of Ukraine. Apart from Sberbank, major Russian stocks, including Novatek, Lukoil, and Rosneft, also experienced similar declines. In order to stabilize financial markets, the Central Bank of Russia intervened in the foreign exchange market and also expanded the Lombard list. Apart from Russian stocks, global stocks also experienced a similar decline to the Jakarta Composite Index (JCI), where the JCI recorded a fall into the red zone with a decline of nearly 2% on Thursday (24/2/22). US stock markets were also sluggish, with the Dow Jones Indus AVG, S&P 500 Index to Nasdaq Composite slumping.

The sharp devaluation undergone by the Ruble has the potential to cause inflation and will most likely result in a bad impact on the Russian population who are likely to be suffocated by the prices of the soaring goods. Prices for homemade products, which are mostly imported, will skyrocket and the cost of traveling abroad will increase. In addition to inflation, the stock market could be in danger of closing. This economic downturn could also affect Russian military operations, with possible pressure on the smooth running of the operation. Russia's internal economic turmoil is expected to worsen shortly as the ruble's slumping value and falling stock prices forced supply activity to stop as a result of low demand.

Ilustrasi oleh: Marsha

Monday (28/2/22), the Russian currency, the Ruble, was observed to have fallen drastically. The ruble plunged into 106.01 per dollar in Moscow and closed Wednesday (2/3/2022) at 106.02 after hitting a record intraday low of 118.35, recording a drop of more than 10% on the day. This decline is a result of the war that occurred between Russia and Ukraine, where countries in the world impose economic sanctions on Russia. A series of sanctions in the form of blocking major Russian banks from the international payment system or the Society Worldwide Interbank Financial Telecommunication (SWIFT)––a system that migrates billions of dollars from thousands of banks and other financial institutions around the world––comes from large and superpower countries, such as the United States and Europe. The impact of this blocking has prompted old Russian investors to seek new investment asylum to new safer zones, namely the yen and the US dollar.

In addition to the Ruble's fall, shares in major Russian banks also slumped as a result of sanctions imposed by western countries. Share price of Sberbank––Russia's largest lender––down 95% on the London Stock Exchange on Wednesday (2/3/22) to trade at $0.01. This fall marked the lowest point in Sberbank's share price which led to its withdrawal from the European market. A spokesman for Sberbank stated that it, in particular its European subsidiaries, had experienced abnormal cash outflows following the Russian invasion of Ukraine. Apart from Sberbank, major Russian stocks, including Novatek, Lukoil, and Rosneft, also experienced similar declines. In order to stabilize financial markets, the Central Bank of Russia intervened in the foreign exchange market and also expanded the Lombard list. Apart from Russian stocks, global stocks also experienced a similar decline to the Jakarta Composite Index (JCI), where the JCI recorded a fall into the red zone with a decline of nearly 2% on Thursday (24/2/22). US stock markets were also sluggish, with the Dow Jones Indus AVG, S&P 500 Index to Nasdaq Composite slumping.

The sharp devaluation undergone by the Ruble has the potential to cause inflation and will most likely result in a bad impact on the Russian population who are likely to be suffocated by the prices of the soaring goods. Prices for homemade products, which are mostly imported, will skyrocket and the cost of traveling abroad will increase. In addition to inflation, the stock market could be in danger of closing. This economic downturn could also affect Russian military operations, with possible pressure on the smooth running of the operation. Russia's internal economic turmoil is expected to worsen shortly as the ruble's slumping value and falling stock prices forced supply activity to stop as a result of low demand.

Ilustrated by: Marsha

Micro, Small, and Medium Enterprises (MSMEs) carry a serious amount of crucial roles for the stability of the national economy. Based on data from the Ministry of Cooperative Spaces and Small-to-Medium Enterprises, the number of MSMEs in Indonesia has reached the number of 64.2 million growing businesses in the first quarter of 2021 and had made contributions to the national Gross Domestic Product (GDP) of 61.07 percent or Rp. 8,573 trillion. Acknowledging the potential for economic improvement, the government pays special attention to MSMEs in Indonesia and continues to strive to empower them in various government policies in order to encourage economic growth. This is reflected in the involvement of MSMEs in the development of Special Economic Zones (SEZs) in various regions in Indonesia.

SEZ has been declared by the government since 2009 with the issuance of Law of The Republic of Indonesia Number 39 of 2009 concerning Special Economic Zones (Law No. 39/2009) and its implementation is further regulated in Government Regulation of the Republic of Indonesia Number 40 of 2021 concerning the Implementation of Special Economic Zones (Government Regulation 40/2021). Based on the Law No. 39/2009, SEZ is an area with certain boundaries within the jurisdiction of the Indonesian Republic which is determined to carry out economic functions and obtain certain facilities. SEZs are developed through the preparation of areas that have geoeconomic and regional geostrategic advantages and functions to accommodate various high-value economic activities with the potential for international competitiveness. Sorong’s SEZ in Papua and Arun Lhokseumawe’s SEZ in Aceh are some of the industrial SEZ in Indonesia, while Mandalika's SEZ is one of the tourism SEZ in Indonesia. To support the development of economic activities in the area, the government provides special facilities and incentives to business owners who are members of the SEZ as an attraction for investment from outsiders.

SEZ's Contribution to MSMEs

The development of the national economy which is carried out with the principle of economic democracy encourages the government to take sides in economic politics that provides opportunities and support for MSMEs and domestic industries. Therefore, as regulated in Law No. 39/2009 a quo, in the development of SEZs, the government provides locations for MSMEs to encourage linkages and synergies with enterprises, both as business actors and as supporters of other business actors. The involvement of MSMEs in SEZ development is expected to increase the competitiveness and quality of the human resources in it contributing to economic growth in the area. Thus, equitable development in Indonesia is not only centered on big cities, but also on the surrounding areas that require more attention.

As a special area, SEZ is equipped with fiscal and non-fiscal facilities for actors and business entities that carry out their business activities in SEZ intending to increase competitiveness to attract investors. In this case, MSMEs as a business segment that participates in economic activities in the SEZ can also feel the benefits from the SEZ development. As stated on the National SEZ Council which based on Law No. 39/2009 and Government Regulation No. 40/2021, some of the benefits that can be felt by MSME owners, business actors, and other business entities in the SEZ include:

1.Remissions in all Tax Obligations

The tax obligations for all MSME actors in the SEZ area will be reconsidered in order to appreciate their contribution to the country's economy. The government imposes a reduction in collecting Income Tax (PPh) for affiliated investors and remissions for business entities inland and/or acquisition transactions for SEZs. Waived Added Value Tax (PPN) and/or Sales Tax on Luxury Goods (PPnBM) payments also apply to business actors in the SEZ area. Moreover, the local government provides reductions, remissions, and exemption from regional taxes and/or regional levies to business entities/business actors in the SEZ, with the reduction in acquisition fees on land and buildings and a reduction in land and building taxes as the bare minimum privilege they can receive.

2.Infrastructure Upgrade

MSMEs and other business actors in SEZ areas will be able to enjoy the ease of access for the infrastructures built inside. In order to improve the accessibility for all SEZ areas, the government built numerous supporting infrastructures. Roads, highways, train stations, harbors, and airports are provided to facilitate mobility for the residents and all visiting external parties. As a result, the number of visitors to the SEZ area will increase and also have the potential to increase the number of local MSME customers.

3. Ease of Business Licensing

MSMEs and other businesses that are established within the SEZ area will be granted convenience in obtaining permits and licenses to set up a business. The business license application will be given by the SEZ Administrators as the middleman. MSMEs will be granted risk-based business licensing which they can obtain through the Online Single Submission (OSS) system, without having to experience all the exhausting stages of proposal approvals. This privilege includes the exemption of proposing building approvals to establish a place of business. Meanwhile, SEZ no longer requires designation as an industrial area, due to the stipulation of an SEZ that carries out industrial-related activities as well as an industrial zone designation.

Reflecting from Mandalika’s SEZ

Stipulated through Government Regulation of the Republic of Indonesia Number 52 of 2014, Mandalika’s SEZ is one of the tourism SEZs that can be considered a great success. The development of the SEZ was life-changing for all citizens who can enjoy the rapid economic growth and improvement of welfare distribution. Their concept as a world-class tourist destination with all the included local pearls of wisdom became the SEZ’s main success factor. The SEZ itself includes all breathtaking tourism sites such as Saleh Bay Area, Moyo, and Tambora Islands (Samota), Mount Rinjani Geopark, Senggigi Beach, and many which contain unique and potential traditions, arts and culture, history, and folk craft industries.

The future projections predicted that more local MSMEs will be involved in supporting Mandalika's tourism, such as providers of transportation, accommodation and lodging, camping ground, and others. As reported by Media Indonesia, Deputy III of the Presidential Chief of Staff, Panutan Sulendrakusuma, stated that the 2021 World Superbike Championship (WSBK) and the 2022 MotoGP at the Mandalika SEZ were the events that highlighted all the attractions and managed to increase NTB's economic growth by 1.7 percent through the participating MSMEs in the region. He also said that the estimated multiplier effect of economic development in the Mandalika SEZ could reach Rp. 4.8 trillion and of the total profits, 45.8 percent will flow to MSMEs, with a value equivalent to Rp. 2.2 trillion. Moreover, business actors are expected to receive a financial boost of Rp. 28.6 trillion in the future and is projected to be able to contribute foreign exchange per year of Rp. 7.5 trillion and contributed to the GDP of the tourism sector of Rp. 16.96 trillion.

Facing the Obstacles in Empowering MSMEs in SEZs

Aside from the various opportunities in the form of convenience and facilities offered to MSMEs in SEZs, there are several challenges to ensure that MSME empowerment in SEZs can be more optimal in the future, including:

1.Producing and Marketing Superior Products

Superior products are products that have the potential to be developed in an area by utilizing local natural resources and human resources. These products are market-oriented and environmentally friendly so that they have a competitive advantage and can compete globally. Even in the famously successful Mandalika’s SEZ, the production and marketing of superior products that are used as Mandalika's trademark as a tourist spot is still a challenge, as it is reported by NTB’s Regional Development Council. Within the area, there are indeed MSMEs that sell souvenirs typical of NTB such as textiles, jewelry, and snacks, but both in type and quality, the products they offer are still widely found in other areas of NTB. If the price of MSME products in the Mandalika SEZ is higher than other products, it is feared that MSME owners in Mandalika will lose competitiveness. This case can also be a lesson for MSMEs in other areas, especially those in the SEZ area to continue to innovate to create quality and more prominent regional specialties and have unique selling points. In addition, product quality and price must also be paid more attention to and adjusted to existing standards to increase competitiveness.

2.Lack of Certainty Incentives

The lack of certainty regarding the receipt of incentives to investors threatens the continuity of MSME business activities in the SEZ. The statutory instruments from the Central Government that regulate SEZs do not fully control the provision of incentives and construction of facilities in SEZ areas and leave the task entirely to the local government. This causes differences in policies regarding the acquisition of incentives in various regions so that each region has a different amount of incentives. Without the certainty of incentives for investors, the development and development of SEZs will be disrupted and thus the empowerment of MSMEs in SEZ areas cannot be maximized. For this reason, the government needs to make more definite policies to regulate the amount of incentives for SEZ investors.

3.Insufficient Coordination and Cooperation between Agencies

SEZs in Indonesia are also still lacking in synergy with the surrounding area and coordination with agencies in the government sector. One of the reasons for this is the location of SEZs, which are mostly located far from the center of local government. Weak inter-institutional coordination can also cause problems such as lack of distribution of resources, lack of training for business actors, and limited and inadequate infrastructure development. Adequate cooperation and coordination are needed in order for SEZs to be successful and to contribute a lot to national development.

Illustrated By: Marsha

“Waste reduction to value creation” – the essence of circular economy simply put by Karen Delchet (2020). Current economic model is best described as a linear model where the extraction of raw material is put at the beginning, followed by the production, distribution, then overconsumption which leads to waste. The assumption of the model is that there is an infinite number of resources, thus profit maximization and over production become its main focus. However, as the World Economic Forum (2018) highlights, the fast growth of cities is paramount and inevitable: the ratio of population increases 40% between 1900 and 2015, estimated to 66% in 2050, and affects the increase of natural resources usage 12 times. This increase directly correlates to over consumption of resources, products, constriction of the supply chain and heightened pollution. Due to the finite number of resources available for mankind, it is not practical, sustainable, and economical to use resources and turn them to waste as the world has been doing so with the current linear model of economy. An alternative to these issues can be the Circular Economy model (CE), in which the resources are used to exhaustion, recycled, and reused again with minimal wastage. The shift from linear model to the circular model requires alteration to the current policies and supply chain, way of business and ultimately a shift in the collective approach to our ways of handling resources available to us. This implementation of CE can be challenging for both developing and developed nations. In particularly developed nations where the linear model of economy is so ingrained within the economy, any alteration can prove to be met with resistance. However, there is a certain group of people within a developed nation which has proven to be agents of change – the youth. This article will focus on Australia and its young citizens, their relationship with understanding of the circular economy, and their positions on the subject matter.

According to the article published by Melles (2021), it was left to individual states and other organizations to spell out the details of a circular economy future due to the “absence of strong federal ambition”. Thus, the inability to unite for a main goal resulted in an imperceptive and inadequate response to the transition to CE and implementation of policies across the nation. In addition, it was found that the quality of the “consultations, policy and potential for reform and transition was dependent on the political regime and leadership at the level across the federal and state government”. This also directly correlated to the quality and ability of local government’s actions in dealing with environmental issues and the transition to CE.

However, due to the persistence of the climate change issue and it being an eminent threat to Australia and its coastal cities, there had been a growing support and funding initiatives by the federal and states which had enabled the emergence of national hubs, consultancies, and digital platforms such as ASPIRE online marketplace. In addition, with collaboration of university sector and major retailers and other industries, the government has been able to develop hubs to identify industry specific issues and implement CE strategies. These initiatives indicate that Australia’s CE implementation process is influenced by economic and political factors. These factors range from disruption of the status quo, redistribution of wealth & resources, and political power balance.

Historically, it was understood that youth’s understanding of the circular economy was minimal and only to an extent of consumer behavior. However, recent studies found that youth groups and citizens are viewed as agents of change, first adopters of new reforms, policies, and actions. Youth groups, alongside local/regional governments and community organizations, were also considered more optimistic, acceptable of reform, and acted as agents of change despite having financial, regulatory, or political limitations. As Wallis & Loy (2021) highlights, young people are highly likely to be pro climate change, environmental sustainability and aware of their consumption than other groups of citizens. This behavior is clearly shown by youth mobilization and rallies that began in Melbourne, Sydney, Canberra, and Hobart outside state parliaments building and town halls. In the protests, students and young people have all gathered, skipping school or university, and joining in solidarity to voice their support for more eco-friendly policies and forcing the government to take action.

Moreover, the Fridays for Future (FFF) movement and their ever-increasing intensity, power, and support, has enabled young people to be established as a political force and agents of CE. FFF is a youth-led and organized global strike movement which was started in 2018 after Greta Thunberg’s demand for action. This movement was then morphed into School strike 4 Climate (SS4C) in Australia which follows the principle of FFF. The efficiency and effectiveness of SS4C is yet to be determined due to movement being in its infancy. In addition to such movements, Australia has a eco-friendly focused political party called the Greens Party which is ranked third in the political influence in the government. The Greens Party’s growing supporters are youth groups and young adults ranging from 18 to 34. Furthermore, Dias (2019) highlights that youth may hold some decisive power when casting their vote in some marginal areas during an election. For example, young voters hold power in Immigration minister Peter Dutton’s Queensland seat of Dickson. This enables youth group’s needs to be fulfilled by the political parties in order to gain voters thus giving youth political influence.

Despite the marginal shift of youths position as political actor, Mayes & Hartup (2022) stated that majority of times, youth voice, actions and concerns are still characterized as “ignorant zealots, anxious pawns, rebellious truants, and extraordinary heroes” by media. The research shows that as long as youth are classified and viewed in these terms, their political power is diminished and their actions are merely reduced to emotions and “just a phase”. Counter to such representation, youth have utilized social media platforms to represent a polished and true self-image of themselves. Mimi Elashiry, an Egyptian-Australian who has large followers and become a self-made Instagram star, is an environmental advocate that has been named Adidas Australia's ambassador. She uses the social media platform Instagram to voice her concerns of climate change and promote the principles of circular economy as well as eco-friendly lifestyle. She becomes one of The Oxygen Project’s “Top 10 Favorite Eco-Warriors in Australia”, representing fellow Australian youths in breaking down the stigma through a contemporary approach. Thus, the growing influence of youth are evident within the current society and political arena.

In conclusion, the state and youth are both actors that coexist within the same society. Each has their own power: states have the power to bring changes through reform, policy, or fundings while youth have limited resources and power of decision making. However, as the research highlights, youth may hold more persuasive power which positions them to be great agents of change within a society. Therefore, the government have begun to see youth as a more politically active force with power of making changes across the nation and industries through their consumption power, voting powers, their digital footprint, and influence.

Illustrated By: Marsha

Center for World Trade Studies Universitas Gadjah Mada (PSPD UGM) in collaboration with the Center for Agrotechnology Innovation Gadjah Mada University (PIAT UGM) and Janitra Bhumi Indonesia Education Consulting held a competition for elementary school principals entitled "Indonesia Green Principal Award 2022". This program was carried out on January 20-22, 2022.  It is marked as the initial stage of developing circular economy-based schools in Indonesia, which was attended by 22 principals of Muhammadiyah Elementary Schools and Madrasah Ibtidaiyah throughout Central Java.

Circular economy is an important theme in this program because it is in line with Indonesia’s position as the second most waste-producing country in the world after China. Presently, the "make-use-waste" linear economic culture is still widely applied by most Indonesians. In fact, this culture can cause adverse impacts on various aspects, ranging from the ecological system, society, to Indonesia's economic growth. Therefore, a solution is urgently needed to reduce and avoid problems that can possibly occur, namely in the form of developing and implementing a circular economy in society. In this case, the participation of the principal as the leader of an educational community is the key in the transformation process to become an agent of change.

The IGPA 2022 activity took place at PIAT UGM for 3 (three) days. The first day of this activity was divided into 3 (three) sessions. First, the opening session of the event was hosted by the drg. Ika Dewi Ana, M.Kes., Ph.D as Vice-Chancellor of the University of Gadjah Mada and Dr. Ir. Taryono, M.SC as the Director of PIAT UGM. The second session, "Introduction to Circular Economics Panel" was led by Dr. Riza Noer Arfani as Director of PSPD UGM, Dr. Wahyu Chandra Purnomo, M.Eng. as Deputy Director of PIAT UGM, and Dr. Tri Mulyani Sunarharum from the Faculty of Engineering UGM. The first day's activities ended with a workshop session with the theme of “Initiating a Circular Economic School” presented by Dr. Junita Widiati Arfani from JBI Education Consulting and Suci Lestari Yuana, Ph.D. Cand. from Utrecht University, Netherlands.

On the second day, IGPA 2022 participants visited 3 (three) local institutions, those are PT. YPTI, SMAN 11 Yogyakarta, and several startups assisted by PT. YPTI. PT. YPTI is one of the first Indonesian-owned companies engaged in checking all exterior and interior body equipment in the automotive sector in Indonesia. In this program, the principals were welcomed by a presentation on "People, Planet, Profit" which was delivered by Mr. Petrus Tedja Hapsoro as Director of PT. YPTI Yogyakarta. Participants also went on a tour to see the products produced by PT. YPTI, such as Reverse Vending Machine (RVM) and other processed plastic products. After that, the participants visited SMAN 11 Yogyakarta which implemented a water management system program. The second day's activities ended by taking a look at the startup assisted by PT. YPTI, Stechoq and Helber, which are engaged in lego robotics, and INASTEK which makes products for automation engineering, particularly in the agro-industry sector, such as RVM and hydroponics.

On the last day, participants made a business model canvas and had a discussion with Rendy Aditya Wachid, B. Arch., MBA, as CEO and Founder of Parongpong RAW Lab, Bandung. Parongpong is a "zero landfills waste" management company that possesses a system design for each stakeholder to be able to carry out the 5Rs, which includes Refusing, Reusing, Reducing, Recycling, and Rethinking waste. The IGPA 2022 program ended with a closing by Dr. Riza Noer Arfani and awarding session for school principals. Through this program, CWTS expects that the participants, the principals of Muhammadiyah Elementary School and Madrasah Ibtidaiyah, can further develop and apply the concept of a circular economy in their education units.

The Center for World Trade Studies Gadjah Mada University (CWTS UGM) visited the residence of the Governor of Central Java, Mr. Ganjar Pranowo, S.H, M.I.P, at Puri Gedeh, Semarang on Saturday (15/01/22). In the brief meeting, the Director of CWTS UGM, Dr. Riza Noer Arfani, together with the Executive Secretary of CWTS UGM, Dr. Maharani Hapsari, and the Representative of the ASEAN Nagoya Club (ANC), Indra Kesuma Nasution, held a discussion with Mr. Ganjar Pranowo SH, M.I.P, regarding the UGM CWTS program and the possibility for parties to collaborate in various collaborations with the Central Java Provincial Government.

Mr. Ganjar appreciated CWTS UGM activities that encourage the implementation of a circular economy as well as provide interesting input related to the development of circular economy implementation in Indonesia. Up to the present, the concept of a circular economy has not been widely recognized by the people of Central Java. However, the principles of circular economy have started to be implemented, one of which is through a waste sorting application called “Jeknyong” which was launched by the Banyumas Regency Government.

During the meeting, Mr. Ganjar also greatly supported the programs related to education and product development for Micro, Small, and Medium Enterprises (MSMEs). In a collaboration with ANC, CWTS UGM initiates Japanese language learning activities and opens opportunities for students in Indonesia to work in companies in Japan. This program is one of the programs that draws attention of Mr. Ganjar and in the future it can possibly be developed into a collaboration between the two parties. At the same time, Mr. Ganjar encouraged CWTS UGM to be involved in developing MSMEs in Central Java.

The visit ended with a commemorative activity from CWTS UGM to Mr. Ganjar Pranowo, S.H., M.I.P. and a group photo. Through this program, it is expected that in the future there will be a great collaboration between CWTS and the Central Java Provincial Government.