Determination of economic sector in East Kalimantan, Indonesia
| Published date | 01 October 2018 |
| Date | 01 October 2018 |
| DOI | https://doi.org/10.1108/JCEFTS-01-2018-0001 |
| Pages | 182-201 |
| Author | Zaini Achmad |
| Subject Matter | Economics,International economics |
Determination of economic sector
in East Kalimantan, Indonesia
Zaini Achmad
Universitas Mulawarman, Samarinda, Indonesia
Abstract
Purpose –This paper aims to analyze the superior economic sector by looking at its contribution to the
gross regionaldomestic product (GRDP) of East Kalimantan Province,the economic base, the multiplier effect
and the strengthof inter-sectorallinkages.
Design/methodology/approach –This study was designed throughtwo research approaches, namely,
quantitative and qualitative method. This is intended to complement the results of the phenomenon under
study and to strengthen the analysis. Secondary data were analyzed by the level of contribution of the
economic sectors to the GRDP,and the base sector was determined through the location quotientapproach.
The two methods of calculationhelped to reveal the dominant economic sectors inEast Kalimantan Province.
The Input Output (IO) Table in 2016 wasmade up dated from the 2009 IO Table to be used as a basis for
building Social AccountingMatrix data or known as the East Kalimantan RegionalSocio-Economic Balance
System (SEBS) (a matrix of 49 49 sectors)in 2017 by using the RAS method. To be consistent, these SEBS
data are then aggregatedso all commodities are combined into economic sectorsused to determine the leading
sector onthe East Kalimantan Province SEBS in 2016 (a matrixof 41 41 sectors).
Findings –Based on the assessmentby scoring of the criteria for determiningthe leading economic sectors
in East Kalimantan, i.e. the contributionof the economic sector to GRDP, the economic base, the multiplier
effect (income, productionfactor, and output) and the linkages between sectors, both backward and forward
linkage,shows the ten leading sectors as follows: the trade; paper and printedgoods; financial institutions and
other financial services; fertilizer; chemical and other rubber products; hotel and restaurant; general
government;fisheries; excavation; and mining without oil and gas.
Originality/value –Similar research has never been done before in East Kalimantan; this is one of the
originalities of this present study. No previous study has comprehensively studied the mediating effects of
touristvalue perception on the determination of economic sector,especially in Kalimantan, Indonesia.
Keywords Economic sector, Gross regional income, Regional economies
Paper type Research paper
1. Introduction
East Kalimantan Provinceis one of the regions in Indonesia rich in natural resources. This is
a great potential and capital to support the acceleration of regional economic development
for the wealth of the people in a sustainable manner. Regional economic development is a
process that includes the formation of new institutions and the development of alternative
industries, where local governments and communities manage existing resources and form
a certain partnership with the private sector. The main focus in regional development is
development policies based on the unique values of the region employing the potential of
local human resources, institutions and physical resources reflected in the role of the
economic sector in the formationof regional economic structures.
The role of economic sectors in the regional economic structure including in East
Kalimantan Provincecan be reflected by its contribution to the gross regional income. As an
area that relies mainly on export commodities, the international trade has a great influence
on the economy of East Kalimantan, especially for commodities having the largest share in
the economic structure of the region.East Kalimantan, since 1990 to the present, depends on
JCEFTS
11,3
182
Journalof Chinese Economic and
ForeignTrade Studies
Vol.11 No. 3, 2018
pp. 182-201
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-01-2018-0001
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1754-4408.htm
the non-renewable resource-based economic sector. Previously, for approximately 20 years
(1970 to 1990), the forestry sector became the economic backbone of the region. The local
government then establishes the forestry sector as a base sector in promoting regional
economic improvement.
The problems identified at that time included the slow development of wood and the
wood processing industry. While other countries had produced plywood, Indonesia,
especially East Kalimantan, was still exporting logs. Furthermore, when the wood
processing factories, such as plywood factories,were built in Indonesia, other countries had
advanced and were able to produce paper. Logs, as the raw materials for the wood
processing industry, continued to experience a decline in production due to massive forest
exploitation to meetexport demand; this condition had caused the regional economicturmoil
with increasing unemployment and massive layoffs at that time. The shift in the economic
base in East Kalimantan was driven back to the non-renewable natural resource-based
economy, namely, coal,oil and gas, which was then determined to be the leading sector. This
economic transformation occurred since the massive exploitation of oil and gas as well as
coal mines.
From the structure of the economic sector, the mining and excavation sector contributed
IDR182.54tn to the gross value-added or 42.91 per cent of the total GRDP of East
Kalimantan Province in 2013, based on the largest current price. The value-added of the
manufacturing industry in 2013 increased from IDR98.65tn in 2012 to IDR104.46tnor 23.52
per cent of the total GRDP of EastKalimantan in 2013 or increased by IDR5.80tn.
In 2013, it turned out that seven economicsectors experiencing positive growth except in
the mining and excavation sector and the manufacturingindustry. In 2013, the mining and
excavation sector and the manufacturing industry, which always contributed significantly
to the East Kalimantan economy,experienced a negative correction of 0.23 per cent and 3.93
per cent, respectively.
Based on the contribution of the economic sector to the GRDP of East Kalimantan, the
mining and excavation sector provides the largest contribution followed by the
manufacturing industry, the trade sector, the hotel and restaurant sector, the agricultural
sector and the service sector. Whereas based on the economic growth rate, the financial,
leasing and business service sector experienced the highest economic growth rate in 2013
and followed by the service sector, the transportation and communication sector, the hotel
and restaurant sector, the tradesector and the agricultural sector.
However, it should be taken into account that the success of regional economic
development is not solely measured by the contribution of economic sectors to GRDP or the
increase in the economicgrowth rate and income in aggregate or per capita, but must alsobe
seen from the increasein income distribution. Although it appears that the per capita income
of the people tends to increase with a high growth rate, it means nothing if only certain
people of the population enjoymore increase in the aggregate income and economic growth
rate, while the other segments of the populationonly earn a little; this indicates inequality in
income distribution.
East Kalimantan’s economystill relies on raw materials and not processed products. The
challenge faced is to build linkages between upstream and downstream of the superior
commodities that can become the future economic base of the region. Economic
transformation to form a balance betweenintermediate demand and final demand is one of
the efforts that can increase the value-added for the economy of East Kalimantan. The
province needs to make changesin the medium and long-term development patterns. Efforts
to prepare for economic transformation towards a more balanced economy between non-
Economic
sector in East
Kalimantan
183
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