Input Output Analysis to Determine Sustainable Development Planning in Indonesia

12 Pages Posted: 11 Jan 2017 Last revised: 17 Jan 2017

Eleonora Sofilda

Trisakti University - Sustainable Development Management Program

Agussalim

Ekasakti University - Economics Faculty

Muhammad Zilal Hamzah

Trisakti University; Indonesian Business Institute

Date Written: October 30, 2016

Abstract

Indonesia is one country in Southeast Asia that shows good economic growth for over a decade after the Asian Monetary Crisis. However, the growth rate start decreased in the last few years and this is known as the impact of the global crisis that occurred in 2008 and until today. The decline in economic growth occurred in 2015 were only 4.7%, compared then growth in 2014, reaching 5.2%. This condition is caused by the weakening of international demand and slowing growth of international investment in Indonesia.

As is known, Indonesia is a large country, rich with the potential of natural resources and human resources. With this condition, the opportunities of substantial of high economic growth will easily reached by Indonesia. However, Indonesia's economy is still highly depending on the global economy. At this time, the conditions of global economy is uncertain, hence it will impact on the economic growth in Indonesia. So need for the Government of Indonesia to create another more potential sector from inside of Indonesia.

Based on the above conditions, this study aims to analyze the potential sectors, where able to trigger economic growth in Indonesia. These sectors will be evaluated from Input-Output tables Indonesia in 2010 that based on Supply and Use Tables (SUT). Input-Output is a matrix that describes the transaction of goods and services between sectors of the economy at any given time. Matrix input-output can explain the interrelationships between economic sectors (Index backward linkage and index forward linkage). A sector which has a high forward linkage, have enough thrust strong compared to other sectors, while sectors that have high backward linkage, indicates that the sector has a high dependence on other sectors. So the Input Output table can be used as a tool for projecting the economy in Indonesia. Input Output Table that compiled by the Indonesia Central Statistics Agency (BPS), hereinafter can be analyzed to determine the structure of the economy is better and integrated.

Based on the results of research on input-output tables Indonesia in 2010, the output of Indonesia reached Rp. 13,104,130 million. From the total output, the largest contribution respectively come from the Manufacturing sector in the amount of 34.15%, Construction is 14.69%, Wholesale & Retail Trade and Repair of Cars & Motorcycles is 10.37%, Agriculture, Forestry and Fisheries (identical with an agricultural country) amounted to 8.12%. While the sector that has the smallest contribution is the Water Supply, Waste Management, Waste and Recycling at only 0.37% and other service sectors amounted to 0.81%.

The National Gross Value Added in 2010, resulting in a structured starting from the Manufacturing sector with a contribution of 26.28% (biggest), sector Wholesale & Retail Trade and Repair of Cars & Motorcycles (12.4%) and Mining & Quarrying (by 12.4%). Meanwhile, the sector of Water Supply, Waste Management, Waste and Recycling has gross value added of the smallest in the amount of 0.395%. The results also indicate that the sector which has a highest forward linkage index is Retail Trade sector, in addition to Cars and Motorcycles. Forward Linkage Index is equal to 7.04446 which mean that each increase of one unit of this sector will increase output of other sectors that use this as input sector amounted to 7.04446 units. The Manufacturing sector and Preservation of Meat have a highest backward linkage index, that is at 1.4031, followed by other Food Industry sectors.

Furthermore, the results also obtain the Leontief inverse matrix, which can be used to see the forward index and the degree of sensitivity of each sector. Degree of sensitivity is used to see how the sector generates an output to be used as input for other sectors. The sectors that have the highest degree of sensitivity is the Wholesale and Retail Trade sector in addition to Cars and Motorcycles with the degree of sensitivity of 7.08739 and is followed by Electricity sector. Based on the results obtained, the policies issued by the government is expected to strengthen stimulus directed to increase production capacity, strengthen competitiveness and improve the fiscal sustainability in the midst of global economic challenges.

Keywords: Potential Sector, Economic Growth, Input-Output Analysis, Backward Lingkage, Forward Linkage

Suggested Citation

Sofilda, Eleonora and Agussalim and Hamzah, Muhammad Zilal, Input Output Analysis to Determine Sustainable Development Planning in Indonesia (October 30, 2016). OIDA International Journal of Sustainable Development, Vol. 09, No. 10, pp. 11-22, 2016. Available at SSRN: https://ssrn.com/abstract=2896519

Eleonora Sofilda (Contact Author)

Trisakti University - Sustainable Development Management Program ( email )

Jakarta
Indonesia

Agussalim

Ekasakti University - Economics Faculty ( email )

Jalan Veteran Dalam No 26 B
Padang
25114 West Sumatra
Indonesia

Muhammad Zilal Hamzah

Trisakti University ( email )

Kakarta
Indonesia

Indonesian Business Institute ( email )

United States

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