Professional Documents
Culture Documents
Indonesian Economic Outlook
Indonesian Economic Outlook
Indonesian Economic Outlook
2008-2012
ASEAN Economic Integration and the
National Economic Outlook
January 2008
Daftar Pustaka
Editors-in-Chief:
Made Sukada
Editorial Team:
Wijoyo Santoso
Endy Dwi Tjahjono
Harmanta
Hidayah Dhini Ari
Ferry Kurniawan
Haris Munandar
Oki Hermansyah
Myrnawati Savitri
The editorial team would like to thank the following members of the Focus Group Discussions
for their participation, information and suggestions: Ministry of Finance, Ministry of Trade, National Development Planning Agency (BAPPENAS), Institute of Economic and Social Research of
the University of Indonesia (LPEM-UI), Bogor Agricultural Institute (IPB), Indonesian Institute
of Sciences (LIPI), the Centre for Strategic and International Studies (CSIS), Indonesian Chamber of Commerce and Industry (KADIN), Indonesian Association of Automotive Manufacturers
(GAIKINDO) and the Indonesian Textile Industries Association (API).
This assessment is the result of analysis and research by the economic research team at the
Directorate of Economic Research and Monetary Policy (DKM). The assessment represents solely
the opinions of the team and does not necessary present or reflect the official opinions of Bank
Indonesia.
ii
Table
Daftar
of Contents
Pustaka
TABLE OF CONTENTS
LIST OF TABLES .....................................................................................................................
LIST OF GRAPHS .....................................................................................................................
LIST OF DIAGRAMS ...................................................................................................................
CHAPTER 1 - GENERAL REVIEW .................................................................................................
v
vii
viii
1
1
4
5
7
7
10
10
14
17
19
20
22
25
28
28
29
30
32
34
35
35
36
41
41
41
42
43
43
44
44
44
44
3.1
3.2
3.3
3.4
iii
DaftarofPustaka
Table
Contents
4.3 Projection for the Indonesian Economy, 2008-2012 .................................................
4.4 Policy Implications ....................................................................................................
4.4.1 Macroeconomic Policy (Monetary and Fiscal) ..................................................
4.4.2 Microeconomic (Structural) Policies ................................................................
CHAPTER 5 - TOPICAL ISSUES ...................................................................................................
45
47
47
47
49
5.1 Mobility of Production Factors, Distribution and Regional Economic Integration .......
5.1.1 Background and Motivation ...........................................................................
5.1.2 Economic Modelling ......................................................................................
5.1.3 Policy Implications ..........................................................................................
5.1.4 Epilogue ........................................................................................................
5.2 Regional Economic Integration, Investment and the Role of Monetary Authority ......
5.2.1 Background and Motivation ...........................................................................
5.2.2 Data and Analysis Method .............................................................................
5.2.3 Short Run Analysis .........................................................................................
5.2.4 Long Run Analysis ..........................................................................................
5.2.5 Conclusions ...................................................................................................
5.3 Impact of Proximity on Provincial Commodity Exports: Gravity Model Approach .......
5.3.1 Overview of Exports by Indonesias Provinces .................................................
5.3.2 Model and Estimates .....................................................................................
5.3.3 Estimate Results .............................................................................................
5.3.4 Conclusions ...................................................................................................
5.4 Human Capital Formation, Income Inequalities and Economic Integration:
49
50
52
53
54
54
55
55
57
57
58
58
60
60
61
62
A Meta-Analysis .......................................................................................................
5.4.1 Background and Motivation ...........................................................................
5.4.2 Education, Openness and Income Inequalities ................................................
5.4.3 Overlapping Generation Economic Model, Heterogeneity and Economic
Integration .....................................................................................................
5.4.4 Role of Human Capital in Conditions of Equilibrium .......................................
BIBLIOGRAPHY .....................................................................................................................
62
62
62
iv
64
65
66
Daftar
List ofPustaka
Tables
LIST OF TABLES
Table 1.1
Projections ..............................................................................................................
Table 2.1
Table 2.2
Table 2.3
Table 2.4
Table 2.5
Table 2.6
Table 2.7
Table 2.8
8
9
10
11
12
12
13
17
Table 3.1
Table 3.2
Table 3.3
23
23
Table 3.6
Table 3.7
Table 3.8
Table 3.9
Table 3.10
Table 3.11
Table 3.12
Table 3.13
24
25
25
31
32
33
33
33
34
Table 4.1
Table 4.2
Table 4.3
44
45
47
Table 5.1
Table 5.2
Table 5.3
Table 5.4
56
56
56
56
Table 3.4
Table 3.5
24
24
Daftar
List
of Tables
Pustaka
Table 5.5
Table 5.6
Table 5.7
Table 5.8
Table 5.9
Table 5.10
Table 5.11
Table 5.12
vi
56
56
56
57
57
58
59
61
Daftar
List of Pustaka
Graphs
LIST OF GRAPHS
Graph 2.1
Graph 2.2
Graph 2.3
Graph 2.4
Graph 2.5
Graph 2.6
Graph 2.7
Graph 2.8
Graph 2.9
Graph 2.10
Graph 2.11
Graph 2.12
Graph 2.13
Graph 2.14
Graph 2.15
Graph 2.16
Graph 2.17
Graph 2.18
7
7
8
8
9
9
10
11
12
13
13
14
14
15
15
15
15
18
Graph 4.1
Graph 4.2
Graph 4.3
Graph 4.4
42
42
43
44
vii
Daftar
List
of Diagrams
Pustaka
LIST OF DIAGRAMS
Diagram 4.1 Structural Reforms, Aggregate Supply and Performance of the Indonesian Economy
viii
45
Daftar
Foreword
Pustaka
FOREWORD
DEPUTY GOVERNOR OF BANK INDONESIA FOR MONETARY POLICY
FOR PUBLICATION
OF THE INDONESIAN ECONOMIC OUTLOOK, JANUARY 2008 EDITION
The Directorate of Economic Research and Monetary Policy has completed an in-depth study on
the medium-term outlook for the Indonesian economy (2008-2012). The findings of this study have
been carefully organised for presentation in this January 2008 edition of the Indonesian Economic Outlook.
My congratulations for this achievement.
The Indonesian Economic Outlook is a regular semi-annual publication by Bank Indonesia forming
a vital component of a wide range of analyses by many units at Bank Indonesia. The description of the
constellation of the economy, the main study themes, projections and topical issues all serve as a strategic
window on the future condition of the Indonesian economy.
The main topic chosen for this edition is: ASEAN Economic Integration and the National Economic
Outlook. As the monetary authority in this republic, Bank Indonesia has the statutory obligation of
working consistently for low, stable inflation. This low, stable inflation will bring improvement to the
investment climate, which in turn will stimulate greater investment and bring significant expansion in
the stock of capital. This book describes how prudent monetary policy is proven to be a pro-investment
policy, particularly in gearing for the ASEAN Economic Community (AEC) in 2015.
However, investment is hampered by various issues that unfortunately still beset this nation. It is
essential that policy makers, including Bank Indonesia, make use of the dynamics of the global and
domestic economy in the creative design and earnest implementation of a range of policies for
improvement of the investment climate. In the medium-term, the most relevant and effective policy for
the Indonesian economy is a structural policy for strengthening aggregate supply.
The effects of structural flaws will undeniably have a negative impact on inflation and
macroeconomic stability, and therefore the design and implementation of structural policies is not
only the domain of the Government, but also represents a concern of Bank Indonesia. Significant
strengthening in aggregate supply is not only intended to create opportunities and build capacity
among the poor, but is also a prerequisite for high economic growth without sacrificing price stability.
To build the productivity and efficiency of the economy, determined, unswerving effort is necessary to
incorporate FDI-led investment growth, improvement in the quality of our nations human capital and
broader, more intensive transfer of technology into the spirit of each and every policy at the national,
regional and sectoral level.
ix
Daftar Pustaka
Foreword
Finally, on behalf of the Board of Governors of Bank Indonesia, I would like to express my sincere
appreciation to the Editorial Team. May the Almighty God always bestow His Blessing on our work and
lighten our steps on the journey to a better future.
Hartadi A. Sarwono
Preface
PREFACE
Let us offer our praise and thanksgiving to the Almighty God, by Whose pleasure the book on the
Indonesian Economic Outlook 2008-2012, edition IV January 2008, has successfully reached completion.
In departure from past publications of the Outlook, this edition examines opportunities and challenges
as Indonesia gears for the ASEAN Economic Community (AEC) in 2015 and the relevant implications for
the Indonesian economy. The issue of economic integration has been given special focus in view of the
agreement reached by Indonesia and nine other ASEAN members in November 2007 on the blue print
for establishment of the ASEAN Economic Community in 2015. This represents a joint commitment to
building a stable, prosperous and highly competitive region with balanced economic growth and reduction
in poverty and socio-economic disparities. There is a growing need for assessment of Indonesias economic
fundamentals and the economic integration of ASEAN to support medium to long-term analyses and
projections on the direction of the economy over the coming five years. For this reason, the Indonesian
Economic Outlook has been developed as a regular product of the Economic Research Office of the
Directorate of Economic Research and Monetary Policy at Bank Indonesia.
The economic projections in this Edition IV of the Indonesian Economic Outlook are intended for
use as internal reference for the units at Bank Indonesia in their medium-term analyses and projections,
including assessments and formulation of Destination Statements in the Strategic Forum (FORSTRA) held
each year, and as a source of information for Bank Indonesia stakeholders. Information and data in these
projections is updated on an ongoing basis. The publication of the Indonesian Economic Outlook is the
culmination of a sincere desire to help place the Indonesian economy on a better course for the benefit
of all who call this country their home.
MADE SUKADA
Director
xi
2007
2008
2009
2010
2011
2012
6.3
5.0
3.9
9.2
8.0
8.9
6.2
5.4
3.8
9.3
7.9
9.4
6.2-6.8
5.6-5.9
4.0-5.0
10.5-10.8
8.1-9.1
10.4-10.7
6.8-7.4
5.6-6.0
7.0-9.0
11.0-13.0
10.5-11.5
12.5-13.5
7.2-7.8
5.6-6.0
8.0-10.0
12.0-13.0
11.5-12.5
13.5-14.5
7.4-8.0
5.6-6.0
8.0-10.0
13.0-15.0
12.5-13.5
14.5-15.5
1.947.1
9.1
6.01%
1980
9.0
5.01%
2145-2180
9.0-10.0
4.51%
2375-2410
8.5-9.5
4.01%
2650-2685
8.0-9.0
2950-3000
7.5-8.5
c.
the next five years without sacrificing longterm fiscal sustainability. The fiscal stimulus
must be targeted at improving infrastructure,
promoting industry capable of generating high
levels of employment, maintaining public
purchasing power, alleviating poverty and
improving income distribution. A steady
reduction is predicted in the fiscal deficit to
1.4% of GDP at end-2012.
Given the importance of physical investment
and human resources to long-term economic
growth, creation of a conducive climate for
investment, infrastructure development,
improved competitiveness and improvement
in human capital will be crucial to building
quality, sustainable economic growth and
readiness for the launching of AEC in 2015.
Concerning this, Presidential Instruction
(Inpres) No. 6 of 2007 concerning Policy for
Accelerated Development of the Real Sector
and Empowerment of Micro, Small and
Medium Enterprises (MSMEs), which covers:
1) Improvements in the Investment Climate,
2) Financial Sector Reform, 3) Accelerated
Construction of Infrastructure and 4)
Empowerment of MSMEs, needs to be fasttracked for optimum implementation.
2006
2007
25
20
15
10
5
0
China
India
United
States
Euro area
Russia
Japan
Brazil
2006
20
2007
15
10
5
0
United
States
Euro area
China
Japan
India
United
Kingdom
Russia
77
78
80
82
84
85
69
86
5
67
4
57
60
40
3.1
34
43
28
33
2
2.1
1.9
20
1.3
1.5
1.0
0
2001
2002
2003
2004
2005
160
25
140
20
120
2006
10
100
80
60
-5
40
-10
0
2000
30
15
4.1
29
5.6
77
2007
20
-15
-20
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Projections
2008-2012
Oil
Alumunium
Metals
Copper
Zinc
Agriculture food (c)
Wheat
Maize
Soya beans
Memo:
Share of wprld GDP (percent) (d)
2000 - 04
2005 - 07 (a)
Contribution of (b)
Contribution of (b)
United
United
World States China World States China
1.7
5.2
0.3
-0.4
0.6
2.8
1.4
6.6
0.1
0.2
0.5
5.5
3.4
4.4
-0.9
-0.5
2.5
3.3
2.7
2.4
-0.8
-0.4
3.1
2.4
0.5
2.5
4.4
-0.1
1.0
0.0
-0.2
0.5
1.9
1.2
3.5
5.0
-0.1
1.4
0.9
-0.1
0.8
1.6
20.8
12.3
19.6
15.1
2.0
Wheat. maize and
soya beans (b)
1.5
FDI inflows
M & As
1,400
1.0
1,200
0.5
+
0.0
0.5
1,000
800
600
Metals ( c )
1.0
400
Oil (d)
1.5
200
0
2.0
1997
1999
2001
2003
2005
1992 93
2007
Source: BoE, Energy Infromation Agency, London Metal Exchange, The Economist, Thompson
Data Stream and US Department of Agriculture
94
95
96
97
98
99 2000 01
02
03
04
05
1998
1999
2000
2001
2002
2003
2004
2005
2006
Word total
491,8
712,9
1.113,8 1.408,3
851,1
618,1
563,4
730,2
971,7
1.335,1
Developed countries
279,0
493,8
853,0 1.125,0
563,4
421,1
354,6
379,5
546,8
824,4
56,7
69,3
76,6
79,9
66,2
68,1
62,9
52,0
56,3
61,7
212,8
219,1
260,9
283,3
287,8
197,0
208,9
350,7
424,9
510,7
43,3
20,7
23,4
20,1
33,8
31,9
37,1
48,0
43,7
38,8
% of world total
Emerging markets
% of world total
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
43
56
49
63
66
76
60
65
70
71
72
82
103
93
93
77
100
110
112
114
150
145
139
150
207
246
242
270
205
184
77
99
108
106
98
134
136
130
147
193
234
218
234
164
147
16
16
14
12
24
36
41
37
9
7
5
The analysis is based on the following periodisation: 19891996 for pre-crisis; 2000-2007 for the post-crisis period.
10
1
-1
-3
-5
1989
1991
1993
Economic Growth
1995
1997
1999
Average 1989-1996
2001
2003
2005 2007*)
Average 2000-2007
Source: CEIC
4
3
20
Peringkat
15
Negara
10
Indonesia
Singapore
Malaysia
Thailand
Phillippines
Vietnam
Kamboja
Timor-Leste
5
Average 1989-1996 = 8.2%
0
-5
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Source : CEIC
2005
2006
2007
69
5
25
33
73
74
111
113
54
8
19
28
75
64
106
120
54
7
21
28
71
68
110
127
Source: World Economic Forum, Global Competitiveness Report 2006 & 2007
11
2007
2006
USA
Singapore
Hongkong
China
Taiwan
Malaysia
India
Korea
Thailand
Philippines
Brazil
South Africa
Argentina
Poland
Croatia
Indonesia
Venezuela
1
2
3
15
18
23
27
29
33
45
49
50
51
52
53
54
55
1
3
2
18
17
22
27
32
29
42
44
44
47
58
59
52
53
Total
55
55
2005
2004
2003
1
3
2
31
11
28
39
29
27
49
51
46
58
57
59
60
1
2
6
24
12
16
34
35
29
52
53
49
59
57
58
60
1
4
40
29
17
21
50
37
30
49
52
47
58
55
57
59
60
60
59
Indonesia
2006
2007
Indonesia
Overall index
Basic requirements
Institutions
Infrastructures
Macroeconomic stability
Health & primary education
Efficiency enhancers
Higher education and training
Goods market & efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
Innovation & sophistication factors
Business sophistication
Innovation
69
54
75
60
78
73
93
44
70
33
51
58
75
15
41
41
39
54
54
82
63
91
89
78
37
65
23
31
50
75
15
34
33
41
Source: World Economic Forum, Global Competitiveness Report 2006 & 2007
12
0
5
10
Source: World Economic Forum. Global Competitiveness Report 2007
15
20
25
Economic
Year
Indonesia
Indonesia
Malaysia
Malaysia
Thailand
Thailand
Philippines
Philippines
Singapore
Singapore
India
India
Honduras
Honduras
Brazil
Brazil
Lesotho
Lesotho
Algeria
Algeria
Egypt
Egypt
China
China
Korea
Korea
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
133
123
21
24
17
15
130
133
1
1
132
120
126
121
113
122
119
124
125
125
152
126
92
83
27
30
163
168
74
74
27
36
135
144
11
9
93
111
143
135
120
122
120
126
119
131
126
55
128
135
101
110
97
105
30
24
33
33
58
58
6
5
35
33
44
21
152
152
73
73
24
24
19
9
35
35
17
17
117
99
102
105
11
12
75
77
5
5
133
134
98
72
95
107
146
146
104
108
165
163
175
175
16
22
224
196
285
285
156
156
177
177
102
102
224
224
184
125
316
411
601
601
240
240
249
249
349
336
34
34
123
121
65
67
19
20
81
86
13
13
108
112
89
78
109
110
129
132
153
156
147
101
28
29
65
68
42
42
144
144
2
2
33
33
9
9
62
62
36
24
47
45
101
101
51
51
193
193
29
29
11
11
49
51
4
4
32
33
141
141
2
2
32
33
147
147
62
64
141
141
62
64
105
83
81
83
62
64
Enforcing Contracts
Rank
Time
(days)
Cost
(% debt)
142
141
62
63
26
26
113
113
5
4
177
177
126
124
112
106
99
99
120
117
146
145
20
20
10
10
570
570
600
600
479
479
842
842
120
120
1,420
1,420
480
480
616
616
695
695
630
630
1,010
1,010
406
406
230
230
122,7
122,7
27,5
27,5
14,3
14,3
26
26
17,8
17,8
39,6
39,6
30,4
30,4
16,5
16,5
16,6
16,6
17,4
17,4
25,3
25,3
8,8
8,8
10,3
10,3
152
Brazil
Brunei
Indonesia
Timor-Leste
Phillippines
Vietnam
China
Thailand
Malaysia
Korea
UK
US
Singapore
116
105
82
58
50
35
33
24
17
13
6
5
50
100
150
200
110
100
90
80
70
60
50
40
30
20
10
0
China
India
United States
Russian Federation
Brazil
Viet Nam
United Kingdom
Australia
Mexico
Poland
Germany
Thailand
France
Malaysia
Indonesia
Singapore
Italy
Ukraine
Japan
Canada
Republic of Korea
Turkey
South Africa
Serbia
Egypt
United Arab Emirates
Czech Republic
Phillipines
Argentina
Marocco
Venezuela
Hungary
Taiwan Province of China
Bulgaria
Greece
Saudi Arabia
Chile
Belgium
Romania
Peru
Nigeria
13
40
ICRG
0
1996
1998
2000
Source: International Country Risk Guide
2002
2004
2006
Market-related factors
Resources-related factors
Others
Follow the
leader
Stable
investment
environment
Government
effectiveness
incentives
Cheap labour
Access to
capital market
Access to
natural
resources
Skilled labour
Access of
regional
market
Growth of
local market
Size of local
market
Other motivations
14
0.30
50
0.25
40
0.20
30
0.15
20
0.10
10
0
0.05
-10
0.00
2000
2001
2002
2003
2004
Agriculture
Electricity. Gas and Water Supply
Mining & Quarrying
Construction
Manufacturing Industry
Trade. Hotel & Restaurant
Source: Central Statistics Agency (BPS), 2008
2005
2006
2007
-20
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Agriculture, Livestock, Forestry
and Fishery
Mining and Quarrying
Manufacturing Industry
Electricity, Gas and Water Supply
Construction
Trade, Hotel and Restaurant
Transport and Communication
Finance, Real Estate and Business Services
Services
Billion Rupiah
120,000
100,000
80,000
60,000
40,000
20,000
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Agriculture, Livestock, Forestry
and Fishery
Mining and Quarrying
Manufacturing Industry
Electricity, Gas and Water Supply
Construction
Trade, Hotel and Restaurant
Transport and Communication
Finance, Real Estate and Business Services
Services
Construction
Trade, Hotel and Restaurant
Transport and Communication
Finance, Real Estate and Business Services
Services
15
16
Number of Actions
Finished by
Total to be Finished June 2007
50
40
9
5
7
5
41
34
165
12
28
8
21
17
18
%
20
18
16
14
12
10
8
6
4
Inflation
BI Rate
0
Jul
Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan
2005
2006
2007
2008
19
20
1)
5
6
21
22
million percent
2006
2006
US$
2006
Unemployment Rate
Country
Brunei Darussalam
0.38
-0.7 30,213.6
US$ PPP
2006
25,094.1
percent
2005/2006
Merchandise Trade
FDI Net Inflow (yoy)
Ratio of
Ratio of
exports to GDP imports to GDP
percent
2006
percent
2006
4.0
65.8
12.9
145.0
50.2
Cambodia
14.16
2.8
512.3
3,226.0
0.8
48.4
40.3
102.0
26.8
Indonesia
222.05
6.6
1,640.4
4,321.3
10.5
27.7
16.8
(2,779.8)
(33.4)
6.14
4.7
574.0
2,332.1
11.4
16.7
159.7
575.8
Malaysia
26.69
3.1
5,880.4
12,184.9
3.0
100.2
81.8
2,094.9
52.8
Myanmar
57.29
208.6
1,958.8
29.4
17.7
(92.9)
(39.4)
Philippines
86.91
4.3
1,351.5
5,332.7
8.1
40.4
44.1
491.0
26.5
Singapore
4.48
0.8 29,499.6
32,379.6
2.7
205.3
180.3
9,053.5
60.4
Thailand
65.23
3.5
9,163.5
1.3
58.8
61.5
1,799.1
20.1
Vietnam
84.22
6.6
723.9
3,373.3
5.3
60.8
66.0
339.2
16.8
ASEAN
567.60
1,890.3
5,210.2
n.a.
70.0
61.0
11,311.7
27.5
Laos
3,167.8
1990
Cambodia
2296
Indonesia
5945
Malaysia
13434
Myanmar
1959
Phillippines 6348
Singapore 28191
Thailand
8291
Vietnam
2346
Source: ILO
1995
2000
2003
2004
2005
2297 3037
8205 7588
18473 19254
2328 3017
6195 6952
38888 42888
11871 11984
3094 3803
2732
8321
19953
3819
6797
46235
13135
4328
2714
8656
21128
4172
7164
49457
13541
4553
2845
922
22112
4541
7271
47975
13915
4809
23
Share of Intraregional
Trade to World Trade
Domain
Country
G3
Developing Asia
ASEAN+4
ASEAN
Developing Asia
53.1
50.0
41.6
33.1
37.9
43.6
43.8
44.8
48.5
11.2
12.8
12.9
1.6
ASEAN
54.3
49.0
37.7
34.9
41.2
50.3
48.8
47.7
56.4
18.9
21.7
24.9
9.5
12.1
ASEAN+4
51.7
49.5
41.1
33.3
38.1
43.7
36.6
40.3
46.1
11.6
13.2
12.8
n.a
n.a
Indonesia
67.9
50.7
43.1
25.1
37.5
45.0
63.7
54.0
58.5
10.0
17.0
20.3
1990 1999
2006
4.5
7.1
10.1
0.8
1.4
7.2
n.a
Table 3.4 Total Exports from Exporting Countries to Export Destinations as Share of
Total Exporting Country Trade
Exports Destination (Share of Total Trade in Domain Country)
Domain Country
USA
Euro
Japan
China
India
1990 1999 2006 1990 1999 2006 1990 1999 2006 1990 1999 2006 1990 1999 2006
Developing Asia
ASEAN
ASEAN+4
Indonesia
21.9
19.4
25.1
13.1
21.9
20.1
24.4
14.2
16.9
14.1
18.2
11.5
16.9
16.0
18.2
12.3
17.0
16.5
17.2
15.1
8.5
10.6
6.9
19.4
0.7
1.2
0.7
0.2
1.0
1.7
0.9
1.9
1.6
2.4
1.5
3.2
Table 3.5 Export Commodities from Exporting Countries to Export Destinations as Share of
Total Exporting Country Trade
Exports Destination (Share of Total Trade in Domain Country)
Domain Country
G3*)
Developing Asia
1995
1999
2006
1995
17
40
42
18
39
39
24
40
32
23
51
25
21
53
23
21
43
29
5
65
30
ASEAN+4
ASEAN
1999
2006
1995
1999
2006
1995
1999
2006
13
67
18
12
67
16
17
66
10
13
63
23
12
62
21
17
64
13
16
67
16
13
68
13
16
62
10
19
58
20
15
68
15
12
69
11
12
69
7
15
66
18
13
67
14
12
70
8
16
67
15
13
69
12
12
65
9
21
40
29
24
40
27
19
66
13
15
68
12
18
66
9
17
63
18
14
64
17
18
65
11
20
66
11
16
68
10
16
64
9
4
61
32
4
67
26
5
80
15
6
77
13
7
82
7
3
80
16
4
79
13
6
83
7
8
70
21
10
68
17
11
72
10
24
Total
ICT
Electronics
Healthcare Products
Textile and Garment
Automotive
Agro-based Products
Fisheries
Rubber-based Products
Wood-based Products
92.86
99.92
75.90
93.38
90.12
84.22
78.33
86.02
92.00
Source: UN Comtrade
X j +M
j
j
Table 3.7 Intra-Industry Trade (IIT) Index for Indonesia by Sector over 5 Years
2002 - 2006
Sector
Malaysia
ICT
Electronics
Healthcare Products
Textile and Garment
Automotive
Agro-based Products
Fisheries
Rubber-based Products
Wood-based Products
24.67
78.33
49.45
9.23
36.79
31.40
14.42
49.56
18.73
Phillippines
Singapore
31.73
31.14
49.74
5.16
58.16
68.93
20.95
8.01
19.12
5.43
48.31
42.85
26.18
88.72
9.62
5.82
39.22
78.15
Thailand
90.94
86.70
51.59
78.99
43.13
21.52
14.35
86.89
92.85
Total
10.18
74.71
80.80
32.95
79.89
65.80
10.42
47.84
52.87
Source: UN Comtrade
25
26
2.
3.
it
10
H
j=1
jt
it
Y
j=1
jt
it
K
j=1
jt
27
28
11
12
29
30
Destination Country
Brunei Cambodia Indonesia
0
0
6
0
68
0
23
3
11
0
111
0
0
0
1
1
0
1
1
129
157
290
0
0
0
0
0
0
0
0
0
0
0
Laos
0
2
0
0
0
0
0
0
3
15
20
0
0
0
0
0
0
0
0
0
0
0
1
0
5
0
0
0
0
0
0
1
8
0
0
96
0
994
0
136
0
0
0
1226
0
232
1
257
3
1382
3
2
0
20
1900
Vietnam
ASEAN
0
0
0
0
0
0
0
0
0
0
0
1
240
1323
258
1066
1475
516
92
229
279
5480
Source: ILO
31
2002
2003
2004
2005
2006
2007
102.5
2,465
1553.3
73,839
1435.4
12,082
253.4
18,273
1880.6
69,196
3316.6
29,755
308.5
9,677
2804.5
91,728
1489.3
46,996
407.8
23,190
3502.1
97,326
5004.7
35,593
533.0
26,416
3604.5
152,815
1839.5
27,714
502.4
16,741
3622.9
105,141
4419.1
16,910
32
HDI
Singapore
Brunei Darussalam
Malaysia
Thailand
Phillippines
Vietnam
Indonesia
Laos
Cambodia
Myanmar
Life expectancy
0.922
0.894
0.811
0.781
0.771
0.733
0.728
0.601
0.598
0.583
0.907
0.862
0.811
0.743
0.767
0.812
0.745
0.637
0.550
0.596
Education
index
GDP
index
Poverty
index
0.908
0.877
0.839
0.855
0.888
0.815
0.830
0.663
0.691
0.764
0.950
0.941
0.783
0.745
0.657
0.572
0.609
0.503
0.552
0.389
5.2
..
8.3
10
15.3
15.2
18.2
34.5
38.6
21.5
Rank
index
25
30
63
78
90
105
107
130
131
132
Literacy rate
(% of age 15+)
Singapore
Brunei Darussalam
Malaysia
Thailand
Phillippines
Vietnam
Indonesia
Laos
Cambodia
Myanmar
92,5
92,7
88,7
92,6
92,6
90,3
90,4
68,7
73,6
89,9
87,3
77,7
74,3
71,2
81,1
63,9
68,2
61,5
60
49,5
Expenditure on health
2004 (% of GDP)
3,7
,,
6,2
4,2
2,7
,,
0,9
2,3
1,9
1,3
1,3
2,6
2,2
2,3
1,4
1,5
1
0,8
1,7
0,3
21
21
20
23
45
26
24
27
20
16
19
30
29
19
18
21
7
3
3
3
24
19
6
16
2
2
3
12
50
13
16
11
28
40
47
27
30
63
29
44
34
11
52
45
17
39
40
36
33
Telephone mainlines
(per 100 people)
Celluler subscribers
(per 100 people)
Internet users
(per 100 people)
103.4
56.3
75.2
43.0
39.5
11.4
21.1
10.8
7.6
0.17
57.9
15.3
42.4
11.0
5.3
12.7
7.2
0.4
0.3
0.12
43.5
25.57
16.8
11.0
4.2
18.8
5.7
1.3
0.3
0.79
Electricity consumption
(kWh per capita)
8087.0
9133.0
3196.0
1896.0
655.0
503.0
498.0
135.0
9.0
126.0
34
13
35
36
BOX:
Impact of the AFTA Agreement
on ASEAN-5 Exports:
A Gravity Model Approach1
I. Introduction
In Singapore on 20 November 2007,
Indonesia and other ASEAN member nations
convened to sign the ASEAN Declaration
containing the blue print of a series of actions
laying the groundwork for launching the ASEAN
Economic Community in 2015. Preceding this
was the signing of the ASEAN Free Trade Area
(AFTA) agreement in Singapore on 28 January
1992, which paved the way for the creation of
a free trade area. When AFTA became fully
effective on 1 January 2003, the agreement
involved six member nations: Brunei Darussalam,
Indonesia, Malaysia, the Philippines, Singapore
and Thailand. The agreement was envisaged as
a means of bringing greater prosperity to all
member nations through increased trade.
Against this background, a brief study was
performed to ascertain the influence of AFTA
on the export performance of ASEAN countries
represented by five members: Indonesia,
Malaysia, Singapore, the Philippines and
Thailand (ASEAN-5).
II. The Gravity Model
The gravity model used to analyse
bilateral trade flows between two different
37
Period
Dummy
Indonesia
1989-2006
Singapore*)
1989-2006
1995
(6.93)
1995
Thailand
1989-2006
1995
Phillippines
1989-2006
1995
Malaysia
1989-2006
1995
C
8.16*
(7.83)
9.95*
(17.59)
8.05*
(4.54)
37.37*
(8.22)
8.28*
(12.64)
log (GDPP)
log (Dist)
dum
0.51*
(-2.55)
0.63*
(8.36)
0.51*
(10.03)
0.44*
(11.09)
0.58*
(12.00)
-0.41**
(3.10)
-0.61*
(-10.82)
-0.47**
(-1.99)
-4.32*
(-7.44)
-0.41*
(-4.76)
0.39*
(4.98)
0.18***
(1.81)
0.51*
(2.99)
0.85*
(5.37)
0.18***
(1.72)
38
Trend
0.02*
0.01*
(2.70)
0.02*
(5.04)
0.02*
(5.33)
0.01*
(5.58)
39
41
USD
14
12
10
160
History
Projections
157
High Price
120
6
4
Reference
80
95
-2
60
58
-4
1980
1970 19731976 19791982 19851988 19911994 1997 20002003 2006 2009 2012
World Real GDP Growth (LHS)
Low Price
30
1990
2000
2010
2020
2030
USD/ barrel
80
70
60
50
40
30
20
10
42
0
1991 1993 1995 1997
1999 2001
2011
MINAS
5
6
Index
Manufactured exports
100
100
US GDP
50
50
US CPI
25
1906
1926
1946
1966
1986
25
2006
Source: Global Financial Data: Grill & Yang (1988), IMF: Pfaffenzeller, Newbold & Rayner
(2007), Reserve Bank of Australia
7
8
43
2003
2004
618.1
563.4
730.2
-27.4
-8.8
29.6
2006
2007
2008
2009
2010
2011
971.7
1335.1
1474.7
1406.4
1470.3
1536.8
1604.0
33.1
37.4
10.5
-4.6
4.5
4.5
1.9
1.5
4.4
1.8
2.2
2.8
2.8
2.5
2.5
2.4
2.4
countries
421.1
-25.2
354.6
379.5
546.8
824.4
940.2
879.0
925.5
972.6
1017.3
-15.8
7.0
44.1
50.7
14.0
-6.5
5.3
5.1
4.6
% of National
GDP Statistics, Economist Intelligence1.7
1.3
Sumber:
Unit, IMF, UNCTAD
1.2
1.7
2.4
2.6
2.3
2.3
2.3
2.4
% of GDP
2005
% of world total
68.1
62.9
52.0
56.3
61.7
63.8
62.5
62.9
63.3
63.4
markets
197.0
208.9
350.7
424.9
510.7
534.6
527.4
544.8
564.2
586.7
-31.5
6.0
67.9
21.1
20.2
4.7
-1.3
3.3
3.6
4.0
2.5
2.4
3.4
3.5
3.6
3.3
2.9
2.7
2.6
2.4
31.9
37.1
48.0
43.7
38.3
36.2
37.5
37.1
36.7
36.6
% of GDP
% of world total
Source: National Statistics, IMF, OECD, UNCTAD, The Economist Intelligent Unit
-0.5
-1
-0.9
-1.1
-1.3
-1.3
-1.5
-1.7
-2
-2.0
-2.4
Conslidation
Stimulation
-2.5
2001
2002
2003
2004
2005
2006
2007
44
2008
c. FDI Inflows
FDI inflows into Indonesia are predicted to
keep expanding. The Government commitment to
safeguard macroeconomic stability through
coordination of fiscal and monetary policy will
STRUCTURAL REFORMS:
Investment Climate Enhancement
Small Scale Enterprise Empowerment
Reform and Infrastructure
Enhancement
Health
Skill
Education
Physical Capital
Total Factor
Productivity
Agregate Supply
Distribution
FDI
Institution
Production
Human Capital
Investment
Consumption
OUTPUT
INFLATION
Agregate Demand
Export
ASSUMPTIONS
World Trade Volume Growth
Oil Price (USD/brl)
Non Fuel Commodity Price
Growth (%)
Fed Fund Rate (%)
BI Rate (%)
Government Budget Deficit
(% GDP)
Net Foreign Direct Investment
(% GDP)
10
7.0
80
7.0
78
7.2
77
7.2
75
7.2
73
15.4
5.1
8.0
-2.8
3.0
8.0
-2.8
3.0
8.0
-2.8
3.0
8.0
-2.8
3.0
8.0
-2.8
3.0
8.0
-1.3
-2.0
-1.8
-1.6
-1.5
-1.4
1.0
1.25
1.35
1.40
1.45
1.50
45
46
7,4-8,0
5,6-6,0
8,0-10,0
13,0-15,0
12,5-13,5
14,5-15,5
47
48
49
50
[ HK
t
t
{[
(1+)/
1+
= t (h)() (1)
[ HK
t
t
1+
1+
[ HK
t
t
1/(1+)
( t )
{[
Ht
Kt
*
t
*
t
[ KH
(1+)/
Yt
Kt
[ HY
(4) (FK )t =
(8) (1) +
where
t
t
1+
[ KY
= t (k)()
*
t
*
t
[ KY
(7)
1+
1+
(10)
Yt
Kt
1/(1+)
= (t (k))
[ KY
t
t
where
= ( / ) 1/(1+)
= [()- ]
1/(1+)
Yt
Ht
1/(1+)
(t (h))
[ HY
t
t
[ HY
= [ (1)/(1)]1/(1+), resulting in = 1 at
time =;
= (1+) /(1+), resulting in = 1 at time = ;
t = t (k) / t (h), resulting in t = 1 at time t (k) =
t (h).
Using this definition, one can write (7) as:
or
51
Yt
Kt
= (t (k))
1/(1+)
[ YK
1/(1+)
Ht + (Ht * )
[ KY
t
t
= ( t )
Ht
Kt
(t ) 1/(1+)
Kt + (Kt * )
Yt + (Yt * ) (t (k))
1/(1+)
Kt + (Kt * )
(14)
(12)
Ht + (Ht * )
t 1/(1+)
Yt
Yt + (Yt * ) t (k)
1/(1+)
Kt
Kt + (Kt * )
Ht
Ht + Ht * t 1/(1+)
Yt
Yt + Yt * t (k)
1/(1+)
Kt
Kt + Kt *
52
Yt
Yt + Yt *
Kt
Kt + Kt *
Ht
Ht
Yt + Yt *
Ht + Ht *
(16)
Yt
Ht
Yt *
Ht *
(16)
Hit
N
j=1
Hjt
Yit
N
j=1
Yjt
Kit
N
j=1
Kjt
for i = 1, , N
53
54
55
0.019
(0.2049)
(0.6281)
0.011
0.013
(0.1636)
(0.2173)
-0.035
(0.8086)
(0.0696)
0.030
0.018
(0.0319)
(0.0354)
-0.005
(0.0250)
(0.0023)
0.070
0.012
(0.2783)
(0.0124)
-0.005
(0.0250)
(0.0023)
0.070
0.012
(0.2783)
(0.0124)
0.038
(0.8380)
(0.1042)
0.014
0.012
(0.2882)
(0.0638)
56
0.007
(0.9981)
(0.3104)
-0.017
-0.010
(0.4737)
(0.3992)
0.007
(0.4570)
(0.0000)
-0.024
0.007
(0.2468)
(0.8188)
(1991-2005)
Model 4
-0.061
(0.052)
(1991-2005)
Model 4
-0.064
(0.0325)
57
58
random effects over an estimation period of 19992006. Before testing the gravity model, this study
begins with an analysis of the pattern of exports
from each province in Indonesia.
5.3.1 Overview of Exports by Indonesias
Provinces
As mentioned earlier, a countrys
international trade can be built up through the
trade conducted by each province. The large size
of Indonesias territory and broad variation of
leading export commodities among provinces can
be harnessed to promote export growth in these
provinces. The most dominant province in export
activity at this time is West Java, followed by Riau,
East Java and Jakarta (Table 5.10). In West Java,
26.2% of exports are shipped to ASEAN, led by
Malaysia, the Philippines, Thailand and Vietnam.
Riau province conducts its export trade mainly
with Singapore.
Table 5.10 Contribution by Province to Non-Fuel
Exports and Imports
PROVINCE
WEST JAVA
RIAU
EAST JAVA
JAKARTA
NORTH SUMATERA
EAST KALIMANTAN
BANTEN
CENTRAL JAVA
IRIAN JAYA
SOUTH KALIMANTAN
EXPORT
2005
2006
23.2
13.6
9.9
8.1
6.6
5.9
7.7
4.2
3.8
3.1
21.4
13
10.4
7.9
6.4
6.2
7.6
3.9
3.9
3.7
2007
19.4
13.5
11.5
7.8
6.5
5.9
6.6
3.8
4.8
3.8
Average
2001-2007
26.2
14
10.3
9.1
6.0
5.5
5.4
4.1
3.2
3.0
EAST JAVA
JAKARTA
NORTH SUMATERA
LAMPUNG
SOUTH SULAWESI
Total
EAST KALIMANTAN
SOUTH KALIMANTAN
BENGKULU
LAMPUNG
SOUTH SUMATERA
Total
31.9
12.4
10.3
6.9
6.2
67.7
59.1
35.6
1.9
1.6
0.5
98.7
SOUTH SUMATERA
JAMBI
RIAU
WEST SUMATERA
WEST KALIMANTAN
Total
NORTH SUMATERA
RIAU
WEST SUMATERA
SOUTH SUMATERA
NORTH SULAWESI
Total
38.9
36.1
5.5
4.7
3.4
88.6
WEST JAVA
RIAU
JAKARTA
EAST JAVA
CENTRAL JAVA
Total
PAPER,PAPERBOARD&MFD THEREOF
EAST JAVA
WEST JAVA
RIAU
JAKARTA
CENTRAL JAVA
Total
CENTRAL JAVA
EAST JAVA
WEST JAVA
JAKARTA
BALI
Total
WEST JAVA
CENTRAL JAVA
JAKARTA
EAST JAVA
BALI
Total
48
39.4
0.8
0.1
0.0
88.3
35.5
34.4
15.3
2.6
0.9
88.7
RIAU
WEST JAVA
JAKARTA
NORTH SUMATERA
EAST JAVA
Total
66.3
19.4
4.2
1
0.8
91.6
32.9
26.5
21.4
6.4
3
90.2
CLOTHING
61.8
17.3
8.6
6.4
0.6
94.6
WEST JAVA
JAKARTA
CENTRAL JAVA
EAST JAVA
BALI
Total
39.8
39.1
8.9
1.9
1.8
91.6
59
Y iY j
Dist ij
(1)
60
This study was also attempted with the OLS pool method,
but the results tended to be inefficient (see Wooldridge,
2006).
Jarakij
Imporj
PDRBi
RER
-0.68***
-0.38*
0.21
-0.03
-0.95*
-1.96***
-1.19***
-0.12
-0.10
-0.04
0.50
-0.41***
-0.28*
0.21
0.43
0.80***
0.56***
1.25***
0.47***
1.27***
0.80***
0.94***
0.80**
0.21**
0.26***
1.25***
0.94***
0.45***
0.36***
0.39***
0.73***
0.62***
1.39***
0.140
1.47***
-0.75*
0.140
0.75***
1.74***
1.65***
0.68***
3.00***
1.82***
0.95***
2.05***
0.00
-0.03*
-0.04
-0.02
-0.07
-0.09
0.01
-0.01
-0.01
-0.03
0.04
0.05
-0.02
-0.02
0.01
61
62
63
64
65
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