Document of The World Bank FOR OFFICIAL USE ONLY fpi 4776 VOL. 1 INDONESIA SELECTED ASPECTS OF SPATIAL DE'VELOPMENT (A Main Report and Four Annexes) Main Report ECONOMIC AND SOCIAL DEVELOl'MENT: AN OVERVIEW OF REGIONAL DIFFERENTIALS AND RELATED PR November 1, 1984 Country Programs Department East Asia and Pacific Regional Office This document has a restriicted distribution anid may be used by recipients only in thr pcnIrmIIII vu. their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency unit = Rupiah (Rp) US $1.00 = Rp. 970 (1983) US $1.00 = Rp. 625 (1980) US $1.00 = Rp. 450 (1978) FISCAL YEAR January 1 to December 31 fC INDONESIA FOR OFFICIAL USE ONLY SELECTED ASPECTS OF SPATIAL DEVELOPMENT MAIN REPORT ECONOMIC AND SOCIAL DEVELOPMENT: AN OVERVIEW OF REGIONAL DIFFERENTIALS AND RELATED PROCESSES Table of Contents Page No. FOREWORD ............................................................. v SUMMARY ....... vii-xvii CHAPTER 1 - INTRODUCTION 1.. The Relevance of Spatial Development Issues. 1 Government Development Objectives. 2 Choice of Units: What Regions?. 3 The General Framework for this Report. 4 Organization of the Report. 5 PART I CHAPTER 2 - SPATIAL DIFFERENTIALS IN ECONOMIC DEVELOEENT. 7 Introduction ............................................ 7 Differentials in Poverty Incidence. 7 Regional Distribution of Key Indiators. 9 Differentials in Per Capita Gross Domestic Product by Erovince. 9 Differentials in Growth Patterns and Economic Struct:ure 15 Regional Differentials in Selectel Sectors .18 Differential Trade Linkages .25 Government Economic Policies and Spatial Development: The Case of Industry ...................................... 26 CHAPTER 3 - SPATIAL VARIATIONS IN SOCIAL DEVELOPMENT .31 Recent Trends at the National Level ................ .... 31 Education Sector: Spatial Differences ............. .... 32 Health Sector: Input and Output by Province ........ .... 35 Social Sector Targets and Spatial Considerations ... 41 This report was prepared by a team consisting of Bank staff and Indonesian and foreign consultants. The team comprised of: Brian Binder (Consultant), Paul Deuster (Consultant), Dharmaputra (Consultant), Tudor Kulatilaka, S.G. Made Mamas (Consultant), Sulekha Patel, Sri Poedjoestoeti (Consultant:), Bhanoji Rao (Team Leader), Robert Rice (Consultant), Richard Sturgis (Consultant), My Thi Vu and K.C. Zacharia. A draft of this report was discussed with the Government in July 1984. This document has a restricted distribution and may be used by recipienis only in the perf nof their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Page No. PART II CHAPTER 4 - POPULATION, MIGRATION AND EMPLOYMENT ..................... 48 Introduction ............................................ 48 Population Growth and Distribution ...................... 48 Migration Rates and Trends, 1971-80 ...................... 51 Characteristics of Migrants .................. ............. 57 The Transmigration Program ............................... 59 Labor Force and Employment Developments in the 1970s and the 1980s....................................... 63 CHAPTER 5 - REGIONAL FINANCES AND PT ANNING .......... 68 Introduction .................. 68 Sources of Finance .. 69 Central and Regional Fiscal Flows .. 70 Provincial Patterns of Revenue and Expenditure . . 73 A New Approach to Determining the Levels of Central Grants .......... 78 Financial Administration ................................ 79 Regional Planning Agencies .............................. 80 Development Planning: The Case of NTB Province ........ 82 Lessons of Experience .. 83 APPENDIX 1 Regional Poverty Lines and Poverty Magnitudes ........... 84 APPENDIX 2 Regional Employment Estimates ........................... 90 APPENDIX 3 Maps ................ 93 Table No. TEXT TABLES 2.1 Poverty Magnitudes for the Major Regions, 1980 8 2.2 Poverty Across Provinces, 1980: A Summary Table 10 2.3 Regional Distribution of Key Indicators .11 2.4 Gross Domestic Product Per Capita at Current Prices by Province, 1972, 1975 and 179 .12 2.5 Variation in Regional Per Capita Incomes Across Selected Countries and Indonesia ................. 13 2.6 Mapping of the Provinces by Per Capita Regional Gross Domestic Product and Average Annual Growth Rate.. 15 2.7 Results of Exponential Trend Regression for RGDP (1970-79) ........................................ 16 2.8 Exports as Percentages of RGDP, 1971, 1975, 1979 17 2.9 Sectoral Composition of Regional Gross Domestic Product 1971 and 1979 (at Constant Prices) 18 2.10 Land Area ('000 ha) and Yield (Kg/Ha) by Region for Selected Agricultural Products, 1971 and 1980 or 1981. .............................. 19 2.11 Regional Data on Fish Production. 22 2.12 Regional Distribution of Manufacturing Employment and Value Added .23 -iii - Page No. 2.13 Regional Distribution of Manufacturing Value-Added By Subsectors, 1971 and 1979 . .. .................. 24 2.14 Regional GDP and Regional Trade, 1979 .............. 26 2.15 Inter-Island Trade Flow Matrices, 1969 and 1979 .... 27 3.1 Literacy and Education: 1971 and 1980.,............ 33 3.2 Educational Progress Indicators, 1971-80 .......... . 34 3.3 Population Served by Health Centers and Other Health Related Data ............... .. .................. 35 3.4 Drinking Water, Bathing and ToiLet Facilities, 1980... . .......... ............. . 37 3.5 Estimates of Infant Mortality, 11969 and 1978 ....... 39 3.6 Simple Correlation Coefficients Between Provincial Infant Mortality Rates and Health/Sanitation/Water Supply Indicators ........ * ... ' ........... ....... . 40 3.7 Total Fertility Rates, 1967-70 and 1980 - By Province, Indonesia ............. ............... 42 3.8 Government Projections of School. Population and Related Indices, 1980/81-1988/89................. 43 3.9 Distribution of Primary Schools and Teachers in 1980/81 and the Expected Distribution of Students in 1988/89v ....................... *.I........... ....... 43 3.10 Permanent Teaching Staff at State Universities or Similar State Institutions by Region and Level of Qualification, 1979/80, . ... * . ......... ... 44 3.11 Illustrative Projection of Growth in Water Production.... . 45 4.1 Population Distribution by Regions, 1961-80........ 49 4.2 Population 1930, 1961, 1971, 1980 and Average Annual Grolwth Rates, 1930-80 ...................... ..... . 50 4.3 Estimates of Net Migration and Nlatural Increase Components of Population Change in Provinces, 1971-80 ..................................... 52 4.4 Lifetime Migration Rates, 1971 and 19808...... .... 53 4.5 Inter--Provincial Lifetime Migration Patt:ern, 1980.. 55 4.6 Inter--Island Lifetime Migrants, 1971 and 1980,..... 56 4.7 Population Flows During 1971-80.........I.......... 57 4.8 Gross Transmigration Rates by Region ................ 60 4.9 Average Annual Growth Rates of Sectoral GDP and EmpLoyment by Region, 1971-80 ..........., 63 4.10 Estimated Sectoral Employment 1971, 1980 ('000) .... 64 4.11 Annual Average Rural and Urban Employment Growth, 197L-80.. ................... ...... ................ 66 4.12 Labor Force Estimates and Labor Force Growth by Reg.ion, 1971-90 .......... ........... . . . ... 66 5.1 The Inter-Authority Fiscal Flows Matrix, 1976/77... 70 5.2 The Inter-Authority Fiscal Flows Matrix, 1980/81.,. 71 5.3 Indicators of Regional Fiscal Dependence Across Countries9 ........ s @.s . * 4 D. 72 5.4 Central Grants as Percent of Total Regional Government Incomes by Level of Authority ....... 73 - iv - Page No. 5.5 Regional Government (Province and Level II) Non-Grant Revenues, 1980/81 .................... 74 5.6 Per Capita Development and Routine Expenditures By Province, 1980/81 .. ... .. ......................... 76 5.7 Sources of Finance for Development and Routine Expenditures by Province, 1980/81 ................ 77 Table No. APPENDIX TABLES Appendix 1: Table 1 - Computation of Poverty Lines for the Rural Areas of the Indonesian Provinces, 1980 ......... 85 Table 2 - Computation of Poverty Lines for the Urban Areas of the Indonesian Provinces, 1980 ........... 86 Table 3 - People in Poverty and Incidence of Poverty, Rural Areas of the Indonesian Provinces, 1980 ..... 87 Table 4 - People in Poverty and Incidence of Poverty, Urban Areas of the Indonesian Provinces, 1980..... 88 Table 5 - People in Poverty and Incidence of Poverty, The Indonesian Provinces, 1980 .................... 89 Appendix 2: Table 1 - Estimates of Employment for the Major Regions and Indonesia, 1971 ... ........... 91 Table 2 - Estimates of Employment for the Major Regions and Indonesia, 1980 ............................... 92 INDONESIA SELECTED ASPECTS OF SPATIAL DEVELOPMENT FOREWORD In 1.974, at Bank mission visited Indonesia arid prepared a report entitled A Framework for Regional Planning in Indonesia /1. It was the first Bank Group mission ouf its kind, and essentially it was a "technical assistance mission to provide . a framework of knowleige, policies, organization, procedures and trained personnel within which the national and local govern- ments could carry out regional planning more effectively"./2 Since that time, while some progress has been made on the decentralization of economic plann- ing, economic and social development disparities across the various regions of Indonesia have not been a subject of in-depth study and analysis partly because of paucity of new data. In recent years, however, the availability of provincial gross domestic product estimates, national socio-economic survey data and the information from the 1980 census filled that gap to a large extent. The Bank took the lead to assemble a Large provincial data base covering various economic and social indicators. The objectives of this report are to present the key regional economic and social data, describe the present situation and recent trends and identify emerging issues relating to spatial disparities in economic and social development and suggest their implications for further follow-up work. This study is organized in the form of a main report and four annexes. This volume, the main report, contains an overview of provincial economic and social development differentials as well as a summary of the principal trends and emerging issues in inter-regional migration and regional distribution of public expenditures which are among the processes that can contribute to narrowing of inter-regional economic and social disparities. The annexes have supporting material as well as additional data. Annex 1 deals with an analysis of the pattern of indust:rial location and has regional data on the manufacturing sector for 1979, as well as information on the Government locational guidelines. Annex 2 deals with inter-provincial migration analysis (Part I) and provincial demographic characteristics and population projections (Part II). Annex 3 also has two parts, the first dealing with an analysis of provincial public finances and the second with regional planning. Annex 4 contains provincial socio-economic data for the past decade, excluding the specialized data presented in the other annexes. /1 Report No. 502-IND, August 15, 1974. (Volume I: Executive Summary, Volume II: Spatial Aspects of the Economy, and VoLume III: The Needs and Objectives of Regional Planning). /2 Ibid. Vol. I, p. i. - vi - Two notable omissions in this report are analyses of transport and urban issues. In both these areas, there are recent or ongoing studies,/3 anld there is little justification to cover them again in the present report. Another major omission is an in-depth study of the development potentials of the different islands and provinces. It is beyond the scope of the present report. /3 In regional transport, there was a comprehensive sea transport study and a recent road transport study, undertaken as part of Bank financed projects. Much follow-up work is being done presently by the Government and the Bank. A study of urban sector finances has been completed recently by Bank staff. In addition, there is a major on-going UNDP-GOI study aimed at formulating a national urban development strategy. - vii - INDONES IA SELECTED ASPECTS OF SPATIAL DEVELOPMENT SUMMARY 1. A distinguishing characteristic of Indones:ia is its geographical and demographic ispread. The country's land area of a lit:tle over 1.9 million sq. km. is distributed over 13,600 islands. The most populated island of Java, with about two-thirds of the country's population, has only 7% of the total land area. Sumatra, Kalimantan and Sulawesi respectively had 25%, 28% and 10% of the area, and 19%, 4% and 7% of the population. The remaining islands (called "East:ern Islands" in this report) had 30% of the area and only 7% of the people. The population of 156 million (1983 estimate) comprises over 50 ethnic groups, and several hundred language/dialect gr'oups. 2. In the context of Indonesia, there are two major faci:ors that moti- vate a study of the spatial diversities in economic cnd social development. The first factor of "intrinsic necessity" arises because Indonesia's large population and natural resources are spread unevenly over the country. The second factor, namely, "Government interest" arises because spatial equity in economic and social development has been incorporated as one oi the objectives in the country's development plans, and also because of the Government's con- cern to ensure that the different islands of the country are brought together in terms of economic linkages and interdependencies which will set a strong basis for political stability. 3. Thi-s report describes the present situation and identifies recent trends relating to spatial disparities in Indonesia and some of the processes that are relevant to achieving eventual reduction in such disparities. The implications of the report's findings for the formulation of pl]ans and pro- grams at sectoral and regional levels are noted. The report also highlights the policy-oriented issues that have to be addressed in future studies. Spatial Differentiatls in Economic Development 4. Differentials in Poverty Incidence. Of the 144 million Indonesians in February 1980, 57 million or nearly 40% have per capita consumer expendi- ture below an absolute poverty cut-off. The poverty problem is the most serious in ruLral Java and parts of Eastern Islands. The rural areas of the Eastern Islands are also characterized by relatively high incidence of depri- vation (percentage of people whose food demands were not satisf ied). In terms of absolute numbers, most of the poor are in Java (42 million out of an estimated 57 million in 1980) and half of the deprived (2.5 million out of 4.8 million) were in the Eastern Islands. At the provincial level, the rural target groups are in all the provinces of Java and Sulawesi and. in Lampung, Bali, West Nusa Tenggara and East Nusa Tenggara. By and large, the same provinces have the urban poverty target groups also, even though urban poverty incidence is far less than rural poverty inci,lence in all cases. One clear implication of the data is that parts of the aforementioned geographical areas may need specially focussed poverty alleviation programs. - viii - 5. Differentials in Per Capita Gross Domestic Product. Inter-island differentials in per capita product are substantial. Java (except Jakarta), Sulawesi and Eastern Islands are low on product per head compared to Sumatra and Kalimantan. Provincial differentials are more pronounced than the inter- island differentials. Provincial differentials in per capita product are quite large in Indonesia in comparison to such differentials in developed countries, South Korea and Malaysia, but are not large compared to the Philippines and Thailand. The coefficient of variation computed for the pro- vincial per capita GDP at constant prices increased from 70% in 1971 to 78% in 1979 when the oil sector was included in GDP and from 38% to 49% when the oil sector was excluded. Clearly, the degree of regional inequality in Indonesia increased in the past decade of fairly rapid overall economic growth at the national level. Contributing to this were the provinces in Java (other than Jakarta) and the Eastern Islands which had relatively low product per capita as well as low growth rate and Jakarta and some of those in Sumatra and Kalimantan which grew particularly fast due to oil exports. The growth potentials and the prospects for realizing relatively higher growth rates in the lagging regions should be thoroughly investigated and appropriate development strategies should be formulated. 6. Differentials in Growth Patterns and Economic Structure. Most provinces have experienced smooth growth (though at different rates) without major fluctuations in the 1970s. There are many provinces with fairly high export-GDP ratios. Different provinces tend to specialize in the export of different commodities; however, the range of commodities is limited. Either oil exports or other traditional exports dominate the economies of most pro- vinces, especially those in the Outer Islands. Non-oil and non-traditional exports seldom occupied an important place. The record of the 1970s has been one of steady growth for almost all the provinces, largely due to fortuitous external circumstances favoring primary commodity exporters. In addition, there have been important shifts in product structure. Every region has experienced a decline in the share of agriculture, and an increase in the shares of manufacturing, construction, and commerce. Important regional dif- ferences persist in economic structure just as they do in regard to growth and poverty incidence. Java's manufacturing share in GDP in 1979 was a high 16% and Sumatra came next with 14%, as against Kalimantan's 5%, Sulawesi's 6% and Eastern Islands' less than 3%. The scope for and strategy of manufacturing development in the Outer Islands should be investigated in relation to the long-term development of the Outer Islands and the country's overall manufac- turing sector. 7. Regional Differentials in Agriculture and Fisheries. With nearly two-thirds of the population, Java had to take the lead among the Indonesian regions in regard to food crop area and production, despite only 7% of total land area. The Outer Islands have a lead only in non-food estate crops. I'he principal crops, each with an area of one million ha or more in 1980/81 were, wet land paddy: 8.2 million ha (Java-60%), dry land paddy: 1.2 million ha (Java: 20%), corn: 2.9 million ha (Java: 66%), Cassava: 1.4 million ha (Java: 70%), coconut: 2.6 million ha (Java: 35%) and rubber: 2.5 million ha (Java: 4%). - ix - 8. There are significant inter-island differentials in agricultural productivity,, In regard to wet land paddy, Java's yields are l:he highest, and have improved in the last decade. Sumatra's yield has declined in the 1970s whereas it has increased in all other areas. The yield level continues to be the lowest in Kalimantan. On Java, dry land yield has improved, but in other regions, improvements were minimal. Corn yield has improved in all the regions. Cassava yield in Java improved though not very significantly. Else- where improvements were minimal. Rubber yields in 1980 were slightly higher than in 1971 only in Java and Sumatra, and declined in Kalimantan. Coconut hectarage is well-distributed throughout the country, however, overall yield dropped in the 70's. A special up to date in-depth study shou].d be carried out to address the issue of regional differentials in agricultural productiv- ity and their implications for resource use aad resource allocation. 9. Total fish catch increased from 1.2 million tons in 1971 to 1.6 mil- lion tons in 1980 giving an annual growth rate of 3.2%. Java's share in the total catch was 28% in 1980, slightly lower thlan Sumatra's share of 31%. Kalimantan's share dropped from 21% in 1971 to 16% in 1980. Its marine fish sub-sector contributed only 49% to the total catch, an exception to the gener- ally large share (ranging from 75% to 90%) of marine fish to total fish catch. There are a number of possibilities for fisheries development. First, the past growth rate of the fisheries sector for the whole country was rather low. It could be stimulated by export development. Second, in the case of Kalimantan, there is a fairly long coast-line and it should be possible to increase its share in total output, especially by developing the marine fish sub-sector. 10. Domestic.and Foreign Trade Orientation. Total inter-island trade flows increased from Rp 185 billion in 1969 to Rp 3,645 billion in 1979. Java's share of exports in total inter-island trade fell from 50% in 1969 to 35% in 1979, whereas its share of imports remained at 30% of total trade. A numerically large and important change wgas the decline in the percentage of total exports from Java to Sumatra. Some of the important if not numerically large, changes are reflected in the increasing trade linkages between Kaliman-- tan and Sulawesi, Kalimantan and Eastern Islands and .Sulawesi and Eastern Islands, (due in part to their physical proximity and hence relatively lower inter-island transport costs). Infrastructure development (i.e., development of ports as well as roads and railways) and institutional improvements (i.e., administrative and managerial improvements to maximize operational efficiency) could greatly facil:itate the growth of inter-island trade linkages. These aspects were discussed in detail in the Integrated Sea Transport Study of 1980 conducted by the Neltherlands Maritime Institut.e as part of a Bank financed project. A comprehensive review of the road sector was also recently under- taken as part of another Bank project. The follow-up work on these studies should be aimed at integrated development of transport infrastructure which could promote inter-island trade linkages and intra-island specialization based on comparative advantage. 11. The five major regions differ in regard to the relative importance of domestic and foreign trade. For products of Java and Sulawesi, export demand from other regions is as important as export demand from abroad. For the products of Sumatra and Kalimantan the export demand is mosltly from x abroad. They export oil, gas, rubber and timber to the rest of the world and these are products based on resource endowments typical to Sumatra and Kalimantan. In the case of these two regions the prospects for widening tlhe export base should be investigated. In the case of Java which specializes (in a relative sense) in food crop agriculture and consumer goods manufacturing, the scope for improving productive efficiency, establishing comparative advantage and developing exports should be addressed in policy-oriented sub- sector studies. 12. Government Economic Policies and Spatial Development: The Case of Industry. Of the wide range of government economic policies that affect the location decisions of firms, the most important are the high levels of protection afforded by the trade regime, investment guidelines laid down by the Investment Coordinating Board (BKPM) and recent regulations affecting import procedures. High levels of protection through import duties, import sales taxes and quantitative restrictions (including outright bans), have stimulated the growth of a wide range of industries oriented towards domestic markets. Amongst the several islands of Indonesia, Java represents the most important market with its large population, rich soil and relatively well developed industrial base. It certainly offered the most logical location choice for a large majority of new industries that sprang up over the past decade. Java also has other features that makes it attractive to potential investors. A relatively welL developed road and port infrastructure, and proximity to the centres of decision-making within the Government provide potential savings in the long run. Moreover, better housing and education opportnities available in the large cities of Java attract skilled labor and managerial staff, creating a pool of talented human resources to the potenitial investor. 13. The Government has employed two policy instruments in response to the increasing concentration of manufacturing industry on Java. First, the Investment Coordinating Board issues guidelines on the location of new investments as a part of its annual list of investment priorities. The shalre of total industrial investments listed by BKPM which were subject to location guidelines rose from 3% in 1977 to 13% in 1982. Second, the Government has recently earmarked six industrial zones outside Java, and plans to attract industrial investments by concentrating on developing the infrastructural framework of these areas and initiating the process of industrial development through the creation of growth centers. 14. Finally, recent changes in import procedures may have spatial implications. Numerous decrees have been issued since November 1982 restricting imports of an increasingly wide range of goods by requiring thlt only licensed importers be allowed to import. In addition to the policy's declared intention of improving the expertise of importers, the new procedures will also give the Government powerful levers to control the level of imports. This may work to the detriment of small or scattered industries in outlying regions who may be hard pressed to obtain a timely supply of imported goods at competitive prices. 15. There are no quick solutions to the problems of regional or spatial concentration of industry. The Government's policy to spread industrial - xi - development across different parts of the counl:ry is motivated by a desire to see an equitable distribution of the results oi this development. This objective may need to be balanced by consideral:ions of efficiency and long- term industrial growth. If policies designed l:o alter the location decisions of potential investors also serve to burden new industries with additional costs, the country runs a risk of encouraging investments which will prove uneconomic in the long run. The Government, oII the other hand, can attract industries to Outer Islands by strengthening infrastructure faclities and providing improved public services such as health and education. The costs of this approach may need to be carefully weighed against the benefits of more uniform industrial development across the nation. At the same time the Government would also need to undertake periodic reviews of economic policies for their effects on industrial location and regional development. Spatial Variations in Social Development 16. Recent Trends at the National Level. There lhas been impressive growth in the provision of social services nationally. In the field of educa- tion, the number of government primary schools increased by 65% during the period 11970-80, junior high schools by 62% and senior high schools by 53%. In health, the numnber oE public health centers increased from 2,679 in 1973/74 to 4,753 in 1980/,31, an increase of 72.4% in just seven years. Urban water supply production ca-pacity increased from 9,00(I liters per second in the early seventies to over 21,000 liters per second in 1980. However, a large part of the total capacity (25,456 liters per second in 1980) was in urban areas only, and for the country as a whole, only 7% of the househoLds in 198) had access to piped water for drinking, and 4% for bathing. Only 8.9% of the households had a private toilet. 17. Education: Most provinces have literacy rates above 6.5% with respect to the population 10 years and over. In the primary school age group, the participation rates in each of the provinces of Java and Sumatra have increased from 60% and above in 1971 to 80% and above -in 1980. The same can be stated about: the other regions in general with the significant exceptions of Irian Jaya and West Kalimantan with primary school participation rates of 67% in 1980. Reasons for such low participation rates have to be investigated. 18. Participation rates do not tell the full story because people may enroll in schools but: may not complete the schooling. In the ru;ral areas of West Java, Central Java and East Java, over 40% of the youth in the age group 15-19 have not completed primary education, as against about 29% in the urban areas. In Lampung, 'South Sumatra and Riau, which are former transmigrant receiving regions, over 50% of the 15-19 population have not completed primary education. These percentages were also high in rural West Kalimantan (61% for males and 69% for females) and rural East Kalimantan (52% for maLes and 57% for females). In the case of Sulawesi and the Eastern Islands, the patterns were similar to those observed in Java and Sumatra with over 40% of the 15-19 rural population not completing primary education. Such large differentials as noted here between regions and between rural and urban areas also prevail - xii - in regard to the secondary education completion rates. An analysis of these differentials is presently undertaken by the Bank to identify the causes behind them and the options available to remedy the situation. 19. Health Sector: Input and Output by Province. The regional differ- ences in average populations served by health centers are striking. Java's provinces are all worse off compared to the national average. There are, how- ever, other balancing factors such as relatively well-developed public and private hospitals. The private sector is quite active in some of the pro- vinces. In Jakarta, Yogyakarta, Lampung, North Sulawesi and East Nusa Teng-- gara, the private sector share was more than 40% of the total bed strength. The government hospitals in Java and Sumatra are of relatively large size wiIth 50% more average bed strength than in Kalimantan, Sulawesi and Eastern Islands. 20. Nationally, 26.4% of the urban households and an insignificant 2.1% of the rural households have access to piped water. Accordingly, the provinces with large urban areas have better access to drinking water. Those with especially insignificant access to piped drinking water are Lampung, Central Kalimantan and West Nusa Tenggara. The patterns described with reference to piped water broadly hold with respect to private toilets with septic tanks. 21. Provinces which had high infant mortality levels in the late 1960"s and where the decline during the 1970's was no more than half of the nationaL decline were East Java, West Sumatra, West Kalimantan, South Kalimantan, Central Sulawesi, West Nusa Tenggara and Maluku. The health, water supply and sanitation indicators have significant correlation with infant mortality. However, infant mortality is not highly responsive to any one single indicator and its reduction requires simultaneous action on many fronts. 22. Nutrition. There are significant spatial differences in nutritional deficiencies. For instance, the incidence of vitamin A deficiency among children is especially high in 15 provinces (listed in declining order of prevalence): Aceh, West Nusa Tenggara, Bengkulu, West Sumatra, South Sumatra, West Java, Central Java, Central Kalimantan, Bali, South Sulawesi, Maluku, South Kalimantan, West Kalimantan, North Sumatra and Southeast Sulawesi. 23. Family Planning. The family planning program was implemented in three phases in the past decade covering the different provinces. However, large regional fertility differentials still persist, with Sulawesi and parts of the Eastern Islands having relatively high fertility rates, and relatively low rates of decline; this aspect needs further study. 24. Social Sector Targets and Spatial Considerations. The spatial dimension should be an important consideration in formulating and implementing social development programs since the government is the principal investor in the social sector and humanitarian considerations call for narrowing, as far as possible, the spatial differentials in social development. 25. The Government's primary school enrollment projections indicate that for the nation as a whole enrollment rate is expected to increase from 88% in - xiii - 1980 to 100% by the end of the Fourth Five Year Plan. What are the regional implications of these targets? During 1980/81 - 1988/B9, the number of schools in Java and Sumatra have to grow relatively faster than in the other regions, in order to match the 1988/89 share of pupils. Sumatra and Sulawesi have to expand the teacher population at a rate larger than the other regions. In a field like education, national targets can be fairly easily translated intD regional objectives. However, when there are financial stringencies, steps have to be taken to see that some of the relatively backward regions are not left far behind. 26. Commensurate with the past growth of primary education, the Government hopess to achieve rapid expansion of secondary and higher educa- tion. Given this rate of expansion in education, the concern naturally arises not only on regional equity in terms of quantity, but also and most import- antly, equity in quaLity. At the University level, one finds the prolifera- tion of institutions with less and less qualified staff as one moves farther from Jakarta and Java. This situation requires some attention and initiation of remedial aci:ion. 27. By the year 2000, according to the lcng-term development plan of the Department of Health, an infant mortality rate (IMR) oi- 45 has to be achieved. In relation to this it is clear that there are many regions where special efforts have to be mounted in order to bring down the high levels of IMR. West Java (IMR - 131), West Sumatra (122), South Kalimantan (122), Central Sulawesi (129), West Nusa Tenggara (188) and East Nusa Tenggara, Maluku and Irian Jaya (125) need special attention. 28. To establish a sound level of population per health center, the overall requirement seems to be over 20,000 public health centers, much larger than the 5000 center,, currently in place. In the process of the expansion of the health infrastructure, special attention should be given to Java and Sumatra and some of the provinces in the Eastern Islands. Similarly, to supply piped water for drinking purposes to, say, 25% of househoLds instead of the 7% in 1980, very large magnitudes of increases in production capacity are required and large regional differentials in the expansion rates are implied. 29. One important question in regard to water supply and sanitation expansion is: where should the incremental capacity be located in the short- run - in the urban areas predominantly or in both urban and ruraL areas, or in rural areas. Urban-rural needs and priorities as well as prospects for cost recovery are the principal issues. Population, Migratiorl and Employment 30. Population Growth and Distribution: The average annual population growth rate for the country in the 1970s was about the highest in the past five decades: 2.3% for the period 1971-80 as against 2.1% for 1961-71 and 1.5% for 1930-61. The provinces of Jakarta, Lampung, Bengkulu, Jambi and East Kaliman- tan had average population growth rates of 4% or more, largely due to rela- tively high in-migration rates. In respect of the last four provinces in- migration was the result of both official transmigration and voluntary migration. - xiv - 31. Migration Rates and Trends, 1971-80: By and large the migration patterns indicated by the data in the 1971 and 1980 censuses were the same in regard to direction of movement by province. In a number oE Sumatra provinces in-migration was a significant proportion of the population size. For instance, in the province of Riau, I out of 6 inhabitants was an in-migrant and in Jambi the proportion was l out of 5. Most conspicuous are the figures for Lampung (an old receiving area for transmigration), where in-migrants made up 39% of the total population. In Java, Jakarta continued to attract large numbers of in-migrants, with 40% of the population of Jakarta born outside Jakarta. In Kalimantan, the provinces of South and East KaLimantan during the 1970s received a number of workers from other areas. The association between volume of migration and distance showed up in the migration links between a number of neighboring provinces. 32. Inter-island Migration: During 1971-80, 1.7 million people moved from Java to the Outer Islands. Out of this, one million could be accounted for by the official transmigration program. The official transmigration program thus played a singularly important role in the net out-migration from Java. In fact, in the absence of the official program, the outflow from Java would have been 0.7 million or less and would have been almost equal to the inflow of 0.5 million into Java. Another important point to note is the abiL- ity of different areas to attract in-migrants. Sumatra and Kalimantan have this capability; not only the inflows were larger than the outflows but also transmigrants accounted for half of the inflows thus indicating relatively high levels of voluntary in-migration along with officially sponsored in- migration. Sulawesi, being relatively poor and underdeveloped, has not yet demonstrated such a capability to attract voluntary in-migration. In fact, relatively more people moved out of Sulawesi to all the islands, and this exemplifies that people from the relatively poor regions move out voluntarily to improve their living standards. 33. Characteristics of the Migrants: Of those who moved to the rural areas, 17.3% had junior or senior high school education compared to 5.4% for the non-migrants. This percentage was a high 40% for the migrants into Java, reflecting very clearly that Java, especially the urban areas, notably Jakarta and Surabaya, drain the Outer Islands of their relatively highly educated manpower. Among the migrants moving into the urban areas, 76% are found in the services, followed by industry (mining, manufacturing and construction) with 21%. Of the migrants moving into rural areas, 60% workc in the agricultu:- ral sector, 26% in the field of services and 13% in mining, manufacturing ancl construction. 34. Determinants of Migration: The provincial migration data were used in conjunction with various social and economic indicators to find the major determinants of migration by using multiple regression analysis. The findings were a stable and significant positive association between the rates of offi- cial transmigration and net migration and a positive and less significant relationship between provincial gross domestic product per capita and the rate of net migration. 35. The Transmigration Program: During the period 1971-80, a million people have been moved under the Government transmigration program. Govern- - xv - ment targets continue to be ambitious partly because of the perceived need to move Java's rural poor to the Outer Islands. Among the problems facing the program is the likelihood of escalating costs due to the need to go to more remote and less favorable areas for land development for transinigration. In addition, inadequate supply of inputs, finance and marketing facilities have serious repercussions on settler welfare. There is also some evidence that the transmigrant receiving provinces have not fared well on the poverty incidence scale. Lampung's rural poverty incidence was a high 47% in 1980, Southeast Su]Lawesi was worse (53%) and South Sulawesi was only marginally better (46%). 36. Issues iII Migration and Transmigration: Net inter-island movement from Java to the Outer Islands would have been insignificant in the absence of the officially sponsored transmigration. It appears, therefore, that in its pursuit of the long-term objective of controlling population density and reducing poverty oni Java, the Government will have to continue to provide some incentives for migration from Java. So far, in the Government transmigration program, each settler family was provided with free transportalion to the site, land for cult:ivation, some agricultural inputs and allowances in cash/kind for an initial settling-in period. Tt is riot entireLy clear whethebr the future programs; can continue to provide such a costly package. A more important question is whether alternative strategies can be more effective in, promoting migration and ensuring settler welfare. For instance, the Government could "free" the land in the Outer Islands from the customary ownership rights, improve access to such land and permit its purchase by the Javanese. Aniother possibility is that migration can be encouraged by promoting the development of urban growth centres in the Outer Islands. Such. a policy may help reduce the inflow of the relatively educated people from the Outer Islands into Java in addition to encouraging movement out: of Java. Finally, the rather high level of poverty incidence in some of the transmigrant receiving provinces needs to be studied to undertake remedial measures. 37. Labor Force and Employment Developments in the 1970s and the 1980s: Java, Sulawesi and E. Islands have had reduced labor absorption (in terms of number of persons) in agriculture. Sumatra and Kalimantan did better largely because! of agricultural job creation via the transmigration program. Indus- trial and service employment increased at respectable. rates in all regions. There was a good regional spread of the industrial sector jobs, mostly due to the spread of the household and small scale industries. 38. Implications of Labor Force Growth: An additional 16 million persons are expectesd to enter the labor force in the 1980s as against the 10 million in. the 1970s. While some agricultural jobs can be obtained in the Outer Islands, mostly via the transmigration program, a major portion of all the new jobs in the 1980s will have to come from industry and services, which will be increasingly located in the urban areas. The process of urbanization to the extent possible can be guided by government initiatives to develop cen- ters of urban and regional growth within the various provinces of the Outer Islands. Of the 16 million new entrants into the labor force in the 1980s, half will be in Java, a quarter in Sumatra andl a quarter in the rest of the country. Commensurate with an anticipated 5% to 6% per annum national - xvi - economic growth rate for the 80's, Java's growth rate may be 4.5% to 5% and all other regions may grow at rates between 8% to 10%. The past (70's) employment elasticities of 0.31 for Java, 0.45 for Sumatra, and 0.20 each for Kalimantan, Sulawesi and Eastern Islands, if applicable in future, cannot give the required employment growth rates in the 80's in all the regions except possibly Sumatra. The need of the 80's thus is an employment-oriented growth strategy in the different regions. A first step to initiate such a process will be to review the various government policies to identify the constraints, if any, to labor-intensive growth and the removal of such constraints. Regional Finances and Planning 39. Central and Regional Fiscal Flows: In 1980/81, the total governrnent revenue was Rp 12.6 trillion. Central accruals amounted to 92% with only 8% collected by the regions. The center used 78% and distributed 14% to the regions. The regions depend to a large extent on the financial flows from the center. In 1976/77, the regions received 58.5% of their total income from the central Government, this figure rose to 63.6% in 1980/81. Especially at the present time, the Government is well aware of the need to augment government non-oil revenues and is presently taking several steps toward tax reform. The opportunity should be used also to simplify and rationalize local taxation. 40. Provincial Patterns of Revenue and Expenditure: The range of per capita non-grant revenue by province was Rp 2,400 in Central Java to Rp 56,000 in East Kalimantan, while the average for the whole country was Rp 5,700. There is a high correlation between provincial per capita revenue and non- mineral GDP per capita. Thus, if regional government expenditures were to be totally dependent on regional revenues, then the regions with relatively higher GDP per capita could spend more on social and economic development and those with lower GDP per capita would spend less, thereby exacerbating the problems of regional economic and social disparities. In this context, grants from the central Government can perform a transfer function to fill the gap between regionally needed expenditures and regionally obtained revenues. 41. Central development spending per head of population and per capita INPRES grants are highly correlated. It was also found that there was a significant correlation between per capita INPRES grants and per capita non- grant income. These seem to imply that the grant allocations favor the better-off and in fact contribute to regional inequalities rather than help to reduce them. This issue requires further careful study and analysis. 42. A New Approach to Determining the Levels of Central Grants to Social Sectors: There are basically two alternative approaches for determining cen- tral grants: (i) one based on development potentials of each region and (ii) the other based on regional needs. The latter approach may be applicable to grants allocated for the development of for social sectors. The following factors could provide the elements of a sound approach to improving grant distribution: (a) estimate for each service the annual expenditure needs by region for raising the level of services by the standards developed for each region over a planning period; and (b) deduct from this the estimated local resources available for expenditure on that service. The result would be the central grant payable to the region each year for the plan period. This - xvii - method, while provi:ding full compensation for resource short-falls, would not provide an incentive to raise local revenues. To overcome this, modifications can be made; for instance, a portion of the central grant can be linked to local revenue raising effort. The pros and cons of establishing an approach such as the one described should be reviewed. 43. Financial Administration: The diversity of sources and channels of finance for regionally provided public services poses many problems of coord- ination and program management. Responsibility for many regionally provided services is divided between the central Government sectoral agencies and the regional governments, each with their own financing sources. The areas of responsibilities could be more clearly divided among them, after a sector by sector review of the present situation. 44. Within the central Government sectoral areas, there seem to be few strong arguments for the separation of develo?ment finance into development project funds, supplementary budget, crash program and foreign aid channels right down to the regional project teams. It should be possible to combine these various sources centrally into single parcels of finance provided through consolidated budget allocations to each sectoral program or project at the regional level. 45. Within the area of regional government activities, matters might similarly be simplified if the INPRES grants were regarded as contributing to the financing of the regional development programs along with finance from local revenue sources, entering the main regional budgets rather than having to be accounted for separately as at present. 46. Regional planning agencies have the responsibility for the prepara- tion of plans as well as annual development budgets. A system of rolling plans will be useful in integrating annual budgets and medium-term plans. 47. Regional Development Planning: The Case of NTB Province and Implications: The movement towards planned regional development began with the preparation of a number of regional studie!s. During the Second Plan period, (1974-79), a number of regional develcipment sl:udies were commissioned with foreign assistance. Sixteen of these, covering most of the country, were carried out at a cost of about $20 million. The NTB province was covered as part of the Eastern Indonesia Regional Development Study undertaken in 1974. For translating the many initiatives recommenced in the study into investment proposals a project was launched with UNDP funding. The project, executed by the World Bank, developed several investment proposals. It demonstrated that the regional planning agencies can benefit greatly from technical assistance and training relatiing to the study of development potentials, formulating development strategies and preparing investment proposals. A new round of studies of regional development potentials aimled at developing not only broad strategies but: also detailed project pipelines would be timely, and should be undertaken during the early part of the Fourth Plan. CHAPTER 1 INTRODUCTION The Relevance of Spatial Development Issues 1.01 One of the most distinguishing characteristics of Indonesia is its geographical and demographic spread. Straddling the equator, it extends some 3,400 miles or 5,110 km from Northwest Sumatra to Irian Jaya. The country's land area of a little over 1.9 million sq km is distributed over 13,677 islands.- As early as in 1928, Bahasa Indonesia was adopted as the national language to assist the integration of the diverse regions and ethnic groups. More often than not, the casual observer may feel that since Indonesia has one language, the diversities are minimum. This is far from the truth. The population of 1.56 million (1983 estimate) comprises over 50 ethnic groups and several hundred language/dialect groups. In the years since independence, attempts have been made to bring about unity arrong the peoples by adopting a pancasila /2 ideology as the basis for policy formulation and by explicitly recognizing inter-regional economic integration as a sl:ep towards lasting political integration. The state logo speaks of "Bhineka Tunggal Ika" or unity in diversity. 1.02 In the context of Indonesia, there are two major factors that moti- vate a study of" the spatial dimensions of economic development. The first factor is the intrinsic necessity of looking at the cotntry in terms of what it really is, namely, the diverse components - the major islands, provinces, and cultures. The second factor is a corollary to the first; namely, the Government's declared interest in, concern for, and objectives of regional development. The two factors are briefly discussed beLow. 1.03 The first f'actor of "intrinsic necessity" arises because Indonesia's large population and natural resources are spread unevenly over the country. The study of development with a view to evaluating development policies of the past and presenting policy directions for the future must pay attention to the peculiar spatial diversities of the country. The island of Java, accounting for 7% of the total geographical area, contains 63% of the 156 million people. It is a natural site for setting up modern consumer goodis industries, investing in transport and other infrastructure and est:ablishing high level educational, health, civic and cultural facilities. Problems confronting Java are high density, poverty in large numbers, very little additional arable land and many landless laborers. These are in sharp contrast to the problems of /1 Nearly 932% of the population, however, is found on 4 islands, namely Java, Sumatra, Kalimantan and Sulawesi. /2 Pancasila stands for the five principles of belief in one God, humanitarianism, social justice, nationalism and clemocracy. - 2 - almost all other regions. They have relatively low population density, unexploited virgin jungles, minimal infrastructure and some people in poverty pockets due to lack of complementary production factors. Even within the islands off Java, Sumatra, Kalimantan and Sulawesi have widely differing resource and demographic profiles compared to, say, Irian Jaya. 1.04 The second factor, namely, Government interest in regional develop- ment emerges rather clearly from a purely political standpoint, to ensure that the different islands of the country are brought together in terms of economic linkages and interdependencies which will set a strong basis for political integration. The nation did see threats of "disintegration" in the past, as for instance, in the Sumatra rebellion in 1958. It is clearly necessary to ensure that the people of no region feel left behind in the development process. Thus, it has become necessary for the Government to state, articu- late and address various objectives of regional development. Government Development Objectives 1.05 Inter-Regional Equity: The best summary of the country's develop- ment objectives is the "development trilogy" spelled out in the Third Five Year Development Plan (REPELITA III): "(a) A more even spreading of development and its results that will lead to the creation of social welfare for the entire people; (b) A sufficiently high economic growth, and (c) A sound and dynamic national stability."/3 The Plan envisaged eight courses of development to achieve the first objec- tive. One of the eight is the even distribution of economic development all /3 The Third Five-Year Development Plan (REPELITA III), 1979/80-1983/84, Draft, (English Translation), March 1970, P.T. Karya Manca Warna, p. I-3. - 3 - over Indonesia./4 In that context, the objective of regional development was translated as the objective of inter-regional equity./!. 1.06 Regional Development Strategies: Chapter 22 of the Third Five Year Plan deals exclusively with "Regional, Village and Townl Development." At the outset of the Chapter, the main directions of regional development were out- lined as enunciated in the Guidelines of State Policy. 16 Some of the more important of tlhese directions are: (a) harmonization of sectoral development programs with the potentials and the problems of each region; (b) transmigra- tion from the densely populated Java to the Outer Islands; and (c) provision of aid and incentives for intensifying the development of relatively backward regions. Choice of Units: Whiat Regions? 1.07 A classic issue in spatial studies is selecting the units of analysis. As one authority on the subject has pointed out, "Indeed, defining regions precisely is such a nightmare that most regional economists prefer to shy away from *the task, and are relieved when they are forced to work with administrative regions on the grounds that policy considerations require it or that data are not available for any other spatial units."/7 For the purpose of translating Indonesian development objectives into programs and projects /4 The eight courses are the even distribution of: ('a) basic needs goods; (b) education and health services; (c) income, (d) employment opportuni- ties; (e) business opportunities; (f) participation in development; (g) development over entire Indonesia; anc (h) opportunity for justice. Ibid, pp. I-4 and I-5. /5 Indonesia is not- the only country which has such a development objective. Most countries with large geographical areas and regional diversities (e.g., India, Malaysia, Mexico) have similar objectives. In Mexico for instance "Because of interest in achieving sustained economic growth and in distributing it equitably, recent administrations have paid greater attention than itheir predecessors to the spatial distribution of the benefits of economic development". Ian Scott, Urban and Spatial Develop- ment in Mexico, A World Bank Publication, Johns Hopkins University Press, 1982, p. 18. /6 The 1945 constitution of Indonesia calls for the adoption of Guidelines of State Policy (and the election of President) once in five years by the People's Consull-ative Assembly. The 1978 Guidelines for State Policy which is presently in force has five chapters, among which is Chapter IV: Basic Guidelines for the Third Five-Year Plan. See Tearn Pembinaan Penatar Dan Bahan-Bahan Penataran Pegawai Republik Indonesia: WUD, Pedoman Penghayatan dan Pengatnalan Pancasila, GBHN, pp. 73-74. /7 Harry W. Richardson, Regional Economics, Lniversily of Illinois Press, 1979, p. 17. - 4 - with a decided location and for ensuring adequate supervision and implemen- tation at the field level, Indonesia is organized into provinces, regencies, municipalities, subdistricts and villages. These regions at different levels are the focal points for planning and implementation of national development programs and projects in Indonesia./8 In this study the provinces are the focus of attention, especially in the various annexes. In this volume, the focus is, more often than not, on the relatively larger regions (islands or island groups) of Java, Sumatra, Kalimantan, Sulawesi and the Eastern Islands (a name used here to include all other areas). The General Framework for this Report 1.08 Description of the spatial diversities in various key economic and social indicators and articulation of recent trends in them is one part of the present report. The other part deals with the economic and social processes that help to minimize inter-regional inequalities. TypicalLy such processes refer to population movements and spatial distribution of public expendi- tures. These are considered in this report in some detail. In addition, intra-spatial improvements in resource allocation and productive efficiency help to bring out the best from each region and also contribute to reducing inequalities. An understanding of these aspects requires in-depth studies of the development potentials of each region. These studies are beyond the scope of the present report. /8 A brief description of the apparatus for political/administrative decision-making in Indonesia is given below. Policy making at the highest level is undertaken by the People's Consultative Assembly (MPR or Majelis Permusyawaratan Rakyat). The Assembly meets only once in 5 years to ratify the Guidelines for State Policy (GBHN or Garis-garis Besar Haluan Negara), and elect the President and Vice-President. The MPR has 920 members: 50% or 460 come directly from the House of Representatives (DPR or Dewan Perwakilan Rakyat) and the remaining half are repre- sentatives of regions and other functional groups such as businessmen, students and farmers. The House of Representatives (DPR) has 460 members, of which 360 are elected every 5 years in the general elections<, and 100 are nominated by the President. The DPR meets several times in a year to pass legislation, approve the budget and generally supervise government operations. Regional assemblies are elected at the provincial and sub-provincial levels, even though their legislative powers are limited. Indonesia has five administrative levels. At the top, the central government decision making apparatus is contained in the various government departments (ministries, headed by a minister). The second, third, fourth and fifth levels are: provinces (headed by Governors), Kabupatens or Regencies (headed by Bupatis), Kotamadyas or municipalities (headed by a Walikota), Kecamatans or subdistricts (headed by Camtas) and villages (headed by Lurah). -5- Organization of the Report 1.09 This report starts with an analysis, of inter-regional disparities in economic and social development and some key issues relating to them (Chapters 2 and 3). It then probes into population, migration and employment issues (Chapter 4), fiscal issues and issues relating to regional planning (Chapter 5). The four annexes have supporting material and data. Annex 1 on indus- trial location patterns and policies is an at:tempt to describe the present location pattern aad policies affecting locat:ion. AXnex 2 has two parts. The first part provides an analysis of inter-regional migration patterns based on a distinctive set of tabulations from the 1980 census. The second part deals with demographic analysis and population projections. Annex 3 has two parts. The first has an analysis of provincial public revenues and expendi- tures and the second has a discussion of the evolution of regional planning i.n Indonesia with special reference to the province of Nusa Tenggara Barat (NTB). The final annex contains selected provincial data on economic and social indicators .for the period 1970-80. PART I SPATIAL DIVERSITIES IN ECONOMIC AND SOCIAL DEVELOPMENT CHAPTER 2 SPATIAL DIFFERENTIALS IN ECONOAIC DEVELOPMENT Introduction 2.01 During the period 1971-80, Indonesia's overa:Ll rate of economic growth was an average of 7.3% per annum. Per capita gross domestic product increased at 5% per annum during the period. Against ithat background of impressive overall pierformance, this chapter describes the present situation and recent trends in spatial disparities in poverty incidence, per capita product, economic growth and developments in selected sectors. Towards the end of this chapter, to illustrate the way in vrhich Government economic policies may bring a'bout spatial differentials in deve:Lopment, an attempt is made to review briefly the impact of industrial. and trade policiess on the location of manufacturing industries. Differentials in Povesrty Incidence 2.02 Overall Magnitudes: Of the 144 million Indonesians in February 1980, 57 million or nearly 40% had consumer expenditures below the absolute poverty cut-off./1 Although the incidence of poverty has declined from a high 57% in 1970 to 40% in 1980,/2 the present magnitude is still very high and constitutes the major challenge that the country faces:. 2.03 Variation Among the Major Regions. The poverty problem is the most serious in rural Java and parts of Eastern Islands as discussed below. In rural Java, 52% of the people were in absolute poverty in 1980. This was one extreme. At the othtsr extreme, poverty incidence in urban Kalimantan was a low 8% (Table 2.1)./3 Java, Sulawesi and the Eastern Islands (Bali, NTT, NTB, Maluku, Irian Jaya) ranked high on poverty incidence in the rura:l areas as well as the urban areas, although within each region, poverty incidence in /1 See Appendix I for the provincial, rural and urban poverty Lines and the poverty magnitudes. /2 A detailed analysis of poverty issues is contained in a paper on "Poverty in Indonesia: Trends, Associated Characteristics and Research Issues", August 1983. /3 Such wide regional variations have also been observed in other countries., For instance, in Brazil, in 1974-75, poverty incidence was only 5X in metropolitan Sao Paulo whereas it was 62% in rural Northeast., See G. P. Pfeffermann and R. Webb, The Distribution of Income in Brazil., World Bank Staff Working Paper No. 356., 1979. Table 2.1: POVERTY MAGNITUDES FOR THE MAJOR REGIONS, 1980 Poverty incidence (%) Incidence of deprivation (%) Population in poverty (Million) Population in deprivation (Million) Major region Rural Urban Total Rural Urban Total Rural Urban Total Rural Urban Total Java 52.3 29.6 46.5 0.5 1.2 0.7 35.1 6.8 41.9 0.3 0.3 0.6 Sumatra 21.5 15.8 20.4 4.2 1.5 3 7 4.7 0.9 5.6 0.9 0.1 1.0 Kalimantan 12.4 8.1 11.5 4.5 1.2 2.6 0.6 0.1 0.7 0.2 * 0.3 Sulawesi 42.7 21.1 39.3 3.6 3.6 3.6 3.7 0.3 4.0 0.3 0.1 0.4 Eastern Islands 47.7 24.3 46.7 27.9 4.8 26.1 4.1 0.3 4.4 2.4 * 2.5 Indonesia 43.3 25.8 39.3 3.8 1.5 3.3 48.2 8.4 56.6 4.1 0.5 4.8 Source: Appendix 1. * Less than 0.1 million persons. Notes: 1. Incidence of Poverty: Percentage of total. population below a designated poverty line (See Appendix 1 for details). 2. Incidence of Deprivation: Percentage of population whose food demands are not satisfied. This is measured on the basis of the data on the percentage of food expenditure in total by expenditure class (See Appendix 1 for details). urban areas was way below that in the rural areas. Kalimantan had the least poverty incidence and next in order was Sumatra. The rural areas of the Eastern Islands were also characterized by the highest incidence of depriva- tion (percent of people whose food demands were not yet satisfied), and would need special attention in regard to taking measures for the enhancement of purchasing power among the poor and ensuring adequate food supplies. In terms of absolute numbers, most of the poor were in Java (42 million out of an estimated 57 million in 1980) and half of the 'deprived" (2.5 million out of 4.8 million) were in the Eastern Islands. Clearly, there are two problems here: the general poverty problem in the rural. areas of Java, Sulawesi and the Eastern Is:Lands and the special 'food' cum purchas:ing power problem in the Eastern Islands. The results become even more clear-cut and sharp at the pro- vincial level. 2.04 Variation Across Provinces: At the provincial level, the data on the incidence of poverty in 1980 are summarized, in TabLe 2.2. IE rural poverty incidence above 25% and urban poverty incidence above 20% are characterized as "serious", then the rural target groups are in all the provinces of Java, and Sulawesi and in Lampung, Bali, NTB and NTT. By and large, the same provinces (Java excluding Jakarta, Sout:h Sulawesi, Lampung, Bali, NTB, NTT) have the urban poverty target groups also. Regional Distribution of Key Indicators 2.05 The data oIn regional distribution of land, population, gross domes- tic product, investments and paddy output (Table 2.3) provide a simple summary of spatial inequities. The dichotomy between land dist:ribution and population distribution is very evident - especially when Java and the Outer Islands are compared. Java has 62% of the people, only 7% of the land area and about 50% of total GDP. When the distribution of GDP is compared with the distribution of population, Sumatra and Kalimantan have relatively higher GDP shares than Java, Sulawesi and Eastern Islands. In regard to foreign/domestic invest- ments, Sulawes]i and Eastern Islands have shares less than their population shares. Regional shares in paddy output are fairly close to population shares. The paddy output share of the Eastern Islands improved iLn the last ten years, but, was less than the population share. Differentials in Per Capita Gross Domestic Product by E'rovince 2.06 Large Differences: In 1979, Indonesia's GDP per capita was Rp 216,000 (or $347). Regional differentials in per capita product were sub- stantial. Java, Sulawesi and Eastern Islands were low on product: per head compared to Sumatra and Kalimantan. Provincial differentials were more pro- nounced than the inter-island differentials. The relatively poor provinces of East and West Nusa Tenggaras had per capita GDP levels of Rp 97,000 ($156) and Rp 99,000 ($159) respectively as against the relatively rich provinces of East Kalimantan and Riau with per capita GDP levels of Rp 1,872,000 ($;3,005) and Rp 1,723,000 ($2,766) respectively. Spatial differentials in per capita product are quite large in Indonesia in comparison to regional differentials in USA, South Korea aLnd Malaysia, but are not large compared to the - 10 - Table 2.2: POVERTY ACROSS PROVINCES, 1980: A SUMMARY TABLE Range of poverty Population in poverty incidence Affected provinces (million) RURAL AREAS I. Less than 25% All provinces in Sumatra excluding Lampung, all provinces in Kalimantan and Irian Jaya 3,5 II. 25% - 35% West Java, Central Sulawesi 7.6 III. 35% - 45% North Sulawesi, Bali /a, Maluku 1.9 IV. 45% - 55% Lampung, South Sulawesi, S.E. Sulawesi, N.T.B. /a 5.8 V. 55% and above Central Java, D.I. Yogyakarta, East Java 27.7 N.T.T. /a 1.5 Total 48.0 URBAN AREAS I. Less than 20% DKI Jakarta, All provinces in Sumatra excluding Lampung, all provinces in Kalimantan and all provinces in Sulawesi excluding South Sulawesi, Maluku, Irian Jaya 2.0 II. 20% - 30% West Java, D.I. Yogyakarta, South Sulawesi, Bali /a, NTT /a 2.1 III. 30% - 40% East Java, Lampung, NTB Central Java /b 4.3 Total 8.4 /a These areas have relatively high rates of incidence of deprivation (See Appendix 1). /b Poverty incidence (41.1%) was only slightly above 40%. - 11 - Table 2.3: REGIONAL DISTRIBUTION OF B:EY INDICATORS Percentage shares Indicator (Year) Java Sumatra Kalimcntan Silawesi E. Islands Indonesia Land area 6.9 24.7 28.1 9.8 30.5 100.0 Population (1980) 61.9 19.0 4.6 7.0 7.5 100.0 GPD (constant (1'971) 54.5 27.9 5.8 6.4 5.4 100.0 prices) (1979) 50.5 27.2 5.6 6.6 6.1 100.0 Approved invest- ment 1967-78 Foreign 56.2 25.2 91.8 2.4 6.4 100.0 Domestic 65.2 18.6 7.9 4.8 3.5 C10.0 Paddy output (19371) 61.5 21.0 4.5 8.1 4.9 100.0 (1'981) 62.6 18.6 !.5 7.6 5.7 100.0 Philippines and ThaiLand (see the values of the coefficients of variation in Table 2.5)./4 2.07 Increasing Inter-Regional Inequality: The co-efficient of variation computed for the provincial per capita GDP at constant prices increased from 70% in 1971 to 78% in 1979 when the oil sector was included in GDP and Erom 38% to 49% when the oil sector was excluded (Table 2.5). (The magnitude of increase was much larger if current price data were considered.) Clearly, the degree of regional inequality /4 The limitations of such international comparisons cannot be overlooked. For instance, the observational units (provinces, states, etc.) are not strictly comparable accross countries. Also, the coefficient of variation is influenced by the degree of disaggregation. - 12 - Table 2.4: GROSS DOMESTIC PRODUCT PER CAPITA AT CURRENT PRICES BY PROVINCE 1971, 1975 and 1979 (in '000 Rupiah) Province 1971 1975 1979 DKI Jakarta 67 205 448 West Java 25 79 152 Central Java 22 60 127 D.I. Yogyakarta 19 64 119 East Java 25 70 147 Total: Java 27 78 163 D.I. Aceh 29 101 420 North Sumatra 40 102 230 West Sumatra 26 68 153 Riau 178 975 1,723 Jambi 43 78 192 South Sumatra 60 145 393 Bengkulu 26 57 149 Lampung 27 72 146 Total: Sumatra 49 166 360 West Kalimantan 30 82 168 Central Kalimantan 33 99 271 South Kalimantan 32 77 181 East Kalimantan 76 499 1,872 Total: Kalimantan 38 149 488 North Sulawesi 38 89 199 Central Sulawesi 17 58 148 South Sulawesi 24 69 159 South East Sulawesi 30 51 107 Total: Sulawesi 26 70 161 Bali 32 80 154 West Nusa Tenggara 16 47 99 East Nusa Tenggara 14 41 97 Maluku 33 91 239 Irian Jaya 33 221 555 Total: E. Islands 24 78 180 INDONESIA: Total 31 97 216 - 13 - in Indonesia increased in the past decade./5 While the evidence for the 1960s and 1970s for the other countries in Table 2.; is somewhat mixed, the long- term US experience points clearly to declinin,g regional inequality. Researchers have identified the following causes underlying this decline: (i) increased efficiency of resource allocation within regions /6, (ii) migration and (iii) relatively more government spending for the poor regions./7 Regional inequality declined in the Republic Df Korea over the early 1970s. Malaysia and Philippines, however, seem to share the Indonesian experience of increasing inequality whereas the Thailand experience of the 1970s has been one of little change in regional inequality. 2.08 A mapping of the Indonesian provinces is provided in Table 2.6 where they are classified by level of per capita GD]' and the average rate of growth in GDP. Provinces in Java (other than Jakarta) and the Eastern Islands are prominent as the regions with relatively low product per capita and low growth /5 Jeffrey Williamson in a study published in 1965, found that regional disparities were less pronounced in the high income and low income countries than in the middle income counlries. This lends support to the view that in the early stages of economic development, regional inequalities will increase and then at the higher levels of development, regional per capita incomes will converge. Alan Gilbert and David Goodman, however, failed to notice any specific linkages between level of development and regional inequality. Wi:Lliamson had in his sample of countries only four low income countries., whereas Gilbert and Goodman had a much larger number of them even though their sample consisted of low and middle income countries only - 15 in all with per capita income less than $900 in 1967. For more details see Williamson, Jeffrey, "Regional Inequality and the Process of National Development: A description of the Patterns" in Friedmann, John and Alonso, Willima (ed)., Regional Policy: Readings in Theory and Applications, the MIT Press, Cambridge, Mass., 1965, and Gilbert, Alan, and Goodman, David, "Regional Income Disparities and Economic Development: A Critique" in Gilbert, Alan (ed)., Development Planning and Spatial Structure, John Wiley and Sons, London, 1975. For an earlier study of regional inequality in Indonesia, see Hendra Esmara, "Regional Income Disparities", BIES, March 1975, pp. 41-57. The paper showed that the degree of inequality increased during 1968-72. For a historical review of the colonial economic policies and their effect on regional inequality, see Mubyarto, Liekman Soetrisno and Michael Dove, Rural Development in Indonesia: Past Experiences and Future Policies, Gajah Mada University Yogyakarta, 1983, pp. 23-29. /6 See Borts G.H., and Stein, J.L., Economic Growth in a Free Market, Columbia University Press, 1964. /7 Richardson, H.W., "Empirical Aspects of Regional Growth in the United States", Annals of Regional Science, 1974. - 14 - Table 2.5: VARIATION IN REGIONAL PER CAPITA INCOMES ACROSS SELECTED COUNTRIES AND INDONESIA Coefficient of Country Years variation (%) /a United States /b 1880 57.9 1900 42.5 1919/21 30.4 1949/51 23.4 Korea, Rep. /c 1960 34.8 1974 20.7 Malaysia /c 1963 31.8 1970 35.9 Philippines /c 1971 54.5 1979 62.0 Thailand /c 1970 75.0 1976 76.0 Current At 1973 prices Prices Indonesia /c RGDP/Capita 1971 66.5 69.5 1975 112.7 74.9 1979 119.0 77.5 Non-oil RGDP/Capita 1971 40.5 37.7 1975 39.9 42.4 1979 52.3 49.0 /a Weighted coefficient of variation is used. The weights are the provincial population totals. /b Source: Easterlin, R.A., "Regional Growth of Income: Long-Term Tendencies" in S. Kuznets et. al., Population Redistribution and Economic Growth, United States, 1870-1950, Vol. II, American Philosophical Society, 1960 /c Bank staff estimates. - 15 - Table 2.6: MAPPING OF THE PROVINCES BY PER CAPI]TA REGIONAE GROSS DOMESTIC PRODUCT AND AVERAGE ANNUAL GROWTH RATE 1970-79 average Per capita RGDP in 1971 annual growth Higher than Lower than rate of RGDP national. average national average Higher than national average Jakarta D.I. Jogyakarta Jambi Aceh S. Sumatra W. Surnatra C. Kalinmantan Bengkulu S. Kalimantan Lampu:ng E. Kalimantan N. Sulawesi Irian Jaya S. SuLawesi N.T.B Lower than national average N. Sumatra W. Java Riau C. Java Bali E. Java Maluku W. Ka'Limantan C. SuLawesi S. E. Sulawes i N.T.T rate. Jakarta and some of the provinces in Sumatra and Kalimantan had high level of product per capita and high growth rate. This phenomenon has contributed to the widening of the provincial disparities in product per capita. The growth prospects of the lagging regions should be thoroughly investigated. Differentials in Growth Patterns and Economic Structure 2.09 Trends in Regional Gross Domestic Product (RGDP), 1970-79: Over the period 1970-79, most provinces have experienced smooth growth without major fluctuations. The exceptions are Riau and B-eng'kulu in Sumatra, and North Sulawesi. This can be noted from Table 2.7 where for each of the other 23 provinces an exponential trend has been found to fit well for the RGDP data. The data in the table also indicate that for almost all these 23 provinces, the growth rates are respectably high. Riau's RGDP fluctuations were induced by variations in the export price of oil: RGDP peaked suddenly in 1973 and then started stabilizing. Bengkulu had difficu:Lties in exports of coffee and timber during 1972-74 after which exports and RGDP picked up. North Sulawesi's problems were due to the uncertain external market for copra. - 16 - Table 2.7: RESULTS OF EXPONENTIAL TREND REGRESSION FOR RGDP (1970-79) Trend rate Trend rate Province of growth r2 Province of growth r DKI Jakarta 9.7 0.99 West Kalimantan 6.7 0.98 West Java 7.2 0.99 Central Kalimantan 10.5 0.98 Central Java 5.5 0.98 South Kalimantan 7.8 0.98 D.I. Yogyakarta 11.2 0.88 East Kalimantan 21.2 0.98 East Java 6.8 0.97 North Sulawesi /a (3.9) (0.68) D.I.Aceh 10.8 0.94 Central Sulawesi 10.4 0.97 North Sumatra 7.3 0.98 South Sulawesi 11.2 0.95 West Sumatra 7.7 0.96 South East Sulawesi 6.3 0.94 Riau /a (3.0) (0.24) Bali 7.4 0.99 Jambi 9.1 0.97 West Nusatenggara 8.7 0.96 South Sumatra 8.9 0.99 East Nusatenggara 6.2 0.91 Bengkulu /a (9.0) (0.68) Maluku 5.0 0.95 Lampung 7.1 0.98 Irian Jaya 18.2 0.94 /a These provinces had severe fluctuations in RGDP, the exponential trends did not fit well, and the concept of a trend rate of growth would not be applicable. 2.10 Export Orientation: Table 2.8 has export to RGDP percentages by province for 1971, 1975 and 1979. There are many provinces with fairly high export-RGDP ratios. In the export menu, the principal items are rubber, timber, coffee and oil and gas. The islands of Sumatra and Kalimantan depend relatively more significantly on exports, and have maintained a leading position in regard to RGDP per capita compared to the other regions. Either oil exports or other traditional exports dominate the economies of most provinces. Non-oil and non-traditional exports have seldom occupied an important place. Even within the traditional category, most provinces depend exclusively on one or two commodities. Given that most primary commodities are notoriously famous for price fluctuations, one must conclude that a number of Indonesian provinces are naturally prone to instability. Yet, the record of the 1970s has been one of steady growth for almost all the provinces (three exceptions have been noted earlier) /8 largely due to fortuitous external circumstances favoring primary commodity exporters. In addition, there occurred important shifts in product structure described below. /8 There is a strong and significant relationship between RGDP per capita and percent of exports in RGDP. The correlation coefficients are 0.76 in 1971, 0.86 in 1975 and 0.84 in 1979. - 17 - Table 2.8: EXPORTS AS PERCENTAGES OF RGDP, 1971, 1975, 1979 Province 1971 1975 1979 DKI Jakarta 9.47 24.41 25.61 /a West Java 0.31 2.15 4.44 Central Java 2.18 1.28 2.23 D.I. Yogyakarta - 0.23 - East Java 3.46 2.07 4.80 D.I. Aceh 4.05 3.04 51.79 /a North Sumatra 28.41 3.04 20.16 West Sumatra 8.18 6.12 13.77 Riau 66.33 85.64 83.58 /a Jambi 20.56 22.68 41.16 South Sumatra 23.64 19.26 31.92 Bengkulu 8.01 0.23 3.39 Lampung 26.95 12.89 25.19 West Kalimantan 23.25 15.82 38.52 Central Kalimantan 21.26 23.38 47.54 South Kalimantan 16.36 19.47 46.59 East Kalimantan 69.41 86.39 108.81 /a North Sulawesi 4.78 2.94 6.49 Central Sulawesi 13.77 5.35 7.30 South Sulawesi 4.69 2.03 8.62 Southeast Sulawesi 16.68 21.48 22.80 Bali 1.67 1.54 2.32 West Nusa Tenggara 2.09 0.83 0.45 East Nusa Tenggara 2.43 1.20 2.85 Maluku 26.89 14.55 25.88 Irian Jaya 2.32 49.57 60.00 /a /a In total exports, the percentage share of oil and natural gas was 54% in DKI Jakarta, 96%' in D.I. Aceh, 96% in Riau, 68% in East Kalimantan and 79% in Irian Jaya. 2.11 Structural Change. The sectoral composition of the regional gross domestic product is shown in Table 2.9. Here, the shares of the principal sectors based on RGDI? at constant prices are ccnsidered since data on current prices indicate relat-ively more exaggerated changes in the percentage composi- tion because oif shifts in relative prices. Every region experienced a decline in the share of agriculture, and increases in the shares of manufacturing, construction, and cormmerce. Although these structural changes have had a favorable impact on economic growth as well as poverty alleviation, important - 18 - regional differences persist in economic structure just as they do in regard to growth and poverty incidence. Java's manufacturing share in GDP in 1979 was a high 16% and Sumatra came next with 14%, as against Kalimantan's 5%, Sulawesi's 6% and Eastern Islands' less than 3%. That some of the Outer Islands lag behind in commercial development iS also brought out by the data in Table 2.9. Java's commercial sector GDP share of 30% was much higher than the share in any other region. Table 2.9: SECTORAL COMPOSITION OF REGIONAL GROSS DOMESTIC PRODUCT 1971 AND 1979 (AT CONSTANT PRICES) Percent of RGDP from Region/Year Agriculture Mining Manufacturing Construction Commerce Service Total Java 1971 42.7 1.7 12.2 3.5 26.8 13.1 100.0 1979 30.3 1.6 16.3 6.4 29.6 15.8 100.0 Sumatra 1971 37.4 30.7 5.5 2.2 15.0 9.2 100.0 1979 30.3 21.5 13.6 5.5 17.3 11.8 100.0 Kalimantan 1971 58.0 4.7 4.8 2.0 22.1 8.4 100.0 1979 30.5 27.3 5.0 3.1 22.5 11.6 100.0 Sulawesi 1971 54.3 2.4 4.4 3.6 20.1 15.2 100.0 19791 48.7 5.2 5.8 4.9 21.2 14.2 100.0 Eastern 1971 64.4 0.9 1.5 3.5 12.7 17.0 100.0 Islands 1979 48.0 14.2 2.6 5.2 15.0 15.0 100.0 INDONESIA 1971 44.0 9.9 8.8 3.1 22.1 12.1 100.0 1979 32.6 10.5 13.0 5.6 24.1 14.2 10(J.0 Regional Differentials in Selected Sectors 2.12 Food Crops: In 1980, almost 26% or Rp 11 trillion out of Rp 44 trillion of Indonesia's GDP came from agriculture, livestock, forestry and fishing. Over half of this, or Rp 6.3 trillion was the value added originat- ing in food crops, and out of this, 55% or Rp 3.5 trillion was from paddy. The other less important food crops were corn, cassava, peanuts and soyabean (together accounting for a little less than 25% of food crop value added.) With nearly two-thirds of the population, despite only 7% of total land area, Java had to be the leader among the Indonesian regions in regard to food crop area and production. It is only in non-food estate crops that the Outer Islands have a lead. 2.13 Among the food crops, those with an area of cultivation of a million ha or more are paddy, corn and cassava. (Soyabeans with 0.8 million ha and peanuts with 0.5 million ha are growing rapidly in terms of area.) In regard to paddy, net harvested area increased from 6.9 million ha in 1971 to 8.2 - 19 - million ha. in 1981 (Table 2.10). During the period, of the increase in wet land paddy area of 1.3 million ha., more than half wEas in Java, about a quarter was in Sumatra and the remainder was shared by the other regions. Despite the sizable share in the incremental wet land hectarage, Sumatra's yields declined whereas Java's wet land yields increased substantially. Sulawesi and the Eastern Islands also had improved yields. Improvements in yields are noticeable in Kalimantan also, but-, the levels continued to be the lowest. Dry land paddy area decreased from 1.5 million ha. in 1971 to 1.2 million in 1981. 0n Java, dry land yield impiroved, but in other regions, improvements were minimal. 2.14 In Table 2.10, data on corn and cassava are also provided. Java accounts for two-thirds of the corn area of some 3 million ha. Sulawesi and the Eastern Islands account for almost the remaining one-third. Yields in Java increased by 65% between 1971-81. Improvements in Sulawesi and the Eastern Islanads were also substantial. Cassava area stagnated at 1.4 million ha. Yields in Java, which accounted for 70% of the area improved though not very significantly. Elsewhere improvements were minimal. 2.15 EstLate Crops: Non-food and estate crops in 1980 accounted for 18% of GDP originating in agriculture, livestock, forestry and fishing. The important sub-sectors, among the non-food and estate crops (that is, with an area of a mi:Llion ha or more) are rubber and coconut./9 (Table 2.10) Most of the rubber hectarage is under small holdings. The area increased from 1.8 million ha. in 197]L to 2.1 million ha. in 1980. MosI: of the increase was in Kalimantan a:Lthough Sumatra accounted for 70% of the total smaLl holder area. Yields in 1980 were slightly higher than in 1971 only in Java and Sumatra, and declined in Kalimantan. Government and private estates are not of major significanice in relation to total area under rubber; but, the yield levels are much higher on estates than on small holdi'ngs. For instance, government estates in Sumatra obtained 1,100 kg/ha in 1980 compared to 545 kg/ha on private estates and 357 kg/ha on smallholdings. CocoInut hectarage is well-distribuLted throughout the country. Overal hect:arage increased from 1.9 million in 1971 to 2.6 million in 1980. Wide regional variations in yield could be noticed. Regional yield differentials, such as those noted here, in food and estate crops have to be studied to find the factors causing the differentials. /9 Other importantt estate crops are oil palm, sugarcane, coff'ee and tea, each with area less than a million ha. - 20 - Table 2.10: LAND AREA ('000 HA) AND YIELD (KG/HA) BY REGION FOR SELECTED AGRICULTURAL PRODUCTS, 1971 AND 1980 OR 1981 Product Year Java Sumatra Kalimantan Sulawesi E.Islands Indonesia Area/Yield /a Food Crops Wet Land Paddy Area 1971 4,050 1,396 470 603 373 6,893 1981 4,779 1,670 596 702 444 8,191 Yield 1971 3,870 3,334 1,927 3,228 3,015 3,527 1981 4,196 3,257 2,445 3,350 3,801 3,783 Dry Land Paddy Area 1971 366 588 239 125 114 1,432 1981 266 426 253 109 136 1,191 Yield 1971 1,512 1,540 1,157 1,448 1,476 1,456 1981 1,783 1,517 1,344 1,412 1,244 1,499 Corn Area 1971 1,858 129 15 343 282 2,627 1981 2,008 124 21 458 345 2,955 Yield 1971 1,014 1,402 736 821 887 992 1981 1,650 1,434 958 1,311 1,155 1,526 Cassava Area 1971 1,101 94 33 76 102 1,406 1981 987 140 37 66 157 1,388 Yield 1971 7,334 9,644 8,806 7,061 7,883 7,601 1981 9,763 10,319 8,383 8,790 8,444 9,586 Estate Crops Rubber Smallholdings Area 1971 50 1,349 411 2 1,812 1980 27 1,470 609 1 2,107 'Yield 1971 205 283 377 302 1980 321 357 282 204 334 Government Estates Area 1971 101 119 2 221 1980 77 107 1 190 Yield 1971 440 615 274 533 1980 881 1,101 163 977 Private Estates Area 1971 94 207 3 2 307 1980 63 170 5 3 238 Yield 1971 240 443 95 628 511 378 1980 296 545 160 n.a. 342 470 Coconut Smallholdings Area 1971 626 454 104 435 252 1,871 1980 812 709 197 533 371 2,622 Yield 1971 594 645 522 785 848 681 1980 419 565 549 904 805 622 Government Estates Area 1971 6 6 1980 14 14 Yield 1971 258 321 1980 158 1,319 246 Private Estates Area 1971 3 3 3 2 11 1980 5 7 1 25 4 43 Yield 1971 107 509 314 375 320 1980 191 200 296 1,130 310 756 /a Totals may not exactly tally with sums of regional numbers because of rounding. - 21 - 2.16 Fisheries: Total fish catch increased from 1.2 million tons in 1971 to 1.6 million tons in 1980. (Table 2.11). Java's share in the total catch was 28% in 1980, slightly lower than Sumatra's share of 31%. For the nation as a whole, the share of marine fish production improved from 66% in 1971 to 75% in 1980. Kalirmantan's marine fish sector contributed only 49% to the total catch, an exception to the generally large share (ranging from 75% to 90%) of marinie fish to total fish catch. There are a number oi possibilities for fisheries development. First, the past growth raLte of the fisheries sector for the whole country was rather low. It could be stimutlated by export development. Second, in the case of Kalimantan, there is a fairly long coast- line and it should be possible to increase its share in total output, especially by, developing the marine fish sub-sector. Table 2.11: REGIONAL DATA ON FISH PRODUCTION Share of marine fisheries (%) in total Region Regional shares (%) regional production 1971 1980 1971 1980 Java 21.5 27.7 51.4 70.8 Sumatra 36.9 31.3 81.8 82.1 Kalimantan 20.7 15.9 36.7 49.3 Sulawesi 14.1 15.8 78.3 78.6 E. Islands 6.8 9.3 90.3 96.3 Indonesia: % 100.0 100.0 66.0 74.5 Production (thousand tons) 1,227 1,647 810 1,227 2.17 Manufacturing Concentration in Java:: The manufacturing GDP grew at double digit rates in most of the years during the 1970s. The sector is made up of the medium and large establishments (generally using some power and employing 20 or more workers), small scale establishments (those employing 5-19 workers) and household industries. Data for the first two types of establishments are considered here. In the total value added of the small, medium and large establishments, the small scale sector share was only 10% in 1979. In total employment the share of the small scale sector was almost - 22 - half./10 About 73% of the large and medium sector value added was accounted for by four industry groups, namely food, beverage, tobacco; textiles and apparel; wood and wood products; and rubber and chemical products. In the small scale sector, the first three groups accounted for 74% of the total value added. 2.18 The regional distribution of manufacturing employment and value added is given in Tables 2.12 and 2.13. In regard to the large and medium establishments, Java's share in value added increased from 80% in 1971 to 85% in 1979. In terms of employment, Java's share increased from 85% to 87%. Such a high degree of spatial concentration is not found in the small-scale sector. In fact, the regional distribution of the small industry was very close to the regional population distribution./ll The small industrial sector is oriented towards the regional markets, likely to utilize local talents and skills and is realtively more labor intensive. In regard to the important sub-sectors among the large and medium industries, Java's share increased between 1971 and 1979 in food, beverages and tobacco products, (92% share in 1979), textiles (98%) and all industries other than wood and related products and rubber and chemical products. Kalimantan's share in wood products increased from 16% in 1971 to 53% in 1979. In rubber products, Java and Sumatra maintained their shares at about 60% and 36% respectively. 2.19 Location Factors Favoring Java: In addition to the fact that Java accounts for a large proportion of total domestic demand, three sets of factors determine most industrial location decisions: transport costs, agglomeration economies and purely personal (entrepreneurial) preferences. All these have acted to favor the location of medium and large industries in Java, especially when the import substituting industries (e.g., food, beverage, tobacco, textiles) have become the key to industrial growth in the recent past. The two major ports of Java at Tanjung Priok and Surabaya facilitated imports of intermediate goods, machinery and equipment; when industries are set up one after the other, agglomeration economies caught up; and with a strong central government decision-making apparatus in Jakarta, entrepreneurs increasingly preferred Java. /10 In 1979, employment in the small scale establishments was 830,000. It was 874,000 in the medium and large establishments. Value added was Rp 186 billion and Rp 1,661 billion respectively. /11 The exception is the small scale rextile industry which has 93.5% of value added in Java (Table 2.13). This sub-sector includes the export: oriented batik industry predominantly located in Central Java and Yogyakarta. - 23 - Table 2.12: REGIONAL DISTRIBUTION OF MANUFACTURING EMPLOYMENT AND VALUE ADDED Item/Year Java Sumatra Kalimantaa Sulawesi E.Islands Indonesi,a Large and Medium Establishments: Percentage of 1971 80.3 12.6 1.3 1.0 0.8 100.0 value added 1974 82.6 12.1 2.7 1.9 0.6 100.0 1979 85.5 10.4 3.0 0.7 C'.3 100.0 Percentage of 1971 85.1 10.6 1.4 1.5 1.4 100.0 employment 1974 86.5 8.3 2.2 1.3 1.8 100.0 1979 86.6 8.4 2.7 1.1 1.2 100.0 Small Scale Establishments: Percent of value added 1979 65.3 17.9 4.5 7.7 4,.6 100.0 Percent of employment 1979 64.7 16.0 2.5 10.6 6.2 100.0 For Reference: Percent of population 1.980 61.9 19.0 4.6 7.C 7.5 100.0 Source: Esmara, op.cit., and Annex 1. - 24 - Table 2.13: REGIONAL DISTRIBUTION OF MANUFACTURING VALUE-ADDED. BY SUB-SECTORS, 1971 AND 1979 Sub-sector Year Java Sumatra Kalimantan Sulawesi E.Islands Indonesia Large and Medium Establishments Food, beverage 1971 86.1 11.6 0.3 1.0 1.0 100.0 Tobacco 1979 91.8 6.8 0.1 0.7 0.6 1(0.0 Textiles 1971 95.2 3.1 - 0.3 1.4 100.0 1979 98.4 1.1 - 0.2 0.3 1()(.0 Wood and 1971 42.4 33.3 16.2 2.5 5.6 100.0 products 1979 24.3 20.5 53.3 0.9 1.0 10(.0 Rubber, chemical 1971 60.3 35.7 3.8 0.2 - 1(0.0 products, etc. 1979 58.0 35.9 6.0 0.1 - 1()(.0 Others 1971 84.7 11.0 0.4 3.6 0.3 100.0 1979 94.7 3.8 0.2 1.1 0.2 10(.0 Small Scale Establishments (1979) Food, beverage, tobacco 57.6 21.7 5.4 10.2 5.1 10(.0 Textiles 93.5 3.8 0.1 1.2 1.4 10(.0 Wood and products 53.8 17.9 10.6 10.7 7.0 10(.0 Others 69.5 19.2 1.9 5.4 4.0 100.0 Source: Esmara, op.cit., and Annex 1. - 25 - Differential Trade L:inkages 2.20 Linkages with Rest of Indonesia and Rest of the World: The five major regions cliffer in regard to the relative importance of domestic and foreign trade. Data on the ratios of exports to GDP by region for the year 1979 were broken down into domestic and foreign components in Table 2.14. For products of Java and Sulawesi, export demand from other regions was just as important as export demand from abroad. For the products of Sumatra and Kalimantan the demand was mostly from exports. They export oil, gas, rubber and timber to rest of the world and these are products based on resource endowments typical to Sumatra and Kalimantan. In the case of these two regions, the prospects for widening the export base should be invTestigated. In the case of Java which specializes (in a relative sense) in food crop agriculture and consumer goods manufacturing, the scope for improving productive efficiency, establishing comparative advantage and developing exports should be addressed in policy-oriented sub-sect;or studies. Table 2.14: REGIONAL GDP AND REGIONAL TRADE, 1979 Exports (Rp Bln) Percentage of exports in GDP GDP To other To To other To Region Rp billion regions abroad regions abroad Java 14,618 1,263 1,188 8.6 8.1 Sumatra 9,734 730 5,070 7.5 52.1 Kalimantan 3,181 164 2,829 5.2 88.9 Sulawesi 1,633 154 145 9.4 8.9 E. Islands 1,85'8 111 480 6.0 25.8 Indonesia 31,024 2,422 9,712 7.8 31.3 2.21 Inter-Island Trade: At the outset it should be noted that the data on inter-island trade are rather weak, and are based on statistical reports from the various regional ports. Summary data in terms of value were published along with trade data on volume for important: commodities. Value data, however, were discontinued since the early 1970s. Bank staff have made some rough and ready estimates of values for the year 1.979 so that a compari- son of trade flows is facilitated with some of the earlier years., The 1969 - 1979 comparison shows that total inter-island flows increased from Rp 185 bil- lion in 1969 to Rp 3,645 billion in 1979. There is no easy way of checking the accuracy of these numbers. However, the implied trend of a very high growth during 1969-79 must be true, given the compendia of other economic indicators that show superior economic performance in the 1970s. Moreover, when total GDP of the nation in 1979 was more than 15 t;imes the level in 1969, the multiplication of inter-island trade by 20 times during that period could not be unrealistic. - 26 - 2.22 Java's exports in total trade fell from 50% in 1969 to 35% in 1979 (Table 2.15). Imports into Java were maintained at 30% of total trade. Intra-Outer Islands trade and intra-Java trade picked up in relation to total trade. A numerically large and important change was the decline in percentage of total exports from Java to Sumatra (from 32% to 19% of total trade). Some of the numerically not large, yet important, changes were the increasing trade linkages between Kalimantan and Sulawesi, Kalimantan and Eastern Islands and Sulawesi and Eastern Islands (due in part to their physical proximity and hence relatively lower inter-island transport costs). Infrastructure develop- ment (i.e., development of ports as well as roads and railways) and institutional improvements (i.e., administrative and managerial improvements to maximize operational efficiency) could greatly facilitate the growth of inter-island trade linkages. These aspects were discussed in detail in the Integrated Sea Transport Study of 1980 conducted by the Netherlands Maritime Institute as part of a Bank financed project. A comprehensive review of the road sector was also recently undertaken as part of another Bank project. The follow-up work on these studies should be aimed at integrated development of transport infrastructure which could promote inter-island trade linkages and intra-island specialization based on comparative advantage. Government Economic Policies and Spatial Development: The Case of Industry 2.23 Foreign Trade Policy and Industrial Location: Foreign trade policy strongly affects the pattern of industrial location. It affects the relative profitability of industries located in different geographic areas./12 High levels of protection against imports both through high rates of import duties and quantitative import restrictions have resulted in the rapid growth of import substituting industries. Because many of them are heavily dependent directly or indirectly on imported inputs, they tend to be located in Java, especially near or in Jakarta. Since Java is the principal market for most consumer goods, there is probably some justification for industrial concentra- tion on Java. However, because of the high levels of protection the rupiah has a higher value than would otherwise be the case. The higher value of the rupiah decreases the incentive to the private sector to increase the produc- tion of both primary commodities and manufactures for exports. In addition there are import duties on most imported intermediate inputs which also raise the cost of production of present and potential export goods. 2.24 The effective rates of protection (ERP) of exportable manufacturing sectors were mostly negative with the BERPs of only 4 out of 15 of them being positive, but still low./13 The principal exportable sectors were dried cassava and tapioca flour, rubber processing, and wood and cork products. These are mainly located in the Outer Islands and the trade regime did not /12 Indonesian foreign trade policy and its effects on industrial development are discussed in the World Bank report, Indonesia: Selected Issues on Industrial Development and Trade Strategy, July 15, 1981, especially in Annex 2, The Foreign Trade Regime. /13 Ibid. - 27 - Table 2.15: INTER ISLAND TRADE FLOW MATRICES, 1969 AID 1979 From/To Year Java Sumatra Kalimantan Sulawesi E.Islands Indonesia Java 1969 0.2 31.8 8.1 5.7 4.2 50.0 1979 7.4 19.2 6.3 4.5 4.6 42.0 Sumatra 1969 14.0 22.2 3.3 0.2 0.1 39.8 1979 16.4 20.2 2.4 0.7 0.5 40.2 Kalimantan 1969 2.4 0.1 0.6 0.7 0.5 4.3 1'979 1.8 0.9 2.6 0.9 0.9 7.1 Sulawesi 1969 1.9 - 0.2 1.1 0.4 3.6 19379 3.2 - 0.5 2.2 0.5 6.4 E. Islands 1969 1.6 - - 0.1 0.6 2.3 1979 2.7 0.1 0.2 0.1 1.2 4.3 Indonesia 1969 :20.1 54.1 12.2 7.3 5.8 100.0 1979 :31.5 40.4 12.0 8.4 7.7 100.0 Basic data: See Annex 4. Note: Java - Rest oiE Indonesia Summary Matrices: To Java To Outer Islands From Java 1969 0.2 49.8 1979 7.4 34.6 From Outer 1969 19.9 30.1 Islands 1979 24.1 33.9 favor the development of these industries. This leads to a lagging industrial sector in the Outer Islands. However, the adverse effect is not only directly on the manufacturing process, but it also adversely affects the development of the raw material sectors themselves, i.e., the production of cassava, rubber, - 28 - palm kernels, tobacco, wood and a large number of less important primary products /14 2.25 Recent Import Regulations: From November 1982 to February 1983, the Government made the decision that several groups of goods could only be imported by importers designated by the Department of Trade./15 For some groups, the designated importers were the sole agents/brand name holders or firms recommended by them. For other groups only one or two importers were designated. The main effect of these regulations on the pattern of industrial location is likely to be hindering development of industries in one area relative to another if a factory operator using an imported intermediate input is unable to become a designated importer and there is only one or a few designated importers in his geographic area. In this case he will probably face higher costs of imported intermediate goods because either he has to purchase the imported goods from an importer from another region, or he will be in a weak bargaining position relative to the designated importers in his area. Especially in the case where there is only one designated importer in a geographic area but many factories are using the imported input, the designated importer will have a partial monopoly position confronting these factories. However, the Department of Trade and Cooperatives has stated in private that except where there are only 1 or 2 approved importers, factories using the intermediate inputs will be given a high priority to become approved importers. However, even if this is the case it does not solve the potential problem of factories too small to import for themselves to obtain these inputs from designated importers at competitive prices. This could adversely affect the small labor intensive industries. (In September 1983, a decree was issued permitting direct raw material imports by producers for own use as long as the goods were included in the mass list of production needs issued by the Investment Coordinating Board.) /14 It is not as if the protective tariffs do not affect Java. The export development of the labor intensive textile, garment, leather products, electronic assembly, and sports and athletic goods industries, which for the most part are located on Java where labor costs are lower, is alsc, somewhat hindered by these policies. However, the export certificate system started to November 1978 partly offsets the adverse effects of the protection system. Under this system, for every dollar of goods exported, producers are given a payment based on the estimated average amount of imported inputs required to produce goods in the industry. This incentive, while helping the import dependent industries of Java does not seem to help the exporters of the Outer Islands. /15 These groups are: (1) electronic and electrical products; (2) chemical products; (3) parts for motor vehicles; (4) metal products; (5) equipment, machinery and parts; (6) textile products; (7) large equipment and parts; (8) certain types of agricultural products, (9) rerolling scrap and melting scrap; (10) foods, drinks and fruits; (11) sheet and plate steel; and (12) goods made from imported iron or steel. - 29 - 2.26 The Effect of the 1982/83 Investment: Coordinating Board Guidelines on Industrial Location: The Investment Coordinating Board (BKPM) guidelines on investment in seLected geographic areas can potentially adversely affect industrial location decisions. In the last six years the number of manufac- turing investment fields subject to location guidelines expanded. In the 1977 list of investment priorities 21 of 671 fields of industrial investment (manufactured items) were subject to location guidelines. A slightly larger number were cLosed to foreign investment. In the 1982/83 list of investment priorities 250 of 1,877 industrial items were subject to location guidelines while another 75 items were closed to all investments. 2.27 Guidelines which Recommend Specific Sites or Provinces: One category of guidelinies is where the Government has norninated a specific site for investments. An example is directing manufacture of aluminium rods to sites near the Asahan project in North Sumatra. Such guidelines are unlikely to discourage investment or reduce productivity and competitiveness since the new industries will benefit from proximity to inputs and from earlier invest- ments in infrastructure. A second category of gu de'.lines requires investment in certain fields of- manufacturing to be located in specific provinces or groups of provinces. For example, vegetables and fruit packing and processing is directed to Sulawesi and fish packing and preserving to provinces in Eastern Indonesia. The intent of the Government with these guidelines would seem to be to dissuade the investor from making invest:ment choices that would lead to a widening disparity in the size of the manufacturing sector among regions, and prevent investment decisions that would lead to underutilization of plant in other provinces. Such guidelines could well discourage investment or lead to inefficiency if economies of scale cannot be realized from production for limited markets. 2.28 Guidelines Excluding Investment in Some Provinces or Regions: There are 122 industrial fields/manufacturing items which have regulations discouraging the investor from locating a factory in certain provinces. Seventeen items are prohibited from Jakarta. Sixteen categories are pro- hibited from JABOTABEK (an urban complex comprising Jakarta, Bogor, Tangerang and Bekasi). Three items are prohibited from Jakarta and West Java provinces. Seventy four items are restricted to locations outside Java. Twelve investment fields are prohibited in Java and some other province or provinces. All of these guidelines on investment location couldl discourage investments in, some subsectors in all or some parts of the island of Java. 2.29 The above discussion implies that a review cf Government pclicies be undertaken to study their adverse effects, if any, on industrial location and regional development, and to identify the policies that require modification or elimination. - 31 - CHAPTER 3 SPATIAL VARIATIONS IN SOCIAL DEVELOPMENT Recent Trends at the National Level 3.01 Education: The number of government primary schools increased by 65% during the period 1970-80, junior high schoc,ls by 62% and senior high schools by 53%. In 1974/75, 5.2% of the government development budget was directed to the education sector. This went up to 10.5% by 1981/82. As a proportion of G])P also, education expenditure was on an upward trend, reaching a level of 2.1% in 1981/82. It is expected that. it wil:L reach an average of 3% of GDP or more during the period of the fourth five year plan (Repelita IV covering 1984/85 to 1988/89)./l 3.02 Healtlh: Expansion of infrastructure at a rapid rate occurred in regard to health and sanitation. For instance, the number of public health centers increased from 2,679 in 1973/74 to 4,753 in 1980/81, an increase of 72.4% in just seven years. In 1974/75, of the total government development expenditure of Rp 966 billion, 2.3% was spent on health services and 0.6% on housing and water supply. By 1981/82, of the expenditure of Rp 6,940 billion, 4.1% went to health sector and 2.4% to housing and water supply sesctors. Despite this increase in health development expenditure relative to total development spending, in the total national budget (rout:ine and development), health expenditure (budget of the department of health) stagnated over the past several years at 1.9% of the total./2 A consequence of this was, whereas development expenditures increased rapidly, routine expenses did not. This naturally led to less maintenance works and less soft-ware supporl: which could affect the level of service and productivity of health infrastruclure. 3.03 Water Supply: In regard to water supply and sanitation, the situa- tion in Indonesia appears least comforting. In the 1970's, mostly the urban areas received attention, especially cities with 100,000 or more people. Projects were undertaken in 38 such cities. Urban water supply production capacity increased from 9,000 liters per second in the early seventies to over 21,000 liters per second in 1980. A large part of the t:otal capacity (25,456 liters per second in 1980) was thus mostly in urban areas only. For the /1 See World Eank, Country Economic Memorandum on Indonesia, 1982, p.123. Educational. expenditure as a proportion of GNP in the late 70's was 4% in South Korea, 5.2% in Malaysia, 3.2% in The Philippines and 3.3% in Thailand. /2 World Bank, Indonesia: Health Sector Review (draft) 1982. It: is also useful to note that in Indonesia health expenditures amounted to less than 3% of GDP compared to over 6% in most of the industrialized countries aind around 4% in middle-income countries. In general about 1/3 of health costs were borne by governments. - 32 - country as a whole, only 7% of the households in 1980 had access to piped water for drinking, and 4% for bathing. Only 8.9% of the households had a private toilet while 26% had a private bath. 3.04 Family Planning: The official family planning program in Indonesia was launched in 1969/70, the first year of the First Five Year Plan. From plan to plan, the program coverage expanded. The program acceptors increased from 53,000 new acceptors in 1969/70 to over 2 million in 1981/82. The program budget in 1980/81 amounted to Rp 9.2 billion. The target of the national family planning program is to reduce the birth rate from a level of over 40 in 1969/70 to a level of 22 by 1990. Education Sector: Spatial Differences 3.05 Literacy: Since the adoption of Bahasa Indonesia as the national language in 1928, more than half a century has gone by and practically all Indonesians living today have been exposed to the national language one way or another. Most provinces have literacy rates above 65% of the population 10 years and over (Table 3.1). The exceptions are Irian Jaya (52%), NTB (55%), West Kalimantan (58.2%), South Sulawesi (62%), Bali (62.2%) and East Java (63.1%). 3.06 School Participation: In the Indonesian education system, children join the primary school mostly at age 7 and study for 6 years. Then comes the three years of education in the junior high school, another three in the senior high school and then five or more years at the academies and univer- sities. School participation rates from the 1971 and 1980 censuses are given in Table 3.1. The following are some of the principal trends. In the primary school age group, the participation rates in each of the provinces of Java and Sumatra have increased from 60% and above in 1971 to 80% and above in 1980. The same can be stated about the other regions in general with the significant exceptions of Irian Jaya and West Kalimantan with primary school participation rates of 67% in 1980. The province of NTB also has a low participation rate (73%), though not as low as in West Kalimantan. The school participation rates in the age groups 13-15, 16-18 and 19-24 were consistently higher in 1980 than in 1971 in all provinces, with few exceptions. There were, of course, fairly wide variations across provinces. 3.07 Progress of Primary Education: Rural-Urban Differentials: A good way of describing progress in the context of the rapidly expanding primary education system is to look at the youth in the post-primary age group and see how many have and how many have not completed the primary level. The data are given in Table 3.2. The most striking feature is the urban-rural differentials rather than the regional differentials. In the rural areas of West Java, Central Java and East Java, over 40% of the youth in the age group 15-19 have not completed primary education, as against about 29% in the urban areas. A similar pattern is observed in the provinces of Sumatra, except tlhat there are provinces such as Lampung, South Sumatra and Riau where over 50% of the 15-19 population have not completed primary education. These percentages were also high in rural West Kalimantan (61% for males and 69% for females) and rural East Kalimantan (52% for males and 57% for females). In the case of Table 3.1: LITERACY AND EDUCATION: 1971 AND 1980 /a Literacy among Percent of specified age group in educational institutions population 10+ Of 7-12 years Of 13-15 years Of 16-18 years Of 19-24 years Province - % 1971 % 1980 1971 1980 1971 1980 1971 1980 1971 1980 DKI Jakarta 79.2 88.2 67.0 91.4 56.0 77.1 30.6 46.3 14.4 14.9 West Jdava 64.8 74.9 55.6 82.4 36.5 54.3 15.3 24.7 4.8 6.4 Central Java 55.8 66.4 57.9 85.1 39.3 56.5 19.4 27.2 7.4 7.4 D.I. Yogyakarta 54.5 69.5 66.8 91.6 57.9 79.9 40.2 55.9 23.3 26.4 East Java 52.8 63.1 60.8 84.6 43.5 57.8 2.9 28.3 7.5 7.5 D.I. Aceh 68.0 74.5 68.1 86.2 59.6 68.6 27.2 38.6 8.4 11.5 North Sumatra 76.5 84.3 68.1 87.3 51.0 67.9 26.1 38.2 9.4 9.2 West Sumatra 75.5 81.8 67.9 88.8 49.4 70.6 29.9 43.8 12.3 12.8 Riau 66.1 77.3 51.1 78.2 40.2 63.5 15.8 31.8 4.6 7.3 Jambi 69.0 75.2 59.0 79.0 42.0 57.3 17.2 26.2 5.1 6.5 South Sumatra 74.3 81.4 61.9 83.1 46.6 60.7 20.5 29.6 19.8 7.1 i Bengkulu 70.0 74.4 64.3 82.4 54.2 59.4 24.3 29.3 7.2 7.6 w Lampung 68.8 76.6 59.2 80.6 40.3 56.8 15.8 23.3 4.3 5.2 L West Kalimantan 47.5 58.2 43.6 66.9 40.9 58.8 16.2 28.6 3.1 6.5 Central Kalimantan 73.2 78.9 65.2 82.6 57.0 66.4 22.6 32.1 6.3 7.8 South Kalimantan 70.1 77.5 67.9 85.2 47.9 47.7 21.7 31.1 8.4 8.7 East Kalimantan 62.0 75.9 58.5 78.9 47.3 65.8 16 z l 7 A c North Sulawesi 87.4 91.0 78.0 88.9 58.7 67.9 26.6 36.7 7.1 9.2 Central Sulawesi 69.3 82.1 72.6 86.4 64.4 66.1 27.2 31.6 6.1 6.6 South Sulawesi 51.2 62.0 55.9 78.8 45.5 61.0 24.6 36.3 9.5 11.7 South East Sulawesi 52.6 68.5 59.2 81.1 63.5 63.7 30.5 35.6 6.4 7.9 Bali 47.6 62.2 56.7 84.5 35.1 65.7 17.0 34.6 5.7 9.5 West Nusa Tenggara 38.1 55.0 42.3 72.5 32.4 43.0 16.9 29.6 4.7 7.6 East Nusa Tenggara 58.1 65.0 60.5 76.4 61.7 69.7 28.0 37.9 7.5 12.0 Naluku 77.0 83.0 73.4 85.7 69.1 73.5 34.5 38.5 8.7 9.2 Irian Jaya /b 52.0 /b 66.9 /b 57.7 /b 33.5 /b 8.2 /a The census participation rates by age do not correspond to precise levels of education (primary, secondary, etc.). Accordingly, the data in this table may not match with the data of the Department of Education on the enrollment rates by level of education. /b Comparable data not available. Sources: 1971 and 1980 Censuses. - 34 - Table 3.2: EDUCATIONAL PROGRESS INDICATORS, 1971-80 Percentage of persons who have not completed primary school Province Urban Rural Males 15-19 Females 15-19 Males 15-19 Females 15-=1 1971 1980 1971 1980 1971 1980 1971 19803 DKI Jakarta 32.1 19.9 43.1 30.6 West Java 24.4 21.0 29.5 26.9 54.5 43.3 60.6 50.0 Central Java 22.2 19.6 32.8 29.1 57.5 44.4 70.5 55.7 D.I. Yogyakarta 13.0 12.2 20.3 15.1 33.2 22.6 49.1 30.0 East Java 24.9 18.1 35.8 26.9 55.7 42.5 68.5 49.8 D.I. Aceh 21.3 11.4 21.3 12.7 47.1 36.0 54.6 37.5 North Sumatra 19.3 17.0 20.5 19.7 43.7 39.7 53.8 48.2 West Sumatra 25.2 15.1 21.1 14.3 49.3 43.5 47.1 42,1 Riau 29.4 17.1 34.0 23.9 68.1 50.9 76.2 57,2 Jambi 45.0 16.4 55.1 27.2 58.9 47.4 73.9 57.0 South Sumatra 37.4 22.9 45.7 26.4 61.8 51.8 70.9 60.4 Bengkulu 25.5 18.0 27.6 18.6 64.7 46.7 71.9 55.6 Lampung 36.6 24.6 43.4 30.9 60.6 58.3 70.2 64,9 West Kalimantan 54.3 26.4 59.2 29.5 69.3 61.4 79.7 68.3 Central Kalimantan 27.2 6.8 28.6 10.2 53.5 42.7 58.4 49.1 South Kalimantan 38.4 22.3 46.1 30.1 51.8 46.3 57.7 56.8 East Kalimantan 33.6 18.1 44.0 25.9 64.3 52.2 68.3 57.2 North Sulawesi 32.0 21.5 27.8 21.5 54.0 48.2 47.7 40.L Central Sulawesi 12.5 11.6 17.2 11.2 44.8 40.4 49.3 44.2 South Sulawesi 27.2 17,7 32.7 21.8 53.2 41.5 59.5 43.9 South East Sulawesi 24.9 13.8 35.4 17.4 48.9 36.2 63.5 40.0 Bali 21.4 15.0 36.7 23.6 47.4 32.2 72.5 48.3 West Nusa Tenggara 20.9 12.5 43.5 37.1 70.7 46.2 80.2 50,5 East Nusa Tenggara 22.4 12.5 32.3 13.5 50.2 42.4 54.2 44,3 Maluku 16.2 11.3 21.3 10.6 45.2 34.9 52.9 42.6 Irian Jaya 24.7 23.6 32.9 30.5 - 44.1 - 51.6 Sources: 1971 and 1980 Censuses. Sulawesi and the Eastern Islands, the patterns were similar to those observed in Java and Sumatra with over 40% of the 15-19 rural population not completing primary education. Such large differentials as noted here between regions and between rural and urban areas also prevail in regard to the secondary education completion rates. The analysis of these differentials is presentl,y undertaken by the Bank./3 /3 World Bank, "Secondary Education in Indonesia: Issues and Programs for Action" (forthcoming). - 35 - Health Sector: Input and Output by Province 3.08 Input: The Infrastructure: There were over 4,500 public health centers at the end of 1980. Each health center had on the average 31,000 persons to serve (Table 3.3). This is a major improvement compared to the average of about 50,000 people per health center in 1972./4 The regional differences in average populations served by health centers ares striking (Table 3.3). Java's provinces have, on the average, 41,000 persons per health center compared to the national average of 31,000 persons. Similar patterns prevail in regard to population per subcenter. All the provinces in Java except Yogyakarta and the province of Lampung in Sumatra have over 30,000 persons per subcenter, much higher than 20,00 persons or less which is the case with other provinces. 3.09 While it is true that some of the provinces, especially those in Java, have a larger average population to be reached by the health centers, there are, in most provinces, other balancing factors such as relatively well- developed public and private hospitals. Jakarta, North Sumatra, East Kalimantan, North Sulawesi and Irian Jaya have more than a dozen hospital beds per 10,000 population. Within the major islan1ds, there are large inter-pro- vincial differentials in per capita bed strength. The private sector is quite active in some of the provinces. In Jakarta, Yogyakarta, Lampung, North Sulawesi and East N'usa Tenggara, the private sector share was more than 40% of the total bed strength. The government hospitals in Java and Sumatra are of relatively large size with 50% more average bed strength than in Kalimantan, Sulawesi and Eastern Islands. In contrast, the private hospitals in Java and Sumatra tend to be of relatively smaller size than in other regions. The large demand for hospital accommodation in Java and Sumatra must be encouraging the growth of a number of small pr^ivate hospitals and nursing homes. 3.10 Drinking Water and Sanitation: Only 7% of the households in 1980 had access to piped water for drinking and 4.]. percent could boast of piped water for bathing. Only 9% of the households had a private toilet. A rela- tively large 26% had a private bath./5 The regional differentials are illustrated in Table 3.4. Because of the tremendous differences in access between urban and rural areas, the provinces with large urban areas have better access. Jakarta, East Java, North Sumatra, South Sumatra, South and East Kalimantan, North Sulawesi, and Bali come under that category. East Nusa Tenggara, Malaku and Irian Jaya also have relatively 'high proportions of /4 This improvement, however, loses part of its significance when it is recognized that in 1972, the average morbidity (sickness) rate was only 5% whereas it was higher in 1980 at 11.57. The data were Erom Department of Health, Indonesia, Household Health Survey Reports for 1972 and 1980. /5 The large difference between 9% with private toiLet and 26%' with private bath must be interpreted as the relative ease wii:h which one can construcl: a make-do private kamar mandi (bathroom). - 36 - Table 3.3: POPULATION SERVED BY HEALTH CENTERS AND OTHER HEALTH RELATED DATA Hospital Percent of beds per total beds Population (000) 1980/81 10,000 in private Per health Per people sector Province center subcenter 1980 1980 DKI Jakarta 56 39 20 48.4 West Java 48 31 4 23.9 Central Java 36 55 5 25.7 D.I. Yogyakarta 32 14 9 55.2 East Java 38 31 5 25.0 Total. Java 41 35 6 31.8 D.I. Aceh 16 12 4 4.3 North Sumatra 37 9 14 26.8 West Sumatra 28 8 8 29.2 Riau 24 12 5 26.2 Jambi 24 11 3 21.3 South Sumatra 36 12 8 10.9 Bengkulu 15 6 3 /a Lampung 30 32 3 43.3 Total Sumatra 28 11 8 23.8 West Kalimantan 18 10 7 19.0 Central Kalimantan 10 6 4 /a South Kalimantan 16 8 8 20.1 East Kalimantan 10 10 14 16r8 Total Kalimantan 14 8 8 17.1 North Sulawesi 21 8 14 45.4 Central Sulawesi 14 9 4 3.9 South Sulawesi 24 11 9 26.5 South East Sulawesi 19 17 5 16.7 Total Sulawesi 21 10 9 30.8 Bali 38 7 7 /a West Nusa Tenggara 34 17 3 9.3 East Nusa Tenggara 20 7 5 49.8 Maluku 16 10 9 26.9 Irian Jaya 8 4 13 4.3 Total E. Islands 20 8 6 17.8 Total INDONESIA 31 18 7 28.1 Source: Department of Health. - 37 - Table 3.4: DRINKING WATER AND rOILET EACILITIES, 1980 Percent of Percent of households households with access to with privrate piped water toilet with for drinking septic tank Urban Rural Urban Rural DKI Jakarta 30.0 5.4 41.8 22.6 West Java 13.2 1.6 18.7 4.0 Central Java 23.4 1.6 23.7 2.8 D.I. Yogyakarta 11.3 1.2 30.3 6.5 East Java 35.8 2.0 27.7 3.5 D.I. Aceh 23.0 0.9 34.6 5.0 North SuLmatra 35.2 3.9 37.1 3.5 West Sumatra 22.1 2.0 18.9 2.1 Riau 18.5 1.1 36.6 4.3 Jambi 6.0 1.4 24.5 4.1 South Sumatra 37.7 2.0 32.8 5.1 Bengkulu 10.4 2.1 12.4 4.6 Lampung 3.5 1.2 25.2 4.7 West Kalimantan 18.4 0.2. 23.2 2.4 Central Kalimantan 2.7 0.1 23.2 1.3 South Kalimantan 49.1 2.7 18.1 3.5 East Kalimantan 22.6 1.1 38.1 4.4 North Sulawesi 31.3 4.5 32.4 105 Central Sulawesi 28.6 1.7 27.2 5.9 South Sulawesi 31.3 1.2 34.6 3.7 South East Su]Lawesi 15.5 1.7 23.4 2.8 Bali 42.8 7.7 37.2 7.7 West Nusa Tenggara 6.7 0.1 15.3 1.3 East Nusa Tenggara 57.6 10.1 32.5 3.1 Maluku 52.6 5.4 37.5 5.7 Irian Jaya 48.0 1.5 27.7 :3.2 Tota:L Indonesia 26.4 2.1 28.9 3.8 Source: 1980 Census. households with access to piped water. Those with insignificanl: access to piped drinking water are Lampung, Central Kalimantan and West Nusa Tenggara. The patterns described with reference to piped water broadly hoLd with respect to private toilets (with septic tanks) also, since the availability of suffi- cient piped water could naturally induce people to go in for private toilet facilities. Che urban-rural differentials are too striking to be ignored. - 38 - However, urban needs may be more urgent and may need earlier attention. The issue should be tackled in the context of formulating an overall long-term strategy for developing drinking water facilities. 3.11 Health and Sanitation Sector Output: Infant Mortality Reduction: It is now very well recognized by policy makers that health centers, hospital beds, piped water, and septic latrines are not the ends, but are important means to achieve "better health for all" that literally begins with healthy babies, an index of the achievement of which is a low infant mortality rate (IMR)./6 3.12 Over the 1970s, IMR declined by 25% in Indonesia (Table 3.5), an achievement which compares favorably to many other developing countries: low income countries as a group experienced a 42% decline over two decades; and in the group of middle income countries IMR declined by 36% in two decades./7 Provinces which had high IMR levels in late 1960s and where the decline du;ring the 1970s was moderate were East Java, West Sumatra, West Kalimantan, South Kalimantan, Central Sulawesi, West Nusa Tenggara (distinctive for an increase in IMR), and Maluku. The case of West Nusa Tenggara where the estimated IMR implies that almost 1 out of every 5 babies dies before the first birthday needs special attention. 3.13 A Few Correlates of Infant Mortality: The discussion so far high- lighted the spatial variations in both inputs and output (IMR). Some simple correlation coefficients between them are presented in Table 3.6. Many of the infrastructure and access indicators have statistically significant correla- tion with IMR. This is good news to health, sanitation and water supply planners. However, the bad news is that infant mortality is not highly responsive to any one single indicator, and its reduction requires a simul- taneous action on many fronts. /6 Indonesia does not have a good compulsory vital registration system. Hence IMR estimates are not available on an annual basis. However, from the census data on children ever born and children surviving by age of mother, indirect IMR estimates can be derived (see Table 3.5). The only problem is the estimated IMRs will be sensitive to reporting errors on children born, children surviving, mother's age etc. Also it is diffi- cult to exactly pinpoint the year to which the estimated IMRs refer. For instance, the IMR computed with 1980 census data might refer to 1976-80 and not exactly 1978 as indicated in Table 3.5. These limitations impose a reduction in the overall accuracy of the IMR estimates and trends. /7 See World Bank, World Development Report, 1982. It is important to note that the Indonesian IMR of around 105 in late 1970's is on the high side compared wo the level of 80 for the middle income countries as a group. - 39 - Tabl]e 3.5:; ESTIMATES OF INFANT MORTALITY 1969 AND 1978 Based on 1971 Based on 1980 Census Census Percentage Province (1969) (1978) decline DKI Jakarta 125 81 35.2 West Java 159 131 17.6 Central Java 147 108 26.5 D.I. Yogyakarta 147 63 57.1 East Java 133 113 15.0 Total Java 138 104 32.7 D.I. Aceh 130 91 30.0 North Sumatra 112 89 20.5 West Sumatra 142 122 14.1 Riau 116 113 2.6 Jambi 157 120 23.6 South Sumatra 153 98 35.9 Bengkulu 148 107 27.7 Lampung 145 98 32.4 Total Sumatra 139 93 49.5 West Kalimantan. 138 117 15.2 Central Kalimantan 129 100 22.5 South Kalimantan 142 122 14.1 East Kalimantan. 118 100 15.3 Total Kalimantan 139 106 23.7 North Sulawesi 112 96 14.3 Central Sulawesi 136 129 5.1 South Sulawesi 154 108 29.9 South East Sulawesi 160 117 26.9 Total Sulawesi 149 108 38.0 Bali 132 89 32.6 West Nusa Tenggara 170 188 (+10.6) East Nusa Tengg;ara 136 125 8.1 Maluku 141 125 11.3 Irian Jaya n.a. 125 n.a. Total E. Islands 164 133 23.3 Total Indonesia, 140 105 25.0 Source: Central Bureau of Statistics estimates modified by the Bank staff. See Annex 2. - 40 - Table 3.6: SIMPLE CORRELATION COEFFICIENTS BETWEEN PROVINCIAL INFANT MORTALITY RATES AND HEALTH/SANITATION/WATER SUPPLY INDICATORS Correlation Coefficients For Linear For Log-Linear Health/Sanitation/Water Supply Indicator Relationship Relationship Population per health center -0.148 -0.184 Hospital beds per 10,000 people -0.415 /a -0.428 /IL Private sector share in hospital beds -0.311 -0.045 Routine Health expenditure per capita -0.392 /a -0.449 /a1 Percent of households with piped water for drinking -0.303 -0.237 Percent of households with piped water for bathing -0.300 -0.365 Percent of households with private toilet -0.478 /a -0.602 /a Percent of households with private bath -0.556 Ia -0.531 /a /a Statistically significant at the 5% or 10% level. 3.14 Nutritional Deficiencies: There are four major prevailing nutri- tional problems: protein-caloric malnutrition, vitamin A deficiency, iodine deficiency and nutritional anemia. One national survey on malnutrition in pre-school children was conducted in 1976-77. The regional data showed that 23% of the children were malnourished in West Java, 28% in the rest of Java, 20% in Sumatra, 27% in Kalimantan, 18% in Sulawesi and 21% in Bali, West and East Nusa Tenggara combined. Data on anemia and iodine deficiency were scarce. On Vitamin A deficiency, an effort was made in 1977 to obtain information on its prevalence among children./8 More than 60,000 children developed gross corneal involvement every year and at least a third of them were left permanently blind or visually impaired in both eyes. The incidence of disease was especially high in 15 provinces (listed in declining order of prevalence): Aceh, West Nusa Tenggara, Bengkulu, West Sumatra, South Sumatra, West Java, Central Java, Central Kalimantan, Bali, South Sulawesi, Maluku, South Kalimantan, West Kalimantan, North Sumatra and Southeast Sulawesi. 3.15 The Family Planning Program: The official family planning program in Indonesia under the charge of the Family Planning Coordination Board (BKKBN) was launched in 1969/70, the first year of the First Five Year Plan. /8 Indonesia: Nutritional Blindness Prevention Project, Helen Keller International and the Government of Indonesia, 1980. - 41 - The target was to reduce the birth rate from its 1969/70 level of over 40 to a level of 22 by 1990. The program was implemented in three phases covering the different provinces, as indicated below. Year of starting Provinces covered 1969/70 Group I: The six provinces in Java-Bali. 1974/75 Group IT: Aceh, North, West and South Sumatra, Lampung, West and South Kalimantan, North and South Sulawesi and West Nusa Tenggara. 1978/79 Group III: All other provinces. Commendable results accrued largely due to the program. The total fertility rate declined by 18% during the 1970s (Table 3.7). Large regional fertility differentials still persist, with Sulawesi and parts of Eastern islands having relatively high ferti:lity rates, and relatively less significant rates of decline in the past. This requires further stucly to identify the causes and initiate feasible action. Social Sector Targets and Spatial Considerations 3.16 The spatial dimension should be an important consideration in formulating and implementing social development programs since the government is the principa:L investor in the social sector a.nd since humanitarian consid- erations call for narrowing, as far as possible, the spatial differentials in social development. The spatial implications of translating national goals are briefly illustrated below. 3.17 Educational Targets: The Government's primary school enrollment projections for the nation as a whole are given in Table 3.8. The school participation rate is expected to increase from 88% in 1980 to 100% by the end of the Fourth FiLve Year Plan (Repelita IV). In the 8 years from 1980/81 to 1988/89, the number of teachers has to increase at an average annual rate of 3.4%, while the student population practically ceases to increase during the period of Repelita IV., largely because of the expectation that fewq from the 12+ age group wi.ll be in primary schools and the impact of the family planning program will be felt. What are the regional implicatiorns of the targets? If the participation rates were to be the same in all the principal regions, then the percernt of students in each region in 1988/89 will be identical to the percent share of each region in the total 7-12 population. The regional population share!s are shown in Table 3.9, along with the 1980/81 regional shares of schools, teachers and pupils. During 1980/81 - 1988/89, the number of schools in JaLva and Sumatra have to grow relatively faster than in the other regions, in ordeir to match the 1988/89 share of pupils. Sumatra and Sulawesi have tc expand the teacher population at a rate larger than the other regions. Similarly, the differentials in the school participation rates noted - 42 - Table 3.7: TOTAL FERTILITY RATES, 1967-70 AND 1980 BY PROVINCE, INDONESIA Province 1967-70 1980 % decline in TFR DKI Jakarta 5.1 4.2 17.6 West Java 5.9 4.6 22.0 Central Java 5.3 4.3 18.9 D.I. Yogyakarta 4.7 3.4 27.7 East Java 4.7 3.6 23.4 D.I. Aceh 6.2 4.9 21.0 North Sumatra 7.0 5.3 24.3 West Sumatra 6.1 4.9 19.7 Riau 5.8 5.1 12.1 Jambi 6.3 4.9 22.2 South Sumatra 6.3 5.2 17.5 Bengkulu 6.6 5.5 16.7 Lampung 6.3 5.2 17.5 West Kalimantan 6.1 5.4 11.5 Central Kalimantan 6.7 5.6 16.4 South Kalimantan 5.4 4.3 20.4 East Kalimantan 5.4 4.7 13.0 North Sulawesi 6.7 6.4 4.5 Central Sulawesi 6.4 6.1 4.7 South Sulawesi 5.6 5.4 3.6 South East Sulawesi 6.4 6.1 4.7 Bali 5.8 3.6 34.9 West Nusa Tenggara 6.5 5.8 10.7 East Nusa Tenggara 5.8 5.6 3.4 Maluku 6.7 6.5 3.0 Irian Jaya 7.1 /a 6.5 9.5 Indonesia 5.5 4.5 18.2 /a Figure for urban areas only. Sources: 1967-70: Lee-Jay Cho, et. al. Estimates of Fertility and Mortality in Indonesia. Central Bureau of Statistics, Jakarta, January 1976; and estimates from the 1980 census of Population. - 43 - Table 3.8: GOVERNMENT PROJECTIONS OF SCHOOL POPULATION AND RELATED INDICES, 1980/81 - 1988/89 Repelita IV Item/Indicator Base year First year Last year 7180/1981 1984,/85 1988/89 Primary Level Population aged 7-L2 ('000) 24,598 26,405 27,732 Participation rate (M) 88.2 96.4 100.0 Gross enrollment rate (%) 104.3 11(.9 108.7 No. of primary school pupils (000) 25,664 29,284 29,482 Of which in government and private schools (000) 22,552 25,943 26,111 Percent in Madrasah schools (M) 11.1 1L.4 11.4 Pupil-teacher ratio 33.8 3L.5 30.0 Primary school teachers (000) 667 823 870 (No. of schools) (000) (106) n.a. n.a. (No. of teachers per school) (No.) (6.3) n.a. n.a. Source: Department of Education and Culture, BP3K, Kumpulan Proyeksi Pendidikan Dasar, Menengah dan Tinggi, 1983. Table 3.9: DISTRIBUTION OF PRIMARY SCHOOLS AND TEACHERS IN 1980/81 AND THE EXPECTED DISTRIBUTION OF STUDENT'S IN 1988/'89 Percent of Percent c,f primary schools teachers Percent of students Region 1980/81 1980/81 1988/89 /a Java 54.9 59.2 56.7 Sumatra 20.2 19.7 22.1 Kalimantan 6.5 5.1 5.1 Sulawesi 9.1 7.8 8.5 E. Islands 9.3 8.2 7.6 Total 100.0 100.0 100.0 /a These are actually the percentage shares of the 7-12 population. Source: Central Bureau of Statistics - 44 - earlier (Table 3.1) provide an indication of how the various regions have to move at different rates in order to catch up with an 100% participation rate by the end of Repelita IV. For instance, Jakarta has to go from the 1980 participation rate of 91% to 100%, while Irian Jaya has to move all the way from a participation rate of 67% to 100%. The Government is aware of the present situation and future requirements. In a field like education, national targets can be fairly easily translated into regional objectives. However, when there are financial stringencies, steps have to be taken to see that some of the relatively backward regions are not left far behind. 3.18 Commensurate with the past growth of primary education, the Govern- ment hopes to achieve rapid expansion of secondary and higher education. The gross enrolment ratio at the junior high school (SMP) level is projected to increase from 36.6% in 1982/83 to 60% by the end of the Fourth Plan. At the senior high school level (SMA), the 1982/83 enrolment ratio was 14.5% wit'h the projected value for 1988/89 at 19.4%. One can expect that the very high rates of junior high school expansion in Repelita IV will necessitate a matching rapid expansion in Repelita V in the senior high school enrolment. In higher education (both diploma and degree levels), the total student strength of around half a million in 1980/81 (both private and public sectors inclusive) is projected to hit a 1.2 million level by the end of Repelita IV. Given this rate of expansion in education, the concern naturally arises not only on regional equity in terms of quantity, but also and most importantly, equity in quality. At the university level, for instance, consider the data in Table 3.10. It shows the proliferation of institutions with less and less qualified staff as one moves farther from Jakarta and Java. Such differen- tials need attention and the Government should review the situation. Table 3.10: PERMANENT TEACHING STAFF AT STATE UNIVERSITIES OR SIMILAR STATE INSTITUTIONS BY REGION AND LEVEL OF QUALIFICATION, 1979/8o Teaching Staff (No.) Ratio of Ph.D/ With Master's Ph.D or Professor to No. of degree Professor Master's Degree Regions institutions level holders Jakarta 2 905 181 1:5 Rest of Java 16 6,822 418 1:16 Sumatra 9 2,665 44 1:61 Kalimantan 4 435 5 1:87 Sulawesi 5 1,655 31 1:53 E. Islands 5 810 12 1:68 Source: Bank staff estimates. 3.19 Goals in the health sector: By the year 2000, according to the long-term development plan of the Department of Health, an infant mortality rate of 45 has to be achieved. Other targets include life expectancy of 60 years, reduction in the proportion of underweight babies from 14% to 7%, and lowering of the protein-calorie malnutrition in under-5 age group from 30% to 10%. As part of the plan it was envisaged that the capacity of the regions - 45 - and provinces to plan and administer their own healtb services should be strengthened. In relation to the IMR goal of 45 mortalities per thousand live births, it is clear that there are many regions where special efforts have to be mounted in order to bring down the high levels of IMR. West Java (IMR - 131), West Sumatra (122), South Kalimantan (122), Central Sulawesi (129), West Nusa Tenggara (188), and East Nusa Tenggara, l4aluku and Iran Jaya (125) need special attention. 3.20 The 1980 census recorded an overall morbidity level of 8 million persons in a reference week. This could be translated into an average of 240 persons per day to visit a public health center if all sick people visited the centers, and if the centers operated 7 days a week. Nqo health center could handle such a load. One doctor could see about 30 patients in an 8-hour day if he spent 15 minutes on the average with a patient. On the basis of the morbidity rate observed in 1980, an average of 1.3 million people per day could be sick in Indonesia by 1988/89. If it is assumed that about half of these people will look to health centers in the first instance, then, at 30 persons capacity level, at one doctor per health center, the requirement is a total contingent of 21,700 public health centers spread all over Indonesia. The average population that will be reached by a health center *by 1988/89 will be 7,800 persons as against the 31,000 in 198C. The accomplishment of such a target would call for special attention in Java and Sumatra and some of the provinces in the Eastern Islands. 3.21 Before concluding the discussion, the situat:ion relating to water supply will be briefly reviewed. A very strong linear relationship was found (quite expectedly) between the provincial data on percent of households having access to piped water for drinking and the per capita production of water (per million inhabiitants). This relationship /9 has been used to project the production of water needed to supply piped water for drinking purposes to 25% of households instead of the 7% in 1980. On an average, 695 li1:ers/second per million persons have to be produced. This level implies, as sliown in the illustrative projections of Table 3.11 not only very large magnitudes of increases in production capacity but also large regional differentials in the expansion rates. Kalimantan's needs are relatively mcre urgent, followed by Sulawes i. 3.22 One important question in regard to water supply and sanitation expansion is, where the incremental capacity should be located in the short run; in the urban areas predominantly or in both urban and rural areas or in rural areas. This is a complex issue, with serious financial irmplications. For instance, cost recovery may be relatively more feasible in urban areas and hence the financing of services may be a less 3evere problem. In the rural areas, the services may have to be given free of cost in the short term, which may not be feasible. Thus urban-rural needs and priorities as well as prospects for cost recovery are the principal issues in regard to water supply and sanitation. /9 The relationship is: (% of household ) =2.095 + 0.033 (water production) (with piped water) (per capita ) - 46 - Table 3.11: ILLUSTRATIVE PROJECTION OF GROWTH IN WATER PRODUCTION Percentage rate of growth in per capita Percent of production (liters/ households million) required to with access to Water production supply drinking water piped water for (liters/million to 25% of househlolds Region drinking in 1980 population, 1980) by some target date Java 6.7 192 262 Sumatra 6.7 158 340 Kalimantan 6.8 96 624 Sulawesi 6.1 125 456 E. Islands 8.8 143 386 Total 7.0 172 304 PART II PROCESSES TO REDUCE SPATIAL DIFFERENTIALS: POPULATION MOVEMENTS AND PUBLIC EXPENDI1'URES - 48 - CHAPTER 4 POPULATION, MIGRATION AND EMPLOYMfNT Introduction 4.01 Movement of people from a poor region to a relatively rich region, or from a region devoid of economic opportunities to one where opportunities exist, is one of the processes by which inter-regional economic disparities get reduced over time. This chapter deals with some aspects of t:hat process in relation to the various regions and provinces of Indlonesia. Population Growth ancd Distribution 4.02 Indornesia, with over 150 million inhabitants ranks fifth in terms of population size among the countries of the world./1 The average annual popu- lation growth rate for the 1970s was about the highest in the past five decades: 2.3% for the period 1971-80 as against 2.1% fcr 1961-71 and 1.5% for 1930-61. The acceleration in population growth in the 1970s was mainly due to a substantial reduction in mortality. Life expectancy at birth increased from 47 years in 1969 to 53 year in 1978 and infant mortality declined from 140 in 1969 to 105 in 1978. 4.03 Comprising five large and thousands of small islands, Indonesia presents a complex geographical-demographic picture. Sumatra, Kalimantan and Irian Jaya are the three largest islands accounting for 25%, 28% and 22% respectively of the total area of Indonesia. T'3ese three islands, however, account for only 19%, 5% and 1% respectively of the total population. In contrast, the island of Java, with a share of 7% in area, has 62% of the population with the high density of 690 persons per sq.km. in 1980. These contrasts in population density across the islands and provinces are brought out in Table 4.1. The provinces of Jakarta, Lampung, Bengkulu, Jambi and East Kalimantan had average population growth rates of 4% or more (Table 4.2). 4.04 A major demographic characteristic unl:il recently was the relatively high rates of fertility and mortality. A study based on the population census of 1971, the 1976 inter-censal survey and the population census of 1980 shows that both the birth rate and the death rate have decreased significantly. The estimated average crude birth rate, which for the period 1967-70 was a high 43.8, decreased to 40.2 during 1971-75 and to 36.2 during 1976-79. At the same time the crude death rate decreased from 18.8 duriag 1967-70 to 16.0 (1971-75) and 13.9 (1976-79). The rate of popu:Lation growth, therefore, at the beginning of the 1970s, was 2.35% and at the end of the said period (1978- 79) it was less at 2.06%. In regard to the various provinces, however, large mortality and fertility differentials interactedl with fairly significant migration levels. The data in Table 4.3 indicate this. Jakarta, Lampung, /1 China, India, USSR and USA have population sizes larger than Indonesia. - 49 - Table 4.1: POPULATION DISTRIBUTION BY REGION 1961-80 Eastern Indicator Java Sumatra Kalimantan Sulawesi Islands Indonesia (1) (2) (3) (4) (5) (6) (7) Land area (sq km) 132,187 473,606 539,460 189,216 570,100/a 1,904,569 Percentage of area 6.94 24.87 28.32 9.94 29.93 10(.00 Population (x 1000) - 1961 Census 62,993 15,739 4,101 7,079 7,106 97,019 - 1971 Census 76,102 20,812 5,152 8,535 8,631 199,232 - 1980 Census 91,270 28,016 6,723 10,409 11,072 147,491 Population Density per sq km - 1961 Census 476 33 8 37 12 51 - 1971 Census 575 44 10 45 15 63 - 1980 Census 690 59 12 55 19 77 Percentage Distribution of Population - 1961 Census 64.93 16.22 4.23 7.30 7.32 100.00 - 1971 Census 63.83 17.45 4.32 7.16 7.24 100.00 - 1980 Census 61.80 18.99 4.56 7.06 7.51 100.00 Average Annual Population Increase - 1961-71 1.9 2.8 2.3 1.9 1.9 2.1 - 1971-80 2.0 3.3 2.8 2.2 2.8 2.3 /a Of this, West Irian accounts for 421,981 sq km. - 50 - Table 4.2: POPULATION 1930, 1961, 1971, 1980 AND AVERAGE ANNUAL GROWTH FATES 1930-80 Population in thousands Growth rate (%) Province 1930 1961/a 1971/a 1981) 1930-61 1961-71 1971-80 Java 41,718 62,993 76,103 91 282 1.3 1.9 2.0 DKI Jakarta 811 2,907 4,576 6,506 4.2 4.6 4.0 West Java 10,586 17,615 21,633 27,d490 1.7 2.1 2.7 Central Java 13,706 18,407 21,877 25,365 1.0 1.7 1.7 D.I. Yogyakarta 1,559 2,241 2,490 2,745 1.2 1.1 1.1 East Java 15,056 21,823 25,527 29,175 1.2 1.6 1.5 Sumatra 8,255 15,743 20,813 27,980 2.1 2.8 3.3 Lampung 361 1,668 2,777 4,622 5.1 5.2 5.8 Bengkulu 323 406 519 768 0.7 2.5 4.4 South Sumatra 1,378 2,773 3,444 4,621 2.3 2.2 3.3 Riau 493 1,235 1,642 2,163 3.0 2.9 3.1 Jambi 245 744 1,006 1,440 3.6 3.1 4.1 West Sumatra 1,910 2,319 2,793 3,402 0.6 1.9 2.2 North Sumatra 2,541 4,969 6,623 8,357 2.2 2.9 2.6 D.I. Aceh 1,003 1,629 2,009 2,608 1.6 2.1 2.9 Kalimantan 2,169 4,102 5,153 6,721 2.1 2.3 3.0 West Kalimantan 802 1,581 2,020 2,483 2.2 2.5 2.3 Central Kalimantan 203 497 700 950 2.9 3.5 3.5 South Kalimantan 836 1,473 1,699 2,069 1.8 1.4 2.2 East Kalimantan 329 551 734 1,219 1.7 2.9 5.8 Sulawesi 4,232 7,079 8,535 10,377 119 1.9 2.2 Central Sulawesi 390 652 914 1,289 1,7 3.4 3.9 North Sulawesi 748 1,351 1,718 2,091 1.9 2.4 2.2 South Sulawesi 2,657 4,517 5,189 6,054 1.7 1.4 1.7 Southeast Sulawesi 436 559 714 943 0,8 2.5 3.1 Bali 1,101 1,783 2,210 2,470 1.6 1.8 1.7 West Nusa Tenggara L,016 1,808 2,202 2,724 1.9 2.0 2.4 East Nusa Tenggara ],343 1,967 2,295 2,722 1.2 1.6 1.9 Maluku 579 790 1,089 1,407 1.0 3.3 2.9 Irian Jaya 179 748 923 1,146 4.8 2.0 2.4 Total Indonesia 60,593 97,109 119,323 83 1.5 2.1. 2.3 n.a. = not available 0.03 percent of total /a Includes adjustment for the exclusion of rural Irian Jaya. Sources: Population Censuses, 1961, 1971 and 19B0. - 51 - Bengkulu, Jambi, East Kalimantan and Central Sulawesi had very high in-migra- tion rates. Provinces in Sulawesi, West Nusa Tenggara, Maluku and Irian Jaya had very high birth rates. Most of these regions had relatively high deat:h rates as well. The very low birth rate in Yogyakarta is generally attributed to "traditionally low level of marital fertility"./2 Migration Rates and Trends, 1971-80 4.05 Lifetime Migration by Province: Table 4.4 has a summary of lifetime migration magnitudes based on the 1971 and 1980 censuses. By and large, the migration patterns indicated by the two censuses were the same in regard to direction of movement by province. Provinces which on a net basis receive!d people continued to do so just as provinces which had net out-migration in the past continued to have net out-migration. A notable exception was Central Sulawesi which had a slight (2%) net out-migration rate according to the 1]971 census data and about a 12% net in-migration rate according to the 1980 CenlSUS. 4.06 In a number of Sumatra provinces in-migration had a significant effect on population change. For instance, in the province of Riau 1 out of 6 inhabitants was an in-migrant and in Jambi the proportion was 1 out of 5. Most conspicuous were the figures for Lampung (an old transmigration receiving area), where in-migrants made up 39% of the total population./3 In Java, Jakarta continued to attract large numbers of in-migrants. In 1980, as in 1971, 40% of the population of Jakarta was born outside Jakarta. In Kalimantan, the provinces of South and East Kalimantan during the 1970s received a lot of workers from other areas so that the percentages of the populations born outside reached 17% and 31%, respectively by 1980. The increase of new arrivals was also related to the transmigration program, especially in South Kalimantan. East Kalimantan attracted migrants because of its logging and petroleum industries. In Sulawesi, the province of CentraL Sulawesi experienced a rather large shift in migration process. In 1971 net in-migrants were less than 2% of the population; in 1980 the process was reversed and net in-migrants were 12% of the population. The number of migrants to Southeast Sulawesi tripled during the 1971-80 decade and the total of the out-migrants doubled, resulting in a positive net in-migration. Nationally, interprovincial mobility increased (from 4.8% to 6.8%). /2 Peter F. McDonald and Alip Sontosudarmo, Response to Population Pressure: The Case of the Special Region of Yogyakarta, Gajah Mada University Press, 1976. /3 For more details on the Government transmigration program, see the discussion below, especially pp. 59-61. - 52 - Table 4.3: ESTIMATES OF NET MIGRATION AND NATURAL INCREASE COMPONENTS OF POPULATION CHANGE IN PROVINCES, 1971-80 Growth Net Natural Provinces rate migration increases DKI Jakarta 3.93 1.15 2.78 West Java 2.66 0.03 2.63 Central Java 1.64 -0.57 2.21 D.I. Yogyakarta 1.10 0.15 0.95 East Java 1.49 -0.26 1.75 D.I. Aceh 2r93 0.17 2.76 North Sumatra 2.60 -0.22 2.82 West Sumatra 2.21 -0.36 2.57 Riau 3.11 0.37 2.74 Jambi 4.07 0.99 3.08 South Sumatra 3.32 0.37 2.95 Bengkulu 4.39 1.31 3.08 Lampung 5.77 2.04 3.73 West Kalimantan 2.31 0.07 2.24 Central Kalimantan 3.43 0.68 2.75 South Kalimantan 2.16 0.13 2.03 East Kalimantan 5.73 2.00 3.73 North Sulawesi 2.31 0.06 2.25 Central Sulawesi 3.86 1.10 2.85 South Sulawesi 1.74 -0.30 2.04 Southeast Sulawesi 3.09 0.42 2.67 Bali 1.69 --0.14 1.82 West Nusa Tenggara 2.36 --0.12 2.48 East Nusa Tenggara 1.95 -0.08 2.03 Maluku 2.88 0.24 2.64 Irian Jaya 2.67 0.26 2.41 Indonesia 2.33 0 2.33 Source: Calculations based on the 1980 Population Census. - 53 - Table 4.4: LIFETIME MIGRATION RATES, 1971 AND 1980 Percentage of Migrants to Total Population 1971 1980 Province In Out Net In Out Net DKI Jakarta 39.4 2.9 +36.5 39.8 6.2 +33.6 West Java 1.7 5.5 -3.8 3.5 5.4 -1.9 Central Java 1.2 8.2 -7.1 1.3 12.7 -11.4 D.I. Yogyakarta 4.0 10.7 -6.7 6.4 9.2 -2.8 East Java 1.1 2.9 -1.9 1.5 5.5 -4.0 D.I. Aceh 3.0 3.3 -0.2 5.5 4.4 +1.0 North Sumatra 8.0 2.8 +5.2 6.6 5.0 +1.6 West Sumatra 3.2 11.6 -8.5 3.9 16.4 -12.6 Riau 12.4 2.5 +9.9 15.9 4.0 +11.19 Jambi 15.5 2.7 +12.8 20.4 3.3 +17.1 South Sumatra 9.5 5.8 +3.7 13.2 7.2 +6.0 Bengkulu 6.9 4.8 +2.2 15.8 5.1 +10.7 Lampung 36.1 1.1 +35.0 38.6 1.2 +37.4 West Kalimantan 1.0 1.7 -0.7 4.2 2.9 +1.3 Central Kalimantan 7.1 1.6 +5.5 14.7 2.6 +12.1 South Kalimantan 3.9 5.0 -1.1 6.9 8.2 -1.3 East Kalimantan 5.4 3.2 +2.2 24.1 2.8 +21.3 North Sulawesi 2.8 3.5 -0.7 4.2 5.7 -1.6 Central Sulawesi 5.6 3.8 -1.8 14.4 2.6 +11.7 South Sulawesi 1.3 4.7 -3.4 1.8 8.5 -6.7 Southeast Sulawesi 3.6 4.3 -0.7 11.1 9.6 +1.6 Bali 1.0 2.7 -1.7 2.6 4.8 -2.2 West Nusa Tenggara 1.5 0.6 +0.9 1.9 1.6 +0.3 East Nusa Tenggara 0.5 1.1 -0.7 1.3 1.7 0.5 Maluku 3.9 3.4 +0.5 8.9 4.6 +4.3 Irian Jaya 22.2 4.3 +18.0 8.4 1.4 +7.0 Indonesia 4.8 4.8 0 6.8 6.8 0 Source: Estimates of lifetime migration are based on the census information on place of birth and place of usual residence. - 56 - Table 4.6: INTER-ISLAND LIFETIME MIGRANTS 1971 AND 1980 (No. of persons in thousands) /a In-migrants to Out-migrants Kali- Eastern from Year Sumatra Java mantan Sulawesi is:Lands Total Sumatra 1971 - 348 7 8 6 369 1980 - 718 26 23 20 787 Java 1971 1,735 - 90 57 53 1,935 1980 2,906 - 374 167 137 3,584 Kalimantan 1971 17 75 - 6 2 100 1980 19 122 123 10 5 156 Sulawesi 1971 90 98 23 - 52 263 1980 145 137 123 - 140 545 Eastern Islands 1971 28 62 3 17 - 110 1980 31 115 11 74 - 231 1971 1,870 583 123 88 113 2,777 Total 1980 3,101 1,092 534 274 302 5,303 /a Excludes persons born abroad, East Timor and those whose place of birth was not stated. census. The same comparative percentages for Kalimantan, Sulawesi and the other islands were 78, 25 and 50 respectively. People from Sulawesi are more or less equally distributed in all other islands,. On all these islands, in-migrants from Java formed the largest group. 4.11 At the time of the 1971 census, 5.7 million persons were counted as lifetime inter-provincial migrants. Of this total, 2.8 million persons or 50% were inter-island migrants. At the time of the 1980 Census, inter-island migrants (5.3 million people) comprised 53% of a.ll inter-provincial mobile population (10 maillion persons). This relative]y constant tempo of inter- island mobility requires further analysis. Since 2.8 million peo-1le in 1971 and 5.3 million people in 1980 were found away from their island of birth, the net inter-island movement during 1971-80 was 2.5 million (Table 4.7). When this net movement is looked at as an outflow, Jiva accounts for an outflow of 1.7 million or 68% of the total. Sumatra contributed 0,4 million and Sulawesi 0.3 million to the total net outflow. It is of interesi: to note 'here the role of transmigration in the demographic balance sheet for Java. Java sent out 1.7 million people; ofE this 1.0 million could be accounled for by the official transmigration program; and Java received 0.5 million persons from the rest of - 57 - Table 4.7: POPULATION FLOWS DURING 1971-80 (Million Persons) Total From/To Sumatra Java Kalimantan Sulawesi Others OutfLow Sumatra - 0.4 - - - 0.4 Java 1.2 - 0.3 0.1 0.1 1.7 Kalimantan - -- - - - Sulawesi ----0.1---- 0.1 - 0.1 0.3 Others - 0.1 - - - 0.1 Total Inflow 1.2 0.5 0.4 0.1 0.2 2.5 Transmigrants (1971-80) +0.6 - +0.2 +0.2 - 1.0 from Java /a /a These data are not from the census. They are the officially recorded numbers of transmigrants. Indonesia. The official transmigration program thus played a singularly important role in the net out-migration from Java. In addition, it might be said that in the absence of the transmigration program, the total mobility would have been only 1.5 million persons instead of 2.5 million and migration would have been largely inter-provincial only and not inter-island. Another important point to note is the ability of different areas to attract in- migrants. Sumatra and Kalimantan have this capability, the inflows were larger than the outflows and transmigrants accounted for half of the inflows. Sulawesi, being relatively poor and underdeveloped, has not yet demonstrated this capability, official sources recorded 0.2 million persons as transmigration from Java to Sulawesi, but the census data implied an outflow during 1971-80 from Java to Sulawesi of 0.1 million persons. (The numbers in thousands were 168 for official data on transmigrants and 110 for migrational outflow estimated from the census.) A large part of this "discrepancy" was because of sizeable inflows from Sulawesi to Java. There were also signifi- cant movements from Sulawesi to other regions. Clearly, Sulawesi was not yet highly attractive for people to move in from far off places. It also exemplifies that people from the relatively poor regions move out voluntarily to improve their standards of life. - 54 - 4.07 The Pattern of Lifetime Migration: I'able 4.5 shows the destination province of the larg(est proportion of out-migrants from each province and the proportion of these out-migrants to total in-migrants at the desl:ination province. It can be seen that the migrants from the provinces oi Sumatra have generally moved to another province in Sumatra, except that those from North and West Sumatra have predominantly moved to Jakarta. 4.08 More than half of the out-migrants from Jakarta lived in West Java, while the majority of the population of Jakarta not born in the capital city, came from West and Central Java. Each of these provinces accounted for about one-third of all migrants to Jakarta. When data similar to those in Table 4.5 were assembled for 1971, it was found that the percentage of the population living in Jakarta and born in West Java decreased between 1971 and 1980. This was caused by the fact that provinces other than West Java were sending more migrants to Jakarta. For instance, in 1971, the largest proportion of out- migrants from Central Java went to Lampung, but by 1980 the largest proportion of migrants from Central Java was directed to Jakarta. For migrants from Yogyakarta and East Java, Lampung remained the mnain receiving area both in 1971 and 1980. 4.09 The destination of the migrants from I'alimantan provinces varies. Most out-migrants from West Kalimantan (64% of l:otal) preferred DKI Jakarta while 27% of out-migrants from East Kalimantan settled in East Java. In regard to Sulawesi, traditionally, people from South Sulawesi moved out of Sulawesi. The 1971 data showed that the major ilow of migrants from South Sulawesi was to Jambi. By 1980 the flow shiftecl to East Kalimantan. Both the 1971 and 1980 data showed that nearly half of the migrants from Southeast Sulawesi settled in Maluku. The association bet:ween vo'Lume of migration and distance showed up in the migration links between a number of neighboring provinces. This pattern is apparent, for instance, for the migrants from Maluku and Irian Jaya. One-third of the population born in Maluku was regis- tered in Irian Jaya in 1980, while one-fifth of the migrants from Irian Jaya resided in Malukcu. 4.10 Inter-island Migration, 1971 and 1980: Table 4.6 shows lifetime inter-island migration as at 1971 and 1980 census dates., If attention is paid to the flow of the in-migrants as a whole (last line in the Table), it is evident that two-thirds of the total number of people have moved to Sumatra and about one-fifth to Java. On the other hand, in regard to the flow of out- migrants (last column), Java is the island which has sent off the most migrants, followed by Sumatra. It was found that 93% of the people entering Sumatra by 1971 and 94% by 1980 were from Java, while 90% of the people who left Java in 1971 and 81% in 1980 settled in Sumatra. F'or Sumatra, Java continued to be the most important sending region. Out of the 3.]. million arrivals into Sumatra, 2.9 million came from Java. The people of Java, however, had increased their spread into islands other than Sumatra. This, in part, should be attributed to the Government efforts in the 1970s to settle transmigrants outside Sumatra. Thus, for instance, according to the 1980 census, 70% of the in-migrants to Kalimantan cames from Java. For Sulawesi and the Eastern Islands, the percentages were 61% andl 45% respectively. As for the migrational outflow, of the 787 thousand people born in Sumatra but living on other islands, 718 thousand (91%) were in Java at the time of the 1980 - 55 - Table 4.5: INTER-PROVINCIAL LIFETIME MIGRATION PATTERN, 1980 Migrants from origin Total to principal Total migrants destination as of migrants entering Total Total Principal leaving province out-migrants in-migrants Province province province of from origin at the of of of origin destination destination origin destination ('000) ('000) (%) (%) DKI Jakarta West Java 401 1,004 65.3 26.0 West Java DKI Jakarta 1,488 2,599 56.3 32.2 Central Java DKI Jakarta 3,228 2,599 26.2 32.5 D.I. Yogyakarta Lampung 253 1,793 24.4 3.4 East Java Lampung 1,598 1,793 30.7 27.4 D.I. Aceh North Sumatra 116 571 54.1 11.8 North Sumatra DKI Jakarta 418 2,599 36.7 4.9 West Sumatra DKI Jakarta 559 2,599 25.2 5.4 Riau West Sumatra 86 135 28.9 18.6 Jambi West Sumatra 47 135 24.3 8.5 South Sumatra Lampung 333 1,793 33.8 6.3 Bengkulu South Sumatra 39 618 46.4 2.9 Lampung South Sumatra 58 618 46.4 2.9 West Kalimantan DKI Jakarta 72 2,599 64.1 1.8 Central Kalimantan S. Kalimantan 25 145 48.0 8.3 South Kalimantan C. Kalimantan 169 142 46.3 55.2 East Kalimantan East Java 34 466 27.4 2.0 North Sulawesi C. Sulawesi 121 187 30.6 1.0 Central Sulawesi North Sulawesi 34 91 25.4 9.4 South Sulawesi E. Kalimantan 512 297 16.6 28.7 Southeast Sulawesi Maluku 90 130 48.0 33.2 Bali C. Sulawesi 118 187 22.5 14.2 West Nusa Tenggara East Java 44 466 19.5 1.9 East Nusa Tenggara DKI Jakarta 47 2,599 19.2 0.4 Maluku Irian Jaya 65 96 27.5 18.6 Irian Jaya Maluku 16 130 22.5 2.7 Source: Population Census 1980. - 58 - Characteristics of the Migrants 4.12 Most studLies of migration find some common characteristics among the migrants./4 They invariably include a relatively high proportion of young adults of working age. Among the migrants, t[he proportion of males is higher at older ages than at younger ages. Migrants generally have higher educa- tional levels than non-migrants. A relatively larger proportion of migrants are employed in non-agricultural activities. A positive relation between regional economic condition and rate of in-migration is also generally observed./5 4.13 Education: The education level of the Indonesian people is still low. More than 90% of Indonesian people had either not been to school or had only completed the primary school level. As The educational status of the large majority is rather low, it does not yet appear as an important charac- teristic of the mobile population. For instance, among the migrants, about 80% had either not been to school or had only primary school education. This, however, should not mask another important observation. Of those who moved to the rural areas, 17.3% had junior or senior high school education compared to 5.4% for the non-migrants. This percentage was a hig'h 40% for the migrants into Java, reflecting very clearly that Java, especially the urban areas, notably Jakarta and Surabaya, drain the Outer Islands of their relatively highly educated manpower. 4.14 Sector of Activity: Indonesia is a large agricultural country where the great majority of the population depends on the agricultural sector. There are distinct differences between the patterns of sectoral distribution of the migrants to urban areas and the migrants to rural areas. Among the migrants moving into the urban areas, 76% are found in the services, followed by industry (mining, manufacturing and construction) with 21%. Of the migrants moving into rural areas, 60% work in the agricultural sector, 26% in the field of services and 13% in mining, manufacturing and construction. There are, however, considerable differences among the different regions. Among migrants to t'he island of Java, 71% are engaged in services, compared to 26% for Sumatra, 44% for Kalimantan, 34% for Sulawesi and 67% for the other islands. Only 6% of the migrants to Java are in agriculture whereas among the migrants to aLl other islands rather high percentages are in agriculture: 63% 14 See K.C. Zachariah and Julien Conde, Migration in West Africa, Demographic Aspect, A Joint World Bank - OECD Study, Oxford University Press, 1981, and Lorene Y.L. Yap, Internal Migrat:ion in Less Developed Countries: A Survey of the Literature, World Bank Staff Working Paper No. 215, Washingtoni DC, 1975. /5 In Ghana,, for example, the rank correlation between the in--migration rate and per capita gross regional product was 0.66. Out-migration rates were negatively correlated with the economic condition of the country or area. For the seven regions of Ghana the rank correlation between out- migration and regional product per capita was -0.62. See Zacharia and Conde, op. cit. - 59 - in Sumatra, 53% in Sulawesi and 39% in Kalimantan. Here again, it is seen that the migrants who have moved to Java reflect the working patterns of typical urban in-migration. Also, the very high proportion of agricultural workers among the migrants into Sumatra is a reflection of official trans- migration and the associated spontaneous migration. Determinants of Migration 4.15 Individuals and families move out of their places of birth for a variety of reasons. Rural to urban migration, and migration from small towns to large towns take place due to the interplay of the so--called pull and push factors. Availability of educational and employment opportunities is an important pull factor which attracts people to the cities from the rural areas. Relatively permanent change of residence requires particularly strong economic motivation and opportunity./6 An ESCAP study on migration in Indonesia observed that the bulk of field studies which examined the factors causing population mobility in Indonesia confirmed the dominance of the eco- nomic factors./7 4.16 The provincial migration data presented earlier were used in conjunction with various social and economic indicators to find the major determinants of migration with the help of multiple regression analysis. Two important results came from the analysis. First, there is a stable and significant association between the rates of transmigration and net migration and second, there is a positive relationship between provincial income and net migration. To a large extent, these are but the mirror reflections of the net in-migration into the Sumatran provinces, encouraged by the officially sponl- sored transmigration program and the net out-migration from the relatively poor provinces of Java, as well as voluntary out-migration from impoverished Sulawesi provinces. The Transmigration Program 4.17 History in Brief: During the colonial past, the Dutch introduced a program of out-migration to Outer Islands as a measure to alleviate the poverty of the Javanese./8 In 1905, a total of 155 families moved from Kedu in /6 However, economic factors can not fully account for migration patterns and regional migration differentials. Socio-cultural factors sometimes dominate in inter-provincial migration. For instance, some ethnic groups of Indonesia are habitual migrants. This pattern of behavior has been noted in regard to the Minangkabau people of West Sumatra, Acehnese and Bataks of the northern part of Sumatra, Rotinese of NTT, Banjarese of South Kalimantan and the Bugis of South Sulawesi. Ihile one must not fail to recognize these migration streams due to socio-cultural reasons, such migration is relatively localized and largely intra-provincial. /7 ESCAP, Migration, Urbanization and Development in Indonesia. New York, U.N., 1981, pp.106-110. - 60 - Central Java to Lampung to found the village of Bagelen. This program was fully financed by the Dutch Government in the first phase during 1905-11. In the next phase during 1912-31, however, the settlers had to share some of the costs. During the entire 26 years, about 21,000 people were moved from Java to the Outer Islands. Then the program pickedl up momentum and during the period 1932-41, as many as 162,000 moved. Afi:er independence in 1945, the new Republic continued the program under the labeL of transmigration and the first batch of transmigrants moved out of Java in 1950. During the period 1971-80, more than one million people have been moved under the government program (Table 4.8)./9 About a third each of these people came from Central Java and East Java, about a fifth from West Java and the balance from Yogyakarta and Bali. The major receiving region (historically) was Sumatra (62.3% - see Table 4.8). The transmigration inflow rate in relation to the total 1971 Sumatra population 'was 3.1%. This rate for Kalimantan was 3.6% and for other regions it was about 2% or less. The low population dlensities prevailing in Kalimantan and Irian Jaya would permit relatively large inflows in future, especially since Sumatra could hence forward aLttract voluntary in-migration. Table 4.8: GROSS TRANSMIGRATIDN RATES BY REGION Officially sponsored Gross (For reference) Major Transmigrants Population transmigration Density receiving Sept. 1972-Oct. 1980 1971 inflow rate per sq km region ('000) (M) ('000) (M) (1980) Sumatra 638.6 62.3 20,813 3.1 59 Kalimantan 187.1 18.2 5.153 3.6 12 Sulawesi 167.6 16.4 8,535 2.0 55 Maluku 12.1 1.2 1,089 1.1 19 Irian Jaya 19.6 1.9 923 2.1 3 Total 1025.0 100.0 36,513 2.8 4.18 Long-term Targets: In the early 1950s, the independent Republic set a goal for the transmigration program of 49 million people by 1995. Between 1951-59, the actual government sponsored migrants numbered only 221,500 as against a goal of 6 million for the period. Despite such setbacks, government targets continue to be ambitious partly because of the perceived, need to move Java's rural poor to the Outer Islands. For instance, the President reiterated, at the time of inaugurating a new transmigrant settlement near Pekanbaru in /8 For a bibliography on transmigration, see Paul A. Meyer and Colin Macandrews, Transmigration in Indonesia: An Annotated Bibliography Yogyakarta, Gajah Mada University Press, [978. /9 It is reported that in the past 3 years, after October 1980, some 350,000 families transmigrated under the official program. - 61 - Sumatra on August 30, 1982, that the expansion of agricultural land in Java was impossible and that some 13 million families should be moved from Java./1O This is, of course, a long-term target. For the immediate future, the annual targets will be at least equal to, if not more than, 100,000 families per year, as in the Third Five Year Plan (Repelita III). Some of the problems confronting the program and the issues to be addressed in the future are briefly mentioned below. 4.19 Some Associated Problems: It is by no means difficult to appreciate the economic and political necessity of a transmigration program. There are, however, many associated problems. Costs are bound to increase as more and more remote areas are opened up. (Already costs are high, nearing almost $7,0003 per settler family.) Escalating costs would pose financial constraints for continued program implementation at planned levels. There is a major non- financial problem as well, namely the whole question of land availability for transmigration. It is often stated that some 48 million ha may be available in the Outer Islands. There are, however, questions pertaining to the accuracy of the estimate in the absence of reliable land-use and land potential data. 4.20 Problems pertaining to quality of land, inputs, finance and marketing which might occur in a transmigrant site could have serious repercussions on settler welfare. In a review of the conditions of 2,733 migrant households in Southeast Sulawesi settled during 1969-74 (Repelita I), it was found that some of the settlers sought wage employment outside their settlement areas because of low incomes arising from landholdings of marginal quality, poor irrigation conditions, and inadequate infrastructure./11 In another study, a research team from the Population Institute of the Gajah Mada University focussed on three transmigrant settlements located in South Kalimantan and South Sulawesi. The settlers moved to the areas during 1970-73. An area in South Kalimantan which received considerable spontaneous transmigration was also studied for purposes of comparative analysis. The study observed striking contrasts between spontaneous and general transmigrants. A far greater proportion of spontaneous migrants claimed that they could make a living from their farms, and that in general they were better off economically than in their home regions. Among the officially sponsored transmigrants, agriculture in most cases could not support the family, because of poor land quality, lack of irrigation facilities and inadequate infrastructure./12 Similar observations were also made in the Bank's Transmigration Review report; the report pointed to the problems of those settled on upland farms, while observing that most settlers were better off in their places of settlement than in Java from where they came./13 There is also /10 Indonesian Observer, Jakarta, August 31, 1982. /11 See N.D. Abdul Hameed, PELITA I: Settlements in Sulawesi Tenggara, Jakarta: Directorate General of Transmigration, July 1976, p.III. /12 See Soeratman, Masri Singarimbun and Patrick Guinness, The Social and Economic Conditions of Transmigrants in South Kalimantan and South Sulawesi, Yogyakarta, 1977. - 62 - some evidence that the transmigrant receiving provinces have not fared well on the poverty incidence scale. Lampung's rural poverty incidence was a high 47% in 1980 (see Annex 1, Table 3). Southeast Sulawesi was worse (53%) and South Sulawesi was no better (46%). 4.21 Critics consider that transmigration has not yet become an integral part of an overall regional development strategy./14 Some recommend that the transmigration program should "aim at ensuring an adequate supply of labor for regional development outside as well as in agriculture; serve as a catalyst for regional development by using labor from Java to remove the obstacles to regional development and to mobility of labor arising from inadequate infra- structure; and offer migrants, both officially sponsored transmigrants and voluntary migrants, opportunities for employment: as wage earners rather than as smallholders"./15 4.22 Costs, administrative and managerial problems,/16 availability of land, lack of proper 'Land titles,/17 conflicts on lanc ownership with the local people and related factors are one set of constraints. There are others relating to the preferences of those who genuinely are interested in migrating. A study on migrant preferences found that "Village people are reluctant to settle in places where there are no friends or relatives and about which they have little information."/18 4.23 Issues in Migration and Transmigration: Net inter-island movement from Java to the Outer Islands would have been insignificant in the absence of the officially sponsored transmigration. It apFears, therefore, that in its pursuit of the long-term objective of controlling population density and /13 World Bank,, Indornesia: Transmigration Program Review, 1981. /14 The basic idea that a program of transmigration should be an integral part of regional development was explicitly stated in Law No. 3 of 1972 and was incorporated in the Second and Third Five Year Plans.. /15 See H.W. Arndt and R.M. Sundrum, "Transmigration: Land Settlement or Regional Deivelopment?" B.I.E.S., November 1977, pp.72-90. /16 The Department of Information, Internal Affairs, Public Works, Communications, Health, Education, Religion, Social Affairs, Finance, Agriculture and Transmigration, and of course, Bappenas are all involved in transmigratiorn. One can imagine the complexity of the coordination task involved. /17 Indonesian business leaders often voiced concern that the shcrt validity of land-titles and the time consuming redtape in land acquisition remained the main obstacles to private investments in estate agriculture. Land titles are given for 30 years in Indonesia. as against 90 years in Malaysia and Philippines, for example. /18 Ida Bagus Mantra, Population Movement in Wei--Rice Communities, Yogyakarta: Gaja Mada University, 1981, p.175. - 63 - reducing poverty on Java, the Government will have to continue to provide some incentives for migration from Java. So far, in the Government transmigration program, each settler family was provided with free transportation to the site, land for cultivation, some agricultural inputs and allowances in cash/kind for an initial settling-in period. It is not entirely clear whether the future programs can continue to provide such a costly package. A more important question is whether alternative strategies can be more effective in promoting migration and ensuring settler welfare. For instance, the Government could "free" the land in the Outer Islands from the customary ownership rights, improve access to such land and permit its purchase by the Javanese. Another possibility is, migration can be encouraged by promoting the development of urban growth centers in the Outer Islands. These and other policy options in migration should be the subject of a special study. Labor Force and Employment Developments in the 1970s and the 1980s 4.24 The spatial developments in employment and labor force in the 1970s are briefly considered in this section. The regional GDP and employment growth rates by sector are given in Table 4.9. Java, Sulawesi and E. Islands have had reduced labor absorption (in terms of number of persons) in agriculture. Sumatra and Kalimantan did better. Sumatra had the highest rate of growth of agricultural employment, where during 1971-80, agricultural employment increased by a million persons. Forty percent of this increase was in Lampung. Transmigration had definite direct impact on agricultural absorption. The transmigrant inflow into Sumatra was 639 thousand persons, of which many would be in the labor force and in agriculture. In Kalimantan, however, the increase in agricultural employment was 140,000 (as against the transmigration inflow of 187,000). In Sulawesi the figures were a reduction of 32,000 in agricultural employment despite the transmigrant inflow of 168,000. In the Eastern Islands the reduction in agricultural absorption was 29,000 and the inflow of trans- migrants was 32,000. These numbers may not be highly accurate; but they portray a general overall tendency everywhere for agricultural jobs to contract, which was countered most effectively in Sumatra by the transmigration program. Elsewhere, transmigration magnitudes were not yet large and did not fully counter the declining agricultural absorption. 4.25 Industrial and service employment /19 increased at respectable rates in all regions. Industry absorbed 3 million more persons in 1980 compared to 1971. In Java about 2.1 million new jobs were available in industry: 0.7 mil- lion in West Java, 0.7 million in East Java, 0.5 million in Central Java and 0.2 million in Jakarta. This is a good regional spread of the industrial sector jobs. Similar spread was also noticed in all other regions. This spread is due to the evenness in distribution of construction and household and small scale industries. Services absorbed 5.3 million persons more in 1980 compared to 1971. Here also there was no particular regional bias. In the context of the 1970s, therefore, industry and services proved to be the labor absorbing sectors, and agricultural activities lagged behind in job creation. Industry and services are generally relatively more concentrated in urban areas. /19 Industry here includes mining, manufacturing, construction and utilities. - 64 - Table 4.9: AVERAGE ANNUAL GROWTH IATES OF SECTORAL GDP AND EMPLOYMENT BY REGION, 1971-8C /a Region Agriculture Industry Services Total Java (a) GDP 2.17 11.20 8.26 6.62 (b) EMP -0.28 6.50 4.57 2.03 (b) - (a) -0.13 0.58 0.55 0.31 Sumatra (a) GDP 4.50 8.06 9.77 7.29 (b) EMP 1.99 8.27 6.17 3.27 (b) i (a) 0.44 1.03 0.63 0.45 Kalimantan (a) GDP 5.92 31.61 16.36 14.74 (b) EMP 0.99 11.53 7.94 2.87 (b) - (a) 0.17 0.36 0.49 0.19 Sulawesi (a) GDP 6.46 13.95 7.92 7.94 (b) EMP -0.20 5.49 5.18 1.57 (b) - (a) -0.03 0.39 0.65 0.20 E. Islands (a) GDP 5.31 28.64 9.42 9.25 (b) EMP -0.13 7.36 6.24 1.85 (b) ' (a) -0.02 0.26 0.66 0.20 Indonesia (a) GDP 3.44 10.82 8.67 7.25 (b) EMP 0.27 6.82 5.00 2.25 (b) - (a) 0.08 0.63 0.58 0.31 /a GDP growth rate for 1971-79 for the regions,, Consequently, in the 1970s urban employment grew at a higher rate compared to rural employment (Table 4.11) in each and every region of Indonesia. However, the urban/rural employment growth differential was the highest in Java (even when Jakarta was excluded), and relatively less in the Outer Islands. 4.26 Outloolk for the Future: There are some hard facts Indonesia has to face on the employment front. An additional 16 million persons enter the labor force in the 1980s (Table 4.12) as against the 10. million. in the 1970s. Given the recent tendency of the agriculture sector to absorb few additional people, almost all the new jobs in the 1980s will have tco come from industry and services, which may be increasingly located in urban areas. This has important implications for urban growth. Indonesia's urban. populal:ion in 1930 constituted 22% of total populationl as against an average of 45% in the middle income - 65 - Table 4.10: ESTIMATED SECTORAL EMPLOYMENT 1971, 1980 ('000) Agriculture Industry Commerce Services Total Province 1971 1980 1971 1980 1971 1980 1971 1980 1971 :1980 DKI Jakarta 52 36 234 434 524 685 477 731 1,287 l,886 West Java 3,883 3,984 616 1,294 1,029 1,678 692 1,306 6,220 8,262 Central Java 5,374 5,324 1,014 1,533 1,236 1,665 803 1,206 8,427 9,728 D.I. Yogyakarta 612 641 196 201 161 179 107 185 1,076 1,206 East Java 6,804 6,320 704 1,409 1,370 1,925 978 1,466 9,856 11,120 Total Java 16,725 16,305 2,764 4,871 4,320 6,132 3,057 4,894 26,866 3.2,202 D.I. Aceh 494 576 30 55 52 82 50 98 626 811 North Sumatra 1,730 1,936 116 230 219 366 207 344 2,272 2,876 West Sumatra 641 666 58 105 104 159 94 137 897 1,067 Riau 372 401 48 83 56 89 50 94 526 667 Jambi 269 345 12 39 30 47 24 52 335 483 South Sumatra 878 1,038 96 166 135 211 94 172 1,203 1,587 Bengkulu 154 221 3 13 7 16 11 23 175 273 Lampung 757 1,142 22 96 62 142 61 121 902 1,501 Total Sumatra 5,295 6,325 385 787 665 1,112 591 1,041 6,936 9,265 West Kalimantan 777 771 19 51 37 69 28 70 861 961 Central Kalimantan 169 263 7 27 9 31 16 34 201 355 South Kalimantan 425 430 35 77 76 112 59 94 595 713 East Kalimantan 133 180 15 48 23 70 27 67 198 365 Total Kalimantan 1,504 1,644 76 203 145 282 130 265 1,855 2,394 North Sulawesi 366 359 37 83 43 83 71 117 517 642 Central Sulawesi 250 293 25 38 15 31 27 444 317 406 South Sulawesi 985 932 129 185 168 233 143 214 1,425 1,564 Southeast Sulawesi 203 188 13 24 12 26 13 27 241 265 Total Sulawesi 1,804 1,772 204 330 238 373 254 402 2,500 2,877 Bali 512 464 65 150 93 163 64 144 734 931 West Nusa Tenggara 514 472 80 141 91 152 58 101 743 866 East Nusa Tenggara 812 767 66 112 20 31 60 84 958 994 Maluku 240 280 9 18 13 32 30 60 292 391 Irian Jaya 197 262 13 24 9 17 36 47 255 350 Total E. Islands /a 2,391 2,362 248 470 250 426 265 462 3,154 3,720 Total Indonesia 27,719 28,408 3,677 6,661 5,618 8,325 4,297 7,064 41,311 5,0,458 /a Unspecified. - 66 - Table 4.11: ANNUAL AVERAGE RURAL AND URB3AN EMPLOYMENT GROWTH 1971-80 Rural Urban Urban/rural Region (%) (%) growth ratio Java 1.1 6.2 5.6 Java excluding Jakarta 1.1 7.0 6.4 Sumatra 3.0 4.9 1.6 Kalimantan 2.7 3.6 1.3 Sulawesi 1.5 1.9 1.3 E. Islands 1.6 4.7 2.9 Indonesia 1.6 5.6 3.5 Table 4.12: LABOR FORCE ESTIMATES AND 'LABOR FORCE GROWTH BY REGION 1971-90 1971 1980 1990 Avrerage Annual Growth (%) Region ('000) ('000) ('000)/a 1971-80 1980-90 Java 27,325 32,776 40,869 2.04 2.23 Sumatra 7,267 9,392 13,389 2.89 3.61 Kalimantan 1,886 2,431 3,202 2.86 2.79 Sulawesi 2,541 2,968 4,748 1.74 4.81 E. Islands 3,230 3,774 4,950 1.74 2.75 Total 42,249 51,341 67,158 2.19 2.72 /a These arie rough and ready estimates obtained by allocating the estimated national labor force among the regions. The allocation was in proportion to the project,ed regional male and female! population in the 15-64 age group. - 67 - countries and 78% in the industrial countries./20 There is a clear likelihood of further urban growth in Indonesia in general and the Outer Islands in particular where the level of urbanization is low compared to Java./21 The process, however, can be assisted by government initiatives to develop centers of urban and re- gional growth within the various provinces of the Outer Islands. Indeed, such initiatives can be complementary to transmigration, and can promote voluntary migration from Java to the Outer Islands, based on development of employment and business opportunities in the non-agricultural fields. Often, they may take the form of establishing industrial estates or export processing zones. Once estab- lished, they can serve as the centers for the growth of a variety of additional opportunities in professional and personal services. 4.27 Of the 16 million new entrants into the labor force in the 198C0s, half will be in Java, a quarter in Sumatra and a quarter in the rest of the country. It is anticipated that the overall economic growth rate in Indonesia in the 1980s will be around 5 to 6 percent per annum./22 The application of the employment elasticity of 0.31 (Table 4.9) of the 70s to the 80s will yield an overall employment growth rate of 1.5% to 1.8%, way below the expected growth rate of labor force of 2.7%. Thus, nationally, overall economic growth in the 80s has to be relatively more employment oriented than during the 70s. S;uch a strategy is especially important for Java, where the rate of economic growrth may not exceed 4.5% to 5% (commensurate with 5% to 6% nationally). Java's employ- ment elasticity in the 70s was also 0.31. If this elasticity were to be assumed for the 80s, the anticipated employment growth rate is no more than 1.5%, far too low to absorb the labor force growing at 2.2%. On the other hand, if Java's employment elasticity were to be raised to 0.45 (same as the elasticity of Sumatra in the 70s), then the employment growth rate in the 80s can equal the labor force growth rate, and serious unemployment problems can be avoided./23 The employment elasticities in Kalimantan, Sulawesi and Eastern Island were equally very low at 0.20 in the 70s. It reflects a growth strategy that is not particularly employment oriented, and needs to be modified in the future, especially in regard to Sulawesi and E. Islands which have fairly high rates of poverty incidence and where annual economic growth rate in the 80s may be in the 8%-10% range. 4.28 The need of the 80s is an employment oriented development strategy for the different regions. A first step to initiate such a process will be to review the various government policies to identify the constraints, if any, to labor- intensive growth of different sectors and the removal of such constraints. /20 World Development Report, 1982. /21 In Java in 1980, urban population was 25% of total population, as agai'nst 20% in Sumatera, 21% in Kalimantan, 16% in Sulawesi, and 12% in Eastern Islands. /22 See World Bank, Country Economic Memorandum for Indonesia, 1983. /23 Very high rates of educational expansion can alleviate the unemployment problems of the immediate short-term. For illustrative projections, see Annex 2, Part II. - 68 - CHAPTER 5 REGIONAL FINANCES AND PLANNING Introduction 5.01 Scope of this Chapter: An important instrument in the hands of the Government is the budget. Expenditure allocations by category (current/ capital), sector of activity and location have important effects on promoting regional development. They are recognized as a means by which inter-regional differentials in levels of development (especially social development) can be reduced. This chapter, therefore, attempts an analysis of recent data on regional. public finances and draws some inferences. 5.02 In Indonesia, as in other developing countries, like India, Malaysia and the Philippines, regional planning agencies have begun to play an increas- ingly important role in the process of formulating regional investment propo- sals which are subsequently incorporated into -national and regional budgets. Hence, this chbapter contains a brief description of the evolution of the regional, planning institutions in Indonesia and some of the approaches taken in recent years to enhance their effectiveness. 5.03 The Levels of Government and the Administrative Structure: Indonesia's provinces represent the Daerah Tingkat I or first stage regions. The regencies/municipalities (kabupaten/kotama,lya) are referred to as Daerah Tingkat II or second stage regions. Most central Government sectoral minis- tries (known a.s departments in Indonesia) have branch offices at the provin- cial level. I'he offices are known as Kantor Wilayah Propinsi (FANWIL). At the level of kabupaten/kotamadya, such branch offices are known as Kantor Departemen Kab,upaten./Kotamadya (KANDEP). The ]CANWIL and KANDEP are staffed by central Government officials. Their operations are financed by the central Government budget. 5.04 The regional government administrations at the provincial and re- gency levels comprise separate legislative and executive arms. The legisla- tive arms are the "people's representative regional councils" and consist mainly of elected representatives. The executive arms are headed by "regional heads" (Kepala Daerah) appointed by the President or on his authority by the Minister of Home Affairs on the nomination of the regional councils. The various regional government activities are carried out by "service depart- ments" or "dinas" within the executive arms of the regional administrations. 5.05 Coordination: Heads of regional administrations exercise a dual role. They are the leaders of the executive b.anches of the autonomous regional governments; they are also the local representatives of the Presi- dent, to exercise overall control on the discharge of all Government functions in their areas and in particular to coordinate the work of all central and regional government agencies. - 59 - 5.06 Role of the Regional Planning Boards: A particularly important coordination role of central and regional government programs is exercised by the "BAPPEDAs" (Regional Development Planning Boards) which have been estab- lished in every province and kabupaten/kotamadya. The BAPPEDAs have both annual and longer term planning functions in relation to regional develop- ment. Each year they prepare a schedule of development project proposals in all sectoral areas, for approval by regional heads and submission to central Government. Medium-term development planning in the regions is undertaken via regional five year plans covering a period coincident with the national five year plans (REPELITA). Sources of Finance 5.07 Sources of Finance for the Central Government: Most, though not all, of the finance for central Government spending in the regions is provided through the national budget. The national budget is financed mainly from oil and non-oil tax revenues, international borrowing and other foreign aid./'I 5.08 Sources of Finance for Regional Government: The sources of finance for the regional governments are: (a) central Government grants, (b) revenues assigned to the regions by central Government, (c) income from local taxes and service charges, and (d) miscellaneous income. 5.09 The main central grant on routine account is known as Subsidi Daerah Otonomi (SDO). The SDO meets the full cost of emoluments chargeable to routine account for regional government staff whose appointments are approved centrally. On development account, the central grants are made through the various INPRES /2 presidential allocations which are partly for the discretionary use of different levels of government (provinces, districts, and villages) and partly for specified uses. Assigned revenues consist, on routine account, of royalties on sales of gasoline (payable to provinces); and on development account, of royalties on forestry and mining (also payable to provinces), the land use taxes (payable mainly to second level authorities), and the cesses on cloves and copra sales (also payable to second level authorities, abolished since 1981). The main local taxes at the provincial level are those on ownership and transfer of motor vehicles; and at the second level, the hotels and restaurants tax, and entertainment tax. Service chaLrges /1 The composition of the 1982/83 budget was, 59% from oil production revenue, 27% from non-oil taxes, 2% from non-tax revenues and 12% from foreign loans and aid. /2 INPRES stands for Instruksi Presiden (Presidential Instruction). Inpres funds flow directly from the center to the various lower levels. At present, there are eight different types of INPRES grants, one for provinces, one for regencies, one for villages and the remainder for specific purposes (e.g., health, primary education, etc.). - 70 - are numerous, especially in second level regions where they are generally a larger source of income than local taxes. 5.09 All local taxes and charges are specified in national legislation, mainly in the laws made in 1956, 1957 and 1968. These laws describe the nature of the taxes and charges but not the rates. Rates are specified in local legislation enacted in each region. Local tax legislation is subject to the approval of the Ministry of Home Affairs for both provinces anid second level regions, which consults the Ministry of Finance in cases where a tax is being introduced. for the first time in a particular region. The same approval procedure applies for provincial service charges; however, for second level regions, service charges need only the approval of the provincial governors. In practice, many of the more important tax and charge rates are standardized nationally. Central and Regi.onal F'iscal Flows 5.10 Flows from the Center, 1976/77 and 1980/81: T'he central-regional financial relationships are displayed in matrix form in Tables 5.1 and 5.2 for 1976/77 and 1980/81 respectively. In 1976/77, the total income of all levels of government was Rp 4.1 trillion. Of this, 90% were receipts under the central account, and 1.0% under the regional accounts. The center used 75% of the total, and t:he regional authorities used the remainder. In 1980/81, the total government: income was Rp 12.6 trillion. Central accruals amounted to 92% with only 8%' collected by the regions. The center used 78% and distri- buted 14% to the regions. The regions thus depend to a large extent on the financial flows from the center. In 1976/77, the regions received 58.5% of their total income from the central Government, which rose to 63.6% in 1980/81. Table 5.1: THE INTER-AUTHORITY FISCAL FLOWS MATRIX, 1976/77 (in Rp Billion) From/to Central Provincial Level II DKI Jakarta Villages Total Central 3,052 293 225 :20 55 3,645 Provincial - 79 4 - - 83 Level II - - 95 - 14 109 DKI Jakarta - - - 53 2 55 Villages - - - - 112/a 112 Others /b - 38 11 10 2 61 Total 3,052 410 335 83 185 4,065 /a Imputed value of physical (and factor) inputs. /b Balances brought forward and loans. - 71 - Table 5.2: THE INTER-AUTHORITY FISCAL FLOWS MATRIX, 1980/81 (in Rp Billion) From/to Central Provincial Level II DKI Jakarta Villages Total Central 9,862 879 750 56 50 11,597 Provincial - 256 19 - - 275 Level II - - 260 - 14 274 DKI Jakarta - - - 113 1 1]14 Villages - - - - 145/a 145 Others /b - 113 45 23 2 183 Total 9,862 1,248 1,074 192 212 12,538 /a Imputed value of physical (and factor) inputs. /b Balances brought forward and loans. 5.11 Provincial Dependence on the Center: An Overview: Data on central grants to states or provinces (the first level regions) for six countries and for Indonesia for different years are given in Table 5.3. A number of obser- vations may be made. The first level regions in Nigeria and Indonesia obtain over 70% of their total revenue from central grants. (Both countries derive a large portion of national revenue from oil.) Australian and Indian first level regions receive central grants amounting to 40% to 50% of regional revenues. Canada, USA and West Germany have relatively low proportions of grants to regions, at levels around 20%. In Australia, Canada, USA and India nearly 60% or more of regional current expenditures could be financed by regional revenues. In Indonesia, such "own resources" amounted to 47.7% of expenditure in 1973/74, but declined thereafter. 5.12 While it is true that a major part of regional income came from th-e central Government, the grant levels as percentages of revenue differ substan- tially by level of regional authority (Table 5.4). For the provinces (exclud- ing Jakarta), the percentages were 76% and above. For kabupaten/kotamadya, they were between 64% and 71%. For DKI Jakarta, the percentage was generally less than 30% mainly because of Jakarta's unique situation in regard to mobil- izing local (non-grant) revenues. The villages also have relatively low percentages of grants to total income, largely because of the villages' contribution of local manpower to development projects, and because of addingS the imputed value of the manpower in village income. - 72 - Table 5.3: INDICATORS OF REGIONAL FISCAL DEPENDENCE ACROSS COUNTRIES (First Level Regions Only) Own revenue as % of Central current transfers Country Year revenue expenditure as % of total revenue Australia 1964--65 57.2 42,3 1974--75 44.3 55.1 Canada 1970 74.7 24.1 1974 72.7 24.4 Nigeria 1964--65 n.a. 77.8 1974 n.a. 71.3 USA 1970 83.6 18.1 1977 85.5 23,0 West Germany 1962 n.a. 18.6 1972 n.a. 14,7 India 1965--66 61.1 37.8 1970--71 56.9 42.8 1975--76 68.1 41,1 Indonesia 1973/74 47.7 62,.3 1974/75 31.2 72,2 1975/76 24.6 77.2 1976/177 34.8 69.9 1977/78 27.3 76.3 1978,/79 29.3 74,.1 Source: Raja Chelliah and Associates, Trends and Issues in Indian Federal Finance, New Delhi: Allied Publishers, 1981, pp. 43-44. For Indonesia: Basic data are from the Central Bureau of Statistics. - 73 - Table 5.4: CENTRAL GRANTS AS PERCENT OF TOTAL REGIONAL GOVERNMENT INCOMES /a BY LEVEL OF AUTHORITY (%) 1976/77 1977/78 1978/79 1979/80 1980/811 All levels 61.7 64.4 64.7 65.0 67.7 Provinces 78.0 80.8 78.6 76.7 76.0 Level II 66.1 64.1 66.4 67.5 71.2 DKI Jakarta 24.5 28.1 28.6 37.4 31.5 Villages 29.8 27.7 27.7 25.0 23.6 /a Excluding balances brought forward from previous year. Provincial Patterns of Revenue and Expenditure 5.13 Provincial Variations in Regional Non-Grant Revenues: Excluding capital balances brought forward, which are likely to be random in quantums, the range of per capita revenue in 1980/81 was Rp 2,400 in Central Java to Rp 56,000 in East Kalimantan, while the average for the whole country was RIp 5,700 (Table 5.5). The local revenues can hardly meet even the recurrent expenses. The provinces of Jakarta, Jambi, Central Kalimantan, East Kalimantan and Central Sulawesi can, if necessary, meet the routine expenditure with local resources. All the other provinces need central support for parts of the routine expenses as well. There is a high correla- tion of 0.82 between provincial per capita revenue and non-mineral GDP per capita. This relationship has an important implication. If regional government expenditures were to be totally dependent on regional revenues, then the regions with relatively higher GDP per capita could spend more on social and economic development and those with lower GDP per capita would spend less. These processes could exacerbate the problems of regional economic and social disparities. To prevent such an outcome, grants from the central Government can, to some extent, fill the gap between regionally needed expenditures and regionally obtained revenues. Such an operation would on the - 74 - Table 5.5: REGIONAL GOVERNMENT (PROVINCE AND LEVEL II) NON-GRANT REVENUES, 1980/81 (Rp per Capita) Local service All Local charges Other Province Ipeda taxes + dinas income Total DKI Jakarta 894 11,508 2,400 5,799 20,601 West Java 323 932 495 2,004 3,754 Central Java 336 872 507 693 2,408 Yogyakarta 251 1,289 617 2,939 5,096 East Java 458 1,030 433 1,166 3,087 Aceh 840 1,349 809 3,889 6,887 North Sumatra 859 1,799 731 3,101 6,490 West Sumatra 318 1,209 677 2,836 5,040 Riau 1,393 1,581 540 4,885 8,399 Jambi 951 1,063 441 7,609 10,064 South Sumatra 1,072 1,551 326 3,148 6,097 Bengkulu 318 818 282 3,246 4,664 Lampung 309 716 371 1,829 3,225 West Kalimantan 580 859 423 8,029 9,891 C. Kalimantan 3,812 336 1,057 20,206 25,411 South Kalimantan 594 984 1,011 7,013 9,602 East Kalimant:an 5,297 2,954 1,281 46,648 56,180 South Sulawesi 369 1,226 813 4,074 6,482 Southeast Su;Lawesi 552 586 454 8,236 9,798 Central Sulawesi 515 754 471 10,907 12,647 Northl Sulawesi 314 1,454 841 4,362 6,971 Bali 427 2,772 590 3,306 7,095 West Nusa Tenggara 264 330 430 1,364 2,388 East Nusa Tenggara 234 266 939 4,830 6,269 Maluku 1,168 659 507 9,011 11,345 Irian Jaya 614 700 625 5,484 7,423 Total Indonesia 555 1,533 629 2,966 5,683 Total excluding DKI Jakarta 539 1,071 547 2,866 5,023 - 75 - one hand call for an adequate growth of central revenues /3 and on the other, an appropriate grant fixing mechanism. In the remainder of this part of this chapter, the provincial expenditure variations are analyzed and the variation in grant allocations are reviewed. 5.14 Development Expenditure in the Provinces: Table 5.6 has data on the central Government development expenditure in the regions (Column 1) in 1980/81. Central spending per head of population varied widely from a low Rp 4,902 for East Java to a high Rp 36,618 for Southeast Sulawesi (ignoring DKI Jakarta which includes a lot of expenditure on general administration,, etc.). There is a tendency for the per head allocations to fall with rising population (the correlation coefficient was -0.6). Turning to regional government's spending on development account (including spending under INE'RES programs), a similarly wide range of per head figures is revealed, from Rp 3,285 for Central Java to Rp 27,444 for East Kalimantan (a rather extreme case). Again there was a fair negative correlation with population size (coefficient once again was -0.6). Total central and regional expenditures have a high degree of correlation between the two principal components of these totals, namely, central sectoral spending and INPRES grants. Excluding DKI Jakarta,/4 the correlation coefficient is 0.9. Clearly any inequities in the distribution of central department spending were not offset by variations in INPRES grants. 5.15 Routine Expenditure in the Provinces: Routine account spending of regional authorities also shows considerable variation ranging from Rp 7,050 for Central Java to Rp 27,663 for Irian Jaya (although there are clearly special circumstances favoring Irian Jaya). Regional routine spending is dominated by staff expenses (generally about 70% of the total), which are largely met by the central Government grant. One would not in theory expe!ct much correlation between routine subsidies and levels of regional government non-grant income, In fact, however, there was a fair degree of positive correlation between the per head measures of the two (coefficient about 0.6 when DKI Jakarta, East Kalimantan and Irian Jaya were excluded as outliers) /3 The issue of adequate growth of central revenue is critical now more than ever before because of the uncertain prospects for the growth of oil revenues. The subject of possible ways to step up non-oil revenues has been receiving government attention. In that context, greater attention can be given to enhance the growth of regional revenues also. The scope for increasing local revenues is discussed in detail in Annex 3. In the short-run, however, regions will continue to depend on the central Government grants to a large extent. But, there may well be relatively greater scope for cost recovery in regard to specific urban services. See the Bank's Urban Sector Report of 1983 for a detailed review of the relevant issues and prospects. /4 DKI Jakarta is excluded because of its very high level of expenditure and East Timor because of paucity of all relevant data, - 76 - Table 5.6: PER CAPITA DEVELOPMENT AND RUOTINE EXPENDITURES BY PROVINCE, 1980/81 Development (Rp/head) Routine (Rp/head) Central Local direct govern- Central spending mert Govern- Total + foreign Inpres contri ment expen- Province aid, etc. grants bution Total subsidy diture DKI Jakarta 94,031 2,042 11,184 107,257 6,690 12,086 West Java 8,1786 3,015 1,464 iL2,655 6,353 7,821 Central Java 4,967 2,830 455 8,252 6,305 7,050 DI Yogyakarta 10,801 4,697 3,014 1.7,792 9,084 10,719 East Java 4,902 3,022 1,271 9,195 5,479 6,435 Aceh 19,467 6,849 2,594 28,910 8,069 9,102 North Sumatra 10,908 5,034 2,628 1.8,570 8,530 10,566 West Sumatra 17,400 5,653 1,863 24,916 7,563 8,880 Riau 23,557 7,292 2,259 _33,108 :10,187 13,238 Jambi 26,864 9,497 2,854 39,215 7,541 10,389 South Stumatra 18,131 6,507 2,483 27,121 5,276 7,030 Bengkulu 34,319 14,185 610 49,114 8,106 9,303 Lampung 8,293 4,629 656 1.3,578 7,038 8,103 West Kalimantan 13,756 8,339 2,429 24,524 8,267 12,754 Central Kalimantan 21,794 13,075 5,817 40,686 11,359 19,106 South Kalimantan 22,712 7,804 4,146 34,662 1.0,266 10,983 East Kalimantan 25,344 10,431 17,013 52,788 8,007 19,812 South Sulawesi. 9,754 4,968 2,641 17,363 7,045 10,037 Southeast Sulawesi 36,618 13,523 4,776 54,917 1.0,177 12,557 Central Sulawesi 20,110 10,896 2,669 33,675 8,973 12,275 North Sulawesi, 16,364 7,920 3,337 27,621 1.3,609 14,794 Bali 12,288 6,889 1,258 20,435 8,220 9,432 West Nusa Tenggara 10,342 5,692 195 16,229 6,536 7,260 East Nusa Tenggara 9,805 5,704 1,546 17,055 11,406 16,291 Maluku 16,275 8,801 3,543 28,619 8,998 13,146 Irian Jaya 28,016 11,365 3,117 42,498 27,197 27,663 Total: Indonesia 13,667 4,465 2,105 20,237 7,111 8,934 (Percentage] (68) (22) (10) (100) Total, excluding DKI Jakarta 9,961 4,577 1,636 16,224 7,130 8,789 (Percentage) (61) (28) (L0) (100) - 77 - Table 5.7: SOURCES OF FINANCE FOR DEVELOPMENT AND ROUTINE EXPENDITURES BY PROVINCE, 1980/81 Regional Government Expenditure Development A/C Routine A/C Total Grants Per to total Grants to capita Grants to Grant to regional regional Non regional regional routine & routine & grant development routine development development Province income expenditure expenditure expenditure income (Rp) _(%) _ _ DKI Jakarta 20,601 15.4 55.4 34.5 29,8 West Java 3,754 67.3 81.2 76,2 71.4 Central Java 2,408 86.1 89.4 88.4 79.1 DI Yogyakarta 5,096 67.2 84.7 74.8 73.0 East Java 3,087 70.4 85.1 79,2 7304 Aceh 6,887 72.5 88.7 80.4 68,4 North Sumatra 6,490 65.7 80.7 74.4 67.6 West Sumatra 5,040 75.2 85.2 80.6 72.4 Riau 9,027 76.3 77.0 79.5 65.9 Jambi 10,064 75.8 72.6 74.9 62.9 South Sumatra 6,097 72.4 75.0 73,6 65.9 Bengkulu 4,664 95.9 87.1 92.5 82.7 Lampung 3,315 87.6 86.9 87.1 77,9 West Kalimantan 9,891 77.4 64.8 70.6 62.7 Central Kalimantan 25,411 68.8 59.5 64.3 49.0 South Kalimantan 9,602 65.3 93.5 78.8 65.3 East Kalimantan 56,180 38.0 40.4 39.0 24.7 South Sulawesi 6,482 65.3 70.2 68.1 65.0 Southeast Sulawesi 9,798 73.9 81.0 76.8 70.8 Central Sulawesi 12,647 80.3 73.1 76.9 61.1 North Sulawesi 6,971 70.4 92.0 82.6 75.5 Bali 7,095 84.6 87.2 85.9 68.0 West Nusa Tenggara 2,388 96.7 90.0 93,0 83.7 East Nusa Tenggara 6,269 78.7 70.0 72.7 73,2 Maluku 11,345 71.3 68.4 69,8 61.1 Irian Jaya 7,423 78.5 98.3 91.5 83.9 Total Indonesia 5,710 68.0 79.6 74.7 67G0 Total excluding DKI Jakarta 5,023 73.1 81c1 77,8 70.0 - 78 - which would apear to indicate that provinces with relatively high local resources tend to receive higher staffing approvals, higher routine grants, and therefore bring about possible inequity in overall cistribution of expenditures. 5.16 Central Grants and Expenditures: The above discussion naturally leads to an assessment of the degree of central grant support which has been financing the widely differing amounts of spending per head of population, and its relationship to the size of local revenue resources. Table 5.7 sets out the per capita non-grant income receipts (routine and development) by province and percentages of central grants in development, routine and total expendi- ture as well as total income. Except Jakarta, Central lKalimantan and East Kalimantan, grants are a major source of funds for regional expenditures. A statistically significant correlation was found between per capita non-grant income and per capita INPRES grants. Here also, the better-off provinces appear favored. A New Approach to Determining the Levels of Cent:ral Grants 5.17 The Need for a New Approach: The anaLysis reported above suggests that there is a prima facie case that the grant system has been favoring many authorities which ought to be able to finance more of their expenditures from local resources. It is time that an appropriate approach be devised and implemented for determining central grants. A good grants system should have the following characteristics: (i) assessment of the relative needs for expenditure on public services in each regional authority; (ii) consideration of the differences between regions in the ability to finance expe!nditures from local revenues, and (iii) incentives for regions to improve the yields from local revenues. 5e18 Elements of the New Approach: It is expected. that the grant deter- mination process would take into account the current spatial differentials in levels of public services (roads, communications, health, education, water supply, etc.) and would stress the provision of services to a comamon standard throughout the nation. There are basically two alternative approaches for determining central grants: one based on development potentials of each region and the other based on regional needs. The second may be useful for grant allocation to social sectors. Then the following steps could provide the elements of a sound approach to grant distribution: (a) estimate for each service the annual expenditure needs by region for raising the level of services to the chosen national standards over a planning period; and (b) deduct from this the estimated local resources available in the region. The result would be the central grant payable to the region each year for the plan period. Needs targets over the plan period would be chosen so that the total of central grants so payable summed to the total grant available for distribu- tion. This method, while providing full compenisation for resource short- falls, would not provide an incentive to raise local revenues. To overcome this, modifications have to be made. Possibilities are: (i) paying only a proportion (say 80%) of the full equalization grant (amount), so that the full service standards can only be achieved by extra revenue effort; and (ii) reserving an amount of central grant for separate distribution as a local incentive grant, linked to revenue-raising. The pros and cons of establishing an approach such as the one described should be reviewed. - 79 - 5.19 Implementing the Change: A fundamental change in approach of the kind put forward above would have to be implemented gradually in order not to greatly upset the existing grant distribution pattern too rapidly. Indeed it may be considered desirable to implement such a new system in a partial way. For instance, the new system could be applied only to certain specific services which readily permit the adoption of national target standards, and which are judged of sufficient national importance for the application of sluch a treatment. Health and educational services could be so treated. In this connection it would be necessary to identify the elements of regional govern- ment revenue to be taken into account in the grant calculations. These would clearly include charges levied for the particular services; in addition a pro- portion of general local revenues would need to be identified as notionally available for their finance. Another alternative is to employ initially a resources equalization grant only, without trying to compensate for needs differences. This might, for exmaple, be an amount calculated as required to bring a region's resources per head of population up to some specified propcr- tion of the national average. An incentive system to raise local revenues could be grafted on to such a grant. Financial Administration 5.20 Multiple Source Financing: The diversity of sources and channels of finance for regionally provided public services poses many problems of coor- dination and program management. Part of the explanation for the multiplicity of financing channels lies in the fact that responsibility for many regionally provided services is divided between the central Government sectoral agencies and the regional governments, each with their own financing sources. The areas of responsibility could be more clearly divided among them, after a sector by sector review of the present situation. Again, the availability oif finance from separate national, local and foreign sources means some inevitable diversity of funding channels. However, there would appear to be considerable scope for simplification within these constraints. Within the central government sectoral areas, there seem to be few stong arguments for the separation of development finance into development project funds (DIP), supplementary budget (ABT) crash program and foreign aid channels right down to the regional project teams; it ought to be possible to combine these various sources centrally into single parcels of finance provided through consolidated budget allocations to each sectoral program or project at the regional level. Such an approach would automatically allow a degree of central program coordination a, the time of preparation of the annual budget, and permit a single system of accounting for use of central funds rather than the existing situation in which separate reporting and accounting procedures are employed in relation to each financing channel. Within the area of regional governnment activities, matters might similarly be simplified if the INPRES grants were regarded as contributing to the financing of the regional. programs along with finance from local revenue sources, entering the main regional budgets rather than having to be accounted for separately as at present. - 80 - 5.21 Planning and Budgeting: Regional platning agencies have the responsibility for the preparation of plans as well as annual development budgets. Regional Five Year Plans drawn up in t:he past had several major weaknesses. Often, they were prepared with litt:le regard to the availability of central Government approval and had no central commitment to the proposals on levels and allocation of resources. They were not action plans. There was no firm programming for development projects. Finally, they were static plans; they were not revised during the five year period to take account of changed circumstances. A system of rolling plans may bes useful in integrating annual budgets and medium-term plans. Regional Planning Agencies 5.22 Regional development planning in Indonesia is strongly influenced by the archipelago nature of the country, the distribution of its population and natural resources, its cultural diversity, the nature of its historical devel- opment and its political system. In this context it is not difficult to understand why the New Order regime has increasingly stressed regional devel- opment and regional integration. The First Five-Year Plan, 1969-74, gave explicit priority to economic growth, stabilizat:ion and rehabilitation of infrastructure that has been neglected for decades. Infrastructure rehabili- tation efforts were set in motion through the ITIPRES programs which were a means of sharing Central Government revenues wit:h lower level governments through a system of flexible direct subsidies./" The period also witnessed the emergence of the National Planning Board (BAPPENIAS) as the pivotal national agency concerned with development planning, establishment of regional planning boards (BAPPEDA), and the initiation of a series of regional development studies intended to provide background information and alternative strategies for regional planning. 5.23 The Second Five Year Plan, 1974-79, continued the earlier emphasis on national economic growth and stabilization. Greater attention was given to regional development in the recognition that the benefits of a stable and strengthened national economy would have to be shared throughout the country. The BAPPEDAs served to promote awareness of fundamental regional development issues as well as the legitimacy of regional development planning as an important governmental function. A major initiative of the second Five- Year Plan was the promulgation of a regionalization concept by dividing the country into four planning regions. Regional budget consultations were started on an annual basis in each of the four planning regions for the pro- /5 The INPRES programs represent an innovation that is itself of interna- tional significance for regional development. For a description of the early program, see Y.B. de Wit. "The Kabupaten Program". Bulletin of Indonesian Economic Studies. Vol. IX, No. 1, March 1973. The best up to date description of the INPRES programs is provideid in an unpublished paper - "INPRES: A Case Study of Financing Local level Development," presented by the Directorage General for Regional Development, Ministry of Home Affairs at the Seminar on Regional Development in ASEAN countries, Bali; September 22-25, 1982. - 81 - vincial BAPPEDAs, representatives of BAPPENAS and the central line agencies. These consultations marked the initiation of the Indonesian budget cycle, and the BAPPEDAs returned to their respective provinces to work with local agencies on preliminary project proposals for the upcoming fiscal year. National consultations took place in October of each year in Jakarta for the BAPPEDAs from each province to bring in their annual budget proposals for discussion with BAPPENAS and the central line agencies. 5.24 During the Second Plan period, a number of regional development studies were commissioned with foreign assistance. Sixteen of these, covering most of the country, were carried out at a cost of about $20 million. These! studies served to provide useful background information and identified broad development strategies for most of the subject regions. 5.25 Indonesia's Third Five-Year Plan, 1979-84 provided further impetus to the evolution of regional development planning. A "trilogi pembangunan" (development trilogy) was set out ordering the national goals as development, equity, economic growth and stability. A significant feature was that the goal of "developmental equity" included spatial equity with strong implica- tions for regional development planning. 5.26 The Fourth Five-Year Plan, 1984-89, is currently taking shape, but it is already clear that the "trilogi pembangunan" of the Third Plarn will remain in effect unchanged. Government officials responsible for preparing the new Plan's Chapter on regional development do not expect major changes in the seven principles that guided the Third Plan. There are indications, however, that major new initiatives will be taken in at least four areas: (1) upgrading of regional management roles and capacities: (2) relatively higher level of sub-national revenue autonomy; (3) development of regional budget consultations, and (4) investment identification and development activities led at the provincial and district levels. Most of these activities require strengthening of the capabilities of the regional planning agencies. The following case study illustrates the need for some form of technical assis- tance to the BAPPEDA. Development Planning: The Case of NTB Province /6 5.27 As noted earlier, the movement towards planned regional developmenrl began with the preparation of a number of regional studies. In the specific case of NTB, the province was covered as part of the Eastern Indonesia Regional Development Study which included NTB, NTT and Maluku. The study was undertaken in 1974, with the assistance of the Canadian International Develop- ment Agency. The final output was reported in 16 volumes which included several sector studies and an outline of a development strategy for the region. 16 The province is one of the poorest in Indonesia. A description of the economy and its problems and the outline of development strategy are given in Part II of Volume IV. - 82 - 5.28 The task of translating the many initiatives recommended in the study into investment proposals which can go l:hrough the budgetary process was by no means easy or straightforward. The competence to do this did not exist either at the national or the provincial leveL. It was obvious that further help was needed, and the Government sought technical assistance for this purpose. This resulted in the UNDP-funded andl IBRD-executed project for "Regional Planning and Preparation of Investment Oriented Projects in the Provinces of Nusa Tenggara Barat and Nusa Tenggara Timor", commonly referred to as the "PPIPD" project after its Indonesiani title. 5.29 The main objective of the project was to develop, within an overall strategy, a series of well-prepared investmenl: proposals for implementation and in the process strengthen the BAPPEDAS' capability for project preparation and monitoring. The technical assistance enabled the BAPPEDAs, working with the provincial offices of line agencies, to slrengthen several dozen project proposals submitted through regular GOI channels for domestic funding. In addition, as many as 22 proposals have been brought into the pipeline, several of them quite large and covering both NTB and NTT provinces. These proposals are in the areas of smallholder cotton development, development of livestock, onshore marine fishery, development of rain-fed agriculture, social forestry, integrated area development, expansion of comraercial tree crops, watershed rehabilitation, irrigation development on the island of Sumbawa, improvements to harbors and ferries, tourism promotion, indlustrial promotion including agro-processing and a health improvement project. 5.30 The project has aroused considerable interest locally as an effec- tive means of regional development planning and investment generation. Three achievements in this field are worthy of special note. First, through the preparation of Blue Book /7 proposals each year, the project has given a new dimension to the dialogue among sector minist^,ies, the local governments and BAPPENAS. Secondly, there is the interest created among aid donors in the projects that are being processed by means of an annual donor agency meeting under the auspices of the UNDP, The latter has helped to secure tentative donor commitment to assist the implementation of projects in the pipeline. Third, and perhaps most important, the technical assistance has helped the province to assume a significant and growing role in establishing project pipelines for the regular Indonesian budget process. In these ways, the project helped to elevate the annual budget p^-eparation process into a channel for achieving long-term objectives. Lessons of Experience 5.31 The PPIPD project has demonstrated that the development of a region, in this case a province, can be planned systemnatically. At the provincial level the local government has come to appreciate the value of viewing the long-term development of the area as a totality and preparing its annual plans within such a framework. The latter step has been initiated mainly through /7 The Blue Book compilation of requests for external assistance is put out annually by BAPPENAS. - 83 - the budget process during the last two years (1981/82 and 1982/83) and hope- fully with the roster of prepared projects now made available, could be fol- lowed through in the coming years. The effectiveness of this approach is already shown from the national level willingness to respond well to NTB requests for funding and assistance. Within the province, the BAPPEDA has assumed a strong position in planning and budgeting and in coordinating intersectoral matters. 5.32 At the national level, the province has obtained greater attention and concrete steps towards decentralization of some of the key planning andl coordinating functions are visible. Consultation with the BAPPEDA is now closer and frequent. The donor community now has access to a roster of identified projects in the BAPPENAS Blue Book, some of them more ready for external assistance. 5.34 Regional planning agencies can benefit greatly from technical assis- tance and training relating to the identification of development potentials, formulating development strategies and preparing investment proposals. A new round of studies of regional development potentials aimed at developing not only broad strategies but also detailed project pipelines would be timely, and could be undertaken during the early part of the Fourth Five Year Plan. As the capacities of the regional agencies are improved, there is greater chance for improving the overall efficiency of resource use in each region and for preparing the ground for eventual reduction of spatial disparities. 84 - APPENDIX 1 Page 1 REGIONAL POVERTY LINES AND POVERTY MAGNITUDES Poverty: The methodology of constru.ction o-F poverty lines for 1980 was explained in detail in a separate paper./l There it was suggested that an essential minimum food expenditure could be estimated as the value of 16 kg of rice per capita per month times a factor of 1.25 to take care oE non-rice food items. At the estimated level of minimum food. expenditure, the ratio of food to total expenditure was read directly from tabulations on consumer expenditure distributions from the 1980 socio-economic survey of households (SUSENAS). The ratio was used to obtain the poverty line from per capita food expendi- ture. This procedure was separately applied to the rural and urban areas of each province. The poverty line computation is shown in Tables 1 and 2 of this Appendix. Poverty incidence and the size of the poverty group are given in Tables 3 through 5. Deprivation: An attempt is also mace to measure the size of the population in deprivation, those whose food demands are not satisfied. The rationale behind the methodology was explained elsewhere./2 Briefly the concept of deprivation relies on finding, within a consumer expenditure dis- tribution, the point at which the proportion spent on food (psf) ceases to increase and starts to decline smoothly. The Central Bureau of Statistics prepared special tabulations of consumer expenditure distributions by 17 expenditure groups for each province and by rural and urban along with the psf for each group. The data were used to measure the size of the deprived popu- lation, that is, the population up to the poinlt on the expenditure distribu- tion from where psf declines. These results are also given in Tables 3 through 5. /1 Poverty in Indonesia: Trends, Associated Characteristics and Research Issues, (draft, August, 1983). /2 Ibid. - 85 - APPENDIX 1 Page 2 Table 1: COMPUTATION OF POVERTY LINES FOR THE RURAL AREAS OF THE INDONESIAN PROVINCES, 1980 Value of Food Poverty Price Value of rice x 1.25 to total line per of rice 16 kg (food expenditure capita Province per kg of rice expenditure) ratio per month West Java 198 3,168 3,960 0.75 5,280 Central Java 188 3,008 3,760 0.68 5,529 D.I. Yogyakarta 196 3,136 3,920 0.63 6,222 East Java 178 2,848 3,560 0.67 5,313 D.I. Aceh 206 3,296 4,120 0.79 5,215 North Sumatra 213 3,408 4,260 0.74 5,757 West Sumatra 212 3,392 4,240 0.78 5,436 Riau 221 3,536 4,420 0.75 5,893 Jambi 208 3,328 4,160 0.72 5,778 South Sumatra 227 3,632 4,540 0.73 6,219 Bengkulu 232 3,712 4,640 0.74 6,270 Lampung 214 3,424 4,280 0.74 5,784 West Kalimantan 224 3,584 4,480 0.82 5,463 Central Kalimantan 246 3,936 4,920 0.77 6,390 South Kalimantan 223 3,568 4,460 0.80 5,575 East Kalimantan 229 3,664 4,580 0.73 6,274 North Sulawesi 224 3,584 4,480 0.74 6,054 Central Sulawesi 222 3,552 4,440 0.76 5,842 South Sulawesi 221 3,536 4,420 0.77 5,740 South East Sulawesi 218 3,488 4,360 0.74 5,892 Bali 179 2,864 3,580 0.75 4,773 West Nusa Tenggara 192 3,072 3,840 0.76 5,053 East Nusa Tenggara 218 3,488 4,360 0.74 5,892 Maluku 239 3,824 4,780 0.71 6,732 Irian Jaya 162 2,592 3,240 0.64 5,062 - 86 - APPENDIX 1 Page 3 Table 2: COMPUTATION OF POVERTY L-INES FOR THE URBAN AREAS OF THE INDONESIAN PROVINCES, 1980 Value of Food Poverty Price Value of rice x [.25 to total line per of rice 16 kg (food expenditure capita Province per kg of rice expendi-ure) ratio per month DKI Jakarta 216 3,456 4,320 0.59 7,322 West Java 211 3,376 4,220 0.67 6,298 Central Java 208 3,328 4,160 0.66 6,303 D.I. Yogyakarta 214 3,424 4,280 0.61 7,016 East Java 202 3,232 4,040 0.64 6,313 D.I. Aceh 211 3,376 4,220 0.76 5,553 North Sumatra 226 3,616 4,520 0.68 6,647 West Sumatra 239 3,824 4,780 0.69 6,928 Riau 226 3,616 4,520 0.69 6,551 Jambi 208 3,328 4,160 0.72 5,778 South Suniatra 218 3,488 4,360 0.66 6,606 Bengkulu 236 3,776 4,720 0.67 7,045 Lampung 226 3,616 4,520 0.64 7,062 West Kalimantan 216 3,456 4,320 0.75 5,760 Central Kalimantan 236 3,776 4,720 0.72 6,556 South Kalimantan 236 3,776 4,720 0.70 6,743 East Kalimantaii 226 3,616 4,520 0.64 7,063 North Sulawesi 225 3,600 4,500 0.75 6,000 Central Sulawesi 217 3,472 4,340 0.69 6,290 South SuLawesi 220 3,520 4,400 0.70 6,286 South East Sulawesi 199 3,184 3,980 0.68 5,853 Bali 189 3,024 3,780 0.69 5,478 West Nusa Tenggara 196 3,136 3,92C 0.74 5,297 East Nusa Tenggara 197 3,152 3,940 0.68 5,794 Maluku 212 3,392 4,240 0.69 6,145 Irian Jaya 157 2,512 3,140 0.56 5,607 - 87 - APPENDIX 1 Page 4 Table 3: PEOPLE IN POVERTY AND INCIDENCE OF POVERTY, RURAL AREAS OF THE INDONESIAN PROVINCES, 1980 Total People in Incidence Population in Incidence of population poverty of poverty deprivation deprivation Province (000) (000) (%) (000) (M) West Java 21,315.6 7,312.7 34.3 /a /a Central Java 20,387.3 12,594.6 61.8 97.0 0.5 D.I. Yogyakarta 2,131.0 1,465.3 68.8 97.4 4.5 East Java 23,223.8 13,713.9 59.1 140.4 0.6 Total Java 67,057.7 35,086.5 52.3 334.8 0.5 D.I. Aceh 2,332.8 22.3 9.5 42.1 1.8 North Sumatra 6,127.7 1,309.0 21.4 190.0 3.1 West Sumatra 2,934.5 431.4 14.7 89.3 3.0 Riau 1,552.7 233.3 15.0 134.7 8.7 Jambi 1,229.6 101.5 8.3 33.6 2.7 South Sumatra 3,288.8 429.3 13.1 173.0 0.5 Bengkulu 683.5 149.5 21.9 65.5 9.6 Lampung 3,936.6 1,862.2 47.3 206.4 5.2 Total Sumatra 22,086.2 4,738.5 21.5 934.6 4.2 West Kalimantan 2,035.6 210.7 10.4 126.2 6.2 Central Kalimantan 838.9 110.5 13.2 /a /a South Kalimantan 1,602.1 215.6 13.5 177-6 T1f East Kalimantan 712.4 105.1 14.8 90.2 12.7 Total Kalimantan 5,189.0 641.9 12.4 234.0 4.5 North Sulawesi 1,730.2 619.8 35.8 2.9 0.2 Central Sulawesi 1,143.5 346.7 30.3 46.2 4.0 South Sulawesi 4,894.0 2,269.0 46.4 210.7 4.3 South East Sulawesi 833.6 440.7 52.9 48.4 5.8 Total Sulawesi 8,601.3 3,676.2 42.7 308.2 3.6 Bali 2,082.7 840.7 40.4 480.8 23.1 West Nusa Tenggara 2,309.8 1,214.3 52.6 548.9 23.8 East Nusa Tenggara 2,492.7 1,480.0 59.4 1,179.8 47.3 Maluku 1,227.1 519.7 42.4 181.5 14.8 Irian Jaya 106.5 12.9 12.1 12.9 12.1 Total E. Islands /b 8,618,8 4,107.6 47.7 2,403.9 27.9 Total Indonesia 111,553.0 48,250.7 43.3 4,215.5 3.8 /a Insignificant _- Includes estimates for some unspecified regions. - 88 - APPENDIX-1 Page 5 Teable 4: PEOPLE IN POVERTY AND INCIDENCE OF POVERTY, URBAN AREAS OF THE INDONESIAN PROVINCES, 1980 Total People in Incicence Population in Incidence of population poverty of pciverty deprivatioa deprivation Province (000) (000) (%) (000) (%) DKI Jakarta 6,320.8 1,066.5 16.9 40.1 0.6 West Java 5,678.1 1,498.0 26.4 81.0 1.4 Central Java 4,704.8 1,935.2 41.1 81.4 1.7 D.I. Yogyakarta 598.3 168.8 28.2 /a /a East Java 5,656.1 2,133.9 37.7 70.5 1.2 Total Java 22,958.1 6,802.4 29.6 273.0 1.2 D.I. Aceh 228.2 2.6 1]1 /a /a North Sumatra 2,076.3 367.2 17.7 25.9 1.2 West Sumatra 424.8 38.7 9.1 21.6 5.1 Riau 578.4 50.7 8.8 8.8 1.5 Jambi 180.0 10.0 5.6 /a /a South Sumatra 1,243.7 187.8 15.1 /a /a Bengkulu 71.3 8.8 12.3 T 2T.5 Lampung 558.0 181,4 32.5 22.3 4.0 Total Sumatra 5,360.7 847.2 15.8 80.4 1.5 West Kalimantan 411.4 18.8 4.6 3.3 0.8 Central Kalimantan 95.4 4.5 4.7 /a /a South Kalimantan 430.2 37.8 3.8 /a /a East Kalimantan 468.9 53.2 11.3 1ZTOD ITO Total Kalimantan 1,405.9 114.3 ,3.1 17.3 1.2 North Sulawesi 351.4 61.1 17.4 10.7 3.0 Central Sulawesi 112.9 15.5 13.7 5.9 5.2 South Sulawesi 1,082.1 256.4 23.7 43.1 4.0 South East Sulawesi 85.7 10.8 12.6 /a /a Total Sulawesi 1,632.1 343.8 21.1 59.7 3.6 Bali 357.6 94.2 26.3 21.3 6.0 West Nusa Tenggara 376.2 128.8 34.2 13.0 3.4 East Nusa Tenggara 203.8 47.0 23.1 18.7 9.2 Maluku 151.5 17.8 11.7 4.9 3.2 Irian Jaya 113.3 4.3 3.8 /a /a Total E. Islands 1,202.4 292.1 24.3 57.9 ZT.8 Total Indonesia 32,559.2 8,399.8 25.8 488.3 1.5 /a Insignificant. - 89 - APPENDIX I Page 6 Table 5: PEOPLE IN POVERTY AND INCIDENCE OF POVERTY, THE INDONESIAN PROVINCES, 1980 Total People in Incidence Population in Incidence of population poverty of poverty deprivation deprivation Province (000) (000) () (000) (%) DKI Jakarta 6,320.8 1,066.5 16.9 40.1 0.6 West Java 26,983.7 8,810.7 32.7 81r0 0.3 Central Java 25,092.1 14,529.8 57.9 178.4 0.7 D.I. Yogyakarta 2,729.3 1,634.1 59.9 97.4 3.6 East Java 28,879.9 15,847.8 54.9 210.9 0.7 Total Java 90,005.8 41,888.9 46.5 607.8 0.7 D.I. Aceh 2,561.0 224.9 8.8 42.1 1,6 North Sumatra 8,204.0 1,676.2 20.4 215.9 2.6 West Sumatra 3,359,3 470.1 14.0 110.9 3.3 Riau 2,131,1 284.0 13.3 143.5 6.7 Jambi 1,409.6 111.5 7.9 33.6 2.4 South Sumatra 4,532.5 617.1 13.6 173.0 3.8 Bengkulu 754.8 158.3 21.0 67.3 8.9 Lampung 4,494.6 2,043.6 45.5 228.7 5.1 Total Sumatra 27,446,9 5,585.7 20.4 1,015.0 3.7 West Kalimantan 2,447.0 229.5 9.4 129.5 5.3 Central Kalimantan 934.3 115.0 12.3 /a /a South Kalimantan 2,032.3 253.4 12.5 17.6 0.9 East Kalimantan 1,181.3 158c3 13.4 104.2 8.8 Total Kalimantan 6,594.9 756.2 11.5 251.3 2.6 North Sulawesi 2,081.6 680.9 32.7 13.6 0,6 Central Sulawesi 1,256.4 362.2 28.8 52.1 4.1 South Sulawesi 5,976.1 2,525.4 42.3 253.8 4.2 South East Sulawesi 919.3 451.5 49.1 48.4 5.3 Total Sulawesi 10,233.4 4,020.0 39.3 367.9 3.6 Bali 2,440.3 934.9 38.3 502.1 20.6 West Nusa Tenggara 2,686.0 1,343.1 50.0 561.9 20.9 East Nusa Tenggara 2,696.5 1,527.0 56.6 1,198.5 44.4 Maluku 1,378.6 537.5 39.0 186.4 13.5 Irian Jaya 219.8 17.2 7.8 12.9 5.9 Total E. Islands /b 9,421.6 4,399.7 46.7 2,461.8 :26.1 Total Indonesia 144,102.2 56,650.5 39.3 4,703.8 3.3 /a Insignificant /b Includes estimtaes for some unspecified regions. - 90 - APPENDIX 2 Page 1 REGIONAL EMPLOYMENT ESTIMATES Labor force and employment data from the 1971 and 1980 Censuses were used here with some adjustments to achieve comparability of concepts and coverage./l The labor force participation rates fronm the two censuses by age and sex were applied to the mid-year population estimates (total size to reflect the whole country and age-sex data smoothed t:o avoid age reporting biases) to get labor force magnitudes for the nation as a whole. The census employment rates were used to obtain the size of employment from the revised estimate of ].abor f.orce, and the census employment composition applied to the size of total. employment to obtain sectoral employment estimates. These national estimates by sector were then distributed among the regions in proportion to the original census data./2 Tables 1 and 2 of this Appendix containi the final employment estimates by region and by sector.. Estimates have also been made for provinces, these have been included in the text (Chapter 4) and hence are not repeated here. /1 For a detailed evaluation of the census data as well as data from various sample surveys of the intercensal period, see Amnex 4 of Poverty in Indonesia, Trends, Associated Characteristics and Research Issues, (draft, August 1983). /2 A step by step account of the estimation procedure is given in the paper cited in footnote 1. - 91 - APPENDIX 2 page 2 Table 1: ESTIMATES OF EMPLOYMENT FOR MAJOR REGIONS AND INDONESIA, 1971 Employment (in thousands) Region/sector Urban Rural Total JAVA Agriculture 302.0 16,423.0 16,725.0 Mining 9.0 16.3 25.3 Manufacturing 515.3 1,679.0 2,194.3 Electricity 20.3 7.7 28.0 Construction 203.7 312.7 516.4 Trade 1,101.2 2,449.0 3,550.2 Transportation 387.4 307.4 694.8 Finance 64.4 10.6 75.0 Service 1,414.8 1,612.2 3,057.0 Total 4,048.1 22,817.9 26,866.0 SUMATRA Agriculture 175.8 5,119.2 5,295.0 Mining 25.4 26.2 51.6 Manufacturing 70.1 162.5 232.6 Electricity 3.2 2.1 5.3 Conatruction 38.7 56.8 95.5 Trade 232.1 260.3 492.4 Transportation 80.0 80.6 160.6 Finance 9.7 2.3 12.0 Service 257.6 333.4 591.0 Total 892.6 6,043.4 6,936.0 KALIMANTAN Agricuilture 70.1 1,433.9 1,504.0 Mining 5.4 1.7 7.1 Manufacturing 24.1 28.7 52.8 Electricity 1.2 0.2 1.4 Construction 9.5 5.2 14.7 Trade 62.0 43.9 105.9 Transportation 25.3 11.0 36.3 Finance 1.8 1.0 2.8 Service 77.4 52.6 130.0 Total 276.8 1_855 - SULAWESI Agriculture 77.7 1,726.3 1,804.q Mining 0.8 2.7 3.5 Manufacturing 32.2 136.0 168.2 Electricity 0.9 1.5 2.4 Construction 15.2 14.7 29.9 Trade 76.2 92.2 168.4 Transportation 31.7 33.8 65.5 Finance 3.0 1.1 4.1 Service 107.8 146.2 254.0 Total 345.5 2,154.5 2,500.0 E. ISLANDS Agriculture 54.2 2,336.8 2,391.0 Mining 0.4 0.2 0.6 Manufacturing 18.3 176.6 194.9 Electricity 1.0 0.4 1.4 Construction 14.3 36.8 51.1 Trade 45.1 157.4 202.5 Transportation 16.7 27.8 44.5 Finance 1.9 1.1 3.0 Service 97.6 167.4 265.0 TOTAL 249.5 2,904.5 3,154.0 TOTAL: INDONESIA Agriculture 679.8 27,039.2 27,719.0 Mining 41.0 47.1 88.1 Manufacturing 660.0 2,182.8 2,842.8 Electricity 26.6 11.9 38.5 Construction 281.4 426.2 707.6 Trade 1,516.6 3,002.8 4,519.4 Transportation 541.1 460.6 1,001.7 Finance 80.8 16.1 96.9 Service 1,985.2 2,311.8 4,297.0 Total 5,812.5 35,498.5 41,311.0 Source: Bank staff estimates based on the 1971 Census data. - 92 - APPENDIX 2 Page 3 Table 2: ESTIMATES OF EMPLOYMENT FOR TEE MAJOR REGIONS AND INDONESIA, 1980 Employment (in thousands) Region/sector Urban Rural Total JAVA Agriculture 605.0 15,700.0 16,305.0 Mining 40.2 148.1 188.3 Manufacturing 1,113.1 2,377.1 3,490.2 Electricity 29.1 16.1 45.2 Construction 372.3 775.0 1,147.3 Trade 1,747.0 3,189.0 4,936.0 Transportation 512.3 490.0 1,002.3 Finance 148.5 45.2 193.7 Service 2,397.8 2,496.2 4,1394.0 Total 6,965.3 25,236.7 32,202.0 SUMATRA Agriculture 158.2 6,166.8 6,325.0 Mining 42.4 72.9 115.3 Manufacturing 123.8 306.8 430.6 Electricity 8.1 3.9 12.0 Construction 86.5 142.6 229.1 Trade 345.7 476.4 1322.1 Transportation 117.4 119.7 237.1 Finance 27.2 25.6 52.8 Service 461.9 579.1 1,041.0 Total 1,371.2 7,893.8 9,265.0 KALIMANTAN Agriculture 31.8 1,612.2 1,S44.0 Mining 6.9 20.7 27.6 Manufacturing 36.6 89.1 125.7 Electricity 1.3 0.7 2.0 Construction 24.2 23.5 47.7 Trade 94.3 110.4 204.7 Transportation 34.1 23.5 57.6 f'inance 13.8 5.9 19.7 Service 137.4 127.6 265.0 Total 380.4 2,013.6 2,394.0 SUIAWESI Agriculture 37.7 1,734.3 1,772.0 Mining 6.0 11.7 17.7 21anufacturing 34.3 183.3 217.6 Electricity 1.5 1.3 2.8 Construct:Lon 30.8 61.1 91.9 Trade 95.1 181.3 276.4 Transportation 35.3 48.5 83.8 Finance 9.1 3.7 12.8 Service 160.5 241.5 402.0 Total 410.3 2,466.7 2.877.0 OT}0ERS Agriculture 51.4 2,310.6 2,362.0 Mining 2.1 29.3 31.4 Manufacturing 28.3 297.7 326.0 Electricity 1.2 2.1 3.3 ConstructLon 19.9 89.4 109.3 Trade 90.0 251.2 341.2 Transportation 22.2 43.4 65.6 Finance 10.9 8.3 19.2 Service 150.5 311.5 462.0 Total 376.5 3,343.5 4j72O.0 TOTAL: INDONESIA Agriculture 884.1 27,523.9 28,408.0 Mining 97.6 282.7 380.3 Manufacturing 1,336.1 3,254.0 4,590.1 Electricity 41.2 24.1 65.3 Construction 533.7 1,091.6 11,625.3 Trade 2,372.1 4,208.3 6,580.4 Transportation 721.3 725.1 1,446.4 Finance 209.5 88.7 298.2 Service 3,308.1 3,755.9 7,064.0 Total 9,503.7 40,954.3 50,458.0 Source: bank staff estimates based on the 1980 Census data. tO v2Ninq / _ 3N vnavC Q:I- . . . . . . . . . .. to3 Af) ,@ II <1 VV-)U ,' '. 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SIILAWVESTEGAAh ha s.eppas hWS6nslcuvaIW heChfhM 1.< ,........... AMrASEIATAI ............... , ,27'd 21. T ANLANES TENGOAHA2- 64 2K ALIMANTANowP" h§0,h '50,0""I ATAN,DTANT'VILBE 24 TIUMUR NuASA 16605R6 FAan,co C0po'0I,0, The AaomlO O absOdfa~W- 40 110em ond,,,WlW 0- 0o 00 23'7N Y -lasauosy.movrnndsmeiracbcof onar 111206116& 106 ..1124 3 -' SEPTEMBER 1984 7 -AIAN.. MU I 18RD- A17765 L6i u 8 x- WA1XD 10 X X Wr ' ,,, ~~~~~~~~~~ ~ ~ ~ ~ ~~~~~~~~~~~~PHILIPPINEs- ES t> ~ ~~ 0 0 S Scxuth Cvhinc BRLINtI g 9 o ACCE5StTO CR1N7XiNg WhA5E>, l9SOACCSS T DRIKIN WATR, Igr& X 13 ,8+ 1 ~~MALAYSIA - j J . . X A % S < 8 C MA ~~~~~~~~~~~~~~~~AAYSIAj ., ; 4otid 7r *riSshhalfusw4 hebC iMno S . < r ' DAA NOT AVAIL SLE t- ui25 24 tAILURNUSATEGi.ARA b tr rdtsti>^h~~~~~~~~~~~~~~aettt=te§>^- ' | '' ' , Erf . - r~~~~~~~~~~z , 25 IA JAKAR.TA2hUohir-7Xfu hr tH': 1'14 l 1i'SPEBp1E IBRD A17766 THAILAND MUEIN ~ LIP&INE INDoONESIA \ l_-J lDS° PRUUEI ,, S r - - PHILIPPWES AVAILABILITY OF PRIVAtE TOILET FACILITIES, 1980 i 3 MALAYSIA C> / . -'i v . 12 10 sT ) 4 Dl Y^OG AKARTA . . S ,,, _ e,1 -14 ¶8 ;A2 /4zf I X 2 ' 1 UMATERRAtSATARA ,0 24, 23- 15.~~ ~ ~ '0 I\- '-.. 30 N ,/ -2, 43 wS - - R 7~~~~~~~~~~~~ 1. 0UK JAKARTA N. 'IN >1r 26 U12. 1 S O L A W E S l T E G G R P h