POTENTIAL APPLICATIONS OF DYSAMS IN INDONESIA: REGIONAL PERSPECTIVE Prepared by: Sumedi Andono Mulyo, Ph.D Head of Division on Regional Social Economic Analysis Ministry of National Development Planning/ National Development Planning Agency (Bappenas) Seminar on Lesson and Tools for Economic Recovery and Employment Creation from Indonesia Coordinating Ministry for Economy and ILO Jakarta, 30 November 2010 1

CURRENT ISSUES 2

ECONOMIC GROWTH VS POVERTY REDUCTION Quadrant I: pro-growth & pro-poor Maintaining economic performance (Sumut, Jambi, Kalteng, Sulsel, Sulbar) Quadrant II: low growth, but pro-poor Increasing productivity and value added (Aceh, Riau, Sumsel, Bengkulu, Babel, Jateng, Jatim, Bali, NTT, Kalbar, Kalsel, Kaltim) Quadrant III: low growth & less pro-poor Increasing productivity and value added mainly labor intensive activities to involve poor people (Lampung, DIY, NTB, Maluku, Maluku Utara) Quadrant IV: pro-growth, but less pro-poor Promoting small-scale and medium enterprises, and labor intensive industries (Sumbar, Kepri, Banten, DKI, Jabar, Sulut, Gorontalo, Sulteng, Sultra, Papua Barat, Papua) Note: Y Axis= Poverty reduction on average 2005-2009 X Axis= Growth of GRDP on average 2005-2009 Sources: Calculated from BPS 3

UNEMPLOYMENT REDUCTION ECONOMIC GROWTH VS UNEMPLOYMENT REDUCTION Quadrant I: pro-growth & pro-job Maintaining economic performance (Papua, Kepri, Sulbar, Sultra, Sulsel, Gorontalo, Papua Barat, Sumbar, dan Sumut) Quadrant II: low growth, but pro-job Increasing productivity and value added (Riau, Jatim, Kalbar, Bali, Jabar) Quadrant III: low growth, less pro-job Accelerating local economic development to improve productivity and create more jobs (Lampung, Babel, Bengkulu, Kaltim, Aceh, Sumsel, Jateng, Kalsel, DIY, Maluku, Sultra, NTT dan NTB) Quadrant IV: pro-growth, but less pro-job Improving the quality of growth by creating more jobs (DKI Jakarta, Sulut, Sulteng, Banten, Malut, Jambi) Note: Y Axis= Unemployment reduction on average 2005-2009 X Axis= Growth of GRDP on average 2005-2009 Sources: Calculated from BPS 4

INTERREGIONAL RESOURCES ALLOCATION DEKON + TP FUND BALANCED (PERIMBANGAN) FUND FOREIGN DIRECT INVESTMENT AVERAGE 2005-2009 (Rp.Million) SHARE (%) 2005-2008 (US$ Million) SUMATERA 37.213 15,65 62.138 27,65 1.133 11,29 JAWA-BALI 157.630 66,31 78.519 34,94 8.516 84,91 KALIMANTAN 11.721 4,93 30.487 13,57 283 2,82 SULAWESI 15.950 6,71 23.811 10,60 76 0,76 NUSA TENGGARA 5.995 2,52 9.965 4,43 8 0,08 MALUKU 4.278 1,80 5.889 2,62 7 0,07 PAPUA 4.942 2,08 13.890 6,18 5 0,05 TOTAL 237.729 100,00 224.698 10.030 Distribution of Dekon+TP Fund (%): Jawa-Bali and Sumatera: 81,69 Kalimantan: 4,93 Sulawesi: 6,71 Maluku and Nusa Tenggara: 4,32 Papua: 2,08 Distribution of Balanced Fund (%): Jawa-Bali and Sumatera: 62,59 Kalimantan: 13,57 Sulawesi: 10,60 Maluku and Nusa Tenggara: 9,30 Papua: 6,18 Source: Calculated from Ministry of Finance, Bank Indonesia, BPS and BKPM REGION DOMESTIC INVESTMENT BANKING CREDIT BANKING CREDIT FOR SMALE-SCALE AND MEDIUM BUSINESS AVERAGE 2005-2008 (Rp. Billion) SHARE (%) 2007-2009 SUMATERA 8.400 31,52 193.749 15,44 117.393 18,79 JAWA-BALI 14.729 55,26 913.352 72,78 408.768 65,43 KALIMANTAN 1.916 7,19 67.483 5,38 33.704 5,40 SULAWESI 1.402 5,26 56.483 4,50 43.281 6,93 NUSA TENGGARA 21 0,08 12.436 0,99 11.971 1,92 MALUKU 0,3 0,00 4.006 0,32 3.523 0,56 PAPUA 185 0,70 7.442 0,59 6.068 0,97 TOTAL 26.654 100 1.254.951 624.708 100,00 Distribution of FDI (%): Jawa-Bali and Sumatera: 86,78 Kalimantan: 7,19 Sulawesi: 5,26 Maluku and Nusa Tenggara: 0,08 Papua: 0,70 Distribution of Banking Credit (%): Jawa-Bali and Sumatera: 88,22 Kalimantan: 5,18 Sulawesi: 4,50 Maluku and Nusa Tenggara: 1,21 Papua: 0,59 5

COMBINATION OF ECONOMIC GROWTH AND JOBS CREATION Scenario High Jobs Creation Low Jobs Creation Java-Bali and Sumatera Kalimantan, Sulawesi, Nusa Tenggara, Maluku, and Papua (KTI) Jawa-Bali and Sumatera (KBI) High Economic Growth Jawa-Bali and Sumatera (KBI) Manufacturing and trade Capital intesive industry, and telecommu-nication and information services Kalimantan, Sulawesi, Nusa Tenggara, Maluku, and Papua Agribusiness, Agroindustry, Tourism Mining industry Low Economic Growth Agriculture, Fishery, Tourism Stagnation Fishery, Agriculture Regional competitiveness  productivity, effcientcy and value added  Harmonization and policy coordination on agriculture, fishery, forestry, manufacturing and trade sectors 6

WHAT WE ARE DOING 7

REGIONAL DEVELOPMENT PERSPECTIVE Interregional Coordination and Cooperation Monitoring and Evaluation Data Base and Information System Best Practices Information Regional Development Strategy and Scenario Monitoring RPJMN 2010-2014 Targeting and Monitoring for Annual Plan (RKP) Investments: Government, Private and Banking Policies, Programs and Activities with Performance Indicators Disaggregate Analysis of the Impacts of National Policy on Regions Interregional Linkage Model 8 8

MODELING FOR REGIONAL DEVELOPMEN PLANNING Policies, Programs and Activities with Performance Indicators Interregional Computable General Equilibrium Model (IRCGE Model) Penyusunan dan Monitoring Pelaksanaan RKP Policy Analysis and Policy Evaluation: Scenario and Targeting Spatial Dynamic Model Spatial Plan: National, Main Island and Province Interregional Linkages Model Agent Based Model Penyusunan RPJMN 2015-2019 Multiregional Econometric Model Investments: Government, Private and Banking 9 9

OPTIMAZING RESOURCES ALLOCATION INTO DIFFERENT REGIONS Dekon/TP Funds + Transfer Fund + Otsus Fund + Loan/Grant + Private Investment + Banking Central Government (+) (+) (+) (+) (+) (+) (+) Local Gov. Local Gov. Local Gov. Local Gov. Local Gov. Local Gov. Local Gov. Resource Allocation to Accelerate Regional Development Local Government Expenditure = Local Economic Investment (+) (+) Pembangunan Wilayah SUMATERA (+) Pembangunan Wilayah KALIMANTAN (+) Pembangunan Wilayah MALUKU (-) (-) Pembangunan Wilayah SULAWESI (-) (+) (-) Pembangunan Wilayah PAPUA Pembangunan Wilayah JAWA-BALI (-) Pembangunan Wilayah NUSA TENGGARA Interregional resource allocation to improve productivity, create more jobs, produce more value added and reduce poverty 10 10 Building and developing growth centre in the regions (outside Jawa-Bali) 10

DISTRIBUTION OF RESOURCES AMONG REGIONS DEKON + TP FUND BALANCE FUND FOREIGN DIRECT INVESTMENT DOMESTIC INVESTMENT BANKING CREDIT BANKING CREADIT FOR SMALL-SCALE AND MEDIUM INDUSTRIES AVERAGE 2005-2009 (Rp. Million) SHARE (%) 2005-2008 (US Million) (Rp. Billion) 2007-2009 SUMATERA 37.213 15,65 62.138 27,65 1.133 11,29 8.400 31,52 193.749 15,44 117.393 18,79 JAWA-BALI 157.630 66,31 78.519 34,94 8.516 84,91 14.729 55,26 913.352 72,78 408.768 65,43 KALIMANTAN 11.721 4,93 30.487 13,57 283 2,82 1.916 7,19 67.483 5,38 33.704 5,40 SULAWESI 15.950 6,71 23.811 10,60 76 0,76 1.402 5,26 56.483 4,50 43.281 6,93 NUSA TENGGARA 5.995 2,52 9.965 4,43 8 0,08 21 12.436 0,99 11.971 1,92 MALUKU 4.278 1,80 5.889 2,62 7 0,07 0,3 0,00 4.006 0,32 3.523 0,56 PAPUA 4.942 2,08 13.890 6,18 5 0,05 185 0,70 7.442 0,59 6.068 0,97 TOTAL 237.729 100,00 224.698 10.030 26.654 100 1.254.951 624.708 Source: Calculated from Ministry of Finance, Bank Indonesia, BPS and BKPM Resources allocation during 2005-2009 has concentrated in Jawa-Bali. Need reorientation of national resources allocation (non-market intervention) to accelerate regional development in Papua, Maluku, Nusa Tenggara, Kalimantan dan Sulawesi, and Sumatera such as: “Location switching” on government investment from Jawa-Bali to Papua, Maluku, Nusa Tenggara, Kalimantan dan Sulawesi, and Sumatera. “Strengthening Public-Private Partnership” for Jawa-Bali. “Promoting Regional Banking” in Papua, Maluku, Nusa Tenggara, Kalimantan, Sulawesi, and Sumatera. 11

WHAT WE CAN UTILIZE DYNAMIC SAM (DYSAMS) 12

VARIOUS TOOLS FOR MODELING Deterministic Approach STRENGTHS WEAKNESSES Deterministic Approach 1. Input-Output Table (National or Interregional) Inter-sectoral analysis Forward and backward linkages Only commodities flows, but not covering income flows Unlimited supply assumption 2. SAM (National or Interregional) Commodities Income flows among different institution 3. CGE (Single Region and Multiregion) Integrated sectoral and regional analysis Post fact analysis Stochastic Approach Multiregional Econometric Interregional linkages Projection Statistical and non-statistical error Mixed Approach 1. Spatial Dynamic Introducing space Complex and need huge data 2. Agent Based Involving individual behavior into analysis Complicated 13

CAN DO AND CAN’T DO WITH DySAMs What we can do with DySAMs Understanding the possible impacts of various public investments on labor market. Identify government strategies and public spending to effectively increase employment and productivity, and reduce poverty. What we can’t do with DySAMs Understanding the possible impacts of various public investments on labor market in different regions. Identify government strategies and public spending to effectively increase employment and productivity, and reduce poverty in different regions. Since Jawa-Bali and Sumatera have dominated Indonesian economy, one single policy (with assumption single price for all regions) will be benefited for these regions. We need to capture regional dimension of national policies. Therefore, we need more information and more interregional analysis. 14

WHAT NEXT 15

AGENDA Continuing partnership and collaboration between GOI and international organizations (ILO, WB, JICA, CIDA, ADB, SIDA, KOICA, etc), and between Kemenko, Bappenas, Minsitry of Finance, Bank Indonesia, BPS, other line ministries, local governments, universities and research institutes. Strengthening policy dialogues and policy forum on modeling and policy formulation. Building the capacity of local governments in doing policy analysis, and preparing development scenarios and strategies. Improving data and information system including efforts to build, update and publish Interregional Input-Output (IRIO) Table, Interregional Social Accounting Matrix (IRSAM) and Interregional Computable General Equilibrium Model IRCGE). 16

THANK YOU. 17

CURRICULUM VITAE Name : Sumedi Andono Mulyo, Ph.D Place/Date of Birth : Yogyakarta, January 21, 1965 Home Address : Komplek Bappenas, Jl. Pertiwi II No.18 Blok A105, RT 03/RW01, Kedaung, Sawangan, Depok-16516 HP: 085-880-596-992 Office Address : Ministry of National Development Planning/ National Development Planning Agency Jl. Taman Suropati No. 2-4 Jakarta-10310 Tel.: 021-3193-4195 Fax: 021-3193-4195 E-mail: sumedi@bappenas.go.id sumedi1965@yahoo.co.id WORKING EXPERIENCE Ministry of National Development Planning/National Development Planning Agency Head of Division, Directorate of Regional Development. Jan 2006-now Head of Division, Directorate of Less-develop Region and Special Areas. May 2004-Jan. 2006 Head of Division, Bureau of Community Empowerment. Dec. 2000-May 2004 Head of Division, Bureau of District and Rural Development. May 1999 –Dec. 2000 Head of Section, Bureau of District and Rural Development. Marc 1994 –Jan. 1997 Planner, Bureau of Economic and Statistical Analysis, 1991‑March1994 EDUCATION Postdoctoral. Graduate School of International Development, Nagoya University, Japan. Oct-Dec. 2006 Doctor of Philosophy. Department of Urban Engineering, the University of Tokyo, Japan. April 2001-Mar. 2004. Master of Arts, Graduate School of International Development, Nagoya University, Japan. Apr 1997-Mar. 1999. Postgraduate Diploma, Institute of Developing Economies Advanced School, Tokyo, Japan. Sept. 1994‑Mar. 1995. Bachelor, Faculty of Economic, University of Gadjah Mada. June 1984‑July1989. 18