- Competitiveness Analysis and Development Strategies for 33 Indonesian Provinces by Tan Khee Giap, Mulya Amri, Linda Low, and Tan Kong Yam
This rare book weighs provincial competitiveness in Indonesia and makes a very important contribution to studies on economic decentralization. It is a resource for governments and policy-makers seeking to accelerate economic growth and poverty alleviation. The book achieves its aims by analysing various data sets and generating simulations based on a wide range of development indicators including macroeconomic stability, institutional strength, business and finance opportunities, and quality of life.
As the book contains abundant information on provincial competitiveness, this review is organized according to two broad and distinct, but related, methods employed in the book. I focus first on the current rankings of the provinces and later on the competitiveness simulation rankings.
The overall competitiveness ranking corroborates observations made in the broader literature on regional economic development, which posit that richer and more advanced regions tend to have greater competitive advantages. Jakarta tops every ranking and the other provinces (located outside Java Island) that rank high on the overall competitiveness scale are those that are already well-known for their respective economic strengths, such as East Kalimantan (natural resources), Riau (manufacturing and foreign direct investment) and Bali (tourism).
However, the study also makes some unexpected discoveries. For instance, at number 23, Maluku ranks relatively high on the macroeconomic stability index while Aceh ranks last (33rd). Yet both provinces have been affected by social and political conflict. Moreover, two popular tourist destinations, Bali and Yogyakarta, oddly enough, rank lower than less developed provinces such as Papua, Lampung, and Maluku on the “Financial, Business and Manpower Conditions” index. Another interesting find is that West Java, home to manufacturing industries, is not highly competitive in the infrastructure development category. The province is ranked twelfth; lower than non-manufacturing provinces such as North Sulawesi and South Kalimantan.
The attempt at undertaking a Strength, Weakness, Opportunity, and Threat (SWOT) analysis of each province is interesting. It is, however, static and should be studied carefully. For example, although East Kalimantan appears to have a greater “opportunity” value over Riau, the analysis does not draw attention to the fact that the former’s economic growth is predominantly driven by a uniform, natural resource industry. On the other hand, Riau receives a wide range of foreign direct investment and has a higher level of trade openness. As such it is important to consider that each of these provinces have different types of “opportunity” values.
The “what-if competitive simulation” forecasts that many provinces will climb ranks; only two provinces, East Nusa Tenggara and North Maluku will maintain unfavourable positions even after improvements in the categories in which they rank low. Yet, industry and trade development will depend on international cooperation and on the policies adopted by the central government rather than on the respective development plans of provincial governments. [End Page 339]
The book’s financial forecast also predicts insignificant changes in future rankings. However, a report by the International Finance Cooperation (IFC) on business activities in Indonesia significantly diverges from the book’s findings. For instance, while the book suggests that Jakarta is the most competitive province, the IFC report lists the capital at eighth place. Moreover, while Yogyakarta is at number 18 in the book’s current rankings; the IFC report deems the province as the easiest to start a business in. Even the book’s simulation on improvements in finance and business policies suggests that the province will climb up to at most the ninth position—this is still far below the IFC rank. It also interesting that the capital city of East Kalimantan, Samarinda, is not among the top twenty cities for businesses in the IFC report and, yet, it ranks second in the book.
The book’s strength lies in its provision and analysis of vast quantitative information. Data at the sub-national level, let alone data on competitiveness, is hard to come by in the case of...