Interregional trade group UI-2012

1. INTERREGIONAL TRADE – PATTERN
AND FUTURE CHALLENGES
“ If each region can grow,
inter-regional trade will
also grow” -- SBY (2009) --

2. Definition and Theories of IRT
Current Situation of IRT in Indonesia
Factors Affect the IRT in Indonesia
IRT Development Policy
Future Challenges
Policy Recommendation

3. Inter-regional Trade :
Trade that takes place between two or more regions
Theories around the Interregional Trade:
Industrial locational choice that is beneficial
Locational Theory
 close to input or market
Regional economic growth directly related to
Economic Base demand of goods and services outside the
Theory region
Competitive Trade interactions will be higher with high
Advantage Theory competitiveness region

4. Regional Dependency on Production input
 Demand = Supply
Lack of Processing Industry (to process raw materials)
Tendency of Lower Global Demand and higher
domestic market
Competitiveness  Specialization
Food Security  Agriculture region vs Non-Agriculture

5. Trade Flows between Regions in Indonesia
Source : Solihin, Dadang (2010)
>> Higher Intra-regional and Lower Inter-regional Trade

6. REGIONAL GAP  “Success breeds Success”
Sumatera Kalimantan Sulawesi
GDP share : 23 % GDP share : 9.1% GDP share : 4.6%
Java & Bali Nusa Tenggara Maluku & Papua
GDP share : 59.4% GDP share : 1.5% GDP share : 2.4%
Source : BPS ( 2010)

7. Effect
>> Concentration of Economic >> Regional income disparity
Activities Java & Sumatera
>> Lower Connectivity/ >> Low level of productivity
Accessibility for region outside  Low investment
Java & Sumatera High Cost attractiveness
Transportation
>> Concentration of high scale >> Excessive Migration from
industry and investment in java low regional economic
higher regional economic

8. The numbers of industries that have high competitiveness
• Major industries and supporting industries
Opennes of region to interregional trade
• Economic expansion will give spread effect to other regions
Regional infrastructure
• Transportation networks, ports, airport, telecommunications and energy
The distribution chain Different Price Among Regions
• Distribution/ transportation cost
The size of domestic market demand and supply capabilities
Role of local Government...

10. Agglomeration of industry
Industrial Area in particular area (22)
To spread of economic
Integrated Economic development outside Java
Development Zone (KAPET) and Sumatera (12)
The development of special
Special Economic Zone zone to perform the functions
(KEK) of economy and acquire
certain facilities (68)
The increasing economic activity  encourage equality and
convergence distribution of income per capita across regions

11. Integrated Economic Development Zone (KAPET)
1 : Agricultural Sector; 2 : Plantation Sector; 3 : Fishery Sector; 4 : Forestry Sector;
5 : Mining Sector; 6 : Tourism and Industrial Sector

12. Law Number 32/2004
Competi Public Public
tiveness Service Welfare
Purpose
the Master Plan for Acceleration and
Accelerator Expansion on Indonesia’s Economic
PERPRES 32/2011 MP3EI Development
- Development of economic potential through 6 economic corridors
- Strenghtening of national connectivity
Expand Domestic Trade

13. 1 Corridors  RG increases 3.4 times to $473 billion by 2030
2 Corridors  RG increases 4.2 times to $1,282 billion by 2030
3 Corridors  RG increases 2.6 times to $152 billion by 2030
4 Corridors  RG increases 4.4 times to $94 billion by 2030
5 Corridors  RG increases 4.3 times to $76 billion by 2030
6 Corridors  RG increases 6.3 times to $83 billion by 2030

14. The Development of Large Islands  Regional Zoning
Regional Development Specialization
Sumatera Center of industrial production and
processing of agricultural, plantations,
fisheries, national energy, trade center
and tourism
Java-Bali Agriculture, manufacturing, services
and tourism
Kalimantan Plantation, animal husbandry, fisheries,
processing of forest products, and
mining
Sulawesi Agriculture, plantation, fisheries, trade,
services and tourism
Nusa Tenggara, Maluku, and Papua Plantation, Fisheries, and animal
husbandry

15. Interregional trade among regions becomes
interregional trade among countries
Consistency of the Implementation of MP3EI
Regional economic zone  Improve
Productivity  Local Government support
Regulation of domestic competition
(betweenregions)

16. Improve the product’s quality to be superior
to similar products from other regions
Penetrate new markets or increasing
domestic market share
Create new investment that is more
productive and more competitive

17. (1) Regional Cooperation and development
of business networks
(2) Optimize the Development of Economic
Zone
(3) Politicall Will of Local Government to
Encourage IRT
(4) Improve interregional linkages through
the strengthening of regional
infrastructure

18. (5) Enhance regional competitiveness
through the development of leading
sector in each region
(6) Encourage more investments outside of
java and Sumatera

19. >> the end <<