Boost Papua’s Economy
Papua’s economy shrank in 2019 and contributed the least to the national economy. Papua-based industries must be strengthened to boost the region’s economy.
Papua’s economy shrank in 2019 and contributed the least to the national economy. Papua-based industries must be strengthened to boost the region’s economy.
JAKARTA, KOMPAS— Java remains the largest contributor to Indonesia’s economy. In 2019, Java’s gross regional domestic product grew 5.52 percent year-on-year and contributed 59 percent to the national economy.
In 2019, Indonesia’s economy grew 5.02 percent. However, the economy of Maluku and Papua in the eastern region shrank 7.4 percent and contributed only 2.24 percent to the national economy, the lowest in all of Indonesia.
In 2018, Maluku and Papua enjoyed a growth of 6.99 percent and a contribution of 2.47 percent to Indonesia’s gross domestic product (GDP). In order to drive the region’s economy, local industries must flourish. Sufficient basic infrastructures such as electricity must be available.
Institute for Essential Service Reform executive director Fabby Tumiwa said the availability of sufficient and affordable energy sources is the main requirement in driving a region’s economy. Sufficient electricity supply is vital and important. Electricity is an energy source for individual, household and industrial activities.
Adequate electricity supply will boost small, medium and large-scale economic activities.
“Advanced industrialized countries have much higher electricity consumption per capita compared to developing countries,” Fabby said in Jakarta on Friday (7/2/2020).
Data from the Energy and Mineral Resources Ministry shows that electrification ratio in Maluku and Papua are below the national electrification ratio of 98.89 percent. As of 2019, electrification ratio in eastern Indonesia was 92 percent in Maluku and 94 percent in Papua. Electrification ratio is the comparison of household with electricity supply and the total population in a region.
In a press conference in Jakarta on Wednesday (5/2), Statistics Indonesia (BPS) chief Suhariyanto said Papua’s economy shrank 15.72 percent. As a result, economy in Maluku and Papua shrunk 7.4 percent. This is despite economic growth in Maluku, North Maluku and West Papua remaining positive in 2019.
“The main reason behind the negative growth of Papua’s economy was Freeport’s declining production due to a mining system switched,” he said.
PT Freeport Indonesia switched its mining system from open-pit to underground, resulting in declining production. Decreasing mining commodity prices also resulted in further decline in Papua’s economy.
BPS data shows that Papua’s economic growth source in mining was minus 43.21 percent in 2019.
Driving factor
Indonesian Chamber of Commerce (Kadin) deputy chair of economic region development Sanny Iskandar said that a region’s economy would grow with the presence of driving factors.
“These can be many things, including manufacturing, retail, property and other industries,” Sanny said.
According to Sanny, Kadin, the Indonesian Employers Association (Apindo) and the Indonesian Industrial Areas Association encouraged economic area development in Maluku and Papua. These areas can be based on natural resources or tourism potentials.
“These two sectors can boost economic growth in Maluku and Papua,” Sanny said.
Maluku and Papua has natural resources potentials including oil, gas and fishery.
“Tourism is actually the industry that can drive economic growth the fastest. Furthermore, there are calls to develop the region’s infrastructure,” Sanny said.
Indonesian Food and Beverage Producers Association (GAPMMI) chair Adhi S Lukman said that infrastructure development in Papua and Maluku was not followed with industrial development.
“The government must make sacrifices to develop infrastructure, especially for industries related to electricity, gas and others,” he said.
Capture fishery using environmentally friendly equipment like fishing rods, commonly carried out by traditional and smallholder fishermen, has power to drive the value-added fishery sector.
PT Harta Samudra director Robert Tjoanda said that capture fishery businesses could be developed in waters in eastern Indonesia. Capture fishery using environmentally friendly equipment like fishing rods, commonly carried out by traditional and smallholder fishermen, has power to drive the value-added fishery sector.
Optimistic
Finance Minister Sri Mulyani Indrawati emphasized that Indonesia had many reasons to stay optimistic this year.
“We have capital to maintain good and harmonious relationship between the government and other stakeholders, including businesspeople,” Sri Mulyani said during the 2020 Fiscal Policy and Economic Outlook Business Gathering organized by Apindo, Kadin and the Indonesian Young Entrepreneurs Association (Hipmi) in Jakarta on Friday.
However, she also emphasized that everyone should stay vigilant.
“Optimism and caution is a good mixture in 2020,” she said.
Separately, Bank Indonesia (BI) deputy governor Dody Budi Waluyo said that Rp 11 trillion of foreign capital left Indonesia in the past week, triggered by sentiments surrounding the spread of the new coronavirus in Asia.
UOB head of research Suan Teck Kin said that economic growth in Asian countries would be affected by the global health emergency triggered by the spread of the new coronavirus. Assuming that the condition persists for six months, Indonesia’s economic growth this year could decline by 0.1-0.2 percent. This year, UOB projects Indonesia’s economic growth to be 5.2 percent. (APO/KRN/LKT/CAS/DIM)