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Transforming Business in Emerging Markets AIMI IC 2015 ISBN: 978-602-7677-80-7

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Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

TABLE OF CONTENTS

Welcome Messages i

2015 Program Acknowledgements ii

Academic Papers

Analysis Of Factors Affecting The Decision To Purchase Products Tupperware In Malaho Bangkahulu Perdana In Bengkulu 1 (Hj Muhartini Salim Imelda Arga Rini) 1

Ministry of Religion in Supporting Ability Religious Tolerence Effect of Leadership Charismatic Employees Competence Stress Tolerance and Interpersonal Trust 16 (John Hendry SKom MM Endrang Ak MBA CfrA CA) 4

Human Resource Development Strategy For Fishermen In Bengkulu Province (Literature Study Approach) 35 (Anzori Tawakal) 5

Policy Simulation On Demand And Supply Beef In Indonesia 47 (Dewi Rahmayanti Sri Handayani) 7

Labour Outsourcing As A Transforming Strategy Into Winning The Competition In An Emerging Market 61 (Muhammad Istan) 8

The Analyses of Profit Ratio Solvency Ratio Company Scale and Economical Value Added toward the Stock Price (Consumer Goods Industrial Company Listed in Indonesian Stock Exchange in Period of 2009-2012) 72 (Rulyanti Wardhani Nizwan Zukhri Devi Valeriani) 9

The Influence of Emotional Intelligence Discipline and Attitude to Work on Job Satisfaction Literature Review 88 (Jamhari Abdillah) 10

The Analysis of Production and Consumption Pattern on Cattle Farmerrsquos Household at Megang Sakti Subdistrict Musi Rawas Regency 97 (Hayatun Nofrida Nenny Wahyuni) 14

Improving Local Government Revenue The Scope For Local Taxes (A Case Study Of Musi Rawas) 108 (Gotri Suyanto Amrullah) 15

The Influence Of Ownership Structure And Leverage On Disclosure of Corporate Social Responsibility Manufacture Companies In Indonesian Stock Exchange 124 (Suharto Miki Indika) 16

Examining the effect of online servicescapes on Indonesian consumer purchase intention 152 (Amelia Husnaina Mailisa Safitri) 17

Shortly Co-Movement Quarterly Earnings Per Share And Monthly Stock Prices A Case Study Of Unilever Indonesia (UNVR) 162

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

(Iskandar Zulkarnain) 18

The Interrelation among Leadership Style Organization Commitment Satisfaction on Controlling System Academic Culture and Staff Performance Empirical Study of Academic Culture in The Institution of Educational Quality Assurance in Bengkulu Province 170 (Komarudin Wilysa Mardani) 19

Performance Evaluation Of Higher Education Institutions With Balanced Scorecard Approach 198 (Sri Ekowati Yusmaniarti) 20

A Case Study Of Good Corporate Governance Implementation By The Board Of Commisioners And Directors According To PBI Nomor8 4 PBI 2006 In PT BANK BENGKULU 213 (MohaMmad Ichsan Muhammad Rusdi Muhammad Nahsyah) 21

Health Financing Analisys In The Implementation Of National Health Insurance In Bengkulu Province 222 (Henni Febriawati Yandrizal) 22

The Tourism Spot Development Strategies Of Long Beach Bengkulu Viewed From The Perceptions Of The Torists And The Local Citizens 231 (Budiman Sakti Harun) 23

The Effect Of Remuneration And Working Motivation To Employee Performance In Ministry Of Finance Institution (Study of State Treasury Office Tax Office Primary and State Property Office and Auctionin the Bengkulu City) 240 (Ersan Syahfitri Gustian Harianto Sahat M Situmorang Wiadi) 25

The Influence of Accounting Information System Toward Internal Accounting Control Affectivity of PT Bank Sumsel Babel Lubuklinggau 254 (Yayuk Marliza Herawati) 26

Time Allocation of Household Rubber Farmers and Their Effects on The Farmers Income in Musi Rawas District South Sumatra Province 258 (Dian Chandera May Shiska Puspitasari) 27

Bargaining Position Of Farmers In Tilapia Marketing 271 (Zaini Amin Andry) 28

Impact Measures Against Experience Marketing Effective And Customer Satisfaction At Bank 276 (Afifi Bachtiar Silke Sachnovrissa) 30

Study Model Institutional Development Organizations Local Goverment In Realize Good Governance (Study in Central Bengkulu Regency) 296 (Seprianti Eka Putri Syaiful Anwar Drmansyah) 32

A Study Of Human Resource Practices In Relationship Towards Employeesrsquo Turnovel Intention In The Manufacturiing Industry In Perak Malaysia 302 (Ismail Reza Bin Abd Rahman Norizan Bin Mohamad Ia Ugen J Krishan Julian Jelani) 33

The Relationship Between Property Stock Prices And Macroeconomics VariablesA Malaysian Case Study 314 (Mohd Nasraf Bin Mohd Nasruddin Jayanthi Devathas Karona Cahya Susena) 34

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Financial Record Management Practices Among Small Medium Entrepreneurs (SMErsquos) In Terengganu Malaysia 320 (Norizan Bin Mohamad Ia Ismail Reza Bin Abd Rahman Mohd Nashraf Bin Mohd Nasruddin) 35

Government Role In Society Poverty Problem Alleviate In The City Of Bengkulu 334 (Heru Susanto) 39

Strategic Planning For Plant Site Selection (An Empirical Study) 340 (Mansyur Daniel) 40

The Images Of Tes Lake As Tourists Visited Destinations In The Provice Of Bengkulu 350 (Syamsul Huda) 42

The Development Of Industrial Sectors To Redusce Proverty And Inequality In Indonesia 367 (Ahmad Soleh Suwarni Nenden Restu Hidayah) 44

The Linkage Between Spiritual Leadership Employee Satisfaction and Organizational CommitmentInsights From Public Servants 383 (Tamri) 45

Partnership Program and Community Development and Its Effect on Development of Small and Medium Enterprises in Bengkulu (Case Study PT Jasa Rharja (Persero) Branch of Bengkulu) 392 (Islamuddin) 47

Identification of Distribution Channel and Marketing Efficiency of Coffee Powder 401 (Hayatun Nofrida Nenny Wahyuni) 48

Marketing Mix Strategy And Accreditaion Status Influences On Students Decision Of University Prof Dr Hazairin Sh Bengkulu 407 (Arifah Hidayati) 51

Public Service Innovation Development Strategy Service Orientation Customer Orientation Service Innovation and Organizational Performance Relationship Modeling 418 (Sularsih Anggarawati Fachri Eka Saputra Armelly) 52

Model of Strategy Enhanched Competitiveness for Small Medium Enterprises in Proverty Area and Prone Natural Disasters 432 (Agus Utomo Anwar Hamdani Riyanto) 53

The Effectiveness of Tacit Knowledge Transfer Among Individuals In an Organization 448 (Dessy Tri Kurniawati) 54

In love with brand a literatur review in management 454 (Ikhtiara Isharina) 55

Revisiting the concept of knowledge management orientation an evidence from indonesian creative industry sector 461 (Ananda Sabil Hussein Mintarti Rahayu Sri Palupi Prabandari Nadiyah Hirfiyana Rosita) 58 Human Resource Flexibility Adaptability Culture and Organizational Innovation 466 (Ben Roy Do Pi Wen Yeh)

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

The Effect Of Corporate Social Responsibility Commitment To Organization and Performance Of Employees 481 (Anwar Hamdani I Gusti Putu Diva Awatara) 56

The Role Of Environmental Ethics in Mediating of Influence of Leadership and Cultural Organization Toward Employee Performance of Environmentally Friendly 486 (Siti Fatonah Anggoro Panji Nugroho) 57

Investment Based on Economic and Social Commitment To Enhanced Firm Value A Role of Board of Directors 491 (Etty Indriani Djoko Sekti Riyadi) 50

Strategy of Local Television in Competitive Broadcasting Industry in Bengkulu 503 (Dedy Wahyudi) 46

The Effect Transformational Leadership Financial Incentives Power Leadership Empowerment Climate On Motivation Intrinsic 520 (Intihan Meilaty Fintharia Sari) 43

Effect Of Government Internal Control Application System (SPIP) And Human Resources Competence For The Effectiveness Of Fianancial Management Area 540 (Baihaqi Agus Haryanto Karina Rizanti) 37

Tourism Branding (Tourism Development Model with Rainbow Troops Momentum-Based in Belitung Island) 555 (Nizwan Zukhri Dwi Haryani Jamilah Cholilah) 11

The analysis Of Citrus Marketing Slam in Musi Rawas Regency 574 (Verry Yarda Ningsih Adi Winata) 13

The Effect Of Perceived Value And Corporate Image On Customer Loyalty Moderated By Financial SwitchIng Cost 580 (DarmansyahAkram Harmoni Wiardi Amelly) 2

Efforts To Enhancing Community Competitiveness (Citizen Advantage) Based On Information Technology Study On Smes Creative Industry In Bengkulu 593 (Effed Darta Hadi Slamet Widodo Willy Abdillah Ferry Tema Atmajaya Fachri Eka Saputra) 3

The Effect of Ethical Climate and Organizational Commitment to Deviant Workplace Behavior 608 (Noermijati Ana Sofia Aryati) 62

Impact of Service Quality on Student Satisfaction in Higher Education 615 (Fatchur Rohman Radityo Putro Handrito) 59

The Effect of Humanities Value on the Entrepreneur Characteristics and the Decision of Being an Entrepreneur 620 (Nadiyah Hirfiyana Rosita Sri Palupi Prabandari) 60

An Analysis Of Total Quality Management With The Orientation Of Etrepreneurship And Market To Improve The Competitive Advantages Toward The Profitability Of Koperasi 626 (Muhamad Sil) 31

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Eid Mubarak What And How Do They Purchase Exlporing the Consumption Pattern Of Muslims At

Kediri East Java Indonesia 633

(Fatchur Rohman Taufiq Ismail) 61

Paticipants Index 640

Transforming Business in Emerging Markets

i

Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

Transforming Business in Emerging Markets

iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

Transforming Business in Emerging Markets

369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

Transforming Business in Emerging Markets

370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

Transforming Business in Emerging Markets

372

while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

Transforming Business in Emerging Markets

373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

Transforming Business in Emerging Markets

374

Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

Transforming Business in Emerging Markets

375

Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

TABLE OF CONTENTS

Welcome Messages i

2015 Program Acknowledgements ii

Academic Papers

Analysis Of Factors Affecting The Decision To Purchase Products Tupperware In Malaho Bangkahulu Perdana In Bengkulu 1 (Hj Muhartini Salim Imelda Arga Rini) 1

Ministry of Religion in Supporting Ability Religious Tolerence Effect of Leadership Charismatic Employees Competence Stress Tolerance and Interpersonal Trust 16 (John Hendry SKom MM Endrang Ak MBA CfrA CA) 4

Human Resource Development Strategy For Fishermen In Bengkulu Province (Literature Study Approach) 35 (Anzori Tawakal) 5

Policy Simulation On Demand And Supply Beef In Indonesia 47 (Dewi Rahmayanti Sri Handayani) 7

Labour Outsourcing As A Transforming Strategy Into Winning The Competition In An Emerging Market 61 (Muhammad Istan) 8

The Analyses of Profit Ratio Solvency Ratio Company Scale and Economical Value Added toward the Stock Price (Consumer Goods Industrial Company Listed in Indonesian Stock Exchange in Period of 2009-2012) 72 (Rulyanti Wardhani Nizwan Zukhri Devi Valeriani) 9

The Influence of Emotional Intelligence Discipline and Attitude to Work on Job Satisfaction Literature Review 88 (Jamhari Abdillah) 10

The Analysis of Production and Consumption Pattern on Cattle Farmerrsquos Household at Megang Sakti Subdistrict Musi Rawas Regency 97 (Hayatun Nofrida Nenny Wahyuni) 14

Improving Local Government Revenue The Scope For Local Taxes (A Case Study Of Musi Rawas) 108 (Gotri Suyanto Amrullah) 15

The Influence Of Ownership Structure And Leverage On Disclosure of Corporate Social Responsibility Manufacture Companies In Indonesian Stock Exchange 124 (Suharto Miki Indika) 16

Examining the effect of online servicescapes on Indonesian consumer purchase intention 152 (Amelia Husnaina Mailisa Safitri) 17

Shortly Co-Movement Quarterly Earnings Per Share And Monthly Stock Prices A Case Study Of Unilever Indonesia (UNVR) 162

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

(Iskandar Zulkarnain) 18

The Interrelation among Leadership Style Organization Commitment Satisfaction on Controlling System Academic Culture and Staff Performance Empirical Study of Academic Culture in The Institution of Educational Quality Assurance in Bengkulu Province 170 (Komarudin Wilysa Mardani) 19

Performance Evaluation Of Higher Education Institutions With Balanced Scorecard Approach 198 (Sri Ekowati Yusmaniarti) 20

A Case Study Of Good Corporate Governance Implementation By The Board Of Commisioners And Directors According To PBI Nomor8 4 PBI 2006 In PT BANK BENGKULU 213 (MohaMmad Ichsan Muhammad Rusdi Muhammad Nahsyah) 21

Health Financing Analisys In The Implementation Of National Health Insurance In Bengkulu Province 222 (Henni Febriawati Yandrizal) 22

The Tourism Spot Development Strategies Of Long Beach Bengkulu Viewed From The Perceptions Of The Torists And The Local Citizens 231 (Budiman Sakti Harun) 23

The Effect Of Remuneration And Working Motivation To Employee Performance In Ministry Of Finance Institution (Study of State Treasury Office Tax Office Primary and State Property Office and Auctionin the Bengkulu City) 240 (Ersan Syahfitri Gustian Harianto Sahat M Situmorang Wiadi) 25

The Influence of Accounting Information System Toward Internal Accounting Control Affectivity of PT Bank Sumsel Babel Lubuklinggau 254 (Yayuk Marliza Herawati) 26

Time Allocation of Household Rubber Farmers and Their Effects on The Farmers Income in Musi Rawas District South Sumatra Province 258 (Dian Chandera May Shiska Puspitasari) 27

Bargaining Position Of Farmers In Tilapia Marketing 271 (Zaini Amin Andry) 28

Impact Measures Against Experience Marketing Effective And Customer Satisfaction At Bank 276 (Afifi Bachtiar Silke Sachnovrissa) 30

Study Model Institutional Development Organizations Local Goverment In Realize Good Governance (Study in Central Bengkulu Regency) 296 (Seprianti Eka Putri Syaiful Anwar Drmansyah) 32

A Study Of Human Resource Practices In Relationship Towards Employeesrsquo Turnovel Intention In The Manufacturiing Industry In Perak Malaysia 302 (Ismail Reza Bin Abd Rahman Norizan Bin Mohamad Ia Ugen J Krishan Julian Jelani) 33

The Relationship Between Property Stock Prices And Macroeconomics VariablesA Malaysian Case Study 314 (Mohd Nasraf Bin Mohd Nasruddin Jayanthi Devathas Karona Cahya Susena) 34

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Financial Record Management Practices Among Small Medium Entrepreneurs (SMErsquos) In Terengganu Malaysia 320 (Norizan Bin Mohamad Ia Ismail Reza Bin Abd Rahman Mohd Nashraf Bin Mohd Nasruddin) 35

Government Role In Society Poverty Problem Alleviate In The City Of Bengkulu 334 (Heru Susanto) 39

Strategic Planning For Plant Site Selection (An Empirical Study) 340 (Mansyur Daniel) 40

The Images Of Tes Lake As Tourists Visited Destinations In The Provice Of Bengkulu 350 (Syamsul Huda) 42

The Development Of Industrial Sectors To Redusce Proverty And Inequality In Indonesia 367 (Ahmad Soleh Suwarni Nenden Restu Hidayah) 44

The Linkage Between Spiritual Leadership Employee Satisfaction and Organizational CommitmentInsights From Public Servants 383 (Tamri) 45

Partnership Program and Community Development and Its Effect on Development of Small and Medium Enterprises in Bengkulu (Case Study PT Jasa Rharja (Persero) Branch of Bengkulu) 392 (Islamuddin) 47

Identification of Distribution Channel and Marketing Efficiency of Coffee Powder 401 (Hayatun Nofrida Nenny Wahyuni) 48

Marketing Mix Strategy And Accreditaion Status Influences On Students Decision Of University Prof Dr Hazairin Sh Bengkulu 407 (Arifah Hidayati) 51

Public Service Innovation Development Strategy Service Orientation Customer Orientation Service Innovation and Organizational Performance Relationship Modeling 418 (Sularsih Anggarawati Fachri Eka Saputra Armelly) 52

Model of Strategy Enhanched Competitiveness for Small Medium Enterprises in Proverty Area and Prone Natural Disasters 432 (Agus Utomo Anwar Hamdani Riyanto) 53

The Effectiveness of Tacit Knowledge Transfer Among Individuals In an Organization 448 (Dessy Tri Kurniawati) 54

In love with brand a literatur review in management 454 (Ikhtiara Isharina) 55

Revisiting the concept of knowledge management orientation an evidence from indonesian creative industry sector 461 (Ananda Sabil Hussein Mintarti Rahayu Sri Palupi Prabandari Nadiyah Hirfiyana Rosita) 58 Human Resource Flexibility Adaptability Culture and Organizational Innovation 466 (Ben Roy Do Pi Wen Yeh)

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

The Effect Of Corporate Social Responsibility Commitment To Organization and Performance Of Employees 481 (Anwar Hamdani I Gusti Putu Diva Awatara) 56

The Role Of Environmental Ethics in Mediating of Influence of Leadership and Cultural Organization Toward Employee Performance of Environmentally Friendly 486 (Siti Fatonah Anggoro Panji Nugroho) 57

Investment Based on Economic and Social Commitment To Enhanced Firm Value A Role of Board of Directors 491 (Etty Indriani Djoko Sekti Riyadi) 50

Strategy of Local Television in Competitive Broadcasting Industry in Bengkulu 503 (Dedy Wahyudi) 46

The Effect Transformational Leadership Financial Incentives Power Leadership Empowerment Climate On Motivation Intrinsic 520 (Intihan Meilaty Fintharia Sari) 43

Effect Of Government Internal Control Application System (SPIP) And Human Resources Competence For The Effectiveness Of Fianancial Management Area 540 (Baihaqi Agus Haryanto Karina Rizanti) 37

Tourism Branding (Tourism Development Model with Rainbow Troops Momentum-Based in Belitung Island) 555 (Nizwan Zukhri Dwi Haryani Jamilah Cholilah) 11

The analysis Of Citrus Marketing Slam in Musi Rawas Regency 574 (Verry Yarda Ningsih Adi Winata) 13

The Effect Of Perceived Value And Corporate Image On Customer Loyalty Moderated By Financial SwitchIng Cost 580 (DarmansyahAkram Harmoni Wiardi Amelly) 2

Efforts To Enhancing Community Competitiveness (Citizen Advantage) Based On Information Technology Study On Smes Creative Industry In Bengkulu 593 (Effed Darta Hadi Slamet Widodo Willy Abdillah Ferry Tema Atmajaya Fachri Eka Saputra) 3

The Effect of Ethical Climate and Organizational Commitment to Deviant Workplace Behavior 608 (Noermijati Ana Sofia Aryati) 62

Impact of Service Quality on Student Satisfaction in Higher Education 615 (Fatchur Rohman Radityo Putro Handrito) 59

The Effect of Humanities Value on the Entrepreneur Characteristics and the Decision of Being an Entrepreneur 620 (Nadiyah Hirfiyana Rosita Sri Palupi Prabandari) 60

An Analysis Of Total Quality Management With The Orientation Of Etrepreneurship And Market To Improve The Competitive Advantages Toward The Profitability Of Koperasi 626 (Muhamad Sil) 31

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Eid Mubarak What And How Do They Purchase Exlporing the Consumption Pattern Of Muslims At

Kediri East Java Indonesia 633

(Fatchur Rohman Taufiq Ismail) 61

Paticipants Index 640

Transforming Business in Emerging Markets

i

Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

Transforming Business in Emerging Markets

iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

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which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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(Iskandar Zulkarnain) 18

The Interrelation among Leadership Style Organization Commitment Satisfaction on Controlling System Academic Culture and Staff Performance Empirical Study of Academic Culture in The Institution of Educational Quality Assurance in Bengkulu Province 170 (Komarudin Wilysa Mardani) 19

Performance Evaluation Of Higher Education Institutions With Balanced Scorecard Approach 198 (Sri Ekowati Yusmaniarti) 20

A Case Study Of Good Corporate Governance Implementation By The Board Of Commisioners And Directors According To PBI Nomor8 4 PBI 2006 In PT BANK BENGKULU 213 (MohaMmad Ichsan Muhammad Rusdi Muhammad Nahsyah) 21

Health Financing Analisys In The Implementation Of National Health Insurance In Bengkulu Province 222 (Henni Febriawati Yandrizal) 22

The Tourism Spot Development Strategies Of Long Beach Bengkulu Viewed From The Perceptions Of The Torists And The Local Citizens 231 (Budiman Sakti Harun) 23

The Effect Of Remuneration And Working Motivation To Employee Performance In Ministry Of Finance Institution (Study of State Treasury Office Tax Office Primary and State Property Office and Auctionin the Bengkulu City) 240 (Ersan Syahfitri Gustian Harianto Sahat M Situmorang Wiadi) 25

The Influence of Accounting Information System Toward Internal Accounting Control Affectivity of PT Bank Sumsel Babel Lubuklinggau 254 (Yayuk Marliza Herawati) 26

Time Allocation of Household Rubber Farmers and Their Effects on The Farmers Income in Musi Rawas District South Sumatra Province 258 (Dian Chandera May Shiska Puspitasari) 27

Bargaining Position Of Farmers In Tilapia Marketing 271 (Zaini Amin Andry) 28

Impact Measures Against Experience Marketing Effective And Customer Satisfaction At Bank 276 (Afifi Bachtiar Silke Sachnovrissa) 30

Study Model Institutional Development Organizations Local Goverment In Realize Good Governance (Study in Central Bengkulu Regency) 296 (Seprianti Eka Putri Syaiful Anwar Drmansyah) 32

A Study Of Human Resource Practices In Relationship Towards Employeesrsquo Turnovel Intention In The Manufacturiing Industry In Perak Malaysia 302 (Ismail Reza Bin Abd Rahman Norizan Bin Mohamad Ia Ugen J Krishan Julian Jelani) 33

The Relationship Between Property Stock Prices And Macroeconomics VariablesA Malaysian Case Study 314 (Mohd Nasraf Bin Mohd Nasruddin Jayanthi Devathas Karona Cahya Susena) 34

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Financial Record Management Practices Among Small Medium Entrepreneurs (SMErsquos) In Terengganu Malaysia 320 (Norizan Bin Mohamad Ia Ismail Reza Bin Abd Rahman Mohd Nashraf Bin Mohd Nasruddin) 35

Government Role In Society Poverty Problem Alleviate In The City Of Bengkulu 334 (Heru Susanto) 39

Strategic Planning For Plant Site Selection (An Empirical Study) 340 (Mansyur Daniel) 40

The Images Of Tes Lake As Tourists Visited Destinations In The Provice Of Bengkulu 350 (Syamsul Huda) 42

The Development Of Industrial Sectors To Redusce Proverty And Inequality In Indonesia 367 (Ahmad Soleh Suwarni Nenden Restu Hidayah) 44

The Linkage Between Spiritual Leadership Employee Satisfaction and Organizational CommitmentInsights From Public Servants 383 (Tamri) 45

Partnership Program and Community Development and Its Effect on Development of Small and Medium Enterprises in Bengkulu (Case Study PT Jasa Rharja (Persero) Branch of Bengkulu) 392 (Islamuddin) 47

Identification of Distribution Channel and Marketing Efficiency of Coffee Powder 401 (Hayatun Nofrida Nenny Wahyuni) 48

Marketing Mix Strategy And Accreditaion Status Influences On Students Decision Of University Prof Dr Hazairin Sh Bengkulu 407 (Arifah Hidayati) 51

Public Service Innovation Development Strategy Service Orientation Customer Orientation Service Innovation and Organizational Performance Relationship Modeling 418 (Sularsih Anggarawati Fachri Eka Saputra Armelly) 52

Model of Strategy Enhanched Competitiveness for Small Medium Enterprises in Proverty Area and Prone Natural Disasters 432 (Agus Utomo Anwar Hamdani Riyanto) 53

The Effectiveness of Tacit Knowledge Transfer Among Individuals In an Organization 448 (Dessy Tri Kurniawati) 54

In love with brand a literatur review in management 454 (Ikhtiara Isharina) 55

Revisiting the concept of knowledge management orientation an evidence from indonesian creative industry sector 461 (Ananda Sabil Hussein Mintarti Rahayu Sri Palupi Prabandari Nadiyah Hirfiyana Rosita) 58 Human Resource Flexibility Adaptability Culture and Organizational Innovation 466 (Ben Roy Do Pi Wen Yeh)

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

The Effect Of Corporate Social Responsibility Commitment To Organization and Performance Of Employees 481 (Anwar Hamdani I Gusti Putu Diva Awatara) 56

The Role Of Environmental Ethics in Mediating of Influence of Leadership and Cultural Organization Toward Employee Performance of Environmentally Friendly 486 (Siti Fatonah Anggoro Panji Nugroho) 57

Investment Based on Economic and Social Commitment To Enhanced Firm Value A Role of Board of Directors 491 (Etty Indriani Djoko Sekti Riyadi) 50

Strategy of Local Television in Competitive Broadcasting Industry in Bengkulu 503 (Dedy Wahyudi) 46

The Effect Transformational Leadership Financial Incentives Power Leadership Empowerment Climate On Motivation Intrinsic 520 (Intihan Meilaty Fintharia Sari) 43

Effect Of Government Internal Control Application System (SPIP) And Human Resources Competence For The Effectiveness Of Fianancial Management Area 540 (Baihaqi Agus Haryanto Karina Rizanti) 37

Tourism Branding (Tourism Development Model with Rainbow Troops Momentum-Based in Belitung Island) 555 (Nizwan Zukhri Dwi Haryani Jamilah Cholilah) 11

The analysis Of Citrus Marketing Slam in Musi Rawas Regency 574 (Verry Yarda Ningsih Adi Winata) 13

The Effect Of Perceived Value And Corporate Image On Customer Loyalty Moderated By Financial SwitchIng Cost 580 (DarmansyahAkram Harmoni Wiardi Amelly) 2

Efforts To Enhancing Community Competitiveness (Citizen Advantage) Based On Information Technology Study On Smes Creative Industry In Bengkulu 593 (Effed Darta Hadi Slamet Widodo Willy Abdillah Ferry Tema Atmajaya Fachri Eka Saputra) 3

The Effect of Ethical Climate and Organizational Commitment to Deviant Workplace Behavior 608 (Noermijati Ana Sofia Aryati) 62

Impact of Service Quality on Student Satisfaction in Higher Education 615 (Fatchur Rohman Radityo Putro Handrito) 59

The Effect of Humanities Value on the Entrepreneur Characteristics and the Decision of Being an Entrepreneur 620 (Nadiyah Hirfiyana Rosita Sri Palupi Prabandari) 60

An Analysis Of Total Quality Management With The Orientation Of Etrepreneurship And Market To Improve The Competitive Advantages Toward The Profitability Of Koperasi 626 (Muhamad Sil) 31

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Eid Mubarak What And How Do They Purchase Exlporing the Consumption Pattern Of Muslims At

Kediri East Java Indonesia 633

(Fatchur Rohman Taufiq Ismail) 61

Paticipants Index 640

Transforming Business in Emerging Markets

i

Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

Transforming Business in Emerging Markets

iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

Transforming Business in Emerging Markets

369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

Transforming Business in Emerging Markets

372

while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

Transforming Business in Emerging Markets

373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

Transforming Business in Emerging Markets

374

Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

Transforming Business in Emerging Markets

375

Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Financial Record Management Practices Among Small Medium Entrepreneurs (SMErsquos) In Terengganu Malaysia 320 (Norizan Bin Mohamad Ia Ismail Reza Bin Abd Rahman Mohd Nashraf Bin Mohd Nasruddin) 35

Government Role In Society Poverty Problem Alleviate In The City Of Bengkulu 334 (Heru Susanto) 39

Strategic Planning For Plant Site Selection (An Empirical Study) 340 (Mansyur Daniel) 40

The Images Of Tes Lake As Tourists Visited Destinations In The Provice Of Bengkulu 350 (Syamsul Huda) 42

The Development Of Industrial Sectors To Redusce Proverty And Inequality In Indonesia 367 (Ahmad Soleh Suwarni Nenden Restu Hidayah) 44

The Linkage Between Spiritual Leadership Employee Satisfaction and Organizational CommitmentInsights From Public Servants 383 (Tamri) 45

Partnership Program and Community Development and Its Effect on Development of Small and Medium Enterprises in Bengkulu (Case Study PT Jasa Rharja (Persero) Branch of Bengkulu) 392 (Islamuddin) 47

Identification of Distribution Channel and Marketing Efficiency of Coffee Powder 401 (Hayatun Nofrida Nenny Wahyuni) 48

Marketing Mix Strategy And Accreditaion Status Influences On Students Decision Of University Prof Dr Hazairin Sh Bengkulu 407 (Arifah Hidayati) 51

Public Service Innovation Development Strategy Service Orientation Customer Orientation Service Innovation and Organizational Performance Relationship Modeling 418 (Sularsih Anggarawati Fachri Eka Saputra Armelly) 52

Model of Strategy Enhanched Competitiveness for Small Medium Enterprises in Proverty Area and Prone Natural Disasters 432 (Agus Utomo Anwar Hamdani Riyanto) 53

The Effectiveness of Tacit Knowledge Transfer Among Individuals In an Organization 448 (Dessy Tri Kurniawati) 54

In love with brand a literatur review in management 454 (Ikhtiara Isharina) 55

Revisiting the concept of knowledge management orientation an evidence from indonesian creative industry sector 461 (Ananda Sabil Hussein Mintarti Rahayu Sri Palupi Prabandari Nadiyah Hirfiyana Rosita) 58 Human Resource Flexibility Adaptability Culture and Organizational Innovation 466 (Ben Roy Do Pi Wen Yeh)

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

The Effect Of Corporate Social Responsibility Commitment To Organization and Performance Of Employees 481 (Anwar Hamdani I Gusti Putu Diva Awatara) 56

The Role Of Environmental Ethics in Mediating of Influence of Leadership and Cultural Organization Toward Employee Performance of Environmentally Friendly 486 (Siti Fatonah Anggoro Panji Nugroho) 57

Investment Based on Economic and Social Commitment To Enhanced Firm Value A Role of Board of Directors 491 (Etty Indriani Djoko Sekti Riyadi) 50

Strategy of Local Television in Competitive Broadcasting Industry in Bengkulu 503 (Dedy Wahyudi) 46

The Effect Transformational Leadership Financial Incentives Power Leadership Empowerment Climate On Motivation Intrinsic 520 (Intihan Meilaty Fintharia Sari) 43

Effect Of Government Internal Control Application System (SPIP) And Human Resources Competence For The Effectiveness Of Fianancial Management Area 540 (Baihaqi Agus Haryanto Karina Rizanti) 37

Tourism Branding (Tourism Development Model with Rainbow Troops Momentum-Based in Belitung Island) 555 (Nizwan Zukhri Dwi Haryani Jamilah Cholilah) 11

The analysis Of Citrus Marketing Slam in Musi Rawas Regency 574 (Verry Yarda Ningsih Adi Winata) 13

The Effect Of Perceived Value And Corporate Image On Customer Loyalty Moderated By Financial SwitchIng Cost 580 (DarmansyahAkram Harmoni Wiardi Amelly) 2

Efforts To Enhancing Community Competitiveness (Citizen Advantage) Based On Information Technology Study On Smes Creative Industry In Bengkulu 593 (Effed Darta Hadi Slamet Widodo Willy Abdillah Ferry Tema Atmajaya Fachri Eka Saputra) 3

The Effect of Ethical Climate and Organizational Commitment to Deviant Workplace Behavior 608 (Noermijati Ana Sofia Aryati) 62

Impact of Service Quality on Student Satisfaction in Higher Education 615 (Fatchur Rohman Radityo Putro Handrito) 59

The Effect of Humanities Value on the Entrepreneur Characteristics and the Decision of Being an Entrepreneur 620 (Nadiyah Hirfiyana Rosita Sri Palupi Prabandari) 60

An Analysis Of Total Quality Management With The Orientation Of Etrepreneurship And Market To Improve The Competitive Advantages Toward The Profitability Of Koperasi 626 (Muhamad Sil) 31

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Eid Mubarak What And How Do They Purchase Exlporing the Consumption Pattern Of Muslims At

Kediri East Java Indonesia 633

(Fatchur Rohman Taufiq Ismail) 61

Paticipants Index 640

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Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

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iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

The Effect Of Corporate Social Responsibility Commitment To Organization and Performance Of Employees 481 (Anwar Hamdani I Gusti Putu Diva Awatara) 56

The Role Of Environmental Ethics in Mediating of Influence of Leadership and Cultural Organization Toward Employee Performance of Environmentally Friendly 486 (Siti Fatonah Anggoro Panji Nugroho) 57

Investment Based on Economic and Social Commitment To Enhanced Firm Value A Role of Board of Directors 491 (Etty Indriani Djoko Sekti Riyadi) 50

Strategy of Local Television in Competitive Broadcasting Industry in Bengkulu 503 (Dedy Wahyudi) 46

The Effect Transformational Leadership Financial Incentives Power Leadership Empowerment Climate On Motivation Intrinsic 520 (Intihan Meilaty Fintharia Sari) 43

Effect Of Government Internal Control Application System (SPIP) And Human Resources Competence For The Effectiveness Of Fianancial Management Area 540 (Baihaqi Agus Haryanto Karina Rizanti) 37

Tourism Branding (Tourism Development Model with Rainbow Troops Momentum-Based in Belitung Island) 555 (Nizwan Zukhri Dwi Haryani Jamilah Cholilah) 11

The analysis Of Citrus Marketing Slam in Musi Rawas Regency 574 (Verry Yarda Ningsih Adi Winata) 13

The Effect Of Perceived Value And Corporate Image On Customer Loyalty Moderated By Financial SwitchIng Cost 580 (DarmansyahAkram Harmoni Wiardi Amelly) 2

Efforts To Enhancing Community Competitiveness (Citizen Advantage) Based On Information Technology Study On Smes Creative Industry In Bengkulu 593 (Effed Darta Hadi Slamet Widodo Willy Abdillah Ferry Tema Atmajaya Fachri Eka Saputra) 3

The Effect of Ethical Climate and Organizational Commitment to Deviant Workplace Behavior 608 (Noermijati Ana Sofia Aryati) 62

Impact of Service Quality on Student Satisfaction in Higher Education 615 (Fatchur Rohman Radityo Putro Handrito) 59

The Effect of Humanities Value on the Entrepreneur Characteristics and the Decision of Being an Entrepreneur 620 (Nadiyah Hirfiyana Rosita Sri Palupi Prabandari) 60

An Analysis Of Total Quality Management With The Orientation Of Etrepreneurship And Market To Improve The Competitive Advantages Toward The Profitability Of Koperasi 626 (Muhamad Sil) 31

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Eid Mubarak What And How Do They Purchase Exlporing the Consumption Pattern Of Muslims At

Kediri East Java Indonesia 633

(Fatchur Rohman Taufiq Ismail) 61

Paticipants Index 640

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Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

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And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

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Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

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Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

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371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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372

while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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374

Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

Transforming Business in Emerging Markets

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

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Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

AIMI IC 2015 ISBN 978-602-7677-80-7

Eid Mubarak What And How Do They Purchase Exlporing the Consumption Pattern Of Muslims At

Kediri East Java Indonesia 633

(Fatchur Rohman Taufiq Ismail) 61

Paticipants Index 640

Transforming Business in Emerging Markets

i

Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

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Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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372

while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

Transforming Business in Emerging Markets

374

Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

Transforming Business in Emerging Markets

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

i

Welcome Message From Chairman of AIMI Assalamu alaikum wr wb Welcome to the fourth International Conference AIMI 2015

As I have stated before that this International conference is the fourth

International Conference organized by AIMI The first was held in Denpasar Bali in 2010 and continued to the second which was conducted in Pekanbaru in 2011 and the third was held in Makassar in 2013 Time goes by and it has been for almost six years AIMI has been established and give beneficial to its members as well as Indonesian society In line with the mission of AIMI which intends to bridge between academic field especially faculty of economics and business and the real business world in terms of decision making process in a business organization and public as well as government institutions

AIMI has considered synchronized and harmonized between the development

and rapid progress in the management practice that is a decision making process including planning doing and evaluation in the business and public organization and the development of higher education as an institution to transfer knowledge and its development to students as well as to develop and create knowledge and technology Whereas the current condition remains showing that the role of higher education is still one step back than the management practice in terms of the effort to elevate public and privatebusiness organizational performance

As we commonly known that business organization cannot be separated from

Industrialization as a process to fulfill the need of society and country Industrialization is also an interaction of natural human financial institutional and technology resources The interaction among them will influence the surrounding environment quality The industrialization can be a driving of the production factor which moves the goods or raw material from the origin place of the production to the manufacturing process Meanwhile the finished goods as the result of manufacturing are also driven from the factory to the consumers who need the goods By connecting the production factor and finished good movement to Indonesia as an archipelago state it will bring it as one of the topics being discussed in this conference

Moreover referring to the contribution of AIMI as stated above it is undoubtable

that AIMI has a high role that is to strengthen Indonesian product and service competitiveness Through four prominent programs for the next three years (AIMI Committee of 2014-2017) which are organizational information cooperation and expertise programs it is hoped that AIMI can elevate Indonesian product and service competitiveness

Global market gives huge opportunities to companies which have product and

service competitiveness Therefore this precious moment will become a great opportunity for business practitioners and academics to share As for business practitioners they can share their current activities and for academics they can deliver relevant theories which are suitable with the current condition

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

Transforming Business in Emerging Markets

iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

Transforming Business in Emerging Markets

372

while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

Transforming Business in Emerging Markets

373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

Transforming Business in Emerging Markets

374

Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

Transforming Business in Emerging Markets

375

Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

ii

And finally I would like to express my great gratitude to AIMI members especially AIMI Bengkulu and all universities in Bengkulu who actively participate in this international conference My gratitude is also expressed to all the business practitioners who have share their time and give us material and immaterial support And the last I would like to thank you to all the sponsors and our distinguished guests the participants of the fourth AIMI International Conference

Hope this International Conference will be beneficial for all of us and Indonesian Society

Thank you

Prof Armanu Thoyib PhD Chairman of AIMI

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

Transforming Business in Emerging Markets

iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

Transforming Business in Emerging Markets

369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

Transforming Business in Emerging Markets

370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

Transforming Business in Emerging Markets

372

while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

Transforming Business in Emerging Markets

373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

Transforming Business in Emerging Markets

374

Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

iii

Welcome Message From Conference Chairman

Welcome to International Conference Indonesian Management Scientists Association

(AIMI) 2015

This International Conference is a manifestation of an attempt to synergize the

participation of practitioners and academics in building Indonesia particularly in the

field of economics and business

AIMI IC 2015 hosted by Indonesian Management Scientists Association working

with University Brawijaya University Bengkulu and Dehasen University Indonesian

Management Scientists Association supporting role in promoting Bengkulu as an

international city

IC AIMI has successfully organized annual conferences in cooperation with the

higher education institutions Support of academics researchers and business

practitioners are clearly visible from a paper accepted by the organizers of this year This

year a total of 6 abstracts and 49 full papers were received and most of them will be

presented

I would like to thank and congratulate the chairman Indonesian Management

Scientists Association Rector of University Brawijaya Dean of Faculty of Economics and

Business University of Brawijaya Rector of University Bengkulu Dean of Faculty of

Economics and Business University Bengkulu the Coordinator of the Doctoral Program

in Management Science University Bengkulu University Rector of Dehasen Bengkulu

Dean of Faculty of Economics University Dehasen Bengkulu for their support the

Ministry of Public Works and Housing Bengkulu Provincial People financial support of PT

Bank Bengkulu PT Rodateknindo Purajaya PT Rico South Son and other sponsors PT

Pelabuhan Indonesia II Branch Bengkulu Cipta Mandiri Planner RSJKO Province of

Bengkulu Bengkulu Muhammadiyah University University Professor Dr Hazairin

Bengkulu STIKES Bakti Husada PT Foundation work Megah PT Samumi Jaya Sakti CV

Modecom for their financial support I want to thank you for all the participants and

organizing for their support

Ir M Nashsyah MM MT

Conference Chair

Transforming Business in Emerging Markets

iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

371

which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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373

compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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iv

Welcome Message From Program Chairman

As the conference manager of 4th ICAIMI 2015 Conference it is my pleasure and

previlege in welcome friends colleagues and participants from all over the world

attending this conference

The 4th Interational Conference AIMI (ICAIMI) 2015 is designed to encourage

management and business research education and more importanly the knowledge

dissemination that are relevance to management studies The conference provides a

platform for all academia who are interested in management and business

development issues relevant to the growth of global economic that enable the

participants to share their knowledge and their experience and more specifically to

develop mutual research interest collaboration

Many countries in the world are projected to be leading economic countries in the

next five years Over 30 papers from 4 countries echoing the conference theme

ldquoTransforming Business in Emerging Marketsrdquo reflect that management business

research and business practices are evolved through the globalization

We hope this conference to be successful and become an important and valuable

resources under your contribution and participation Finally on behalf the organizing

commitee members i hope and i am sure you will have fruitful discussion and successful

meeting wish you all have a pleasant and enjoyable day in bengkulu and looking

forward to seeing you in person

Ananda Sabil Hussein PhD

2015 Program Chairman

Transforming Business in Emerging Markets

v

2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

Transforming Business in Emerging Markets

369

THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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370

Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

Transforming Business in Emerging Markets

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which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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2015 Program Acknowledgements

Conference Chairman

Ir M Nashsyah MM MT

University of Bengkulu

Program Chairman

Ananda Sabil Hussein PhD

University of Brawijaya Indonesia

Conference Editorial Board

Prof Armanu Thoyib PhD University of Brawijaya Indonesia Prof Candra Fajri Ananda PhD University of Brawijaya Indonesia Prof Ahmad Erani Yustika PhD

University of Brawijaya Indonesia Prof Iwan Triyuwono SE PhD University of Brawijaya Indonesia

Prof Dr Eko Ganis SPhD University of Brawijaya Indonesia

Prof Dr Kamaludin University of Bengkulu Prof Dr Azlina Azizan

University of Pahang Malaysia

Dr Rachata Channoi Burapha University Thailand

Dr Hung-Che Wu Nanfang College of Sun Yat-Sen University China

Dr Goerge Wu Xiamen University Taiwan

Willy Abdillah PhD University of Bengkulu

Dr Sumiati University of Brawijaya Indonesia

Dr Fatchur Rohman University of Brawijaya Indonesia

Dodi Wirawan Irawanto PhD University of Brawijaya Indonesia

Conference Administrator

Dr Sumiati

Dr Noermijati

Radityo Putro Handrito MM

Ikhtiara Kaideni Isharina MM

Rahaditya Yunianto MM

Taufiq Ismail MM

Sigit Pramono MSc

Nadiyah Hirfiyana Rosita MM

Program Assistants

Davinindya Giffar

Herdian Khusna

Sponsors

Institutions University of Brawijaya University of Bengkulu University of Dehansen

Bengkulu

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THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

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which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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THE DEVELOPMENT OF INDUSTRIAL SECTORS TO REDUCE POVERTY AND INEQUALITY IN INDONESIA

Ahmad Soleh1 Suwarni2 Nenden Restu Hidayah3

Faculty of Economics University of Dehasen Bengkulu123 ahmadsolehse81yahoocoid1

+62 852730022801

Abstract

The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia This sector contributes a high level of national economy and absorb labor Economic growth in both sectors is likely to decrease With the development of this sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The purpose of this study was to determine the development strategy of the industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector The method used is descriptive analysis Data collection techniques in this study using the method of documentation Results from this study indicate that the development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers KeyWords development industrial sector Poverty Inequality Indonesia

INTRODUCTION Geopolitics and geostrategy Indonesia is in the middle area of strategic and dynamic and is in the scope of the ASEAN region which became the center of the economies of the developing countries whose economies are developed such as China India the countries of Latin America Russia Central Europe and a number countries in Asia Besides the geopolitical and geostrategic considerations Indonesia is a country with great natural resources and has the largest population and the worlds 4th largest population to 1 in the ASEAN region In the implementation of development the necessary co-operation with other countries One form of cooperation is an agreement of cooperation in economy through trade The concept of free trade in general intended to improve the welfare of the countries involved Some forms of cooperation agreement free trade by Indonesia both bilateral and multilateral including the ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand Free Trade Agreement (FTA) ASEAN-South Korea Free Trade Agreement (FTA) Indonesia-Japan Partnership Agreement and the Asean Economic Community (AEC)

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Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

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which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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Asean Economic Community (AEC) is a cooperation agreement between the member countries of ASEAN Asean Economic Community (AEC) has been agreed by ASEAN member countries in the Bali Concord II in 2003 Asean Economic Community (AEC) is one of the goals of regional economic integration by 2015 Asean Economic Community (AEC) is on the agenda along with ASEAN countries with the aim of making ASEAN as 1) Single Market and Production Base 2) Highly Competitive Economic Region 3) A Region of Equitable Economic Development 4) Integration into the Global Economy (Jayant 2015) This collaboration is an opportunity for Indonesia to boost economic growth Economic integration through the opening and formation of larger markets drive increased efficiency and competitiveness as well as the opening of employment opportunities Indonesias ability to capture these opportunities are influenced by many factors such as economic stability in the country and abroad Global economic developments influence on the economy of Indonesia In recent years after experiencing a crisis severe enough the economy of the United States in mid-2014 began to improve However the economies of some other developed countries have not shown sufficient improvement Euro Area recovery is still slow economic growth in China continued to decline and the Japanese economy is still in recession In the same period the decline in world demand was followed by a decline in international commodity prices including oil prices were down sharply Indonesias economy is also faced with the increasingly difficult world liquidity in line with policy reductioncessation of bond purchases (tapering off) conducted by the Central Bank of the United States With this development in 2014 the global economy grew only 34 percent (OECD 2015) Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter Slowing global economy in the second quarter 2015 was driven by lower commodity prices in the international market and the uncertainty of the US fed funds rate (httpwwwcnnindonesiacom) The global economic slowdown may impact on the purchasing power and prosperity If this takes place in the long term will increase poverty and inequalities in income distribution Poverty and inequality in Indonesia is one of the issues that must be addressed Although the trend of poverty each year in Indonesia tends to decrease the amount of poverty is relatively high In September 2014 the number of poor people in Indonesia reached 2773 million or by 1096 Meanwhile if the review of the income distribution inequality of income distribution in Indonesia tends to increase In the 1999 Indonesian Gini index of 031 and in 2014 Indonesia Gini index of 041 Increased domestic industrial sector is important in overcoming the economic slowdown there Manufacturing industry sector make a major contribution to the economy During the period 2000-2014 this sector contributed to GDP average of 2644 per year Another sector that has contributed greatly to Indonesias GDP is agriculture livestock forestry and fisheries Year period 2000-2014 this sector contributed an average of 1465 per year In addition to providing a high contribution to the GDP of Indonesia this sector is also a sector

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which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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which absorbs the highest labor In February 2015 this sector to absorb labor force amounted to 4012 million people Based on the above background the necessary strategies to increase the industry sector (Manufacturing Industry Sector and Agriculture Livestock Forestry and Fishery Sector) to boost the economy in Indonesia With the economic recovery is expected to increase purchasing power and welfare of the people who ultimately reduce poverty and equitable development on the other hand is expected to reduce inequality in Indonesia LITERATURE REVIEW Economic Structure The economic structure is used to indicate the composition of the economic sectors in an economy The dominant sectors are unreliable or have a top position in the structure and characteristic of an economy What is meant by the dominant economic sector or sectors of the economy that relied is the source of livelihood of the majority of the population as well as being the largest absorber of labor The dominant economic sector or reliably it can also mean a sector that contributed most to the national product with a high growth rate which is characteristic of an economy Two kinds of economic structure namely (1) The agrarian structure economic structure is dominated by the agricultural sector

Agriculture as a source of livelihood of the vast majority of the population In general developing countries including Indonesia called an agricultural country and countries including undeveloped countries where agriculture is still very traditionally considered a traditional agricultural country

(2) The structure of industry where the economic structure is dominated by the industrial sector The vast majority of donated domestic product and economic growth stayed contributed by the industrial sector Countries the United States Germany Britain France Italy Japan and Canada which includes the advanced industrial countries European countries and other countries including industrialized countries

Industry and Industrialization The industrial sector is believed to be a sector that can lead other sectors in an economy towards progress Products industrialization always have high terms of trade or more profitable and then to create greater added value than the products of other sectors This is because the industrial sector has a very diverse and capable of providing a high marginal benefits to the wearer seta provide margin profit more interesting Therefore industrialization is considered as a panacea to solve the problem of economic development in developing countries Industrialization Strategy In economic theory there are two kinds of patterns of strategy that can be used in carrying out a process of industrialization which is a strategy Import Subtitution (SI) which is often referred to as inward-looking strategy or orientation into the strategy and export promotion (PE) which often outwardlooking called the strategy outward orientation SI strategy more emphasis on the development of the domestic market-oriented industries

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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while the PE into the international market SI strategy based on the idea that the high economic growth rate can be achieved by developing domestic industries that produce import substitute goods While the PE strategy is based on the premise that a high rate of economic growth can only be realized if the products are made domestically sold on the export market Thus in contrast to SI strategy the strategy of PE there is no discrimination provision of incentives and other facilities from the government both for industries oriented to the domestic market as well as industries oriented to export markets (Tambunan 2001) Strategic Priorities for Agriculture and Rural Development in Indonesia Pro-poor growth and rural development and the Vision for Rural Indonesia in 2020 described in the previous chapter will require concerted efforts across a wide range of areas To increase effective incomes and food demand and availability agricultural productivity and economic growth must be broad based and rapid and investments must be made in physical infrastructure like roads and irrigation and in agricultural research and extension Governance and civil society human resources and entrepreneurship and education and health must all improve Environmental and natural resource policies must be strengthened and enforced for the results to be sustained over the long term (ADB 2006) METHODS The method used in this study is a descriptive analysis that describes and analyzes the development of industrial sectors to reduce poverty and inequality in Indonesia data collection techniques in this study using the method of documentation The data used is secondary data sourced from books literature journals reports and official information of state institutions and accessed via the Internet RESULTS AND DISCUSSION Economic Growth and per Capita Income Asean Countries GDP is defined as the total market value of all final goods and services produced within a country in a given period It includes private and public consumption private and public investment and exports less imports GDP is the most commonly used measure of economic activity and serves as a good indicator to track the economic health of a country Economic growth (GDP growth) refers to the percent change in real GDP which corrects the nominal GDP figure for inflation Real GDP is therefore also referred to as inflation-adjusted GDP or GDP in constant prices The next GDP per capita stands for Gross Domestic Product (GDP) per capita (per person) Per capita GDP is typically expressed in local current currency local constant currency or a standard unit of currency in international markets such as the US dollar (USD) GDP per capita is an important indicator of economic performance and a useful unit to make cross-county comparisons of average living standards and economic wellbeing However GDP per capita is not a measure of personal income and using it for cross-country comparisons also has some known weaknesses In particular GDP per capita does not take into account income distribution in a country In addition cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often donrsquot reflect the purchasing power in the countries being

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

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high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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compared (httpwwwfocus-economicscom) Average economic growth and the average GDP Per Capita in US Dollars (USD) ASEAN countries in 2010-2014 are shown in Figure 1 Source httpwwwfocus-economicscom

Figure 1 Average Economic Growth and per Capita Income Asean Countries 2010-2014

Figure 1 shows the average economic growth and per capita income average of ASEAN countries in 2010-2014 In terms of economic growth in each country it is known that the three countries had an average of higher economic growth compared with other countries The three countries are Laos (825) Cambodia (695) and Myanmar (690) In addition to having an average of high economic growth the countrys economic growth trend is likely to increase in each year While the two countries have averaged economic growth is low (below average economic growth of ASEAN countries namely 564) is the state of Thailand (360) and Brunei (056) In addition to having an average of low economic growth the trend of the countrys economic growth tends to decline In 2010 Thailand had economic growth of 78 and in 2014 had economic growth of 07 Furthermore Brunei in 2010 had economic growth of 26 and in 2014 had a negative economic growth of -23 The high economic growth in a country is not always accompanied by high per capita income Brunei has a low economic growth but have a per capita income is very high (US $ 43240) Laos Cambodia and Myanmar has a high economic growth but has a low per capita income The World Bank classifies countries in the world based on the level of per capita income (1) Low income economies Low-income countries that have a per capita GNP of le US $ 520 (2) Lower-middle economies Countries with middle to lower incomes who have a per capita GNP of US $ 521-US $ 1740 (3) Middle economies Middle-income countries that have a GNP per capita of US $ 1741-US $ 2990 (4) Upper-middle economies High middle-income countries which have a per capita GNP of US $ 2991-US $ 4870 (5) High income economies Countries with high income who have a per capita GNP of US $ 4871-US $ 25480 or more

Series1 Laos 825

Series1 Cambodia

695

Series1 Myanmar

690Series1

Singapore 642

Series1 Philippines

626 Series1 Vietnam 584

Series1 Malaysia 578

Series1 Indonesia

578

Series1 Thailand 360

Series1 Brunei 056

Average Economic GrowthSeries1

Singapore 53376

Series1 Brunei 4324

Series1 Malaysia

9979 Series1 Thailand

5276

Series1 Indonesia

3572

Series1 Philippines

2561

Series1 Vietnam

1644Series1 Laos

1365

Series1 Myanmar

1111

Series1 Cambodia

0904

Average GDP Per Capita in US Dollars (USD)

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

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2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

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The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

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well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

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increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

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382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

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Based on these groupings countries with high income (High income economies) are Singapore and Brunei Malaysia and Thailand High middle-income countries (Upper-middle economies) is Indonesia Middle-income countries (Middle economies) is the Philippines Countries with lower-middle income (Lower-middle economies) is Vietnam Laos Myanmar and Cambodia Based on per capita income data it can be said that Singapore and Brunei is the countrys most prosperous compared to other ASEAN countries However the high per capita income should also be in line with the uneven distribution of income Indonesian Economic Growth Figure 2 shows the Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (billion Rupiahs) in 2001-2014 Figure 2 shows that during the period 2001 to 2014 economic growth in Indonesia has fluctuated However the trend of economic growth in Indonesia tends to increase The average economic growth in Indonesia reached 542 per year In 2008 the world economy rocked by the global crisis but it is not affecting the economic growth of Indonesia Economic growth does not decline significantly Indonesias economic growth in 2008 was recorded at 601 with the rate of inflation increased by 1106 The impact of the global crisis is felt in 2009 economic growth in Indonesia experienced a larger decrease compared to the decline in economic growth that occurred in 2008 In 2009 economic growth was recorded at 463 or decreased by 138 from the previous year With the improvement in the national economy Indonesias economic growth began to increase in 2010 until 2011 Indonesias economic performance again decreased in the last three years the trend of Indonesian economic growth tends to decline Indonesian economy in 2015 is still affected by the global economic slowdown Indonesias economic growth in the first quarter amounted to 471 (y-o-y) lower than the fourth quarter of 2014 amounted to 501 (y-o-y) In the second quarter economic growth in Indonesia amounted to 467 (q-to-q) lower than the previous quarter In terms of exports a decline in export value of Indonesia Indonesias export value in July 2015 reached US $ 1141 billion down 1923 compared with the same month the previous year (y-o-y) as well as when compared to June 2015 exports fell 1553 The value of non-oil exports in July 2015 amounted to US $ 999 billion down 1723 compared to June 2015 Exports of non-oil exports of oil and gas in July 2015 reached US $ 142 billion down 126 over the previous month By sector non-oil exports of manufactured products from January to July 2015 fell by 765 compared to non-oil exports of manufactured products to the same period in 2014 and non-oil exports and other mining products fell 884 while non-oil exports of agricultural products rose 002 (BPS 2015)

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Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

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Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

375

Figure 2 Growth Rate of Gross Domestic Product at 2000 Constant Market Prices by Industrial Origin (percent) 2011ndash2014

Economic growth by industrial origin tends to fluctuate Most sectors experienced a decline in growth business fields since 2012 until the second quarter of 2015 Sector which had an average of the highest economic growth in the transport and communication sector (1205 per year) while the sector had an average of the lowest economic growth is Mining and Quarrying sector (112 per year) and even this sector experienced negative economic growth (022) in 2014 this sector has an average economic growth below the average GDP and two other sectors namely Agriculture livestock Forestry and Fishery sector (350 per year) and the Manufacturing Industry sector (479 per year) Indonesian Economic Structure Economic structures can be interpreted as the composition of the role of each sector in the economy The condition of Indonesias economic structure can be seen through the contribution of each economic sector to the GDP Figure 3 shows a Percentage Distribution of Gross Domestic Product at Current Market Prices by Industrial Origin 2000-2014 The three sectors that provide the greatest contribution to the GDP of Indonesia is the Manufacturing Industry sector (2657 per year) Trade Hotel and Restaurant sector (1502 per year) and the Agriculture Livestock Forestry and Fishery sectors (14 56 per year) While the sector that contributes the smallest is the Electricity Gas and Water Supply sector (082 per year) Trend contribution of each sector to GDP is relatively stable Contributions Manufacturing Industry sector Agriculture Livestock Forestry and Fishery Mining and Quarrying sector and sectors tended to decrease in recent years

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas and WaterSupply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estate andBusiness Services

Services

Gross Domestic Product

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

376

Source httpwwwbpsgoid

Figure 3 Percentage Distribution of Gross Domestic Product at Current Market Prices by

Industrial Origin 2000ndash2014 Poverty and Inequality in Indonesia Results from various studies have found that economic growth would increase per capita income and eventually will lead to poverty reduction The view that economic growth can reduce poverty originally based on the theory trikle down effect that mention the part that trickle down from the rich to the poor High economic growth will increase the capacity of the economy creating new jobs increasing income per capita (mean reducing poverty) raising demand and supply and so rotates to follow the mechanisms of the economy An economy is said to be pro-poor if such growth can reduce the existing imbalances This means that the benefits of such growth can be enjoyed disproportionately by the poor more than the non-poor The economic policy of a country should be prepared for a more pro-growth pro-jobs and pro-poor (Maipita 2014) Poverty and Inequality remains a problem in development in Indonesia High economic growth has been accompanied by a decrease in poverty but has not been accompanied by an equitable distribution of income This is indicated by the gap widening income distribution Figure 4 shows the Percentage of Poor and Gini Index in Indonesia Trend poverty in Indonesia in 2000-2014 tended to decrease However this figure is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) The number of poor people is strongly influenced by the poverty line because the poor are the people who have -rata average expenditure per capita per month below the poverty line During the period March 2014-September 2014 poverty line rose by 317 percent from Rp 302 735 - per capita per month in March

Agriculture LivestockForestry and Fishery

Mining and Quarrying

Manufacturing Industry

Electricity Gas andWater Supply

Construction

Trade Hotel andRestaurant

Transport andCommunication

Financial Real Estateand Business Services

Services

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

377

2014 to Rp312328 - per capita per month in September 2014 Poverty Line (GK) consists of Food Poverty Line (FPL) and Non-Food Poverty Line (GKBM) GKM role for GK very dominant reaching 7347 percent in September 2014 Poverty is not just a question of how the number and percentage of poor people Another dimension to consider is the depth and severity of poverty In addition to efforts to reduce the number of poor poverty reduction policy is also related to how to reduce the depth and severity of poverty Poverty depth index value and Severity Index Poverty in rural areas is relatively higher than the value of the index in urban areas In September 2014 the value index Depth of Poverty in urban areas is only 125 whereas in rural areas reached 225 For Poverty Severity Index values in urban areas is only 031 while in the rural areas reached 057 The level of income inequality is one aspect of poverty that need to be considered as essentially the level of income inequality is a measure of relative poverty The size is most often used in measuring the level of income inequality is the Gini ratio Figure 4 shows the trend of the Gini ratio of Indonesia in 1999-2014 increasing In 1999 Indonesia gini ratio of 031 and in 2014 to 041 Since 2011-2014 gini ratio is relatively unchanged amounting to 041 Gini ratio is relatively higher in urban areas (036 per year) compared with the Gini ratio in rural areas (029 per year) This phenomenon shows that the Indonesian economy has not fully pro-poor due to high economic growth have not been able to reduce the gap in income distribution Economic growth and inequality have a positive correlation the higher the economic growth lacks the increase in inequality

Source httpwwwbpsgoid

Figure 4 The Percentage of Poor and Gini Index in Indonesia

The

Per

cen

tage

of

Po

or

Gin

i In

dex

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

378

The role and Direction of manufacturing industry in Indonesia Industrial sector is one sector which plays an important role in national development Industrial sectors contribution to national development over the years showed a significant contribution Since 2001-2014 Manufacturing Industry sector provided the largest contribution to GDP (2657 per year) when compared with other sectors The role of manufacturing industry sector in national economic development can be seen from the contribution of each subsector to GDP Non-Oil and Gas Manufacturing Industry contributes a high (2267 per year) while Oil and Gas Manufacturing Industry contributed 390 per year Throughout 2014 the manufacturing industry grew 486 growing sub-sector namely food and beverage industry The Ministry of Industry is targeting growth of manufacturing industry in 2015 amounted to 61 with the largest contributor sectors namely food and beverages It is important to support the growth of industry in Indonesia namely the supply of energy at a low price and supporting infrastructure In the 2015-2019 Development Plan the government plans to increase the number of large and medium industries by 9 thousand units in the next five years with a workforce that is absorbed around 3 million people Of these 50 were directed to grow outside of Java Small industry is also planned to increase to 20 thousand units during 2015-2019 Manufacturing industry sector in addition to providing a huge contribution to the Indonesian economy this sector also employs many workers and cenedrung increased in each year In February 2015 this sector employment for 1638 million people With the development of this sector is expected to absorb more labor Increased employment will reduce unemployment increase the purchasing power and reduce the level of poverty in Indonesia It is important to support the growth of industry in Indonesia include 1) Provision of Energy

The issue of the availability of energy to accelerate the current economic development increasingly dominates the public debate If in the period before the construction of the availability of energy especially oil and gas have been linked with activities of public consumption but along with the growth of the Indonesian economy the issue of energy security is increasingly showing its role in the Indonesian economy The energy sector has a considerable contribution in the economy such as meeting the needs of industry and fuel for transportation National energy condition is the high dependence on fossil fuels (oil coal and gas) besides Indonesia also became a net oil importer since 2003 To meet the high demand for energy in the country should be developed especially in the renewable energy industry and the development of sustainable national development

2) Increased Productivity and Infrastructure Industry policy aimed at improving the competitiveness of national industry through diversification of products and markets in order to increase exports Industrial policy geared to improve the competitiveness of national industry through diversification of products and markets in order to increase exports transformation industries based on comparative advantage (of the industry based on cheap labor and natural resources) towards productivity-based industries are supported by qualified human resources as

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

379

well as science and high technology The continuity of the development of the industry is also affected by the availability of reliable and adequate infrastructure

3) Development of Industrial Area With the development of industrial areas will prevent the concentration of industrial estate development only in certain places only So it needs to be regulated a) The provisions of the boundaries of each region industry b) The provisions on the criteria industrial area c) mapping centers of industry in each region industrial clusters

4) Addition of Industry and Equitable Distribution of Population Gaps economic concentration occurs in the territory of Indonesia It can be seen from the GDP contribution of the region to the national GDP Java and Sumatra is an area that the largest contribution to GDP Indonesia In 2014 Java had the highest contribution to GDP (5738) subsequently Sumatra (2317) and the remaining 1945 came from the island of Borneo Sulawesi Bali Nusa Tenggara Maluku and Papua The amount of revenue contribution of Java and Sumatra indicated by the level of development of economic activity in the islands of Java and Sumatra is much more advanced compared to regions outside of Java and Sumatra Economic development in Java and Sumatra dominated by secondary and tertiary sectors are growing relatively fast and more oriented to the processing industry and manufacturing and services As for the development of economic activities outside Java and Sumatra is still dominated by the primary sector namely agriculture and mining while for the secondary and tertiary sector growth is relatively slow With the addition of industry population and equitable distribution of industry in the region will be able to reduce the gap of economic development in Indonesia

The Role and Direction of Agriculture Livestock Forestry and Fishery sector in Indonesia Agriculture Livestock Forestry and Fishery sector is a very important sector in the economy of Indonesia A change in the economic structure of Indonesia from agriculture livestock forestry and fishery sector to the manufacturing industry sector since the new order until now In 1970 the gross value added of agriculture livestock forestry and fishery sector contributes about 45 of GDP in the 1990s contributed approximately 16 to 20 and in 2014 only gave a contribution of 1433 While the manufacturing industry sector contribution to GDP reached 2371 This reflects that the national economy experienced a structural change in three decades The smaller the contribution of agriculture livestock forestry and fishery sector to GDP compared to sectors other non-primary economy it does not mean the volume in agriculture livestock forestry and fishery sector tends to decrease The decline was caused by the growth rate of output (average per year or total growth) Year 2001-2014 agriculture livestock forestry and fishery sector had an average growth of 350 per year is relatively lower than the growth rate of output from manufacturing industry sector (479 per year) and relatively lower than national output growth rate (542 per year) Although there has been a change in the structure of the Indonesian economy from agriculture livestock forestry and fishery sector to the manufacturing industry sector the

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

380

increase in agriculture livestock forestry and fishery sector needs to be done because it is directly or indirectly will affect other sectors of the economy Some of the reasons have to be improved agriculture livestock forestry and fishery sectors among others a) Potential Natural Resources

Indonesia is one country with a wealth of diverse natural resources spread across Indonesia rich in land soil fertility and climate that supports the products of agriculture livestock forestry and fishery qualified and able to compete in the free market Management of natural resources must also be accompanied by the concept of sustainable economic development with sustainability and environmental damage and improving the quality of human resources in the engineering and management of modern agriculture

b) Fueling Economic Growth Agriculture livestock forestry and fishery sector to be one important element for economic growth in Indonesia Although this sector is not a sector is the largest contributor to GDP but the sector remains the backbone of Indonesian economy and become one of the mainstay export in the country of Indonesia and became one foreign exchange earner in each year

c) Population Great and Adsorbed on Agriculture Livestock Forestry and Fishery Sector Indonesia is one country with the fourth largest population in the world after the state-level China India and the United States and ranked first in the ASEAN level Based on a report released by the Central Statistics Agency (BPS) the population of Indonesia Year 2014 amounted to 2521648 thousand people The contribution of agriculture livestock forestry and fishery sector to Gross Domestic Product (GDP) of Indonesia tended to decrease while the majority of the Indonesian population is still in rural areas and depend revenue from the agricultural sector Employment in this sector in February 2015 was very high reaching 4012 million In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) With the development of agriculture livestock forestry and fishery sector is expected to reduce poverty and income distribution more equitable especially between rural and urban communities

Development of agriculture livestock forestry and fishery sector can be done through 1) Revitalization of Agriculture Food and Agriculture Commerce

In order for the development of the agricultural sector is not lagging behind from the manufacturing industry sector and other sectors particularly agricultural food then directed to the realization of self-sufficiency and food sovereignty are supported by agricultural mechanization and large-scale agriculture Large-scale agriculture is geared to meet the domestic needs and produce products that are highly competitive in the global market Downstream industry development of large-scale agricultural products needs to be done to obtain greater added value

2) Increased Production and Productivity Horticulture Food Compliance Livestock and Agribusiness Increased agricultural production fisheries and animal husbandry aims to meet domestic food needs in addition to the increase in production is directed to the fulfillment of export to abroad Diversification of agricultural products with the use of

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

381

high technology can improve product competitiveness in the global market Food consumption of livestock production in Indonesia is quite high Results of livestock production in the country has not been able to meet the needs of the entire population So that Indonesia is one country that has a dependency on meat Increased production of livestock farms in the fulfillment of food needs to be done so that domestic production can meet the needs of the entire population or reduce import dependency

3) Provision of Facilities and Infrastructure Agriculture Increased agricultural production will be effective with the provision of agricultural infrastructure Through the provision of facilities and infrastructure tools agricultural machinery and technology according to the needs of farmers will be able to increase agricultural production through the development of food security in the context of diversification of food resources and the application of appropriate technology

4) Development of Small Scale Farmers Need to develop farmer groups MSMEs (Micro Small and Medium Enterprises) and cooperatives are growing rapidly especially in rural areas With this concept the region will grow and thrive because of the passage of the system and agribusiness and able to serve pushing and pulling of agricultural development in the surrounding region Development of small-scale farmers can be done through courses training of farmers in the fields of farming the ease of obtaining access to credit ease in obtaining seeds and fertilizers at low prices until the marketing of agricultural products internships and study visits In the development of small-scale farmers it is necessary to optimize the role of government officials in the field companion

CONCLUSION The development of industry through the manufacturing industry sector and agriculture livestock forestry and fishery sector is very important in improving the economy of Indonesia In addition to providing a high contribution to GDP these two sectors absorb the labor very high reached 5650 million people The poverty rate in Indonesia is still relatively high In September 2014 the number of poor people in Indonesia reached 2773 million people or by (1096) Relative poverty is higher in rural areas (1376) when compared with the poverty in urban areas (816) Furthermore the increasing trend of income distribution (the higher the gap) The development of manufacturing industry sector and agriculture livestock forestry and fishery sector is expected to increase employment improve peoples purchasing power and ultimately will reduce poverty and equality The development of manufacturing industry sector through (a) the provision of energy (b) increased productivity and infrastructure (c) the development of industrial areas and (d) the addition of industrial and equitable distribution of the population Further development of agriculture livestock forestry and fishery sector through (a) revitalization of agriculture food and agricultural trade (b) an increase in production and productivity of horticulture the fulfillment of food livestock and agribusiness (c) provision of agricultural infrastructure and (d) development of small-scale farmers

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia

Transforming Business in Emerging Markets

382

REFERENCES Asian Development Bank (2006) Indonesia Strategic Vision for Agriculture and Rural

Development Philippines ADB Asian Development Bank (2015) Economic Growth ndash Focus Economic httpwwwfocus-

economicscomEconomic-Indicatorgdp (12 September 2015) Badan Pusat Statistik (2014) Foreign Trade Statistical Bulletin Eksports Katalog BPS

8202002 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2014) Statistical Yearbook of Indonesia 2014 Katalog BPS 1101001

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Bulanan Data Sosial Ekonomi Katalog BPS 9199017

Edisi 64 September 2015 Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Laporan Perekonomian Indonesia2015 Katalog BPS 9199007

Jakarta BPS Jakarta Indonesia Badan Pusat Statistik (2015) Produk Domestik Bruto (Lapangan Usaha)

httpwwwbpsgoidSubjekviewid52subjekViewTab3|accordion-daftar-subjek2 (15 September 2015)

Badan Pusat Statistik (2015) Kemiskinan httpwwwbpsgoidSubjekviewid23subjek ViewTab3|accordionndashdaftar-subjek1 (15 September 2015)

Focus Economies (2015) GDP and GDP Per Capita httpwwwfocus-economicscomeconomic-indicatorgdp-per-capita (12 September 2015)

Jayant Menon and Anna Cassandra Melendez (2015) Realizing an ASEAN Economic Community Progress and Remaining Challenges Philippines ADB Economics Working Paper Series No 432

Maipita Indra (2014) Mengukur Kemiskinan amp Distribusi Pendapatan Yogyakarta UPP STIM YKPN

OECD (2015) Survey Ekonomi OECD Indonesia 2015 OECD Publishing Sari Elisa Valenta (2015) Pertumbuhan Ekonomi Indonesia Melambat ke Level 467 Persen

httpwwwcnnindonesiacom ekonomi 20150805114222 ndash 92 - 70171 pertumbuhan ndash ekonomi ndash indonesia ndash melambat ndash ke ndash level ndash 467 ndash persen (10 September 2015)

Tambunan Tulus (2001) Industrialisasi di Negara Sedang Berkembang Kasus Indonesia Cetakan pertama Jakarta Ghalia