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Regional Development Generates National Development

By Rustan A.

(PKP2A III LAN Samarinda-East Kalimantan)

The major engines of economic activity in the global economy are not nations, but regions; or

in other words regions are the center of growth1. One of the main ideas expressed by Ohmae

is completely relevant to answer one of the economics primary issues that is: where do

economic activities should be carried out? And the solid answer must be in regions. The role

of regions is increasingly important since regions are capable of making policies that are

more spatial than the central government, which is more macro level. As a result, decisions at

local level can be set up better, especially in terms of equitable development, strengthening

the superior sectors, and job opportunities2. However, it does not indicate the role of central

government is no longer needed, mainly if it associated with the context of Indonesia which

is still implementing similar/ symmetric decentralization.

Regions become key player in national development fully as a consequence of globalization

and modernization. These circumstances have changed the structure and how economic

activity works. Ohmae even said that global stage is borderless. This idea quite relevant

because of advancement in technology, communication, and transportation has made region

and country can exchange of information, goods, services, financial, and even human capital

without long and complicated mechanism. The existence of free trade zone is also taking part

from that borderless transformation, that welcome global trade and investment. Free trade

was defined as freedom in four vital factors, namely freedom of movement of goods, of

people, of capital, and of freedom of establishment without discrimination. However,

borderless world bring uncertainties, for example, the implementation of AFTA in Indonesia

that gives two sides impact to regional context (where the direct economy activities occur);

on one hand this will stimulate competition and improve the quality of the local economy in

against global economy, but the other side, the regions are not ready to compete will shut

down the local economy without any advantages. Therefore, efforts to prepare regions to

have high competitiveness and successful region are needed.

Through the concept of market preserving federalism that encourage economic competition

among regions, regional economic development can be optimized3. Interestingly, industries

and service provider attracted to prosperous regions. However, a region does not have to be

prosperous before it can become rich4. Actually, central government has a duty to taking care

all regions equally and not just let few regions prosperous while most of the others left behind

and poor. In short, it is central government role to assist regions in maximizing the local

competitiveness and innovation to attract more investments. It is a requirement for any region

in Indonesia to improve the competitiveness, because in total it is needed for the

improvement of national competitiveness in the middle of high demand for a globally

competitive5. It begins with the preparation of human capacity and mapping potential sectors

1 Ohmae, Kenichi., 2005. The Next Global Stage: Challenges and Opportunities in Our Borderless World.

Wharton School Publishing 2 Tarigan, 2005. Ekonomi Regional:Teori dan Aplikasi.Bumi Aksara:Jakarta

3 Sato (2004) Quoted by Brodjonegoro (2006) : Desentralisasi sebagai Kebijakan Fundamental untuk

Mendorong Pertumbuhan Ekonomi Nasional dan Mengurangi Kesenjangan Antar Daerah di Indonesia 4 Ohmae, Kenichi (2005)

5 PPSK BI-FE UNPAD (2008): Profil dan Pemetaan Daya Saing Ekonomi Daerah di Indonesia

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in the regions, which create pools of specialized skill, technology, input, and infrastructure.

While innovation sides could be performed throughout local rules that provide ease of doing

business in the regions and tax incentives for investors. It is the ability of regions to do

something distinctive and unique with the inputs they have, and a region must continually

upgrade itself, become more sophisticated in how it competes, move to higher levels of skill

and technology to continually improve the quality of the service and the features that are

provided in the region's product base. Otherwise, it will always be vulnerable to being beaten

by other locations in the country and in the world that have lower wages6. The final result of

all this efforts is the growing number of prosperous regions that support the national welfare.

National development is aggregate or accumulation from regional development. This fit the

framework of the GNP as an accumulation of GDP, though it cannot be used to generalize the

prosperous of all regions. In Indonesia case, approximately 60 % of GNP is contributed only

by Jawa and Bali, and the others only play a minor role, which means that GNP fail to take

account the reality of all regions. Ohmae called this evidence as the obsolete of nation-state.

As a center of growth and the direct economy activities occur, it is relevant to give more

attention to boost up regional performance than GNP. Realizing this circumstance (in the

context of Indonesia) striking differences in the development of western Indonesia and

eastern Indonesia or between developed region and lagged region are trying to be solved

through decentralization. Decentralization means regions are considered more suitable to

determine, plan, and implement development plan in the regions; which up to a point, regions

can catch up higher economic performance equally. Along with decentralization, regions and

even with other countries can easily make agreement and cooperation, transfer of goods,

services, financial, and technology. As a result, the spread effect of advancement of other

regions/ countries can be shared out. This is support the idea that regions are the fundamental

economic player and obsolete role of nation-state. Nevertheless, it is not true for Indonesia

for certain extent. As a republic country, one thing that should be pointed out is agreement

and collaboration between countries and regions must involve the role of central government.

On the whole, by strengthening the regional development through decentralization is a key

element in the advancement of the regions to compete globally. Government has to create an

environment that foster innovation and local quality. Still, the regulation and control of the

central government is required in order to maintain economic stability and national

development strategies on the appropriate track.

6 Porter. 1995. Regional Specialities. Industry Week 244.6 March 20,1995.