THE IMPACT OF PUBLIC INVESTMENT AT THE HUMAN RESOURCES

ON THE ECONOMIC, SOCIAL AND ENVIRONMENTAL ASPECTS

Dr. Ardi Novraand

Dr. M. Ridwansyah

(Case Study Kerinci Seblat National Park)

The Third Internasional Conference on Quantitative

Methods used in Economic and Business (3rd ICQMEB)

2010

Fakultas Ekonomi Universitas Malahayati, Lampung. Tanggal 16-18 Juni 2010

INTRODUCTION

The development oriented to find out the higher Economic Growth and Regional Native Revenue

PROBLEM TO IMPELEMENTED

The State Law of Indonesian article 33 (4) UUD 1945 by UU No. 33/2004 have been recommended that the 20% of the public budget to financing of the education sector.

Routine(RGE)

Development (DGE)

Imbalanced of LGE (local government expenditure)

In the developing country likely Indonesia, the negative impact of the economic growth oriented will be primary factor to degradation of the environmental (Bunasor, 2001).

Implication

The weakness of the supporting to accelerate the development.

Natural Resources Exploitation

We know

THE RESEARCH OBJECTIVE AND BENEFIT

OBJECTIVE

to analyze the impact of the local governmentexpenditure at the human resources on the social,economic and environmental aspect in the regencyaround the Kerinci Seblat National Park (KSNP).

BENEFIT

we can justified that the local government expenditure structure to achieve ofthe regional sustainable development (RSD).

Empirical Evidence of the LGE Policies

The LGE using to finance the routine (RGE) and development (DGE) activities whobased on the regional financial statistic divided onto 21 sectors

Figure 1. The direct and indirect effects of the change of the sector allocation atDGEs on social, economic and ecology aspect.

An the research will be aggregated onto 10 sectors were;1. Regional development (RDA), 2. Research and development (R&D), 3. Transportation (TRA), 4. Industry and business (IBA), 5. Water resources (WRA), 6. Agricultural (AGA), 7. Small and medium business (SBA)8. Human resources (HRA), 9. Social welfare (SWA), and 10. The other sector (OSA).

The Structure of LGEs

The regional economic progress can be divided onto three periods were1. centralization before economic crisis (1994–97),2. centralization post crisis period (1998– 2000), and3. Decentralization period (2001–recently).

The figure 2, show that1. Although the value of the DGE will be

increase but the trend of the DGE allocationespecially human resources (HRA) sector isdecline because the growth of the DGE valueslower than RGE.

2. This variation of HRA among the region willbe indicating of the different paradigmamong the local government.

3. The full authorities to design expenditureand declining trend of the DGEs on thetherefore can be influence of the regionaldevelopment.

The Impact of the LGEs Structure Trend

Table 1. The Evaluation Result of the Crisis and DecentralizationImpact (%)

Implemented of the fiscal decentralization policies able to increase the growth ofoutput but no able to improve declined of the growth on the crisis period.

IMPLICATION;• Incapability of the economic to

supplied the job opportunities(unemployment rate increasing).

•Higher gap of the agricultural andnon-agricultural sector

•Rising pressure to natural resources(increasing of the the deforestationand degradation at the buffer zoneand national park)

Variation among regions show that different perception the benefit from buffer zone(Jambi want to protect and the others want to get economic benefit)Implication the rate of forest degradation in Bengkulu and West Sumatera higherthan Jambi Region.

Analytical Framework and Research Methodology

This research survey using the pooling data was combined the cross section data at 3regions (Bengkulu, Jambi and West Sumatera) and time series data (1994 – 2003).

The econometric model in the research divided onto 7 blocks within 58 behaviorequation and 8 identities equation.

Figure 2The Equation Model, Estimate Methods and Stage to Find Out the LGEs Sustainable Model

The impact of the public policiessimulation divided onto histories(STEPARD METHOD) and forecasting(REGRESSION METHODS)

This value will be used to forecast the impact on the endogenous variable on thenext years using the regression methods.The program tools to estimate and simulate used SAS/ETS 6.12.

Result and Discussion

The DGEs trend as long 2007 to 2010 isdecline, especially supporting by decreasethe allocation for transportation sector(TRA) in Bengkulu and West Sumateraregion

What Happen on 2010 if There’s not Any Changes the LGE Allocation

Th

e F

ore

cast

ing

Re

sult

on

20

10

implication

• The economic growth will be declinebecause the high dependency of theregional economic on the agriculturalsector.

• The pressure of the natural resources andso supporting factor the higher of theforest convert and national parkdegradation.

• There is unsustainable economic growthcaused the economic transformation isnot running with perfectly.

The Impact Evaluation of the HRA Allocation

The transmission impact:

The policy not able support to develop the small and medium business where indicated bydeclining of the credit allocation for this sectors (SBC) but only to support increase of theAGC.

Increasing of the HRA without Changes the RGE and DGE Ratio

The first impact:The effort to rise HRA must be substitution from the other sector expenditure likelytransportation (TRA), region development (RDA) and the others sector (OSA) (Table ).

Cont…………..

The Finally Impact on the social, economic and environmental aspect (Table).

The agricultural output portion (ECS) and output per-caput (GDC) will beincrease but the economic growth will be weakness.

The others negative impact of policy was the unemployment rate (UE)increasing and more higher rate of region deforestation and buffer zonedegradation.

The agricultural sector expansion estimate as one of factor to support theforest conversion and the short run will be decline pressure to national park.

This is indicated by declining of the rate of KSNP degradation (KSD) but ifdecreasing the natural resource stock in region and buffer zone forest on thelong run the KSNP will be increasing.

This phenomena show that the rising allocation for human resources withoutre-structure of the RGE and DGE is no good for sustainable development onthe local development.

The RGE Reallocation to Priority Increasing of the HRA Sector

The policy to increase the HRA by 5 and 10% reallocation of the RGE.

The first and transmission impacts reallocation policy to increasing priority of theHRA sector on the others public and private financial (see following Table)

The Public FinancialThe rising of the HRA followed by increaseof the others priorities sector were TRA andRDA

The Private Financial• The investment credit (CIC) especially

on the agricultural sector (AGC) will bedecrease

• The small and business credit (SBC) willbe increase

This regional finance phenomena hoping to accelerate of the economic structuretransformation (labor and output market), and then can be positive impact toothers indicators (see Table)

The finally impact to RSD indicators

The social and economic aspect The labor and output transformation

(decline of the LAS and ECS) can be ableto higher economic growth (ECG) andincome per-caput (GDC)

The higher economic growth can beincrease of the labor demand, and thenthe un-employment rate (UE) will bedecrease.

The impact of low dependency of the agricultural sector, improving of the welfare (GDC)and the higher job opportunities on the environmental or ecologies aspect were:

• The region deforestation rate (RDR) and the KSNP buffer zone degradation (BZD) willbe declining.

• But this condition not able to find out zero degradation of the KSNP, but this trendreasonable to increase reallocation of the RGE.

The LGEs Structure for Sustainable Development

TEMPORARY CONCLUSION

The sectored policy or only focused on the any aspect where is indicated at theLGEs allocation can be find of the opportunity cost or”trade off” among the threeaspect.

The reallocation of the RGE policy to support the human resources developmentis the best result to get the sustainable criteria

but

there policy must be followed the others sectors, especially on the transportationto improve the infrastructure and regional development.

To find out the sustainable development with restructure of the LGEs can be do it by 20% reallocation of the RGEs to increasing the DGEs.

The Values of the Regional Sustainable Development (RSD)

No Reg Value

Indicators Target of the RSDSocials Economies Ecologies

WAP UE LAS ECS ECG GDC RFA BZD KSD

1 BG

Base 64.30 5.06 73.23 44.59 3.16 1.17 39.37 17.82 4.83

Sim 65.28 4.34 72.10 44.05 3.89 1.25 42.06 17.56 4.84

Changes 0.98 -0.72 -1.12 -0.54 0.73 7.06 2.68 -0.26 0.01

2 JM

Base 59.43 3.17 73.62 45.20 3.56 1.17 35.93 8.70 7.43

Sim 60.38 2.47 72.59 44.68 4.30 1.25 38.50 8.51 7.43

Changes 0.96 -0.71 -1.03 -0.52 0.74 7.13 2.57 -0.19 0.00

3 WS

Base 54.84 4.13 66.41 34.90 3.83 1.26 50.81 7.32 7.18

Sim 55.78 3.43 65.45 34.40 4.58 1.34 53.29 7.19 7.18

Changes 0.94 -0.70 -0.95 -0.50 0.75 6.62 2.48 -0.13 0.00

The RSD target indicators were:• rising of the working age participation (WAP), economic growth (ECG) and output

per-caput (GDC), regional forest areas (RFA) and• declining of the unemployment (UE) and proportion of the agricultural labor (LAS)

and output (ECS), buffer zone deforestation (BZD) and• minimize of the KSNP degradation (KSD).

The Structure of the LGEs and Banking Credit Allocation on the RSD

This target reliable if the balances ratiobetween RGEs and DGEs (50:50) and theallocation of the priorities sector areHRA, TRA and RDA

Varieties among the region show that theallocation for HRA not always thebiggest.The biggest LGEs allocation in Bengkuluand Jambi region were HRA, but in WestSumatra was TRA.

This phenomena show that the regional development must be do it simultaneouslyamong the human resources and improving of the transportation infrastructure torise a regional accessibilities

On the private sector there policy must be followed to supporting of the small andmedium business sector especially non-farm business.

CONCLUSION AND POLICY IMPLICATION

CONCLUSION

The regional sustainable development reliable to find if the local governmentable to manage the local public expenditure.

The strategies to improve the development quality can be done by decline ofthe routine expenditure to finance the sectors priorities.

Three sector priorities what can be achieve this target are human resources,transportation and regional development.

POLICIES IMPLICATION

The impact of public investment at HR has a characteristic as the long runeffected and there effectively if supported by another sector.

The ideal of the local government expenditure can be found if thereimplemented the policy to efficient of the RGEs.

The both effectively and efficiently policies at the LGEs, and so optimally theregulated and motivate role of the local government can be order condition toachieve the regional sustainability development.