Re Ni The Interregional Impact of Fiscal Decentralization in Indonesia: Inter Regional Social Accounting Matrix Model Satria Utama, SE Bambang P.S. Brodjonegoro, PhD Keywords: IRSAM, Fiscal Decentralization ABSTRACT Undang-undang 22/0 dan 25/99 telah merubah pola hubungan pusat-daerah di Indoensia dari pola. sentalstik: menjadi Aesentalisis yang efektif berlaku sejak bulan Januari 2001 ‘Lebin jauhpemesinth juga mengeluarkan —Peraturan Pemerinish (PP) yang mengatur lebih detail tentang Keewajiban dan Kewenangan daerah, hutang daerah dan hal Tainnya, | selain beberapa sektor penting. seperti sistem peradilan, agama, keamanan dan hal lain yang masih ditawah {anggung,jawa dan kewenangan pereratah pusat Konsekuensi fangsung dari perubahan ini adalah pemetintah harus mengatur pemerataan dan sustainabilitas anggaran antar For detail dicusion of constructing IRSAM 1990 ee Luky Eko W ryanto, “Fiscal Deentalzation And ‘The Economie Performance In Indovesia: An Intemepional Computable General Equtitcum Approach, uupublished PRD dissertation Regiral Seience Progra at Comell University May 19678 J INDONESIAN JOURNAL OF EcoNORICS AND DevELoPmENT Institutional Accounts In the SAM framework, the factorial income was distributed to the institutional accounts. All of the labor income accrued to house hold in terms of wages and salaries, while the capital income was distributed to household as capital earning and to companies and government as retained profits or undistributed profits, In the case of capital income, this study assumed thet the proportions of capital income that accrue to household st che region level were similar to proportions atthe national level, ‘The total labor and capital income from each micro region are not attributable only to hhouscholds in corresponding micro region because the process of producing 1 unit of commodity, each micro region must utilize input from the other micro regions. To determine the portion of total labor and capital income attributable to households within the region and to household in the other micro regions, information from Multitegional Input-Output table for 1990 was utilized. This approach assumed that the distribution of sectoral factorial income corresponded to each micro region's contribution to production (of | unit of commodity in particular micro region. Government Accounts “These ‘accounts were the central focus of this study. The estimation was intended to portray the prevailing varieties of procedures in goverment budget allocation process. ‘Those accounts were broadly divided into government expenditures for current or routine ‘purposes and govemment expenditures for investment or capital consumption purposes. A differentiation was also made between accounts forthe eentral goverment and for the local government. The term “Government Current Expenditure” includes government budgets for routine purposes and some portion of govemment budgets for development purposes. For ‘estimating account for current government expenditure, information from the government ‘consumption column of the final demand block in the Multiregional UO table for 1990, ‘was utilized directly. However, because that information did not differentiate between the consumption of the central and regional government, some data from the Ministry of Finance concerning sectoral allocation of current government expenditure was utilized to calculate the proportions between the two levels of government, ‘The estimation of goverment investment account was accomplished mainly utiiozed the data of realizatiuon of govemment budget for investment in 1989/90 and 1990/91 fiscal years. This data available from Ministry of Finance and The BAPPENAS (National ‘development Planning Agency) It should be realized that there is classification difference between the terms “sector” in government budget documents and the terms in production activities, some conversion matrix had to be adopted. The matrix ideally would be a result of comprehensive study of every item of expenditure in the government investment activities. Because the approach ‘was considered impractical of the scope of this study a conversion matrix from secondary “For dealled discussion see, Luky Eko Wuryanto, “Fiscal Decentralization and he Exenomie Verformance in Indonesia: An itereginal Conte General Egulibeium Apprash,” unpubishs PRD. Dissertations, Regional Selene Progam at Camel University. May 199%Suri VtnaS din onbang 5. engl xen | 79 type information based on Stavenuiter’s work implemented in department of Man power was employed.* Production Activities ‘The entries for the accounts were transferred directly from the entries in the intermediate demand block of the Multi Regional V/O table for 1990 after the adjustment procedure were done. It should be notes that for some typical SAM formats, entries that are transferred from an input-output table must be formatted in consumer price framework. ‘One main reason for doing so isto have the best representation for the demand structure of the SAM table, which emerging institution account. That only be achieved through ‘incorporating the institution's demand structure in consumer price format. However, there is the difference, in any economy, between the demand structure from producer’ standpoint (supply side) and forma the consumer standpoint (demand side) because of ‘trade and transport constraints. Therefore, the estimated IRSAM must add some account to reconcile the differences. In particular IRSAM framework, the differences were reconciled with the inclusion of separate account called trade and transport margin. (Others Account ‘These accounts include export and import, subsidies to production sectors, indirect taxes, clement of centraVlocal government revenues and expenditures, private investrient, private capital account, government and private borrowing. The export, indirect taxes, Private investment entries were obtained directly from adjusted Multi Regional 1/0 Table. ‘The private investment entries were checked with data conceming private investment realization from National Investment Coordinator Board (BKPM). “Table 2.3 IRSAM 90 102 102 Classification Specs coat Facto Labor Wester Java and akan t Labor Cental ava 3 Labor Easter Java 5 {Labor Suse “4 {Labor Kattan 4“ Labor Sulawesi “a Labor Easter sand st ‘Capital Wester ava ad Inka 2 Capital Comal ta 4 Capital Eastem Java ‘ (Capital Samatera 4s (Capital Katimanan o (Capit Sulawesi ° ‘Capit Easier Ind si Inston Housshold Wester ava and Jakarta 7 Household Coal va 5 Houscold Ease Jv ° Comrie a 0 Household Sumater s Hoaschold Kalimantan 3 Hourehold Sunwes se ousehold Easter nd ss > For farther discussion sce Stan Staventer, “Input Output Analysis for Indonesian Employment Planing,” a summary report, Aprit 1987, depariment of Man Power, UNDP/ILO. The conversion mats tha ty is presented m Appendie C80 | INDONESIAN JoURWAL OF ECONOMICS AND DEVELOPMENT ‘Table 23 SAM 90 102 x 102 Classification, continued ce ie calc ET Aceoe Copa One Tava 36 Local Government Roane Expendiure us ‘eal Government Invextrent in Economic Inastuctre vse ‘Leal GvernmertInvestmentn Socal Ifastctre 59 Local Government lve in Gen Services oes 1400) ‘Cena Goverment Rouine Expense 1st Cestal Goverment ives in Agile 1602 Cental Govern nvesmenin Indy 04 Mining 1163 ‘Cental Goverment invesmen in Enerzy 804 Cental Goverment jvestment Transport sn Tous 1965 Central Goverment Invesent in Education 2086 Central Government fnvestent in Heals aus Cena Goverment jvestent Housing and Water Supp. nas (Cental Goversnent Levent in General Series ae Cental Goverment Investnent ther 2430 ‘Specified Developmen Transfer in Road Improverent 3531 Spesifed Developme Transfer i Primary duane an ‘Specified Developmen Transfer in Heth aes mn | Speed Development Tantra Reforestation 2a Products Food Cros was Aetvity Estate Crops 3076 Lsesock an Ferestry ne Fisheries a9 Mining Saao Food Beverages and Tobacco saat Teale 3482 ‘Wood Production and Comttion ya ape. Met! Produc and aber manuticrng, Bae CChemials, Basie Met. amd non met product sas lect, Gas and Water 03s “rade, Hot! ond Restaurant 4a Tranepriation nd Communication sass Fiance Real sate Pub Adin, And Other Services on Exogenous Trade and Transport Margin %0 ndiet es o Subsidies 2 Lacs Goverment Curent Jaa 2 Loca! Goverment Curent oui ava 8 Local Goverment investment ava 95 Local Goverment vesiment tie Jaa 9% Central Goverment Cent ” {Cental Goverment Iezment & Development Tranter a rivate Capt 10 Restofthe word tot Updating nd Constructing IRSAM 1999 ‘To mect the objectives of the paper as mentioned above we aggregated the IRSAM 102 x 102 sectors into 30 x 30 with two macro region: Java and Outer Island and 7 household ‘micro regions: Wester» Java and Jakarta, Central Java, Eastem Java, Sumatera, Kalimantan Sulawest, and Eastem Island.Setria Vase § don Bambang. , Thelnguct ois Deetatton | 81 “Table 3.1 IRSAM 90 30830 rs Far Prod 2 aw sea 3 HNC va ‘ HE aa 5 Compass ‘ fetionlGoversnet Cunet 7 fein Goversnet vee ® ‘Cena Goverment Curent > Cent Govern vent 0 Agia u Ming 2 Manaicre 8 Ustiies “ Serves 1S OweHAVA Facer Po 6 NowshodSumstera ” Mowehld Kalimantan 4 Howscold Saves ® Hosseol! asm ian 20 Compas 2 Reina Goverment Curet 2 Aion Govemmen vest 2 Cent Govermest Cart ™ ‘Cental Goverment nvsinet 2 -Apiahure % Mining n Manatctre 2” Uses » Serves ee ane In updating the matrices within RAS method, we estimate the account of destination matrix as follows 1. The value of exogenous factors expenditures account estimate from the amount of relum on forcign capital which is transfered to the origin country, the dats om National SAM 1999" was utilized. In terms of income, the value estimate from the ‘eturn on Indonesia investment abroad and wages/salaries obtained by the Indonesian labor (TKI) which is transferred into domestic. The same data from National SAM 1999 (account no. 1-23) was utilized, 2. Value of Exogenous household expenditure is accumulation from: import, savings, indirect taxes. The data of income side estimate from institutional transfer from abroad. The data source is National SAM for 99 (account no.24-33). To distribute them into regional accqunt the proportion of IRSAM for 1990 was utilized * Extended discussion canbe found ia Sata Utama, "The Intereginsl Ipc of Fiscal Dezenralzation in Indonesia: tes Regional Socia) Accounting, Marit Model™ uagublshed Bachelor thesis, enor Program at University of indonesia May 2003, Natl Social Accounting Matrix for 1999, Bereau of Susie Cen ns)42 | TuponesiaM JouaNaL oF Economics a¥D DeveLorneNT 13, Values of companies exogenous expenditure come from retain earnings and foreign transfer conducted by company. The income side utilized data transferred income from abroad. All the data utilized National SAM 1999 (account no. 34), then distributed to Java and Other [sland region equal tothe proportion of IRSAM 1990, 4. Data of disaggregated of Government Account refers to the national and regional budget (APBN & APBD) 1998-1999 and 1999-2000." The regional budgets data cstimates from balance sheet consolidation of provinces and municipalities. In ordet to then avoiding double counting in calculation, we screened the balance sheet of provinces and municipalities and deduct the transfer payment from province to ‘municipals. To distribute the amount of Central Government expenditure to the region the DAU and DAK proportions was utilized, 5. The exogenous amount of production activity isthe export and import values and the indirets taxes minus subsidies. The income side value comes from data of investment in Indonesia which has increased production capacity. The data from National SAM 1999 (consolidated account no. 36-73) National Input-Output for 1999 were ‘compared and utilized. For distributing to the each region the proportion of IRSAM 1990 utilized as reference. 6.RAS method of Updating IRSAM ‘After colnpleting estimate the total and exogenous variable, the total of endogenous variable} was found. They were calculated as result of deducting the total and the exogenous account, The next pace is iterates the origi matrix using RAS roethod as follows 1. First estimating the endogenous income “Shadow” matrix (Z) by multiplying input coefficient 1990 {A(0)} with the output value of 1999 {X(1)} 2. Summing the columns side sth result we obianed the income endogenous shadow transaction matrix {U'}. The {U} is compared with the matrix {U (I). Since the destination matrix is not identical with the base year, the value must be different. Figure the ratio (R). After that, multiply the matrix A (0) with the value of ratio, 5 the result labeled (A'). Repeating the frst step, we multiply the matrix (A') with {X (Dj, the result is (Z') whose equal total columns with the total income of 1999 ‘matty [Next sum the row from (Z') to get the expenditure endogenous shadow matrix (V". “Then we compared the value with total expenditure of matrix 1999. It should be different, and now we caialate the ratio between therm, the result labeled matrix S. ‘Then multiply the matrix (A') with the S, the result is matrix (A) when we multiply this matrix with (X (1)} we found matrix (2) whose the sum of the rows equal to the ‘expenditure of endogenous accounts 1999 {V (1)} 4.Repeating the first sep by summing the column then afjst the matrix asthe step above to get the A? matrix which is equal tothe endogenous income of IRSAM 98. For the rows we applied the same formula to obtained the shadow matrix which equal to the endogenous expenditure of 1998. '5.The iterations in this tudy stop inthe step of 69 iterations. The reason isthe matrix shown divergences. The tolerance level of acceptance isthe deviations not more than 5 Ye ftom destination matrix.” * 4am previous fiscal yer (1998-1999) and % current fiscal year (1999-2000) * Soe, Ati Pratikto," Dampak Pengelsaran Perbangunan Pemerinah thadapPerckonomian Prins DDK! 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When government current (both local and central) expenditure originated in Java, the effect accrued most in Java Region (77.93% from regional and 77.87% from central). The spillover impact is the rest (22.069% from regional and 22.192% from central). While the injection originated from Outer Java its impact distribute more equally between Java and Outer Java. The magnitude of multiplier effect in Java reach 45.56% and the rest accrued in the origin region, Outer Island (54.933 %). ‘The data indicates that the Indonesian economic still dependent with the Java region ‘This phenomenon also showed that most of the labor forees or capital utilized in Outer Java came from Java. The similar condition accrued in the government investment spending as shown in table 3.3, When we observed more, the best srtegy in injecting government account is through the intergovernmental transfer fom Outer Java, from the dt above expenditures spend. from local government (both curtent and investment) has greater effect than the central government direct expenditure The other advantage of injected government account throlgh the local it also generate greater intva-regional income. kn terms of output multiplier we obtained that the multiplier effect from the Govemment Current Account both from regional and central inal regions is always greater than the Government Investment Account The reason isin government current expenditures, the ‘values of sectional (o total) output multiplier reflect only the sectorl (or total) output increase (demanded) for 1 ripiah of govemment consumption. In government investment expenditure, the values of sectoral (or total) output multipliers reflect only the sectoral (or total) output increase (demanded) fr ! rupiah of government purchases ‘on investment goods during the constuction period. Thus, similarly to case of income multipliers, the output mubiptier: im the government investment expenditure do not capture the additonal output generated by the increase of economic grows that can be expected as completed investment projects would presumably improve the general production capacity Examining the effect of goverment injection to the production activities, we conclude that the highest impact from government current expenditures (both in Java and Outer Java) are always found in services sector. When the spending originates from Java, "multiplier effect reach 85.67 % in Java, and the Outer Island received the rest, 14.321 %. Im the other hand while the injection originated in Outer Java, Java region received 38.856 % of the output multiplier. From the table 3.4 above showed that the income ‘multiplier while the injection originated from the Outer java is created greater multiplier and more equally. Output multiplier analysis also shows while the multiplier output accrued not in the origin region (such as the injection originsted from Java and the multiplier discussed is jn Outer Java) most of them impact the manufacture sector as the highest. The main reason why services received the highest multiplier impact is the mast of the current ‘expenditures component is routine spending or purchase regularly. The services sectors characterized the same type In term of Government Investment Expenditure in both regions highest value of output multiplier is always found in manufacturing sector. The condition is the same for bothSeis Vana $ don Bonbeg 25.8. elapse | 89 Central and Local Government. It is considerate because most of the investment spending is to purchase capital goods which utilized to increase the production capacity, ‘And most of them is produced by manufacturing sectors, Funher more the same phenomenon repeated, the spending in investment originates from Java has less spill over effect than spending originates from Outer Java. It shown in the table 44 that the government injection in ivvestrent from java result 84,21 % ‘multiplier effect in Java and just only 15.789 %. The same condition also worked in Central Government Investment account. It showed that the supply for cupital goods and services in the Outer Island still dependent from Java region industries. The Best strategy in government spending is allocating the investment in Quter Java. In addition 10 provide the vacancies for labor force, allocating injection in Outer Java also reducing the disparities between two regions and also promote the region’s manufacturing activities, ‘The Structural Path Analysis After calculating the multiplier effect, we would explore the structural path of the injection of government account. The objectives of observing i s to show the path from the government account injection to the household. By knowing this path, we recognize which sector and household in the IRSAM for 1999 system influences much to the income distribution. Figure 4.1 Structural Path of Sava Local Goverment Routine injection Lec.Gov. Routine. (i) WH. Java G) Manufact Java (v) 0.587 SY force Java (x) LG Cut Cys Cyf1Cal" (Cur Ca}+Cu) Cet CyL1- Cor Ca (CuCl [Cai Cg ACah + Cer CpG Co Coe Crm Cy Cod]90 [INDONESIAN JouRWAL oF Economics AND DeveLopment Figure 4.2 Structural Path of Java Local Government Investment Injection 0.1208 Looper, ] 9828 54.48 % Invest Java feeenp Manufact Java 0 Factor Hi.Java Java (y) 0.306 | 6) 0.587 Agricut saya (x) Le, Ca [Ie CuCl Cyt Cy Dy Carll Cy Cag Cae Call * Car Cu Cy Figute 4.3 Stuctra Path of Quer Island Local Government Routine Injection ‘Service Out. (5) Loc.Gov Routine (1) (average Factor HH. Java Jawa (p) (@) 0.223 ‘agric Java (2) (Average) 0.587Invest Out oO Sata Utama hen Bambang 5.2, Tengen ‘Value added in Outer Island LG CarCy*Cy [1 Cal Cue CyfCay Cp) * CIEE Eye Ce (Ce Co" CarPC Cpe Cll-Cu Cor Cu(C Co)” Coat Coe Com Cyl -C-Crear(Cam* Cred Cy*Cou*Cam’Cye* Cyl Car Com CeCe Cu) Value added in Ja He Cyt Cat Cyt Capl1-Cox Cone Cam* Cra) 2. Cyr Cau Can Cpe Cel |-CaCmr CeCe Ce a Figure 4.4 Structural Path of Outer Island Loca! Government Investment Injection HH.Out (9) 61.55% 0.512 ‘Agric, Out (x) onde Le Cy Cy Cu) + CWI C=C Cal 2 Cyl CyerCall Cor CuC Cadcle INDONESIAN JOURNAL OF ECONOMICS AND DEVELOPRENT Figure 45 Structural Path of Central Goverment Routine Injection from Outer Island Mining Out, o. Factor Manufact Java ava (p) (rm) HH. Java @ 587 ‘Agric Java (2) ‘Additional Value added in Java Ve [Ca Caad* Coad "Cyn Ca ICC (Can* Cre] 2. {(CurCa)*C] Cam” Cp Cap ICC Cl Cam Cd)” $5.04 % 0.667 0.124Seri Vora den beng 25 0 elpctvcloeamsaien | 93 FiguiedS Strecturl Path of Central Government Investment Injection from Outer sland HH.Out (3) Central Tvest out 2 Factor uae Jawa) 3.64% Manufact Java m) Factor HH, Java Java oO yo 8.69 % From the structural path analysis above, we conclude the main sectors in Java are Services, Manufacture and Agriculture. In the outer Island the main sectors which evolve muuch in distributing income are Manufacturing, Services, Mining, and ‘Agriculture, From the path above we also noticed that the jajection account from Java Island effect insignificantly to the outer island, but the injection from outer island increase the income of Java’s industries and household significantly. When we observe ‘the central government account expenditures, we could see that the central goverment injection from the Outer Island region has a greater spill over effect to the Java, rather ‘than the injection from the local government. From the structural path above, the best strategy is allocating the expenditures fram local ‘government through intergovernmental transfer from the outer island ‘Shock Variable Simulation ‘As mentioned above, after implementing the decentralization in fiscal policy, central ‘government of Indonesia not involves much in managing local budget allocation. Central ‘government transferred the fund to the region through General Purposes Grant (DAU), Specific Purposes Grant (DAK), and Balancing Fund (BF) which consists of tax sharing, and natural resource income sharing. “This section wauld explore the impact regional government budget for the fiscal year 2002 and the compare with the initial matrix of IRSAM 99. The objective is 10 know ‘whether the budget allocation of regional goverment of 2002 is generate equal income, reducing the disparities and encourage the national economic growth.oT [Anvonesian JOURNAL OF ECONOMICS AND DEVELOPHENT Before implies the simulations the following assumption should be noted: “The sock variables utilized are DAU, DAK and BF of fiseal year 2002. All the data compiled fom Dirjen Perimbangan Keuangan pusat dan Daerah, Ministry ‘of Finance, Indonesia All the transferred payment distributed to ‘oth current and investment ‘expenditures of region government. 3. DAK is subject to be earmarked the allocation must in the following sectors: Infrastructure (road and irrigation), government Infrastructure, Public Heath and Public Education. The consequence is DAK ean be only utilized through Regional Investment Expenditure Account DAU is the grant that local government has authority in its allocation, under the definition, we assumed that the most routine expenditures financed from DAU. The main reason is the only DAU grant is fixed aniount and distributed bby the central government in the early fiscal year. The distribution of DAU for routine and investment purposes depend on the ratio of SDO and INPRES before fiscal decentralization, Balancing Finance which consist of income sharing on tax and natural resources do not have fix income scheduled, also the payment of BF is not all in early fiscal year, under this condition we generate assumption that all the fund is allocated in regional investment expenditure. In analyzing utilized shock variable considered the result of income and output ‘multiplier above, then the analysis restricted under the following scenarios: 1 Scenario I, the simulation utilized shock variable DAU, DAK, BF then distributed as the proportion of IRSAM 99. The objective behind this simulation is to estimate the actual income of the whole economics with the current government expenditure. It also means that goverment has no authority change he allocation behavior to preferred sectors and houschold. Scenario Il, In this scene the local govemment has authority to change allocation of the budget. The scenario will allocate the budget to the sectors depend on the value of the global influence. The objectives behind this simulation are to optimize the income of whole economics and to measure the disparities among the region, ‘Scenario Ill Ia this scenario the expenditure will be allocated in the sestors which have significant value in global mfluence. The difference from simulation Il is it also considered the magnitude of direct influence to the factors. The objective of this simulation is to optimize the household income significantly. ‘Scenario IV, in this simulation the transferred fund will be allocated almost in the same proportion in all sectors and household, The allocation based on the ‘sum of the global influence of all sectors, Figure 4.6 Consolidated Regional Finance (lion Rupabs)" Te ‘ater and DAU Gone Papas) 131 as DAK (Spevite Purpose) states Lnaaass Balancing Fund 490507 wane pikthe focal government badge valu wile data rom DirenPerimbaegan Kevangan Past dan ‘Doerah, Minsty of Finane, Al the dia oumload rom ww spssSatria Utama S den Bandarg PS. ThelnpecatFacalDecenizton | 95 Figure 4.7 Distibuting of DAU, DAK and BE Roane fone na Toaine Our fv Outer TAT Beas Tae Ha TO DAK S244 170.855 BF 499517 14272993 ‘otal 29502073 1276986 sasen003 Bowie Figure 48 Local Budget Allocations in IRSAM 1999 Routine fa Tnvsonen va tee i a T nies eee IH, West “OKI 0.16% 729% (200% 46% OOO 000% OR 0.00% HH.Cen tava 0.4% 385% «635% — «GH — DH 0.00% 0.00% 000% HHLEss Ja OS ABI 792% ©—«670 0% 0.00% 000% 000% Apiesiare 0% SAI GN 780% GUE 90TH ASH 8% Mining 000% 050% 059% © 833% OHH ONE 145% 039% Manutature 10s 307% LIK ——69EH 969% ISH SKA BION Uitte: Osby 100% 092% ©—-BID%® 0H. BT OTH LDH Seview wen 3427% 401% — 19% 298% LTH 13.90% 102% Tost ava Jo000% SRATH BGI — GUSH LONGO SOU ADAM SOIT ater sand HH, Sumter oor — 0.00% 0.00% — 000% 0.00% 007% 0.00% 000% HH Kalimanan 0.00% — 000% 000% © 000% ONO OM 8% OTH, HH, Saws 00% — 0.00% 0.00% — 000% 0.00% 0mm 0.00% 000% HH. Esser tnd 0.00% 0.00% 0.00% 000% 000% © 0.00% 000% 000% Agicuture OOM «309% © 294% 759% — 000% «40% BI 930% Mining 000% 212% 221% TASH OOH ET SK 8H. Manutitwe 000% 42% 3.48% THB 00H 540K SIM Ustties 000% Ons 05% — 9.00% ©. 0% OOH 12% Services 000% 16m 169% 829%: 189% 23H 10.35%, TToualOuter'thnd 000% TAA «LOSE BASE — GK 149% 75K 8% ‘Tota done __100.00% _10000% _10000% _1on.00% 10.00% _10000% _10000% _10000% Rowe Ouer and Tnvesimen Outer nd soa r 1 wv r u meee, HH. West +DKI 000% 0.00% 000% 000% 00% Om 000% OOK WHC fra OOK 0.00% 0.00% 0.00% 00% 0.00% 0.0% OME WH. East tsa 000% 0.00% 000% 0.00% 00% 0.00% © 0% OM ‘Agricutwe 000% 3.60% 3TH 734% 000% 34848. Mining 000% 032% 038% THK — 000% 0% 04% 10.39% Maruti 000% 994% 123% 657% — 000% 19.70% 156% Unites 000% 051% 0Me% OH — 00TH 04H AIH THT Series 00% 160% 168% 172% © 000% 700% 8.10% 102% Tata ve 000% —3203% 263% 378% — 000% STI VOM —5017% ose ian 1H, Sunaera 010% 630% 105% — 645% 0.00% 00% 0.00% a.m96 {INDONESIAN JouRNAL OF EcoNoMicS AND DeVELoPMENT Wi Kalimanan 003% «193% 3.23% —-S98% —0ON% 000% 0 OOH HH, Sulawesi 003% 149% 249% 6.00% 000% 000% ao 0.00% HHL Eastem nd 004% 158% 258% 6.00% 000% 0.00% 0.00% 0.00% ‘Agicuture 0.00% 697% © «G8EH 709% OHH 11.06% RAI 939% Mining 000% 347% 40% 702% OOH. «93TH 12H 920% Manufacture 198% 456% ILI 7124% 97 41.96% 98H sites 069% 064% 051% «BATH 000% 026% OHH 122% Series 9LIT% —3060% BLL TIN 234% 620% TIT —1035% 4 Total Quer and 100.0% | 6197% —71368% DIN 10000% GBA —TO9I% 49TH Tous indoesin__100.00% _10000% _10000% _1on0% _lonco% _100.00% _rono0% 100.0% Figure 49 Simulation Result ‘Simulation ava o w Ww Ww WH West +DKI 1.1603 #8060 mRSTS x20 HHL Con tv vom9 907011 3144039 sisae6s HL al Sv ous rrsos 4993583 arnas0 ‘Apicubure 5 1mm, as3.at67 1 409.2862 Ming 0.0000 a6t losést vatossi Manuele ragasowse = sgm022—DaaTO.I87 ass Uses e258 197029 ian 2ans569 Services seoodaigs 1672.82 6 BIB sass. 4t3s Toa ava SRB SLIT AIO LB STISSDB % 70% s7230% sansa s2% eras HH, Sumter ro1s7s oa7ist 10759197 57.7053 HH Kalimanan our oan 009723 860409 HHL Sulawesi o7a0s aso ou vero. ‘HH, acer lind 10486 sear esau 149.7906 Arieutwe 381 1.939.368 auras 2oreasss Mining 0.000 10804143 1.2sa9310 149.0509 Manutiere sagog9r62§——rarSéann1 173605072 oan 873 Uses ne 076 eome0 a0 se70 Services 45A155598—SQ0TSSO2 IS ABS.ISS sesso “Tora! Quer itn m2umms ITO pRON 51899 % s8290% amo 6.166% 27363% Tot indonesia \atorazo0s —se3saasn9 = mtagoim2 = SL 3787 % 100% 100% oom 100%Satria Vane § Sen Bambang 2.5. Te input fisaDeenatanion | 97 Figure 49 Disparities and Income Simulation uw W, 1 Diparities among Housholt 0893 101005607 2 Disparives among indus 139 1a tame one 2 Disaros Among Regt 0235 ame wR as 44 Pereapita come. Household (Thousand) o2s 945215698 5) Per Capita come. Indies Thousand) 683753 aan 751 SRT LTO 6 _ Por Cais income Ta Thousand) 623967 453205 _sonaep 153519 From the simulation above we can conclude while the local governments do not have authority to change the budget allocation we can observe that the disparities arvong the sectors are still occurred widely. From the data we noted all the income distribution impact only in its self cegion. In the second simulation while the local government assumed has an authority to allocate their budget to the sector depend on their global ‘multiplier. We could see thatthe Java accounts injection effects less to other region than the injection from the account of Outer Java, More over we could observe which sectors acquired highest impact of the injection From the data in Java Island manufacturing, services amd wgrculture are the sectors dominate the budget allocation and also received highest portion of the output multiplier from Outer Java. Inthe Outer Island services, manufacturing, mining, and agriculture are prominent sector which effect lots to the whole economics. This phenomenon showed that the manufactures, services, agriculture, and mining have the wide inter and int linkages among sectors and among region. When we compare the value of shock variable in Java and outer island, we may see that the Indonesian economies still depend on Java Island, By the data above the percentage ‘of income increasing between Java and Outer Island is narrow range, although the value ‘of shock variable in the Outer Island almost reaches three times than lava’, [While the disparities are discussed, the fiscal decentralization program bring opportunity forthe region to expenses the budget depend on the local need and priority the result is the program make possibilities in reducing disparities among region, houschold and also industrial sectors Considering the simulations above, the best strategies are: 1. Injection comes from local government through fiscal decentralization programm 2. Set the priority of expenditures in Outer Island to minimize the economic dependency of Java. 3. Considering the linkages and the multiplier effect of one sector in the whole economies. ‘Concluding Remarks ‘The IRSAM model can be utilized as tools of analysis on Several simulations of policies, the lack ofthis mode! itis only snapshat one period time. From the Multiplier, Strectutal Path and the Shock Variable analysis we summarized that the economic behavior of Indonesia still dependent with Java Island, Thus the98 | INDONESIAN JOURNAL OF ECONOMICS AND DEVELOPMENT development plan should set to empower the economics potency of the Outer Island. “More over from household income analysis we also note thatthe lack capacity of human resources in the Outer Island should be improved. 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