Journal of Indonesian Economy and Business Volume 25, Number 1, 2010, 103 – 113

THE IMPACT OF ROAD NETWORK LINKAGES FOR REGION SECTORAL GROWTH IN JABODETABEK AREA1

Poerwaningsih S. Legowo Faculty of Economics Christian University ([email protected])

ABSTRACT

Transportation infrastructures serve as one of the preconditions to improve a regions’ economy. Transportation infrastructure may influence regional economic growth as well as the regions surrounding it. The objective of the current study is to analyze the influence of these infrastructures towards economic activity growth (total units, workers, and sector production) of a region as well as the regions surrounding it. Analysis is also conducted towards a number of policies of which act as basis for decision making concerning transportation infrastructure development in a region. The area of study consists of , , , Tangerang and or commonly referred to as JABODETABEK area. Time series data is used from the period 1990- 2006, and encompassing 4 economic activities including trade, transportation, home-construction and industry. Together with the data model, estimations are made by using Two Stages Least Squares (2SLS) prediction methods. A simulation model is then subsequently used with the SIMNLIN procedure. The results of the simulation demonstrate that toll infrastructure investments in each region generally elevate regional economic growth (PDRB) and its surroundings, except for Bekasi. Conversely, road investment policies generally reduce PDRB growth in a region. Moreover, the results of the simulation indicate that the impacts of toll development increases growth in the home-construction sector in almost all regions. Conversely, policies to increase road investments would reduce growth in the home- construction sector in all regions. Keywords: Transportation infrastructure, interregional linkages, economic growth and JABODETABEK area

INTRODUCTION1 roadnet transportation infrastructure that connected them. The regions of Jakarta, Bogor, Depok, Tangerang and Bekasi are often called According to the President Instruction JABODETABEK area. Geografically these (Inpres) number 13 th 1976 has become the areas bordered one and other. The interrelation basic frame of development of the Jakarta with of bordered areas becomes more solid through its neighboring the regions. The Inpres says that Jakarta as the capital city will be deve- loped to the neighboring regions which function as hinterland. The hinterlands are 1 Paper Presented at the Second Indonesian Regional Science Association Conference (IRSA Institute) Bogor (include Depok), Tangerang and Organized by IRSA. Bogor, July 21-22, 2009. Bekasi. 104 Journal of Indonesian Economy and Business January

With the Inpres the goverment built the (Indonesian Hotel and Restaurant Assco- as long as 46 km which was ciation, 2006). operated in 1978. This toll road connects The same thing happens with Purwakarta. Jakarta, Bogor and the neighboring regions. In the past this city was crowded, because The Jagorawi toll road has played an many people used this road to go to Bandung important role in developing the economy of and back via Padalarang. Now the activities in the neighboring regions, especially to increase this town becomes slow. This city is now the output of several sectors in called “the retired city”. The economic (Bogor Dalam Angka, 1983). growth drastically goes down, hundred of The building of the toll road continous bussinessman especially in the informal until now, one of them opening the Cipularang sectors (restaurant, ceramic, kiost and saveral toll road as long as 129 km in the year of gas station) and other bussiness are closed 2005. This new road connect the Cikampek because they are now almost no buyers toll road to the (JORR) (Nurlaela Munir, 2006). and become the alternative short cut from The same thing happens with Cianjur, the Jakarta to Bandung and return. The Cipularang condition of this city is almost the same with toll road is very useful because it connect Purwakarta. The development and the opening Jakarta to Bekasi and to all other cities in West of the road (roadway, toll road, railway) can Java. bring strong effect, both positive or negative. The existence of the road made the capital From the explanation above, this is city of West Java grow very fast, the economic phenomenon at appeared from the strong growth of Bandung in year 2005 reach 7.8% infrastructure of the road and the networking bigger than previous year which is 7.5%. The of the regions which formed by the road. So it Product Domestic Regional Bruto (PDRB) is neccessary to analyze how the road impact increase 25% from Rp 34.8 triliun to Rp 43.5 in one region could effect the economic triliun. The absorption of employment (labor) growth of the region and also toward the other increases 30% and the level of unemployment neighboring regions. decreases 10.3%. Therefore, the questions for this research Observing the explanation above we can are: First how the roads infrastructure could assume that the building of the road will effect the economic activities of one region develop the economic activities of a region, and also the neighboring regions. Second, which later will affect the neighboring regions. which road infrastructure policy, could give On the contrary, the existence of the toll road the most effect to sectoral and the economic will also bring disadvanteges for some growth for every region in Jakarta, Bogor, regions. This happen to saveral net road, for Tangerang and Bekasi or JABODETABEK example Jakarta-Bandung road through area. . Before the building of Cipularang toll road this road has a lot of activities such as THEORITICAL FRAMEWORK resting places, restaurant, shops which sold all kinds of necessities. After the was opened A general formulation of a production (Jakarta-Bandung, Bandung-Jakarta), the function for sector i in region r, with various activities in Puncak decrease, even saveral types of infrastructure is: bussiness are closed and move other region. Q = f (L , K ; IA ,..., IN ) (1) This happen especially at Cipanas resort, the ir ir ir ir r r decrease of omzet for people who sell food where: and other things reach until 30-70 percent.

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Qir = value added in sector i, region r wij = 1 if region “i” and “j” are conti- Lir = employment in sector i, region r guous, 0 otherwise Kir = privat capital in sector i, region r wij = 0 IAr,…,INr = infrastructure of various type s in region r. The variable W*H is the firts -order spatial lag of higway and street capital. It is Among the types of infrastructure dis- the sum of higway and street capital in all tinguished are: transport, communication, neighboring region. In keeping with the energy supply, water supply, education, health hyphothesis that highway plus street capital is services, and so on. productive largely by shifting the economic To analyze the effect of road network activity from one region to another, we expect infrastructure to sectoral productivity, α3 to the significantly positive and to α4 the approached by putting capital stock value from significantly negative. the highway and street in Cobb Douglas From equation of the above we can production function in the formed of log linier estimate the relation between the road network which should with the following equation infrastructure with the sectoral production in (Boarnet,1995) : one region with it neighboring regions.

log (GCPit) = α0 + α1 log (Lit) + EMPIRICAL ANALYSIS α2 log (Kit) + α3 log (Hit) + The effect of road network i in one region

uit (2) to sector activity growth was made equation model, the model was adopted from where: production function was made by Boarnet. GCP = gross county (region) product The equation was made to analyze the sector L = labor input (employment) in the activity in a certain region, one sector consist region of saveral activity equation: number of unit, K = privat capital stock the total number of man power, and certain H = highway and street capital stock sector activity production. i, t = indexes region, and indexes time First, the structural equation the number The production function later on wided by of unit is the function of the road network putting the highway and street capital stock infrastructure (roadway, toll road, railway) from the neighboring regions. There for we from one region and the neighboring regions can see the effect of the road network and others variable which was considered infrastructure of the neighboring to the regions relevant. Road invesment determined by the production the area. There for the function related road characteristic with the certain became: sector characteristic. Second, the identity equation of the total number of unit is the log (GCPit) = α0 + α1log(Lit) + equation function of the whole number of α2log(Kit) + α3log(Hit) + units in certain sector in one region. Third, the structural equation of the sector activity α4log(W*Hit) +uit (3) production is the function of the total number where : of unit, the number of man power in the sector W = is a neighbor matrix with elements and other variable which was considered relevant. Fourth, the structural equation of the wij . region is the function of all the sectors production in the region.

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The Equation Model: number of unit, TUDAG = the total of number of trade sectoral production and PDRB regions region in i The following is the general equation TKDAG = number of man power in model for Jakarta, Bogor, Tangerang and trade sectors in region i Bekasi. The equation model was made to QDAG = production of trade sector in analyze the activity according to the number region i unit, total of number unit, number of man KRDAG = credit trade sectors in region power, and the sector production. i Determination of the road category was based GDAG = goverment expenditure for on the road characteristic and the characteristic trade sector in region i activities of certain sector. LTKDAG = lag the total number of man power in trade sector in region i The Equation of the Trade Activity Unit PDRB = product domestic regional UPKL = a0 + a1 IRdW i + a2 IHW i + bruto in region i

a3 ITR i + a4 IRW i + a5 TITRj + UMR = upah minimum regional (regional basic salaries) a TITR + a PDRB + 6 ij 7 POPU = population in region i a8 POPU + U1 (4) IRdW i = street (jalan kabupaten) in- vesment in region i UGR = b0 + b1 IRdW i + b2 IHW i + IHW i = roadway (jalan negara) in- b3 ITR i + b4 IRW i + b5 TITRi + vesment in region i

b6 TITi + b7 PDRB + b8 POPU + ITR i = toll road invesment in region i U2 (5) IRW i = railroad investment in region

UHTL = c0 + c1 IRdW i + c2 IHW i + i TITR i = total invesment in region i c3 ITR i + c4 IRW i + c5 TITRi + TITR j = total investment neighboring c6 TITRij + c7 PDRB + c8 POPU + regions j

U3. (6) TITR ij = total invesment the region i and neighboring regions j TUDAG = UPKL + UGR + UHTL (7) The Equation of the Transportation TKDAG = d + d UMR+ d GDAG + 0 1 2 Activity Unit d3 PDRB + d4 LTKDAG + UTP= f0 + f1 IRdWi + f2 IHW i + U4 (8) f3 ITR i + f4 IRW i + f5 TITRi + QDAG = e + e TUDAG + e TKDAG + 0 1 2 f6 TITRij + f7 PDRB + f8 POPU + e KRDAG + U (9) 2 5 U6 (10) where: UTRK= g0 + g1 IRdWi + g2 IHW i + UPKL = the number of ‘pedagang g3 ITR i + g4 IRW i + g5 TITRi + kakilima’ (PKL) in region i g TITR + g PDRB + UGR = the number of whole seller, 6 ij 7 ritailer in region i g8 POPU + U7. (11) UHTL = the number of hotel region in i TUANG = UTP + URK (12)

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TKANG = h0 + h1 UMR+ h2 GANG + where :

h3 PDRB + h4 LTKANG + URUM = the number of house-build- ing unit in region i U8 (13) TKRUM = the number of man power of QANG = i0 + i1 TUANG + i2 TKANG + house-building sector in region ii i2 KRANG + U9 (14) QRUM = production of house-build- where: ing sector sector in region i UTP = the number of passenger KRRUM = credit for house-building vehicle in region i sector in region i UTRK = the number of trucks unit in GRUM = goverment expenditure for region i house-building sector in TUANG = the number of total unit of region i transportation sector in LTKRUM = lag of number of man power region i of house-building sector in TKANG = the number of man power of region i transportation sector in region i The Equation of Industrial Activity Unit

QANG = production of transportation UIBM = m0 + m1 IRdWi + m2 IHW i + sector activity in region i m ITR + m IRW + m TITR + KRANG = credit of transportation sector 3 i 4 i 5 i in region i m6 TITRij + m7 PDRB +

GANG = goverment expenditure for m8 POPU + U13 (18) transportation sector in region i UIKC= n0 + n1 IRdWi + n2 IHW i +

LTKANG = lag of number of man power n3 ITR i + n4 IRW i + n5 TITRi + of transportation sector in n TITR + n PDRB + n POPU + region i 6 ij 7 8 U14. (19) The Equation of the House-Building TUIND = UTP + UTRK (20) Activity Unit

TKIND = o0 + o1 UMR+ o2 GIND + URUM= j0 + j1 IRdWi + j2 IHW i + o3 PDRB + o4 LTKIND + j3 ITR i + j4 IRW i + j5 TITRi + U15 (21) j6 TITRij + j7 PDRB + QIND = p0 + p1 TUIND + p2 TKIND + j8 POPU + U10 (15) p3 KRIND + U5 (22) TKRUM = k0 + k1 UMR+ k2 GRUM + where : k3 PDRB + k4 LTKRUM + UIBM = number of Big-Medium indus- U11 (16) tries unit in region i UIKC = number of small industriesunit QRUM = l0 + l1 TURUM + l2 TKRUM + in region i l2 KRRUM + U12 (17) TUIND = total of number unit of industries activities in region i

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TKIND = number of man power of as well as by Private Company (especially the industry sector activity in toll road). These policies are made to increase sector i the growth of the region through the deve- QIND = production of industries lopment of netroad , tollroad and railway. activities in region i The netroad infrastructure variable is KRIND = credit for industries sector in approached (proxy) by investment value, a regional sector in region i certain amount of nominal value stated by GIND = goverment expenditure for rupiah (million rupiah) which is used as an industries sector in region i expenditure to develop the netroad infra- LTKIND = lag of number of man power structure. The policy will increase 10 percent of industries sector in region i every category of the netroad in certain region.

IMPACT OF NETROAD FOR The Impact of Increasing the Tollroad SECTORAL GROWTH Investment Policy. The netroad infrastructure policy is the The policy to increase the investment of policy made by the Central Government or the tollroad in every injection region generally Local Goverment (Pemda), but it can also be will increase the economic growth (PDRB) of made by both Central and Local Government Jakarta, Bogor and Tangerang. On the

Table 1. The Impact of Tollroad for Sectoral Growth in JABODETABEK Area

Impact The Impact of the Jakarta Tollroad for Sectoral Growth (%) PDRB Regoins Trade Transportation House-Building Industry Jakarta 3.34 23.14 0.29 3.70 2.60 Bogor 1.42 1.03 - 0.42 1.04 0.85 Tangerang 0.57 0.89 17.09 0.88 1.45 Bekasi - 0.34 0.51 9.87 2.33 0.54 The Impact of the Bogor Tollroad for Sectoral Growth (%) Jakarta 0.91 3.76 0.08 1.69 0.71 Bogor 0.22 - 0.25 0.19 1.14 0.62 Tangerang 0.17 - 4.24 15.62 4.41 2.77 Bekasi 0.09 - 0.28 14.51 1.31 0.55 The Impact of the Tangerang Tollroad for Sectoral Growth (%) Jakarta 0.96 3.37 0.08 1.78 0.75 Bogor 0.57 - 0.43 0.45 2.92 1.59 Tangerang 0.71 - 4.24 15.57 4.37 2.75 Bekasi 0.06 0.03 9.62 1.24 0.47 The Impact of the Bekasi Tollroad for Sectoral Growth (%) Jakarta - 0.85 - 3.25 - 0.04 - 0.39 - 0.39 Bogor - 3.08 - 1.75 0.05 - 0.86 - 1.20 Tangerang - 0.56 - 0.23 - 3.62 - 0.58 - 0.61 Bekasi 0.03 0.07 - 4.70 - 0.49 - 0.16

2010 Legowo 109 contrary, giving injection to Bekasi region will of every region as well as their impact to the decrease the economic growth (PDRB) of all changes of sectors growth percentage the regions including Bekasi itself. According to Reitveld, the existence of The Impact of Increasing the Roadway netroad infrastructure which connects one Investment Policy. region with another could increase or decrease The policy to increase the roadway invest- the economic growth of the region. The ment (Jalan Kabupaten dan jalan Negara) in changes of the growth either positive or every region generally has a negative impact negative begin by the changes on the number (decreasing) the growth of PDRB) in the of activity unit. This could happen because the impact region. transportation cost (from the trade occurred The largest contribution on decreasing the among the regions) will be lower compared to PDRB in the region comes from the pro- the difference of input and output price among duction of sectors which have the largest the regions. (Reitveld et al, 2001). negative percentage in forming the PDRB in Therefore the low transportation cost its region. Table 2 shows the recapitulation of become an incentive for the businessmen the policy of every region as well as their (producer) in the sector of trade, trans- impact to the changes of sectors growth portation, house and building, and industry to percentage. move (mobility) to the neighboring regions From the analyses which was made which have the relatively cheaper input price. concerning the impact, it is necessary to study Table 1 shows the recapitulation of the policy

Table 2. The Impact of Roadway for Sectoral Growth in JABODETABEK Area Impact The Impact of the Jakarta Roadway for Sectoral Growth (%) PDRB Regions Trade Transportation House-Building Industry Regions Jakarta - 0.99 - 4.24 - 0.06 - 0.65 - 0.55 Bogor - 3.69 - 4.37 - 0.13 - 2.14 - 2.09 Tangerang - 0.53 - 0.23 - 3.39 - 0.35 - 0.47 Bekasi 0.06 - 0.16 - 1.38 - 0.59 - 0.14 The Impact of the Bogor Roadway for Sectoral Growth (%) Jakarta 0.56 0.46 0.02 0.36 0.21 Bogor - 0.35 - 2.78 - 0.01 - 0.19 - 0.28 Tangerang - 0.14 - 0.57 - 0.03 0.51 0.18 Bekasi 0.01 - 0.03 1.78 0.24 0.09 The Impact of the Tangerang Roadway for Sectoral Growth (%) Jakarta - 1.82 - 3.82 - 0.08 - 0.77 - 0.73 Bogor - 11.34 - 8.40 - 0.25 - 5.83 - 5.85 Tangerang - 2.09 - 1.38 - 12.0 - 0.68 - 1.49 Bekasi 0.17 - 0.47 - 4.05 - 0.92 - 0.20 The Impact of the Bekasi Roadway for Sectoral Growth (%) Jakarta - 1.26 0.05 - 0.04 - 0.40 - 0.94 Bogor - 7.75 - 4.01 - 0.17 - 3.98 - 5.56 Tangerang - 1.39 - 0.57 - 8.60 - 0.86 - 1.67 Bekasi 0.09 - 0.30 - 4.24 - 0.54 - 0.29

110 Journal of Indonesian Economy and Business January more the theory of Reitveld which says that electricity 1,63, main road 0,178. (Calderon, the development of netroad will make the 2002). transportation cost cheaper than the difference In relation with the negative impact to the of input and the output price among the growth of PDRB, Boarnet in his research also regions. Therefore the development of netroad found that the effect of highway capital to the infrastructure becomes the incentive for the increasing of productivity of the economic businessmen (producer) to move (mobile) to activity in the intra region is positive, while to the regions which have relatively cheaper the nearest neighboring region the effect is input price. (Reitveld et al, 2001). negative. Table 3 shows is the summary of The movement or mobile activities could several researches about the impact of only occurred if there is an assumption that the transportation infrastructure investment to the government does not interfere too much in economic growth which was made in several determining the location of various activity regions or countries. centers including trade sector, industrial sector as well as house and building sector CONCLUSION (Christaller in Pacione, 2001). The result of the estimation shows there is a significant effect of the road network A COMPARISON WITH THE RESULT infrastructure invesment in the one area to the OF THE PREVIOUS RESEARCH economic activity of the region and the The similar research has been made in neighboring regions. some regions in Germany. The research was The operasional of policy is done through made on several netroad infrastructures (high- simulation, that is by putting shock variables way). The result of the research explained that into the equation model. The policy is to there is a positive effect to the output result by increase the invesment of a certain road the increasing number of manufactured network in certain region and, or the regions (Bundeslander). The analyses used combination of a certain regions or more. Cobb-Douglas production function, translog production function and growth accounting The policy of the toll road network approach. All the approaches proved that there invesment generally produce positve impact to is a significant effect on netroad infrastructure economic growth of the region. Especially this to productivity in manufacturing sector policy has the most significant impact to (Stephan, 1997). house-building sector. The similar invention was found by On the contrary the policy of roadway Aschauer. He said that the core base of infra- (jalan kabupaten, jalan negara) generally structure, roadway, airport, mass transpor- decreases the economic growth of the region. tation constitute a strength (power) which Especially this policy has the most significant could explain the creation of productivity. The impact to housing-building sector. result of the research shows that there is a The observation shows that the sector man relationship between infrastructure investment power generally effected by UMR (minimum with the economic growth with the elasticity regional wages) and goverment expenditure about 0,34 – 0,39 (Aschauer, 1989). The same for certain sector and PDRB. Generally UMR thing happened with the research made by was related negatively the absorption of man Calderon in several countries in Latin power. While PDRB and goverment America. The result of his research shows expenditures for certain sector was related infrastructure elasticity value to PDRB per positively. This mean that the absorption of manpower is as follows: telephone 0,156, man power sector is high.

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Table 3. Result from Studies of the Impact of Transportation Infrastructure Invesment on Economic Growth Type of Model Effect of transportation Output elasticity Study and data Invesment of public capital Aschauer (1991) Production function 1. Total transport capital effect 0.166 growth model (data on growth of Kp/L USA) 2. Transit capital effect on 0.384 growth of KP/L 3. Highway on growth of KP/L 0.231 Garcia-Mila and Production function Elasticity of GSP respct to 0.04 McGuire (1992) (USA data from the 48 highway capital contigous states) Munnell (1990b) Production function Elasticity of GSP with respct to 0.06 (USA data from the 48 highway capital contigous states) McGuire (1992) Production function Elastisity of output with respect 0.121 – 0.370 (USA data from the 48 to highway capital contigous states) Elastisity of output with respect 0.121 – 0.127 to highway capital-controlling for state effect Haughwout 2 SLS spatial Elastisity of output with respect 0.08 (1996) equlibrium model (USA to highway capital data from the 48 contigous states) Azis (1990) The development of JLS (Trans Sumatera) bring benefit for trade between the regions. It is more dominant than within the region. The model use is Analytical Hierarchi Process (AHP). Kimpraswil The development of road in Trans North Sulawesi give contribution use (2003) Computable General Equilibrium (CGE).

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