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ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

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analisis sektor unggulan di Kota Surabaya menggunakan analisis LQ dan Shift-Share(SS) tahun 2010-2013
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ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA Prepared to fulfill the Regional Economics’s task Structural assignment that guided by Setyo Tri Wahyudi, SE.,M.Ec.,Ph.D. Galuh Eka Pramithasari 125020107121009 INTERNATIONAL UNDERGRADUATE PROGRAM ECONOMIC DEVELOPMENT FACULTY OF ECONOMICS AND BUSINESS FACULTY
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Page 1: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC

GROWTH IN KOTA SURABAYA

Prepared to fulfill the Regional Economics’s task

Structural assignment that guided by Setyo Tri Wahyudi, SE.,M.Ec.,Ph.D.

Galuh Eka Pramithasari

125020107121009

INTERNATIONAL UNDERGRADUATE PROGRAM

ECONOMIC DEVELOPMENT

FACULTY OF ECONOMICS AND BUSINESS FACULTY

BRAWIJAYA UNIVERSITY

MALANG

2015

Page 2: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

I. INTRODUCTION

I.1. Background

Every region has several goals to be achieved in running governance every

period. This goals is vary depend on every program that assigned in first period of

governance. Among all goals that assigned, economic goal has become one important

goals that need to be achived. It because economic activity become important role that

cover of many people lives.

Economic goals that need to be achieved by every region may vary. But there

are several goals that we can see in every region or even in a country. There are major

three goals that usually become an important indicator of government’s success. Those

goals are stability price, low rate of unemployment, and high rate of economic growth.

When this goals achieved it can be one success indicator for all government.

Among three goals that mentioned before, all goals cannot achieved together or

we can said that those goals are trade-off. Governemnt usually focused on one or two

goals to make economic condition within a region running well. The successful

economic condition in a region can showed by many indicator. The most frequently

indicator used and the most easy calculated indicator is economic growth.

Economic growth can be seen from percentage change in Gross Domestic

Product (GDP) from one period to another period. According Prishardoyo (2008) from

Setiawan (2014), a process speed economic growth in the region show by using the rate

of increase of GDP (Gross Domestic Product), so that the level of GDP per capita

growth in the community is often achieved as a measure of success of a region in

achieving the goal of creating development economy.

Development economy can be achieved by every government in region by

planning their economic activity and distributed it well. Every planning must be

suitable for characteristics and potention in every region. Because all region have

different characteristics and potention so it is an assignment for every government to

make regulation that suitable for their region and can develop every potention that exist.

Page 3: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

And the last, from developing every potention it will bring economic development in

every region.

From this explanation, writer use Kota Surabaya as research object with several

consideration. Kota Surabaya as capital city of East Java have big contribution in

economic activity in Java. East Java is second highest contributor of GDP in Java Island

after DKI Jakarta (see appendix 1). This result is unpredictable since Kota Surabaya has

very little precentage of agricultural sector compared with other region. This research

conducted to see which sector that become base sector in Kota Surabaya.

I.2. Formulation of Problem

Based on the description above, there are several problems that can identified

formulation of problem as follows:

I.2.1. Is there any changes in the economic structure of Kota Surabaya in the year

2010-2013?

I.2.2. Which sector that become base sector and non base sector in Kota Surabaya

year 2010-2013?

I.3. Research Purpoes

Based on the formulation of the problem described above, then we got

objectives of this study are as follows:

I.3.1. To examine whether there are change in the economic structure of Kota

Surabaya in the year 2010-2013.

I.3.2. To understanding which sector that become base sector and non base sector

in Kota Surabaya year 2010-2013.

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II. LITERATURE REVIEW

II.1. Economic Development Theory

Economic development has wide meaning andt the content itself can included

many changes in the economic arrangement in the society as a whole. Development is a

process when there are transformation in several period of time. This transformation

characterized by structural change or in another word a change in core of economic

activity and economic structure in the society in the relevant framework.

Economic development also have another meaning of increasing production

quantitatively that inculding the process of development change in the production

composition. By using allocation’s change in production resources in economic sectors,

change in the pattern of distribution of wealth and income among the various group of

economic actors, change in institutional framework in a whole society life. One

important thing in development process is the expanding of employment opportunities

that very productive.

II.2. Regional Economic Development

Regional economics is a branch of economics that in his discussion include

potential differences elements of an area with other regions. Analyze a region (or parts

of) the whole or view the various regions with diverse potential and how to set up a

policy to accelerate the economic growth of a region. With this objectives, we can

analyze and developing every potention that exist in every region and hopefully it can

boost economic development in every region.

Each region needs to develop state of the economy, so it is necessary to develop

economic development. According Adisasmita (2008) regional economic development

is a function of the potential of natural resources, labor and human resources, capital

investment, infrastructure development, transport and communications, industry

composition, technological, economic and trade situation between regions, capabilities

and funding financing of regional development, entrepreneurship, local institutions and

widespread development environment.

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According Arsyad (2010), local economic development is a process, the process

includes the establishment of new institutions, the development of alternative industries,

where local governments and communities to manage existing resources and form a

pattern of a partnership between the regions with the private sector. The principal issues

in regional development lies in the emphasis on development policies based on

characteristic (unique value) of the region concerned by the potential use of human

resources, institutional and physical resources locally. There are several theories that

can partially help to understand the importance of local economic development, the

basis of economic theory, neo-classical economic theory, location theory, central place

theory and the theory of gravity

II.3. Economic Growth Theory

Economic growth can be defined as the process of Increased Production of

Goods and Services in the Public Economy activity. It can be said that the growth

involves the development of a single dimension and measured by increased production

and income. In Economic Growth, usually in the production process which involves a

review of a number of types of products by using a specific means of production

(Djojohadikusomo: 1994).

Adearman (2006), the definition of economic growth is the perspective of a time

period when the economy is said to be experiencing growth in a long time (10, 20 or 50

years, or even longer) experienced an increase in output per capita. Of course during

that time could happen fall in output per capita, due to crop failure for example, but if in

quite a long time the per capita output shows an ascending tendency, it can be said that

economic growth occurs.

Some economists argue that the tendency of the increase in output per capita

alone is not enough, but the increase in output will have to come from the internal

processes of the economy. In other words, the process of economic growth must be self-

generating, which means that the process of growth itself generates the power for the

onset of continued growth in future periods.

Page 6: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

II.4. Economic Base Theory

Regional economic activity is classified in two sectors of activity, namely the

base activity and non-base activity. Base activity is activity with base-oriented to sell

goods and services outside bounds economy’s area that is concerned. While the non-

base activities are local oriented activities that provide goods and services to the people

need within the borders of the respective economies.

One way to determine a sector as a sector basis or non-base is by using Location

Quotient (LQ). Arsyad (1999: 315) explains that the technique can divide the Location

Quotient economic activity of a region into two groups. namely:

1. The activities of economic sectors that serve markets in the region itself and outside

the region concerned. Sectors of the economy such as this so-called economic

sectors Potential (Base).

2. The activities of economic sectors that serve the regional market potential is not

called sectors (non-base) or Local Industry.

This theory states that the main determinants of economic growth in the region

is directly related to the demand for goods and services from outside the area. The

growth of industries that use local resources, including labor and raw materials for

export, will generate local wealth and employment creation (job creation) (Arsyad,

1999).

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III. RESEARCH METHODOLOGY

III.1. Types and Sources of Data

The type of data used in this analysis using secondary data obtained from

Central Bureau of Statistics East Java (BPS Jawa Timur) and Central Bureau of

Statistics Kota Surabaya (BPS Kota Surabaya). Data is taken from Table of Gross

Domestic Product with constant price 2000 classification of 9 sector. Period that used is

the latest period with four year research in 2010-2013.

III.2. Scope of Research

In accordance with the objectives that want to be achieved in this research,

writer want to analyze the distribution of base and non-base sector in Kota Surabaya.

As a result of this analysis, it is expected to contribute in the regulation making by

Government. It can seen from the contribution of every sector and the effect among

sector itself.

III.3. Data Collection Method

This research is a desk study where the data used is secondary data such as GDP

and Input-Output Tables. The data is in the form of documents obtained from the

following sources:

1. Central Bureau of Statistics (BPS) of Kota Surabaya website

2. Central Bureau of Statistics (BPS) East Java website

3. Previous research

Page 8: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

III.4. Data Analysis Technique

III.4.1.Location Quotient (LQ) Analysis

Location Quotient is a technique used to extend the shift share analysis. One

approach used to determine the base sectors are LQ. Industrial activities that

serve the market area itself as well as outside the region concerned. This

industry is called, Indutri Base. Economic activity or industry that caters only to

the region itself is called the Industrial non bases or Local Indutri.

The formula to calculate LQ is as follows:

LQ=

y i

y t

Y i

Y t

Where :

y i=Economic sector income∈KotaSurabayay t=Total income∈KotaSurabayaY i=Economic sector income∈E ast JavaY t=Total income∈East Java

Specification:

a. If the results of LQ> 1 then the sector is considered a sector basis,

meaning that the level of specialization of Kota Surabaya is higher than

the level of East Java. Commodity production is concerned has

exceeded the consumption needs in the areas where the commodity is

produced and the excess can be sold outside the region (exports).

b. If LQ <1 then the sector considered non sector basis, meaning that the

level of specialization in Kota Surabaya is lower than in East Java

province.

Page 9: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

III.4.2.Shift-Share Analysis

Shift-Share analysis is a technique to analyze changes in comparison with

the regional structure of the national economy. In this analysis, will be

compared how local growth conditions for national growth. The aim is to view

and determine the performance or productivity of the regional economy with the

wider area or nationally.

General form of the equation shift share analysis and its components are as

follows:

Dij=N ij+M ij+C ij … (1 )

Where :

i=Economic sector∈Region (9 sectors)j=Regional variable that examined ( Kota Surabaya)n=Regional variable∈East Ja vaDij=Changes i sector∈KotaSurabayaN ij=National share i sector∈Kota SurabayaM ij=Industrialmix i sector∈Kota SurabayaC ij=Regional shift i sector∈KotaSurabaya

In this study the variable region used is GDP is denoted as (E). Equation

(1) above can be searched with this formulation as follows:

Dij=E 'ij × Eij …(2)

N ij=Eij × (rn )… (3)

M ij=Eij × (rin−rn )… (4)

C ij=Eij × (rij−rin )… (5)

Where :

Eij=GDP i sector∈KotaSurabaya 2010E 'ij=GDP i sector∈KotaSurabaya 2013rij=sector i growth∈Kota Surabayarin=sector i growth∈East Javarn=average GDP growth∈East Java

Page 10: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

The average GDP growth rate in the province of East Java (rn) can be

defined as follows:

rij=E'

ij−Eij

Eij

… (6 )

rin= E'¿−E¿

E¿… (7 )

rn=E ' n−En

En

…(8)

Where :

E¿=GDP i sector East Java∈2010E '¿=GDP i sector East Ja va∈2013En=TotalGDP of East Java∈2010E 'n=TotalGDP of East Java∈2013

Furthermore, regional economic growth component the proportional

shift (PS) and a differential shift (DS) is used to see changes in the growth of an

activity in the study area to the activity in the reference area. While PS to see a

change in the growth of activities in the area total GDP reference to activities in

the area of reference.

III.4.3.Klassen Tipology

The second component of the value of the PS as the horizontal axis and

vertical axis values as the DS. So as to obtain the four categories, namely:

Differential Shift (DS)Proportional Shift (PS)

Negative (-) Positive (+)

Positive (+)Kuadrant IV

(Potential)

Kuadrant I

(Rapid Growth)

Negative (-)Kuadrant III

(Depressed)

Kuadrant II

(Develop)

Source : Wibowo (2004)

Page 11: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

Specification:

a) Quadrant I (PS positive and positive DS) is a region / sector with

very rapid growth.

b) Quadrant II (PS positive and negative DS) is a region / sector at a

speed of stunted growth but tend potential.

c) Quadrant III (PS negative and negative DS) is a region / sector

with weak competitiveness, and also the role of the lower region.

d) Quadrant IV (PS negative and positive DS) is a region / sector

with the speed but growing stunted growth.

Page 12: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

IV. RESULT AND DICUSSION

IV.1. Location Quotient (LQ) Analysis Result

Location Quotient (LQ) have function to examine which economic sector that

become base sector and non-base sector which can determine the role of sector in

economy activity within a area. The result of Kota Sutrabaya’s LQ analysis can

showned below :

Table 1 : Location Quotient (LQ) Result of Kota Surabaya year 2010 - 2013

No Sector/Industry Year Average LQ2010 2011 2012 2013

1 Agriculture 0,01 0,01 0,01 0,01 0,012 Mining and Excavation 0,00 0,00 0,00 0,00 0,003 Processing Industry 0,86 0,85 0,85 0,83 0,854 Electricity, Gases and Water 1,72 1,65 1,62 1,59 1,655 Construction 2,10 2,05 2,05 2,03 2,056 Trade, Hotel and Restaurant 1,36 1,34 1,33 1,32 1,347 Transportation and Communication 1,57 1,55 1,52 1,50 1,538 Finance, Leasing and Corporate

Services1,20 1,18 1,18 1,17 1,18

9 Services 0,98 0,98 0,97 0,96 0,97 Total 9,80 9,60 9,52 9,40 9,58

Source : Secondary Data Analysis, 2015.

As you can see in table 1 above, Kota Surabaya has 5 leading sector that become

base sector. This mean that this five sector can fullfil the local needs and even expirt to

another region. Those sector are electricity, gases and water sector, construction sector,

trade, hotel and restaurant sector, transportation and communication sector, and the last

one is finance, leasing and corporate services sector.

In 2010, the sector that become base sector in Kota Surabaya are electricity,

gases and water sector, construction sector, trade, hotel and restaurant sector,

transportation and communication sector, and the last one is finance, leasing and

corporate services sector. This five sector has the LQ value above 1. And as you can see

Page 13: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

there are sector that have to become potential sector in next period. That sector is

services sector which have value 0,98.

In next period or in year 2011, sector that become leading sector in Kota

Surabaya is same as previous period. But among all those base sector there are

decreasing value in LQ result. As we can see that every sector has decreased for almost

0,02-0,07. This is mean that every sector still can fullfil local need but to fullfil another

area needs (or export) is decreasing. But for services sector that have potential to

become base sector is still stagnant.

Year 2012 base sector in Kota Surabaya is still the same. But there are several

sector that in same result and there are some of them that decreasing. Sector that still in

same value is construction sector and finance, leasing and corporate services sector.

Beside this sector or another 3 base sector has decreased 0,01. But for services sector

that have potential to become base sector has decreased 0,01 become 0,97. If this pace

is still same for next period this mean that services sector has no potential to become

base sector.

In last period of research or in 2013 the base sector is still same. But the value of

LQ has decreasing again. Although the decreasing is not as many as 2011, 0,01-0,03,

but this result is disappointing since we will enter Asean Economic Community in

2015. Services sector also have decreased by 0,01. Although the average of the result is

good but if this result is decreasing continously, Kota Surabaya’s government should

make several regulation that can improve the LQ result.

In average the result of LQ is good in several sector. Kota Surabaya is still

considering an leading region among city in East Java. It showed by the result of base

sector in this area is quite good. Even there are sector that has no contribution at all.

Those sector are mining and excavation sector. But this result is understandable since

Kota surabaya has no area that become mining area. Kota Surabaya is fulled by housing

business. It shown by the LQ result of construction sector that have an average 2,05.

IV.2. Shift-Share Analysis Result

The objectives to be achieved in this study by using shift share analysis, the first

to determine the effect of economic growth in East Java on economic growth in Kota

Page 14: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

Surabaya (national growth effect or national share). The second to determine the

relative changes in the performance of the sectors in the city of Surabaya on the same

sectors in East Java (proportional shift or industrial mix). The third is to find a

competitive advantage sectors in Kota Surabaya against the same sectors in East Java

(differential shift or regional shift).

The first analysis is national share. This analysis have main aim to examine the

effect of economic growth in East Java to economic condition in Kota Surabaya. The

result of national share in Kota Surabaya is shown below :

Table 2 : Table 2 : Effect of Economic Growth in East Java on Economy of

Kota Surabaya years 2010-2013 (millions Rupiah)

No Sector/Industry

GDP Kota Surabaya

2010

East Java Average GDP

Growth

National Share (Ns)

(Eij) (rn) (Nij)1 Agriculture 79.171,88 22,54 1.784.478,582 Mining and Excavation 6.353,21 22,54 143.196,893 Processing Industry 19.225.158,74 22,54 433.321.577,484 Electricity, Gases and Water 2.054.130,71 22,54 46.298.663,735 Construction 5.916.295,16 22,54 133.349.138,306 Trade, Hotel and Restaurant 37.025.575,65 22,54 834.530.474,617 Transportation and Communication 10.082.259,62 22,54 227.247.051,758 Finance, Leasing and Corporate

Services5.745.701,96 22,54 129.504.087,36

9 Services 7.694.194,84 22,54 173.421.748,58 Total 87.828.841,77 22,54 1.979.600.417,28

Sources : Secondary Data Analysis, 2015.

According to the result in table 2, it is shown that Trade, hotel and restaurant

sector has the largest result or 834.530.474,61 million Rupiah. This is mean that trade,

hotel and restaurant sector become sector with largest proportion that affected by

economic growth in East Java. The result is following by processing industry sector and

transportation and communication sector. This result is commonly found since Kota

Surabaya have large contribution in economic activity in this three sector.

If the result of national share this is mean that economic growth in East Java has

effect to economic activity in Kota Surabaya. And if the result is negative this is mean

Page 15: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

that economic growth in East Java has no effect on economic condition in Kota

Surabaya. From the result above although there are sector that has small result, it has no

negative result. As you can see the smallest one is in mining sector with number

143.196,89 million Rupiah then following with agricultural sector with number

1.784.478,58 million Rupiah. Although the result is particulary small compared with

other sector, this result is common since Kota Surabaya has small area of mining and

agriculture.

As for seeing the change relative performance of sectors that exist in Kota

Surabaya against the same sectors in East Java can be seen in Table 3 below :

Table 3 : Proportional Shift Value Sectors in Kota Surabaya years 2010-2013

(millions Rupiah)

No Sector/Industry

GDP Kota Surabaya

2010

i sector Growth in East Java

Average GDP

growth in East Java

Industrial Mix

(Eij) (rin) (rn) Mij = Eij (rin-rn)1 Agriculture 79.171,88 7,79 22,54 -1.167.424,972 Mining and

Excavation6.353,21 12,12 22,54 -66.186,11

3 Processing Industry 19.225.158,74 19,10 22,54 -66.156.337,714 Electricity, Gases and

Water2.054.130,71 18,19 22,54 -8.933.026,05

5 Construction 5.916.295,16 27,41 22,54 28.835.308,356 Trade, Hotel and

Restaurant37.025.575,65 31,26 22,54 322.713.833,43

7 Transportation and Communication

10.082.259,62 34,94 22,54 125.011.602,98

8 Finance, Leasing and Corporate Services

5.745.701,96 25,70 22,54 18.187.023,47

9 Services 7.694.194,84 16,27 22,54 -48.265.947,99 Total 87.828.841,77 22,54 22,54 370.158.845,40

Sources : Secondary Data Analysis, 2015.

Based on Table 3 shows that the sectors of trade, hotel and restaurant has a mix

of the most large industrial value is 322,713,833.43 million dollars. This means the

trade, hotels and restaurants leading to the economy grew relatively fast compared to

the same sector in East Java. So that the effect of the mix of industrial / sectoral against

trade, hotels and restaurants Kota Surabaya has a positive value. Then the result is

Page 16: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

followed by transportation and communication sector that have a result 125.011.602,98

Overall it can be concluded that the rapid economic growth in trade, hotels and

restaurants and transportation & communication in East Java positive effect on the same

sector in Kota Surabaya.

As for the view of competitiveness or competitive advantages of the sectors in

Kota Surabaya on the same sectors in East Java can be seen in Table 4 below :

Table 4: Values of Sectors Competitiveness in Kota Surabaya, 2010-2013 (millions

Rupiah)

No Sector/Industry

GDP Kota Surabaya

2010

i Sector Growth in

Kota Surabaya

i Sector Growth in East Java

Differential Shift (DS)

(Eij) (rij) (rin) Cij = Eij (rij - rin)

1 Agriculture 79.171,88 -0,22 7,79 -634.113,612 Mining and

Excavation6.353,21 11,65 12,12 -2.966,78

3 Processing Industry 19.225.158,74 16,47 19,10 -50.590.801,774 Electricity, Gases and

Water2.054.130,71 10,72 18,19 -15.350.138,68

5 Construction 5.916.295,16 25,08 27,41 -13.803.951,656 Trade, Hotel and

Restaurant37.025.575,65 29,01 31,26 -83.197.639,04

7 Transportation and Communication

10.082.259,62 30,53 34,94 -44.438.430,74

8 Finance, Leasing and Corporate Services

5.745.701,96 23,73 25,70 -11.332.878,83

9 Services 7.694.194,84 15,74 16,27 -4.062.329,59 Total 87.828.841,77 24,21 22,54 -

223.413.250,68

Sources : Secondary Data Analysis, 2015

According to table 4 we can see that there are no sector that have competitive

advantage in Kota Surabaya. This can seen from the result of Regional Shift above. All

sector has negative value which mean that the development of those sector is not

significant. This result is quite surprising since Kota Surabaya has a good result in

national share and industrial mix.

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From this result we can conclude that all the sector has no competitive

advantage at all. If we can see further this result may caused by the ability of Kota

Surabaya in producing product that have competitive advantage compared with other

region is still low. This is also mean that most of product that used in economic activity

in Kota Surabaya not produced by Kota Surabaya itself but come from another area.

IV.3. Klassen Tipology Result

The second component of the value of the PS as the horizontal axis and vertical

axis values as the DS. So as to obtain the four categories, namely:

Table 5: Position Relative Sector Based PS And DS Approach

Differential Shift (DS)Proportional Shift (PS)

Negative (-) Positive (+)

Positive (+) Kuadrant IV (Potential) Kuadrant I (Rapid Growth)

Negative (-)

Kuadrant III(Depressed) :1. Mining sector2. Agricultural Sector3. Electricity, Gases and

Water sector4. Services Sector5. Processing Industry

Sector

Kuadrant II (Develop):1. Trade, Hotel and

Restaurant Sector2. Transportation and

Communication3. Construction Sector4. Finance, Leasing and

Corporate Services Sector

Sources : Secondary Data Analysis, 2015

Based on the result in Table 5 there are no sector that considered in Kuadrant I

or have rapid growth. This result is have same result with LQ result before. Even in LQ

the result are have many sector that become base sector, but the result are decreasing.

From comparing the result in PS and DS we find that there are four sector that included

in Kuadrant II or developed sector. Those sector are :

1. Trade, Hotel and Restaurant Sector

2. Transportation and Communication

3. Construction Sector

4. Finance, Leasing and Corporate Services Sector

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And there are five sector that considered as depressed sector or in Kuadran III,

those sector are :

1. Mining sector

2. Agricultural Sector

3. Electricity, Gases and Water sector

4. Services Sector

5. Processing Industry Sector

V. CONCLUSION

Page 19: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

From the result of research that already done, we can conclude several

conclusion and recommendation for Kota Surabaya Government in developing

economic activity in this area, those are :

1. According to Location Quotient (LQ) result, the base sector in Kota Surabaya is

five sector. This mean that this five sector can fullfil the local needs and even

expirt to another region. Those sector are electricity, gases and water sector,

construction sector, trade, hotel and restaurant sector, transportation and

communication sector, and the last one is finance, leasing and corporate services

sector.

2. From national share that have aim to examine the effect of economic growth in

East Java to economic condition in Kota Surabaya. It is founded that trade, hotel

and restaurant sector become sector with largest proportion that affected by

economic growth in East Java. The result is following by processing industry

sector and transportation and communication sector.

3. For proportional share (PS) we can find that the rapid economic growth in trade,

hotels and restaurants and transportation & communication in East Java positive

effect on the same sector in Kota Surabaya.

4. From the result of Differential Shift (DS) we can conclude that all the sector has

no competitive advantage at all. If we can see further this result may caused by

the ability of Kota Surabaya in producing product that have competitive

advantage compared with other region is still low. This is also mean that most of

product that used in economic activity in Kota Surabaya not produced by Kota

Surabaya itself but come from another area.

5. Based on the result in comparing PS and DS, there are no sector that considered

in Kuadrant I or have rapid growth. This result is have same result with LQ

result before. Even in LQ the result are have many sector that become base

sector, but the result are decreasing.

6. Comparison of PS and DS have result in Kuadrant II or developed sector. Those

sector are Trade, Hotel and Restaurant Sector, Transportation and

Communication, Construction Sector, Finance, Leasing and Corporate Services

Sector

Page 20: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

7. And there are five sector that considered as depressed sector or in Kuadran III,

those sector are Mining sector, Agricultural Sector, Electricity, Gases and Water

sector, Services Sector, Processing Industry Sector

From this result writer have suggestion to Kota Surabaya Government.

Determination of development policy and development of regional economic

sectors should be prioritized in sectors that could potentially be a base sector and

have a major effect on GDP contribution Kota Surabaya. If this base sector

developed more it can have good potential to become main contributor not only in

Kota Surabaya but also in East Java and Indonesia.

APPENDIX

Page 21: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

Appendix 1 : Chart 1.2. Percentage of GDP in Java’s Province in 2013

29%

24%14%2%

25%

7%

DKI JakartaWest JavaCentral JavaDI YogyakartaEast JavaBanten

Source : BPS, processed

Appendix 2 : Table GDP Constant Price East Java 2010-2013

No

Sector/IndustryYear

2010 2011 2012 20131 Agriculture 51.329.548,83 52.628.433,15 54.463.942,77 55.330.095,902 Mining and Excavation 7.757.319,82 8.228.632,48 8.419.507,76 8.697.627,56

3 Processing Industry 86.900.779,13 92.171.191,46 98.017.056,47103.497.232,6

8

4Electricity, Gases and Water 4.642.081,81 4.932.084,36 5.238.431,69 5.486.499,10

5 Construction 10.992.599,76 11.994.825,72 12.840.565,41 14.006.020,59

6Trade, Hotel and Restaurant

106.229.112,97

116.645.214,35

128.375.498,60

139.431.307,45

7Transportation and Communication 25.076.424,92 27.945.256,13 30.640.913,33 33.837.742,37

8Finance, Leasing and Corporate Services 18.659.490,17 20.186.109,19 21.782.339,97 23.455.842,04

9 Services 30.693.407,48 32.251.530,62 33.884.591,41 35.686.078,02

Total342.280.764,8

9366.983.277,4

6393.662.847,4

0419.428.445,6

9

Appendix 3 : Table GDP Constant Price 2000 Kota Surabaya 2010-2013

Page 22: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

No Sector/IndustryYear

2010 2011 2012 20131 Agriculture 79.171,88 77.663,11 78.013,26 79.001,28

2 Mining and Excavation 6.353,21 6.511,23 6.743,23 7.093,65

3 Processing Industry19.225.158,7

420.223.278,6

4 21.421.547,93 22.390.903,12

4Electricity, Gases and Water 2.054.130,71 2.089.362,01 2.188.177,38 2.274.285,70

5 Construction 5.916.295,16 6.316.849,86 6.782.238,21 7.400.100,11

6Trade, Hotel and Restaurant

37.025.575,65

40.371.150,00 44.011.461,26 47.766.042,34

7Transportation and Communication

10.082.259,62

11.122.647,38 12.054.700,61 13.160.461,86

8Finance, Leasing and Corporate Services 5.745.701,96 6.153.536,23 6.613.389,33 7.109.284,28

9 Services 7.694.194,84 8.110.024,29 8.515.422,36 8.905.129,55

Total87.828.841,7

794.471.022,7

5101.671.693,5

7109.092.301,8

9

Page 23: ECONOMIC BASE SECTOR ANALYSIS IN ENCOURAGING ECONOMIC GROWTH IN KOTA SURABAYA

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