Indonesians Resonance

Let Indonesians talk more about Indonesia development, and let its resonances break the lame development.

Discussing Development Proposal within Economic Base Model Context

Economic base (EB) model is the oldest, simplest and most widely used technique for regional economic analysis. This model is based on the idea which asserts strengthening and growing the local economy by developing and enhancing the basic sector or export sector ( Florida State University, Department of Urban and Regional Planning website). Or in a simple term may be said that regional economic growth is attained only by an increase in exports. Because of those the EB model is also known as an export-base model (US Department of Commerce, 2005).

The advantages of this model are easy to apply, a fairly flexible framework (can be applied to towns, cities, states, regions, etc for the short or long-run changes in economic), and highlights the importance of the openness of a regional economy to its growth. But there are also some criticisms to this model such as neglect of supply-side influences on regional growth, little or no convincing evidence to support using this paradigm for the long-run regional growth model, etc. (Regional Economic Growth Theory website).

According to proposal within EB model context, it can be suggested that all development actors should consider and provide comprehensive policies and strategies which focus on protecting and stimulating growth in the basic industries if their areas have potentials for it (Paul Templet, no year indicated). Such as a “We help you export” propaganda which is implementing by a lot of countries where they are trying to remove the trade barriers and any other barriers for foreign investments, improve infrastructures (especially transport), deregulate labor markets, and any kind strategies which support export activities. (Johannes L., 2006).

By these comprehensive regulations, the basic industries which typnically include resource-extractive industries (mining, agriculture, fishing, timber) as well as heavy manufacturers are getting more chance for well growing. Then the export sector which identified by EB model as the “engine” of the local economy will expand and be followed by increase of a “multiplier effect” to the local employment and earnings (Paul Templet, no year indicated). Of course, this will emerge direct links to unemployment rate reduce and consumption to good and services locally increase. By more consumption locally, the expansion of local sector will follow to the positive line. Next, the increasing employment rate will generate community income. It means the poverty rate is getting more chance to decrease while saving and investment activities will increase. This situation will make local sector has more and more possibility to expand. On the other side, there is a positive externality of industries growth where usually a certain company in basic industries provides regular programs for promoting social development of the community. Even some people said that this is a part of company strategy in order to get community support, but these programs are really giving the light signal to decreasing of unemployment and poverty rates.

Overall, I conclude that by EB model, which tend to emphasize export expansion (basic sector), not only both employment generation and poverty reduction as main effects which can be reached, but also the local sector expansion. The expansion and decline of local sector is depended on growth or contraction in the basic industries. This is the “economic base” that “supports” the local sector. (Paul Templet, no year indicated).

However, keeping the positive cause-effect linkages for getting maximum intended effects are not easy. Besides direct (physical) development, there are a lot of important factors which have to be considered. In this time, the essay would only discuss about human capital and social capital. Certainly, human capital stock of the area which is supported by good knowledge and skills would be hired by industrial base companies. As some experts said the higher the human capital stock, the easier is the acquisition of new knowledge and skills (Johannes L., 2006). Without good human capital, the companies have to hire manpower (worker) from outside of the region (import). This will deliver to the high cost of production processes, unabsorbed local unemployment and sometimes the some portions of worker money will go to the worker home region (not support to the local economy). Furthermore, the reducing profit of the companies because high cost of man power would head for warning signal of operating sustainability of this industry in this area. So then, the local development actors should promote a number of education programs for their local manpower regularly and it would be passed on from generation to generation.

Regarding to the social capital, the industrial or export companies do not only find areas which strategies based on location theories, but also based on social capital or social condition where they can expand their business. In this term, social capital is included a good situation of community such as good norms, not susceptible of conflict among the community, can be trust, punctuality, etc (Johannes L., 2006). Because of this, the development actors also have to consider any kind of programs which could strengthen the social capital of the community.

Now, we are asking about how far the Indonesia government efforts in order to keep positive cause-effect of EB model for indonesia people and how wise Indonesia people to their human and social capitals? Have you seen the real sample of “Lapindo mud” case?, have you seen how big uneployment rate in indonesia due to lack of knowledge and skill?, how do you feel regarding “Poso conflict” case and other conflict cases in Indonesia?. Finally, do you believe the poverty can be alleviated without human and social capitals improvements?

Regards – Bang Jenal

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2 Comments»

  Raymondkc wrote @

nice work, man

  hassan hamidu wrote @

i want know some news about biology and must important topic that contain?


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