Provinces in the eastern part of Indonesia are seeing robust economic growth in the third quarter thanks to higher commodity prices, but without diversification away from commodities the regions may not sustain such rapid growth, economists say.
While the nation’s overall economic growth was 5.02 percent in the July to September period yearon-year (yoy), provinces in eastern Indonesia saw higher growth, namely Maluku and Papua with 13.72 percent, Sulawesi with 6.67 percent and Bali and Nusa Tenggara, both with 5.04 percent, according to data from the Central Statistics Agency (BPS).
President Joko “Jokowi” Widodo said he wants to spread economic contributions from the eastern part of Indonesia to the whole archipelago and pledged to boost infrastructure development in the regions.
However, economists said the government’s efforts to build infrastructure on the outskirts of the country had yet to bear fruit as they required more time before affecting the local economies. Instead, the rising prices of mining commodities have become the main reason for the spike in growth in eastern parts.
“Improvements in commodity prices, such as gold in Papua, caused the jumping growth,” University of Indonesia (UI) economist Lana Soelistianingsih said on Monday following the data release.
The BPS data also showed that the overall growth of the nation’s mining sector reversed its minus 0.72 percent yoy contraction in the second quarter to become a 0.13 percent gain in the third quarter, thanks to the higher production of some mining commodities like gold, BPS head Suhariyanto said.
The eastern part of Indonesia still relies heavily on the mining sector so that most provinces, such as Papua, Maluku, Central Sulawesi and several areas in Kalimantan, see their economic growth spike when prices and production increase, said Center for Reform in Economics (CORE) research director Mohammad Faisal.
“Other areas, like South Sulawesi, recorded growth because of their diversified economies,” he said. “Bali, on the other hand, is supported by its tourism sector so that when the overall economy slows down, it is still able to post growth.”
With the projected stable increase in commodity prices going forward, economists expressed optimism that economic growth in the area can be improved, although concerns over its sustainability remain.
“The growth will be sustainable if those provinces can transform and diversify their economies. If they’re still commodity dependent, the growth won’t sustain,” Faisal said.
Apart from the mining sector’s reversal of fortune, the top three sectors that booked the highest growth in the third quarter include information and communications, financial services and transportation and warehousing, according to BPS data.
In quarter-on-quarter, transportation and warehousing, agriculture, forestry and fisheries, as well as the construction sector, were at the top of the list.
In West Nusa Tenggara and Maluku, the regions that posted the most growth in the third quarter, the marine industry is enjoying growth, especially in the shrimp and seaweed aquaculture industries, according to the Indonesian Chamber of Commerce and Industry (Kadin). Bengkulu, Lampung and Java are also seeing growth in the same sector.