2012年-世界发展银行全球_Agglomeration_and_Manufacturing_Activities_in_Indonesia_25页_4mb

Summary of "Agglomeration and Manufacturing Activities in Indonesia"

Core Content

This policy note from the World Bank examines the role of agglomeration in the growth and productivity of Indonesia's manufacturing sector. It highlights how manufacturing firms benefit from clustering in certain areas due to externalities such as access to labor, skills, and infrastructure, as well as knowledge sharing and market proximity.

Main Points

• Agglomeration Definition: Agglomeration refers to the process where firms locate in areas with existing manufacturing activities to benefit from externalities like localization economies (shared inputs and knowledge) and urbanization economies (diverse inputs and proximity to consumers).

• Location Trends:

  • Manufacturing activities in Indonesia have historically concentrated in Java, particularly in major cities like Jakarta, Bandung, and Surabaya.
  • Despite government efforts to decentralize, Java remains the main manufacturing corridor.
  • Some firms are moving to new locations adjacent to these core cities, forming new agglomerations.
  • Non-core regions such as Cirebon, Lampung, and Pekalongan are emerging as new manufacturing hubs.

• Impact on Productivity:

  • Firms located in agglomeration areas enjoy higher productivity due to better access to inputs, labor, and services.
  • Empirical evidence shows that firms in agglomeration areas have 30% higher total factor productivity (TFP) than those outside.
  • The productivity gap between agglomerated and non-agglomerated firms widens over time.
  • New agglomerations also show productivity gains, though smaller than traditional ones (10% higher TFP on average).

• Role of Foreign Investment and Exporters:

  • Agglomerations are dominated by foreign investors and exporters, who contribute to productivity spillovers.
  • The presence of foreign firms increases both horizontal (within industry) and vertical (upstream/downstream) productivity spillovers.
  • In 2009, 3.1% of manufacturing firms in core regions were foreign-owned, compared to 0.9% in non-core regions.

• Challenges and Constraints:

  • Congestion, high costs, and regulatory inefficiencies in core regions may be pushing firms to move to non-core areas.
  • Corruption and bureaucratic delays are significant issues in core regions, particularly in Jakarta.
  • Infrastructure and access to finance are key factors that attract firms to agglomerate.

• Special Economic Zones (SEZs):

  • The government has promoted SEZs such as Batam and KAPETs (Integrated Economic Development Zones) to attract manufacturing investment.
  • However, these zones have not been as successful as expected in drawing significant investment.
  • KAPETs aim to leverage local comparative advantages, but their impact remains limited.

• Industry-Specific Behavior:

  • Light manufacturing industries (e.g., garments, food, and wood-based products) are more likely to move to new locations due to lower costs and constant internal returns to scale.
  • Heavy manufacturing industries (e.g., machinery and electronics) tend to remain in core agglomerations.

• Policy Implications:

  • The policy focus should be on facilitating private-sector-led agglomeration rather than mandating industrial distribution.
  • Policymakers should address congestion costs, regulatory inefficiencies, and improve infrastructure to enhance the benefits of agglomeration.
  • Understanding firm site selection criteria is crucial for designing effective policies to support agglomeration and reduce regional disparities.

Key Information

• Java's Dominance: Java hosts 81% of medium and large manufacturing firms and 75% of total manufacturing output in 2005-08.
• Core vs. Non-Core Regions:
  • Core regions (e.g., Jakarta, Bandung, Surabaya) are more attractive due to better infrastructure, access to finance, and labor availability.
  • Non-core regions, especially those with KAPETs, are showing growth in manufacturing activity.
• Productivity Gains: Agglomeration areas show a 63% TFP growth between 1991-94 and 2005-08, while non-agglomeration areas show 154% growth.
• New Agglomerations: Emerging agglomerations in areas like Bandar Lampung and Cirebon are contributing to the decentralization of manufacturing activities.

Conclusion

The agglomeration process in Indonesia's manufacturing sector is a key driver of productivity and economic growth. While Java remains the dominant manufacturing corridor, new agglomerations are emerging, especially in response to rising costs in core regions. Policies should support and enhance the conditions that facilitate agglomeration, including improving governance, infrastructure, and access to finance, while also addressing the challenges that hinder the process.