Local government development policy: Natural resource revenue sharing and economic growth in Indonesia

Bachtari Alam Hidayat, Tria Apriliana, Agus Faturohim, Ribut Nurul Tri Wahyuni, Firdaus Landekumandang, Loso Judijanto, Teti Rahmawati, Amir Hamzah, Yolanda Yolanda, Herie Saksono

Article ID: 10375
Vol 8, Issue 15, 2024

VIEWS - 53 (Abstract) 12 (PDF)

Abstract


Regions rich in natural resources often exhibit a high dependency on revenue from Revenue Sharing Funds (DBH). This dependency can pose long-term challenges, especially when commodity prices experience significant fluctuations. This study examines the role of Revenue Sharing Funds from Natural Resources (DBH SDA) on economic growth in 491 regencies/cities in Indonesia during the 2010–2012 period. The analysis employs panel data regression. The selection of this period was based on the occurrence of a resource boom characterized by a surge in global demand for natural resource commodities, accompanied by an increase in commodity prices. This condition positively impacted the revenues of both the nation and resource-rich regions. The results of the study show that economic growth is not influenced by DBH SDA but rather by General Allocation Funds (DAU). This indicates that the central government still plays a significant role in determining economic growth at the regency/city level in Indonesia. Regions need to prioritize economic diversification to reduce reliance on DBH SDA and DAU. Investment in productive sectors, such as infrastructure, education, and technology, can be a strategic approach to accelerating regional economic growth.


Keywords


natural resources; economic growth; revenue sharing fund; development; panel data regression

Full Text:

PDF


References


Abduvaliev, M., & Bustillo, R. (2020). Impact of remittances on economic growth and poverty reduction amongst CIS countries. Post-Communist Economies, 32(4), 525–546. https://doi.org/10.1080/14631377.2019.1678094

Amare, M. Z., Mulugeta, W., & Mencha, M. (2024). Nexus between natural resource endowments and economic growth in selected African countries. Discover Sustainability, 5(1). https://doi.org/10.1007/s43621-024-00448-3

Anggraeni, P., Daniels, P., & Davey, P. (2020). Improving the benefit of natural resources endowment to economic welfare in Indonesia: A mixed-method analysis. International Journal on Advanced Science, Engineering and Information Technology, 10(3), 1234–1244. https://doi.org/10.18517/ijaseit.10.3.12067

Arvin, M. B., Pradhan, R. P., & Nair, M. S. (2021). Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries. Economic Analysis and Policy, 70, 468–489. https://doi.org/10.1016/j.eap.2021.03.011

Astuti, D., & Lestari, E. P. (2020). The Government Spending on Education and Health Care in Indonesia’s Economic Growth. 143(Isbest 2019), 14–18. https://doi.org/10.2991/aebmr.k.200522.004

Badrudin, R., & Siregar, B. (2015). The evaluation of the implementation of regional autonomy in Indonesia. Economic Journal of Emerging Markets, 7(1), 1–11. https://doi.org/10.20885/ejem.vol7.iss1.art1

Dinh Thanh, S., Hart, N., & Canh, N. P. (2020). Public spending, public governance and economic growth at the Vietnamese provincial level: A disaggregate analysis. Economic Systems, 44(4), 100780. https://doi.org/10.1016/j.ecosys.2020.100780

Duek, A., & Rusli, R. (2010). The natural resources industry in decentralised Indonesia: how has decentralisation impacted the mining, oil and gas industries? January 2010. http://fdef.uni.lu/index.php/fdef_FR/economie/crea

Effendy, I., Ananda, C. F., Maski, G., & Susilo. (2023). the Influence of District-City Government Education and Health Expenditures on Economic Growth of East Java Province During Period of 2011-2019 Years. Russian Journal of Agricultural and Socio-Economic Sciences, 134(2), 59–65. https://doi.org/10.18551/rjoas.2023-02.07

Eisenmenger, N., Pichler, M., Krenmayr, N., Noll, D., Plank, B., Schalmann, E., Wandl, M.-T., & Gingrich, S. (2020). The Sustainable Development Goals prioritize economic growth over sustainable resource use: a critical reflection on the SDGs from a socio-ecological perspective. Sustainability Science, 15, 1101–1110.

Erlyn, P., Hidayat, B. A., Fatoni, A., & Saksono, H. (2021). Nutritional Interventions by Local Governments as an Effort to Accelerate Stunting Reduction. Jurnal Bina Praja, 13(3), 543–553.

Erlyn, P., Hidayat, B., Cahyo, A., & Saksono, H. (2022). Investment in Human Resources to Increase Achievement Levels of Sustainable Development. Jurnal Bina Praja, 14(1), 135–146. https://doi.org/10.21787/jbp.14.2022.135-146

Fang, X., Khalaf, O. I., Guanglei, W., Cristia, J. F. E., & Almasabi, S. (2024). Exploring impact of green finance and natural resources on eco-efficiency: case of China. Scientific Reports, 14(1), 1–10. https://doi.org/10.1038/s41598-024-70993-4

Faturohim, A., Akbar, A., Hidayat, B. A., & Saksono, H. (2023). An Analysis of Urban Poverty and Unemployment. Jurnal Bina Praja, 15(2), 309–324. https://doi.org/10.21787/jbp.15.2023.309-324

Faturohim, A., Hermawan, A., Suherli, M., Ariyantini, M., Yuliana, E., Firdaus, M., Pramoda, R., & Hidayat, B. A. (2024). Benefit distribution and management of inland fisheries : A case study at Batu Tegi Dam , Lampung Province , Indonesia. 17(3), 1278–1287.

Frankel, J. A. (2012). The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions, John F. Kennedy School of Government, Harvard University, HKS Faculty Research Working Paper Series No. 12-014.

Garg, D. S., Mittal, D. S., & Garg, A. (2024). Navigating the path for economic resilience and sustainable economic growth: Empirical insight from G-20 nations. Sustainable Futures, 8(July), 100338. https://doi.org/10.1016/j.sftr.2024.100338

Hardi, I., Afjal, M., Can, M., Idroes, G. M., Noviandy, T. R., & Idroes, R. (2024). Shadow economy, energy consumption, and ecological footprint in Indonesia. Sustainable Futures, 8(July), 100343. https://doi.org/10.1016/j.sftr.2024.100343

Harsono, I., Purnamawati, I. G. A., & Demung, I. W. (2023). Determinants of Economic Growth, Poverty, and Unemployment: A Path Analysis Study. Jurnal Ilmu Sosial Dan Humaniora, 12(2), 359–366. https://doi.org/10.23887/jish.v12i2.63986

Hidayat, B. A., Fatoni, A., Saksono, H., Asriani, A., & Andari, T. (2022). Integrated River Transport Development to Support Smart City. Jurnal Bina Praja, 14(1), 1–15. https://doi.org/10.21787/jbp.14.2022.1-15

Hidayat, B. A., Faturohim, A., Judijanto, L., Hanapi, S., Alfayanti, A., Purno, M., Landekumandang, F., Wahyuni, R. N. T., & Shinoda, K. (2024). Map to prosperity: Natural resource revenue sharing and infrastructure development in Indonesia. Journal of Infrastructure, Policy and Development, 8(11), 1–16. https://doi.org/10.24294/jipd.v8i11.8405

Hidayat, B. A., Supartoyo, Y. H., Setiawan, S., Ragimun, R., & Salim, Z. (2024). Government infrastructure investment stimulation through booming natural resources: Evidence from a lower-middle-income country. Plos One, 19(5), e0301710. https://doi.org/10.1371/journal.pone.0301710

Hidayat, B. A., Yuliana, E., Wicaksono, B., Matara, K., Afriyanni, Wulandari, S. N., Amri, N. H., & Saksono, H. (2021). Objectives of Sustainable Development and Analysis of People’s Economy Improvement. Proceedings of the International Conference on Sustainable Innovation Track Humanities Education and Social Sciences (ICSIHESS 2021), 626(Icsihess), 182–186. https://doi.org/10.2991/assehr.k.211227.030

Jakovljevic, M., Timofeyev, Y., Ranabhat, C. L., Fernandes, P. O., Teixeira, J. P., Rancic, N., & Reshetnikov, V. (2020). Real GDP growth rates and healthcare spending - Comparison between the G7 and the EM7 countries. Globalization and Health, 16(1), 1–13. https://doi.org/10.1186/s12992-020-00590-3

Kolstad, I., & Wiig, A. (2009). Is Transparency the Key to Reducing Corruption in Resource-Rich Countries? World Development, 37(3), 521–532. https://doi.org/10.1016/j.worlddev.2008.07.002

Maharani, M., & Akbar, N. A. (2023). Utilization of Petroleum and Natural Gas on the Sustainable Development of Indonesian Economy. Journal of Sustainable Development and Regulatory Issues (JSDERI), 1(1), 1–8. https://doi.org/10.53955/jsderi.v1i1.1

Majid, A., Ismail, M., & Saputra, P. M. A. (2020). Effect of Natural Resources Share Fund on Economic Growth, Unemployment and Poverty in Producing Regions in Indonesia. 144(Afbe 2019), 315–324. https://doi.org/10.2991/aebmr.k.200606.055

Moonti, R. M. (2019). Regional Autonomy in Realizing Good Governance Roy Marthen Moonti. Substantive Justice, International Jurnal Of Law, 2(1), 43–53.

Mudayen, Y. M. V., & Maridjo, H. (2018). The Impacts of Fiscal Decentralization, Institutional Transformation, and Regional Revenue on Income Disparities between Provinces in Indonesia. Journal of Economics, Business, & Accountancy Ventura, 20(3), 247–259. https://doi.org/10.14414/jebav.v20i2.878

Perianayagam, A., Khalifa, A. A., Al-Ghanim, K., Al-Sulaiti, H., & Mourshed, M. (2024). Do income and consumption growth cause CO2 emissions in Qatar? Implications for climate policy. Discover Sustainability, 5(1). https://doi.org/10.1007/s43621-024-00525-7

Pertiwi, D., Maksum, A., & Lumbanraja, P. (2022). The Effect of Original Local Government Revenue, General Allocation Fund, and Specific Allocation Fund on Economic Growth with Capital Expenditures as a Moderating Variable in Regencies and Cities in North Sumatra Province. International Journal of Research and Review, 9(7), 172–186. https://doi.org/10.52403/ijrr.20220719

Qurbani, I., Sumarno, T., & Cassy, R. (2020). Regional Economic Development Strategy: Increasing Local Generated Domestic Revenue of the Regional-Owned Enterprises in the Oil and Gas Sector. Brawijaya Law Journal, 7(1), 70–81. https://doi.org/10.21776/ub.blj.2020.007.01.05

Raghupathi, V., & Raghupathi, W. (2020). Healthcare Expenditure and Economic Performance: Insights From the United States Data. Frontiers in Public Health, 8(May), 1–15. https://doi.org/10.3389/fpubh.2020.00156

Raihan, A., Rahman, J., Tanchangya, T., Ridwan, M., & Bari, A. B. M. M. (2024). Influences of economy, energy, finance, and natural resources on carbon emissions in Bangladesh. Carbon Research, 3(1). https://doi.org/10.1007/s44246-024-00157-6

Ramey, V. A. (2021). The macroeconomic consequences of infrastructure investment (Vol. 28215). University of Chicago Press Chicago.

Rawung, S. S., Poluakan, T. C., & Hamenda, B. (2023). The Effect Of Regional Original Revenue, General Allocation Funds, And Special Allocation Funds On Economic Growth In The North Sulawesi Province. Jambura Equilibrium Journal, 5(2), 119–121.

Saksono, H., Hidayat, B. A., Yuliana, E., Wicaksono, B., Afriyanni, Wulandari, S. N., Momon, M., Matara, K., & Amri, N. H. (2022). The Impact of Tourism and The Creative Industry on The Economy of The Community. Proceedings of the International Conference on Sustainable Innovation Track Accounting and Management Sciences (ICOSIAMS 2021), 201(Icosiams 2021), 22–25. https://doi.org/10.2991/aebmr.k.211225.004

Sandy, N. T., & Inayati, I. (2022). Transfer of Land and Building Taxes in the Plantation and Forestry Sector in Indonesia in a SWOT Analysis Review. Jurnal Public Policy, 8(3), 168. https://doi.org/10.35308/jpp.v8i3.5484

Sasongko, H. E., & Wibowo, P. (2022). Government Spending and Regional Economic Growth: the Mediating Effect of Human Development Index. Jurnal Ekonomi Bisnis Dan Kewirausahaan, 11(2), 230. https://doi.org/10.26418/jebik.v11i2.52229

Sengaji, M., Sasongko, S., & Sakti, R. (2019). Determinant of Regional Economic Growth in East Java, Indonesia. Jurnal Ekonomi Dan Studi Pembangunan, 11(2), 104–115. https://doi.org/10.17977/um002v11i22019p104

Shi, Y., Guo, S., & Sun, P. (2017). The role of infrastructure in China’s regional economic growth. Journal of Asian Economics, 49, 26–41. https://doi.org/10.1016/j.asieco.2017.02.004

Sunardi, S., Djazuli, A., Handayani, R. D., Hidayat, B. A., & Saksono, H. (2022). The Role of Human Development in Improving Local Government Performance Through Good Government Governance. Jurnal Bina Praja, 14(3), 571–582. https://doi.org/10.21787/jbp.14.2022.571-582

Suslova, E., & Volchova, N. (2012). Human Capital, Industrial Growth and Resource Curse. The Economic Journal of the Higher School of Economics, 12(2), 217–238.

Tahir, M., Albahouth, A. A., Jaboob, M., Osama, A. J., & Burki, U. (2024). The consumption of natural resources and its effects on environmental quality: Evidence from the OECD countries. Sustainable Futures, 8(June), 100248. https://doi.org/10.1016/j.sftr.2024.100248

Wang, S., Wang, X., & Lu, B. (2022). Is resource abundance a curse for green economic growth? Evidence from developing countries. Resources Policy, 75(May 2021), 102533. https://doi.org/10.1016/j.resourpol.2021.102533

Widodo, S. (2019). Regional Autonomy Implementation through Improvements Quality of Governance, and Public Services. American Journal of Social Sciences and Humanities, 4(3), 474–485. https://doi.org/10.20448/801.43.474.485

Wong, C. S. (2021). Science mapping: A scientometric review on resource curses, dutch diseases, and conflict resources during 1993-2020. Energies, 14(15). https://doi.org/10.3390/en14154573

Wulandari, S. N., Saksono, H., Izzati, N., & Elven, R. R. (2024). Oil And Gas Regionally Owned Enterprisesand Regional Development In Policy, Environment, And Health. Technium Press.

Yao, H., Tian, M., Ma, J., She, X., & Gao, J. (2019). Study on “resource Curse” Based on the Panel Data in Coal Resource-Rich Districts of Inner Mongolia. E3S Web of Conferences, 118, 3–7. https://doi.org/10.1051/e3sconf/201911801015

Yasa, P. G. A. S. (2021). Distribution and Revenue Sharing of Natural Resources in Indonesia: Autonomous Region and Legal Pluralism Perspective. Udayana Journal of Law and Culture, 5(2), 172–184. https://doi.org/10.24843/UJLC.2021.v05.i02.p05




DOI: https://doi.org/10.24294/jipd10375

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Bachtari Alam Hidayat, Tria Apriliana, Agus Faturohim, Ribut Nurul Tri Wahyuni, Firdaus Landekumandang, Loso Judijanto, Teti Rahmawati, Amir Hamzah, Yolanda Yolanda, Herie Saksono

License URL: https://creativecommons.org/licenses/by/4.0/

This site is licensed under a Creative Commons Attribution 4.0 International License.