Map to prosperity: Natural resource revenue sharing and infrastructure development in Indonesia

Bachtari Alam Hidayat, Agus Faturohim, Loso Judijanto, Sidiq Hanapi, Alfayanti Alfayanti, Marhaendro Purno, Firdaus Landekumandang, Ribut Nurul Tri Wahyuni, Kunihiko Shinoda

Article ID: 8405
Vol 8, Issue 11, 2024

VIEWS - 776 (Abstract)

Abstract


The well-being of society can be realized through meeting basic needs, one of which is providing public infrastructure. This study examines the role of Natural Resource Revenue Sharing Funds (DBH SDA) on government investment in infrastructure in 491 regencies/cities in Indonesia. The testing in this research uses panel data regression analysis. The results show that per capita DBH SDA in Indonesia during the study period of 2010–2012 has a significant and positive influence on government investment in infrastructure. The selection of this period is based on the consideration that a resources boom has occurred, where there is an increased global demand for natural resource commodities followed by an increase in commodity prices, thereby positively impacting revenue for countries or regions abundant in natural resources. Despite DBH SDA having a significant and positive influence, regional spending on infrastructure tends to be more influenced by central government transfers such as General Allocation Fund (DAU), Special Allocation Fund (DAK), and Local Own-source Revenue (PAD). It was found that government investment in infrastructure tends to be influenced by transfer funds, indicating that the role of the central government remains significant in determining the infrastructure expenditure of regencies/cities in Indonesia.


Keywords


natural resources; infrastructure investment; revenue sharing fund; development; panel data regression

Full Text:

PDF


References

  1. Adomako, S., Danso, A., & Boateng, A. (2023). Corporate Sustainability in Africa. In: Palgrave Studies in African Leadership. Springer International Publishing. https://doi.org/10.1007/978-3-031-29273-6
  2. Aguirre Unceta, R. (2021). The economic and social impact of mining-resources exploitation in Zambia. Resources Policy, 74, 102242. https://doi.org/10.1016/j.resourpol.2021.102242
  3. Ahmed, Z., Asghar, M. M., Malik, M. N., et al. (2020). Moving towards a sustainable environment: The dynamic linkage between natural resources, human capital, urbanization, economic growth, and ecological footprint in China. Resources Policy, 67, 101677. https://doi.org/10.1016/j.resourpol.2020.101677
  4. Álvarez, R., & Vergara, D. (2022). Natural resources and educational attainment: Evidence from Chile. Resources Policy, 76, 102573. https://doi.org/10.1016/j.resourpol.2022.102573
  5. Aman, J., Abbas, J., Shi, G., et al. (2022). Community Wellbeing Under China-Pakistan Economic Corridor: Role of Social, Economic, Cultural, and Educational Factors in Improving Residents’ Quality of Life. Frontiers in Psychology, 12. https://doi.org/10.3389/fpsyg.2021.816592
  6. An, H., Razzaq, A., Nawaz, A., et al. (2021). Nexus between green logistic operations and triple bottom line: evidence from infrastructure-led Chinese outward foreign direct investment in Belt and Road host countries. Environmental Science and Pollution Research, 28(37), 51022–51045. https://doi.org/10.1007/s11356-021-12470-3
  7. Appiah, M., Onifade, S. T., & Gyamfi, B. A. (2022). Building Critical Infrastructures: Evaluating the Roles of Governance and Institutions in Infrastructural Developments in Sub-Sahara African Countries. Evaluation Review, 46(4), 391–415. https://doi.org/10.1177/0193841x221100370
  8. Arellano-Yanguas, J. (2018). Extractive industries and regional development: Lessons from Peru on the limitations of revenue devolution to producing regions. Regional and Federal Studies, 29(2), 249–273. https://doi.org/10.1080/13597566.2018.1493461
  9. Azolibe, C. B., & Okonkwo, J. J. (2020). Infrastructure development and industrial sector productivity in Sub-Saharan Africa. Journal of Economics and Development, 22(1), 91–109. https://doi.org/10.1108/jed-11-2019-0062
  10. Cacciuttolo, C., Guzmán, V., Catriñir, P., et al. (2024). Sensor Technologies for Safety Monitoring in Mine Tailings Storage Facilities: Solutions in the Industry 4.0 Era. Minerals, 14(5), 446. https://doi.org/10.3390/min14050446
  11. Chapman, D. (2002), Corruption and the Education Sector. USAID. pp. 1-25.
  12. Chen, K., Li, Q., Shoaib, M., et al. (2024). Does improved digital governance in government promote natural resource management? Quasi-natural experiments based on smart city pilots. Resources Policy, 90, 104721. https://doi.org/10.1016/j.resourpol.2024.104721
  13. Chile, N. I., Uzoechina, B. I., Eze, M. A., et al. (2021). Does the Abundance of Natural Resources Crowd-Out the Manufacturing Sector? Evidence from Nigeria. Asian Development Policy Review, 9(3), 108–126. https://doi.org/10.18488/journal.107.2021.93.108.126
  14. Crook, R. C. (2003). Decentralisation and poverty reduction in Africa: the politics of local–central relations. Public Administration and Development, 23(1), 77–88. Portico. https://doi.org/10.1002/pad.261
  15. Daulay, A., Yusuf, M., & Maipita, I. (2021). Analysis of Regional Disparity Among Regencies/Cities and the Correlation with Economic Growth North Sumatera in 2010-2019. In: Proceedings of the International Conference on Strategic Issues of Economics, Business and, Education (ICoSIEBE 2020). https://doi.org/10.2991/aebmr.k.210220.009
  16. Dinga, G. D., Mama, N., & Achuo, E. D. (2024). Resource abundance: Blessing or curse? Comparative analyses of point and diffuse resources. Heliyon, 10(3), e25078. https://doi.org/10.1016/j.heliyon.2024.e25078
  17. Du, Y., Zhou, J., Bai, J., et al. (2023). Breaking the resource curse: The perspective of improving carbon emission efficiency based on digital infrastructure construction. Resources Policy, 85, 103842. https://doi.org/10.1016/j.resourpol.2023.103842
  18. Duek, A. and Rusli, R. (2010). The natural resources industry in decentralised Indonesia: how has decentralisation impacted the mining, oil and gas industries? Available online: http://fdef.uni.lu/index.php/fdef_FR/economie/crea (accessed on 1 August 2024).
  19. Duque, E. A., González, J. D., & Restrepo, J. C. (2016). Developing Sustainable Infrastructure for Small Hydro Power Plants through Clean Development Mechanisms in Colombia. Procedia Engineering, 145, 224–233. https://doi.org/10.1016/j.proeng.2016.04.066
  20. Eisenmenger, N., Pichler, M., Krenmayr, N., et al. (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(4), 1101–1110. https://doi.org/10.1007/s11625-020-00813-x
  21. Ellalee, H., & Al-Qaysi, I. I. (2023). Digital Government a Pathway to Sustainable Development. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4508819
  22. Fu, R., & Liu, J. (2023). Revenue sources of natural resources rents and its impact on sustainable development: Evidence from global data. Resources Policy, 80, 103226. https://doi.org/10.1016/j.resourpol.2022.103226
  23. Guo, W., Yang, B., Ji, J., et al. (2023). Abundance of natural resources, government scale and green economic growth: An empirical study on urban resource curse. Resources Policy, 87, 104303. https://doi.org/10.1016/j.resourpol.2023.104303
  24. Han, J.-S., & Lee, J.-W. (2020). Demographic change, human capital, and economic growth in Korea. Japan and the World Economy, 53, 100984. https://doi.org/10.1016/j.japwor.2019.100984
  25. Hidayat, B. A., Supartoyo, Y. H., Setiawan, S., et al. (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
  26. Hidayat, B. A., Yuliana, E., Wicaksono, B., et al. (2021). Objectives of Sustainable Development and Analysis of People’s Economy Improvement. In: Proceedings of the International Conference on Sustainable Innovation Track Humanities Education and Social Sciences (ICSIHESS 2021). https://doi.org/10.2991/assehr.k.211227.030
  27. Hidayat, B., Fatoni, A., Saksono, H., et al. (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
  28. Irarrazaval, F., & Viale, C. (2022). Natural gas revenues, subnational politics, and agrarian change in Peru and Bolivia. The Extractive Industries and Society, 11, 101093. https://doi.org/10.1016/j.exis.2022.101093
  29. Ivanyna, M., & Salerno, A. (2021). Governance for Inclusive Growth. IMF Working Papers, 2021(098), 1. https://doi.org/10.5089/9781513582467.001
  30. Jang, H., & Topal, E. (2020). Transformation of the Australian mining industry and future prospects. Mining Technology, 129(3), 120–134. https://doi.org/10.1080/25726668.2020.1786298
  31. Kumari, A., & Sharma, A. K. (2017). Infrastructure financing and development: A bibliometric review. International Journal of Critical Infrastructure Protection, 16, 49–65. https://doi.org/10.1016/j.ijcip.2016.11.005
  32. Kwakwa, P. A., Dankwah, J. B., Adu Boahen, E., et al. (2023). Financial development in South Africa: The role of natural resources, IT infrastructure, and government size. Cogent Economics and Finance, 11(2). https://doi.org/10.1080/23322039.2023.2281844
  33. Kyriakopoulos, G. L., Sebos, I., Triantafyllou, E., et al. (2023). Benefits and Synergies in Addressing Climate Change via the Implementation of the Common Agricultural Policy in Greece. Applied Sciences, 13(4), 2216. https://doi.org/10.3390/app13042216
  34. Le Clech, N., & Guevara-Pérez, J. C. (2023). Latin America and the Caribbean’s Productivity: The Role of Pro-Market Policies, Institutions, Infrastructure, and Natural Resource Endowments. Economies, 11(5), 142. https://doi.org/10.3390/economies11050142
  35. Leigh, A., & Neill, C. (2011). Can national infrastructure spending reduce local unemployment? Evidence from an Australian roads program. Economics Letters, 113(2), 150–153. https://doi.org/10.1016/j.econlet.2011.05.037
  36. Li, Y., Mehmood, N., & Iqbal, N. (2022). Natural resource abundance and financial development: A case study of emerging (E−15) economies. Resources Policy, 79, 103018. https://doi.org/10.1016/j.resourpol.2022.103018
  37. Liang, Y., Zhou, H., Zeng, J., et al. (2024). Do natural resources rent increase green finance in developing countries? The role of education. Resources Policy, 91, 104838. https://doi.org/10.1016/j.resourpol.2024.104838
  38. Liang, Y., Zhou, K., Li, X., et al. (2020). Effectiveness of high-speed railway on regional economic growth for less developed areas. Journal of Transport Geography, 82, 102621. https://doi.org/10.1016/j.jtrangeo.2019.102621
  39. Liu, T., & Lan, B. (2024). On the conflict of natural resources abundance and export upgrading in upper-middle and high-income countries. Resources Policy, 89, 104633. https://doi.org/10.1016/j.resourpol.2023.104633
  40. Magazzino, C., & Mele, M. (2021). On the relationship between transportation infrastructure and economic development in China. Research in Transportation Economics, 88, 100947. https://doi.org/10.1016/j.retrec.2020.100947
  41. Martinez-Vazquez, J. (2011). The Impact of Fiscal Decentralization: Issues in Theory and Challenges in Practice. Asian Development Bank.
  42. Mohamed, E. S. E. (2020). Resource Rents, Human Development and Economic Growth in Sudan. Economies, 8(4), 99. https://doi.org/10.3390/economies8040099
  43. Morgandi, M. (2008). Extractive Industries Revenues Distribution at the Sub‐National Level. Revenue Watch Inst.
  44. Moti, U. G. (2019). Africa’s Natural Resource Wealth: A Paradox of Plenty and Poverty. Advances in Social Sciences Research Journal. https://doi.org/10.14738/assrj.67.6814
  45. Mutiarin, D., Nurmandi, A., Paksi, A. K., et al. (editors). (2022). Proceedings of the International Conference on Sustainable Innovation on Humanities, Education, and Social Sciences (ICOSI-HESS 2022). Atlantis Press SARL. https://doi.org/10.2991/978-2-494069-65-7
  46. Njue, N., Stenfert Kroese, J., Gräf, J., et al. (2019). Citizen science in hydrological monitoring and ecosystem services management: State of the art and future prospects. Science of The Total Environment, 693, 133531. https://doi.org/10.1016/j.scitotenv.2019.07.337
  47. Plank, B., Streeck, J., Virág, D., et al. (2022). From resource extraction to manufacturing and construction: flows of stock-building materials in 177 countries from 1900 to 2016. Resources, Conservation and Recycling, 179, 106122. https://doi.org/10.1016/j.resconrec.2021.106122
  48. Polyzos, S., & Arabatzis, G. (2008). Spatial distribution of natural resources and their contribution to regional development in Greece. Discover the world’s research, 9(1), 183-199.
  49. Poudineh, R., Sen, A., & Fattouh, B. (2018). Advancing renewable energy in resource-rich economies of the MENA. Renewable Energy, 123, 135–149. https://doi.org/10.1016/j.renene.2018.02.015
  50. Raihan, A. (2023). Artificial intelligence and machine learning applications in forest management and biodiversity conservation. Natural Resources Conservation and Research, 6(2), 3825. https://doi.org/10.24294/nrcr.v6i2.3825
  51. Ramey, V. (2020). The Macroeconomic Consequences of Infrastructure Investment. National Bureau of Economic Research. https://doi.org/10.3386/w27625
  52. Saksono, H., Hidayat, B. A., Yuliana, E., et al. (2022). The Impact of Tourism and The Creative Industry on The Economy of The Community. In: Proceedings of the International Conference on Sustainable Innovation Track Accounting and Management Sciences (ICOSIAMS 2021). https://doi.org/10.2991/aebmr.k.211225.004
  53. Salite, D., Kirshner, J., Cotton, M., et al. (2021). Electricity access in Mozambique: A critical policy analysis of investment, service reliability and social sustainability. Energy Research and Social Science, 78, 102123. https://doi.org/10.1016/j.erss.2021.102123
  54. Savoia, A., & Sen, K. (2021). The Political Economy of the Resource Curse: A Development Perspective. Annual Review of Resource Economics, 13(1), 203–223. https://doi.org/10.1146/annurev-resource-100820-092612
  55. Sebos, I., Kitsara, G., Karali, A., et al. (2023). Climate-Resilient Urban Regeneration: Transforming School Yards for a Sustainable and Adaptive Future. https://doi.org/10.5194/ems2023-73
  56. Shahbaz, M., Siddiqui, A., Ahmad, S., et al. (2023). Financial development as a new determinant of energy diversification: The role of natural capital and structural changes in Australia. Energy Economics, 126, 106926. https://doi.org/10.1016/j.eneco.2023.106926
  57. 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
  58. Shi, Z., Loh, L., Wu, H., et al. (2024). Smarter and cleaner: How does energy digitalization affect carbon productivity? Energy Strategy Reviews, 52, 101347. https://doi.org/10.1016/j.esr.2024.101347
  59. Shivaprakash, K. N., Swami, N., Mysorekar, S., et al. (2022). Potential for Artificial Intelligence (AI) and Machine Learning (ML) Applications in Biodiversity Conservation, Managing Forests, and Related Services in India. Sustainability, 14(12), 7154. https://doi.org/10.3390/su14127154
  60. Song, M., Wang, J., & Zhao, J. (2018). Coal endowment, resource curse, and high coal-consuming industries location: Analysis based on large-scale data. Resources, Conservation and Recycling, 129, 333–344. https://doi.org/10.1016/j.resconrec.2016.08.005
  61. Sun, Y., Ak, A., Serener, B., et al. (2020). Natural resource abundance and financial development: A case study of emerging seven (E−7) economies. Resources Policy, 67, 101660. https://doi.org/10.1016/j.resourpol.2020.101660
  62. Teng, Y.-P. (2023). Natural resources extraction and sustainable development: Linear and non-linear resources curse hypothesis perspective for high income countries. Resources Policy, 83, 103685. https://doi.org/10.1016/j.resourpol.2023.103685
  63. Tienhaara, K., & Walker, J. (2021). Fossil capital, ‘unquantifiable risk’ and neoliberal nationalizations: The case of the Trans Mountain Pipeline in Canada. Geoforum, 124, 120–131. https://doi.org/10.1016/j.geoforum.2021.06.005
  64. Turan, T., & Yanıkkaya, H. (2020). Natural resource rents and capital accumulation nexus: do resource rents raise public human and physical capital expenditures? Environmental Economics and Policy Studies, 22(3), 449–466. https://doi.org/10.1007/s10018-020-00264-9
  65. Villena Gonzales, W., Mobashsher, A., & Abbosh, A. (2019). The Progress of Glucose Monitoring—A Review of Invasive to Minimally and Non-Invasive Techniques, Devices and Sensors. Sensors, 19(4), 800. https://doi.org/10.3390/s19040800
  66. Wang, S., Wang, X., & Lu, B. (2022). Is resource abundance a curse for green economic growth? Evidence from developing countries. Resources Policy, 75, 102533. https://doi.org/10.1016/j.resourpol.2021.102533
  67. Wong, C.-S. (2021). Science Mapping: A Scientometric Review on Resource Curses, Dutch Diseases, and Conflict Resources during 1993–2020. Energies, 14(15), 4573. https://doi.org/10.3390/en14154573
  68. Xu, G., Jiang, J., & Wang, R. (2022). The impact of natural resource endowment and transportation infrastructure on China’s regional green economic performance in the context of COP26. Resources Policy, 79, 103099. https://doi.org/10.1016/j.resourpol.2022.103099
  69. Yao, H., Tian, M., Ma, J., et al. (2019). Study on “Resource Curse” Based on the Panel Data in Coal Resource-Rich Districts of Inner Mongolia. E3S Web of Conferences, 118, 01015. https://doi.org/10.1051/e3sconf/201911801015
  70. Zhang, C., & Teng, W. (2023). Natural resources led financing of investment: A prospect of China’s provincial data. Resources Policy, 86, 104164. https://doi.org/10.1016/j.resourpol.2023.104164
  71. Zhong, Y., Chen, X., Yao, X., et al. (2024). Natural resources and the trilemma of financial development, institutions, and markets: Sustainable development pathway via natural resources for China. Resources Policy, 90, 104759. https://doi.org/10.1016/j.resourpol.2024.104759
  72. Zhou, M., Jiang, K., & Chen, Z. (2023). The side effects of local government debt: Evidence from urban investment bonds and corporate pollution in China. Journal of Environmental Management, 344, 118739. https://doi.org/10.1016/j.jenvman.2023.118739


DOI: https://doi.org/10.24294/jipd.v8i11.8405

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Bachtari Alam Hidayat, Agus Faturohim, Loso Judijanto, Sidiq Hanapi, Alfayanti Alfayanti, Marhaendro Purno, Firdaus Landekumandang, Ribut Nurul Tri Wahyuni, Kunihiko Shinoda

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

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