Disparity between provinces narrows

BOGOR, West Java (JP): Income disparity between the provinces may be persisting after 25 years of New Order rule, but it has declined significantly with extensive improvements in educational and health services, a World Bank official said yesterday.

Jorge Garcia Garcia, a World Bank representative to Indonesia, said that although the government had improved education and health services, they must improve faster in less-developed provinces.

He considered health and education to be the main determinants of a regions welfare.

"Indonesia's income distribution right now is relatively equal... I cannot judge whether this is good or bad, because some people may consider that it could be better," Garcia said at a seminar held by Bogor Agricultural University.

Garcia said that socioeconomic indicators for the provinces showed that efforts to reduce inequality must continue.

"The government can select interventions which improve equity without sacrificing growth, such as by improving education and health facilities," he said.

He said the poorer provinces could continue to catch up with the richer provinces if the government maintained the progressive policies it has had since the late 1960s.

Back then the government avoided large fiscal deficits and an overvalued rupiah. It also devalued the rupiah and reduced fiscal and current account deficits quickly, Garcia said.

But the government has also imposed some regressive rulings which have made some provinces grow faster than others, he said.

These include import and export restrictions which favor Java over other provinces.

"Import restrictions protected the commodities that Java produced, like rice, sugar and manufactured goods, but provinces outside-Java lost because they had to pay higher prices for the commodities that Java produced," he said.

Export restrictions were imposed mainly on agricultural and forestry products which Sumatra and the eastern islands produce.

According to Garcia's studies, based on data from the Central Bureau of Statistics from 1983 to 1993, the real GDP per capita of the 27 provinces, except Riau, grew 4.75 percent on average, while the non-oil real GDP per capita grew 5.5 percent a year. Riau's real GDP fell 1 percent a year on average.

Bali's real GDP grew the fastest at 7.5 percent on average; followed by Lampung, 7.3 percent; Central Java, 6.1 percent; Jakarta, 6.1 percent; South Sulawesi, 6 percent and North Sumatra, 5.9 percent.

East Kalimantan's, South Sumatra's and Irian Jaya's real GDP grew the slowest at 0.4 percent, 1.7 percent and 1.9 percent on average, respectively.

Excluding oil and gas, real GDP in all the regions grew between 1983 and 1993, Garcia said.

He said that although the welfare of people in eastern Indonesia was frequently a concern because of their low incomes and the high incidence of poverty there, some of their incomes had grown faster than the national average since 1975.

"In fact, both low and high growth rates of total per capita income can be found in provinces of western Indonesia (Sumatra, Java and Bali) and in eastern Indonesia (Kalimantan, Nusa Tenggara, Sulawesi, Maluku and Irian Jaya)," Garcia said.

His studies concluded that provinces which started with the highest per capita GDP in 1975 finished with the highest per capita GDP in 1993, thus the richest and poorest provinces in 1975 continued to be the richest and poorest in 1993.

Riau, East Kalimantan, Aceh, Jakarta, South Sumatra and Irian Jaya had the highest per capita GDP in 1975 and 1993. East Timor, East Nusa Tenggara, West Nusa Tenggara and Lampung recorded the lowest per capita GDP in 1975 and 1993.

Garcia said the original conditions of the provinces mostly determined their final status, but faster accumulations of human and physical capital increased provinces' per capita GDP.

Garcia's studies found that high population densities did not hamper growth rates and that low population densities did not ensure high growth rates.

During the 1960s, for example, the national population density was about 60 people a square kilometer, but during the 1980s and 1990s, per capita income grew at about 4.5 percent a year, while the population density reached about 90 people a square kilometer.

"Low population densities prevented specialization because they reduced the size of the market and increased the costs of providing good transport and communications infrastructure," he said. (pwn)