Disparity between provinces narrows

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)