Seaport Status, Access, and Regional Development in Indonesia Muhammad Halley Yudhistira Yusuf Sofiyandi Institute for Economic and Social Research (LPEM), Faculty of Economics and Business, University of Indonesia April 29, 2015
Outline Introduction Literature Review Development of Seaport Infrastructure Estimation Strategy Econometric approach Source of Data Result and Analysis Remarks
Introduction There is a consensus that transport infrastructure expansion is one of critical factors for regional economic development transport infrastructure expansion is one of critical factors for regional economic development Better transportation infrastructure enables the economy to access wider market, benefits from trade, promotes inter-regional integration, and improves factor markets In the context of Indonesia, expanding port infrastructure perhaps plays one of the most fundamental roles in shaping the national economy. As an archipelago country, Indonesia has heavily relies on the reliability of their ports in supporting national inter-island trade, as well as factors mobility.
Introduction (2) Hence, the main question is: How does the current seaport network affect the regional development in Indonesia? Most common impact study of seaport infrastructure relates the port capacity (or total throughput) and the regional development, (for example, see Jun, Yu, & Lee, 2014) In this paper, rather than examining the effects of port size, we measure the effects of districts distance to the nearest port We argue that the access may also be more important and has direct impacts on landlocked district, depending on the access.
Our Study In this research, we argue that sea ports benefit not only the owning district, but also other districts We measure the access to port as the shortest distance of the respective district to the nearest port We hypotheses that all regions will directly benefit from the nearest port, however the benefit attenuates with the distance Our initial results show that the elasticity lies of GDP per capita w.r.t distance is between -0.08-0.11 (-0.04-0.05, respectively) for main (collector, respectively) port GDP per capita in secondary sector is most benefited from the presence of seaport, followed by the tertiary sector. Being closer to the nearest port also reduces poverty rate, and raises employment in manufacturing and service sector
The Impacts of Ports on Economic Development On Regional GDP: Bottaso, et. al. (2014) study the direct and indirect effects associated to port activities for a sample of 621 regions located in 13 European countries, over the period 1998 2009. They suggest that ports might have non-negligible effects on local GDP. Interestingly, an important share of the effects takes place outside the region where the port is located. Chang, Shin, and Lee (2014) use I-O analysis to estimate the port sectors impact in South African. The results show that both, forward and backward linkages are relatively small
The Impacts of Ports on Economic Development (2) On Regional GDP: Shan, Yu, Lee (2014) study the impact of seaports on the economy of 41 major port cities in China over the period 2003 2010. The result show that the most indicators of port development are positively related to economic growth and the neighboring ports also contribute to the local port city economy Song and van Geenhuizen (2014) estimate the output elasticity of China s seaport infrastructure during 1999 2010. The results indicate clear positive effects of port infrastructure investment in all regions.
The Impacts of Ports on Economic Development (3) On Employment: Bottaso, et. al. (2013) study the impact of port activities on local employment by analyzing a sample of about 560 regions (which includes 116 ports) located in 10 West European countries, over the period 2000 2006. They found that regional employment is positively correlated to port throughput. The result is confirmed if, instead of total employment, we consider service and manufacturing employment. An increase of million of tons in port throughput is associated in an increase in employment of 0.0003 percent.
Infrastructure Quality in Selected Asia Countries 2014 Singapore Malaysia Thailand Philippines China India Indonesia Road 6.1 5.6 4.5 3.6 4.6 3.8 3.9 Railroad - 5.0 2.4 2.3 4.8 4.2 3.7 Seaport 6.7 5.6 4.5 3.5 4.6 4.0 4.0 Air transport 6.8 5.7 5.3 3.6 4.7 4.3 4.5 Note: 1 = extremely under-developed; 7 = efficient by international standards Source: Global Competitiveness Report (2014/2015) Our seaport capacity is relatively lacking compared to other archipelago countries in South East Asia
Indonesia s Infrastructure Quality Our infrastructure indices are increasing during 2010 2014, except for air transport infrastructure For seaport, the index hikes 11.1 percent, yet is lower than roads and railroad infrastructure Source: Global Competitiveness Report (2010/2011, 2014/2015)
Indonesia Port Development Plan, 2011-2030 47.1 billion USD is needed for: Four (Six, respectively) additional main ports in 2015 (2020, respectively) One additional collector port in the end of 2030 Number of ports 2011 2015 2020 2030 Number of Main port 43 47 49 49 Feeder port Regional 185 185 183 183 Local 631 630 628 627 Collector port 282 280 282 283 Total 1,141 1,142 1,142 1,142
Econometric approach Estimation Strategy To quantify the impact of access to port, we consider a simple linear regression as following y i = β 0 + 2 K γ j log (d ij ) + σ k X ik + j=1 k=1 L θ l Z il + ɛ i (1) where y i is outcome variable, and d ij is the distance of district i from nearest seaport type - j. X and Z are vectors of variables representing infrastructure and other variables, respectively. Several outcome variables are considered: GDP per capita, GDP per capita by sector. If being closer to the port is beneficial, then γ j < 0 l=1
Source of Data Data The sample is based on 488 districts of Indonesia, observed in 2011. We use year of 2011 since the data for port status provided by Indonesian National Ports Master Plan (INPMP) is only for 2011. The basic dataset on district level is obtained from Indonesia Database for Policy and Economic Research (INDO-DAPOER) of the World Bank. The database provides us GDP per capita, land size, and other economic variables at district level.
Source of Data Data (2) To obtain the distance variables, we combine the information from, and distance matrix retrieved from QGIS software. The INPMP provides the information on ports name, location at district level, and status. Two types of port are considered: main and collector port The distance matrix provides information on the distance between any pair of district For each district i, the shortest distance to nearest port type -j is { d j i = 0 ) ( min d j im, i m p j otherwise (2) where m is for all districts that have port type -j.
Source of Data Distribution of Seaports More than half of total districts in Indonesia have at least one port (56.1 percent), and the majority has feeder port (37.1 percent). Only 8.2 percent of total districts does own main port. number of districts % to total districts Number of districts which have Main port 40 8.2 Feeder port Regional 118 24.2 Local 158 32.4 Collector 181 37.1 At least one port 274 56.1 No port 214 43.9 Number of districts 488 100.0
Source of Data Descriptive Analysis Variable Obs Mean Std. Dev. Min Max Minimum Distance to Port (km) 485 26 39 0 290 Distance to Collector Port (km) 485 32 38 0 221 Distance to Feeder Port : Local (km) 485 45 48 0 312 Distance to Feeder Port : Regional (km) 485 70 91 0 553 Distance to Main Port (km) 485 138 135 0 678 GDP per Capita 2011 (million IDR) 486 8.7 12 1 142 Population Density 2011 (people per km-sq) 466 944 2,100 1 14,488 Villages with Asphalt Road (% of total) 488 67 29 0 100
Source of Data Scatter Plot
The Effects of Distance to the Nearest Port on GDP per capita Dependent variable: GDP per capita (1) (2) (3) (4) (5) (6) Distance to main port -0.109* -0.105* -0.0961* -0.0951* (-5.20) (-5.01) (-3.68) (-3.72) Distance to collector port -0.0529* -0.0466* -0.0382*** -0.0362*** (-2.94) (-2.66) (-1.93) (-1.89) % villages asphalted 0.00386** 0.00465* 0.00351** (2.46) (3.05) (2.26) Population -0.0146 0.0203-0.0151 (-0.30) (0.44) (-0.32) Dummy - Java Island -0.311 0.0729-0.257 (-1.41) (0.35) (-1.04) Dummy - Capital city 0.361** 0.380* 0.357* (2.47) (2.90) (2.63) Java*Distance to main port 0.0745 0.0949 (1.42) (1.61) Java*Distance to collector port -0.0363-0.0399 (-0.74) (-0.77) Constant 2.287* 1.949* 2.380* 2.143* 1.329** 2.249* (24.01) (33.65) (22.59) (3.14) (2.21) (3.38) Observations 483 483 483 483 483 483 Adjusted R 2 0.053 0.017 0.066 0.091 0.076 0.101 F 27.02 8.661 16.38 7.270 7.016 6.517 t statistics in parentheses. *** p<0.10, ** p<0.05, * p<0.010
The Effects of Distance to the Nearest Port on GDP per capita by Region Total Java-Sumatera Other Distance to main port -0.0951* -0.0567*** -0.111* (-3.72) (-1.70) (-3.91) Distance to collector port -0.0362*** -0.023-0.0771* (-1.89) (-1.10) (-2.89) Control variables % villages asphalted Y Y Y Population Y Y Y Dummy - Java Island Y Y Y Dummy - capital city Y Y Y Java*Distance to main port Y N N Java*Distance to collector port Y N N Observations 483 257 226 Adjusted R 2 0.101 0.077 0.104 F 6.517 4.889 7.304 t statistics in parentheses. *** p<0.10, ** p<0.05, * p<0.010
The Effects of Distance to the Nearest Port on GDP per capita by Sector Primary Secondary Tertiary Distance to main port -0.00139-0.0731* -0.0463* (-0.10) (-3.30) (-3.18) Distance to collector port -0.00885-0.0282*** -0.0177*** (-0.73) (-1.85) (-1.71) Control variables % villages asphalted Y Y Y Population Y Y Y Dummy - Java Island Y Y Y Dummy - capital city Y Y Y Observations 483 483 483 Adjusted R 2 0.250 0.164 0.301 t statistics in parentheses. *** p<0.10, ** p<0.05, * p<0.010
The Effects of Distance to the Nearest Port on Poverty Rate by Region Total Java-Sumatera Other Distance to main port 0.0102* 0.00784** 0.00936* (-4.32) (-2.33) (-2.91) Distance to collector port -0.000903 0.000364-0.00247 (-0.45) (-0.16) (-0.79) Control variables % villages asphalted Y Y Y Population Y Y Y Dummy - Java Island Y Y Y Dummy - capital city Y Y Y Java*Distance to main port Y N N Java*Distance to collector port Y N N Observations 483 257 226 Adjusted R 2 0.307 0.075 0.388 F 24.40 5.378 29.05 t statistics in parentheses. *** p<0.10, ** p<0.05, * p<0.010
The Effects of Distance to the Nearest Port on Employment Rate by Region (1) Dependent variable: Employment rate in manufacturing sector Total Java-Sumatera Other Distance to Main Port -0.0341** -0.0735* -0.0106 (-2.56) (-4.50) (-0.45) Distance to Collector Port -0.0495* 0.00995-0.0748* Control variables (-3.35) (0.72) (-2.93) GDP in manufacturing Y Y Y % villages asphalted Y Y Y Population Y Y Y Dummy - Java Island Y Y Y Dummy - capital city Y Y Y Java*Distance to main port Y N N Java*Distance to collector port Y N N Observations 483 257 226 Adjusted R 2 0.726 0.776 0.622 F 207.4 79.95 51.64 t statistics in parentheses. *** p<0.10, ** p<0.05, * p<0.010
The Effects of Distance to the Nearest Port on Employment Rate by Region (2) Dependent variable: Employment rate in service sector Total Java-Sumatera Other Distance to Main Port -0.0145-0.0466* 0.0169 (-1.10) (-3.26) (0.65) Distance to Collector Port -0.0423* -0.00367-0.0513** Control variables (-3.37) (0.69) (-3.20) GDP in service Y Y Y % villages asphalted Y Y Y Population Y Y Y Dummy - Java Island Y Y Y Dummy - capital city Y Y Y Java*Distance to main port Y N N Java*Distance to collector port Y N N Observations 483 257 226 Adjusted R 2 0.651 0.702 0.594 F 103.7 44.43 39.94 t statistics in parentheses. *** p<0.10, ** p<0.05, * p<0.010
Remarks This paper investigates the effects of being closer to the nearest seaport to the regional development in Indonesia. Using 2011 dataset, our early results show that districts closer to the seaport produce higher levels of GDP per capita, particularly for tradable goods. the elasticity lies between -0.08-0.11 (-0.04-0.05, respectively) for main (collector, respectively) port One percent closer to main port potentially leads to 0.08 and 0.05 percent increase in GDP per capita in secondary and tertiary sector, respectively. Meanwhile, one percent decrease in the distance to nearest feeder port increases the GDP per capita in secondary and tertiary sector as much as 0.03 and 0.02 percent, respectively.
Remarks (2) Better access to the nearest port also reduces poverty rate, and raises employment in manufacturing and service sector Next to do: Identify other potential outcomes: employment (Bottaso et.al, 2013), firm productivity (Banerjee, Duflo, and Qian, 2012) Dealing with endogeneity problem
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