Accounting for Services: The Economic Development of the Indonesian Service Sector, ca 1900-2000 9789048521234

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Accounting for Services

Accounting for Services The Economic Development of the Indonesian Service Sector, ca. 1900-2000 Daan Marks

a

Amsterdam, 2009

This publication has been made possible with the support of the Unger-Van Brerofonds.

isbn 978 90 5260 336 0 © 2009 Daan Marks and Aksant Academic Publishers,Amsterdam All rights reserved, including those of translation into foreign languages. No part of this publication may be reproduced in any form, by photoprint, microfilm or any other means, nor transmitted into a machine language without written permission from the publisher. Lay-out: Hanneke Kossen, Amsterdam Cover design: Studio Dien Bos, Amsterdam Aksant Academic Publishers, p.o. Box 2169, 1000 cd Amsterdam, The Netherlands

Contents



Acknowledgements  13

1

Introduction  17 1.1 The context  17 1.2 Bridging a gap  19 1.3 Theoretical context: the service sector and economic growth  20 1.3.1 Definition and classification of services  20 1.3.2 The service sector and economic growth  23 1.3.3 Economic factors affecting the development of the share of services in real output   27 1.3.4 Socio-economic factors affecting the development of the service share in total output   30 1.4 National accounting: aim, advantages and disadvantages  31 1.5 Indonesia’s economic history and its pecularities  34 1.5.1 Indonesia’s economic history in a bird eye’s view  34 1.5.2 Some peculiarities in studying Indonesia’s economic history  38 1.6 Outline of the book  40

2 National accounting for services in Indonesia  41 2.1 Introduction  41 2.2 History of Indonesian national income estimates  41 2.3 Statistical sources  43 2.4 Estimating value added in services  46 2.4.1 Transport and communications  46 2.4.1.1 Rail transport  47 2.4.1.2 Road transport  47 2.4.1.3 Water transport  51 2.4.1.4 Air transport  52 2.4.1.5 Communications  52 2.4.2 Trade  53 2.4.2.1 Trade margins in colonial times  53 2.4.2.2 Trade margins in Indonesia’s national accounts  55 2.4.3 Government  59 2.4.4 Ownership of dwellings  61

2.4.5 Financial sector  64 2.4.6 Other services  66 2.5 Assessing the reliability of the estimates  68 3

The development of the Indonesian service sector: a quantitative analysis  71 3.1 Introduction  71 3.2 Developments in employment structure  72 3.3 Value added in the service sector  79 3.3.1 Economic structure  79 3.3.2 Growth in the service sectors  81 3.4 Labour productivity  85 3.5 Concluding remarks  88

4

Roads to riches? Transportation and economic development in Indonesia  91 4.1 Introduction  91 4.2 Transportation and economic growth: theoretical framework  92 4.2.1 Fogel’s social savings  92 4.2.2 A spatial price equilibrium model  93 4.2.3 Other theoretical foundations  95 4.2.4 Evolution of transport networks  98 4.3 Transport developments in Indonesia, 1900-2000  100 4.3.1 Water transport  100 4.3.2 Rail transport  112 4.3.3 Road transport  122 4.3.4 Air transport  127 4.4 Concluding remarks  129

5

Involution and growth: the ambiguous role of the trade sector in the economic development of Indonesia  131 5.1 Introduction  131 5.2 Foreign trade: an engine of growth?  132 5.2.1 A century of foreign trade  132 5.2.2 Changes in the direction of trade: regionalisation of trade  137 5.2.3 Trade policy  140 5.2.4 Foreign trade as engine of growth   144 5.3 Domestic dynamics in the trade sector: involutionary growth?  145 5.3.1 Employment and labour productivity  145 5.3.2 Changes in the organisation of distribution  147 5.3.3 Involutionary growth   151 5.4 Concluding remarks  156

6

Unity or diversity? Market integration through trade and transport  159 6.1 Introduction  159 6.2 Stable food prices, market integration and economic development  161 6.3 Intertemporal rice price stabilisation in Indonesia: government intervention  162 6.4 Spatial price differences in Indonesia   169 6.4.1 A simple approach  169 6.4.2 Advanced testing for market integration: method   171 6.4.3 Advanced testing for market integration: results  174 6.5 Concluding remarks  181

7

Conclusions  183 7.1 Accounting for services  183 7.2 The economic development of the Indonesian service sector, ca. 1900-2000  184 7.3 Transport, trade and integrating markets  185 7.4 The service sector: tertiary?  188



Appendices 1 National accounting for transport and communications  191 2 National accounting for trade  259 3 National accounting for government services  279 4 National accounting for housing  293 5 National accounting for financial services  299 6 National accounting for other services  307



References  321





List of Tabels

Table 1.1 Table 1.2

isic classification of activity  22 Changes in service shares over time, France, United Kingdom, and United States  28

Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 2.13 Table 2.14 Table 2.15 Table 2.16 Table 2.17

Main bps publications relevant for this study  46 Taxis in Surabaya, 1925-1929  48 Value added by taxis in Indonesia, 1929  48 Value added of road transport, 1930  49 Degree of urbanisation, 1890-1930  49 Trade margins in the Netherlands, 1913 and 1987  54 Peasant crops, volumes traded at 10 per cent margin  56 Trade margins for different export commodities  56 Trade margins used by Neumark on other commodities  57 Salaries and wages paid by the colonial government, 1922-1931 Number of dwellings in Indonesia, 1930  61 Monthly expenditure on rent in guilders, August 1925  62 Total output housing sector, 1930  63 Housing in Indonesia’s i-o tables  64 Other services in the i-o tables  67 Value added by other services  68 Quality of Indonesian service sector estimates, 1930  69

Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 Table 3.9

By-employment in 1905 population count  73 Consequence of by-employment in the 1905 population count  74 Peasants engaged in by-employment in 1905, by category of employment  76 Annual growth in employment by sector, 1930-2000  78 Composition of the service sector, 1900-2000  79 Average annual sectoral growth rates, 1900-2000  84 Labour productivity in Indonesia’s service sector, 1905-2000  86 Average annual labour productivity growth, 1905-2000  87 Decomposition of labour productivity growth, 1930-2000  88

Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6

Registered merchant fleet in the Netherlands-Indies, 1890-1939  100 Inter-island freight and productivity of kpm and pelni, 1950-1960  107 Tonnage, cargo and productivity of inter-island fleet, 1957-64  107 Cargo and passengers carried by pelni, 1962-1967  109 The Indonesian merchant fleet, 1968-2000  109 Average annual growth in grt and loaded cargo, 1968-2000  110

60

Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 4.12 Table 4.13 Table 4.14 Table 4.15 Table 4.16 Table 4.17 Table 4.18

Productivity in inter-island shipping, 1993-1997  110 Railway and tramway companies in Java, Madura and Sumatra  113 Developments in rail transport, 1890-1940  116 Average annual growth of rail transport, 1890-1939  116 Developments in rail transport, 1949-2000  119 Road conditions, 1967  123 Road development plan, 1957  124 Average annual growth in motor vehicles, 1949-2000  125 Number of vehicles per 1,000 inhabitants, 1950-2000  125 Average annual growth in length of road, 1959-2000  125 Length of road per 1,000 inhabitants, 1954-2000  125 Air transport developments in Indonesia, 1930-2000  127

Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 5.6 Table 5.7 Table 5.8 Table 5.9 Table 5.10 Table 5.11 Table 5.12

Composition of imports into Indonesia by economic categories, 1950-2000  136 Exports from the Netherlands-Indies by destination, 1900-1939  138 Imports into the Netherlands-Indies by origin, 1900-1939  138 Exports from Indonesia by destination, 1952-2000  139 Imports to Indonesia by origin, 1952-2000  139 Trade and economic growth in Indonesia, 1900-1997  145 Occupational structure, 1905-2000  146 Labour productivity in Indonesia’s service sector, 1905-2000  147 Average annual labour productivity growth, 1930-2000  147 Trade margins in rural Java, 1982  150 Employment in trade sector, 1905-2000  150 Share of urban self-employed in total labour force in a selection of economically advanced countries, 1930-1999  154

Table 6.1 Table 6.2 Table 6.3

Net rice imports as percentage of domestic supply, 1900-2000  164 Augmented Dickey-Fuller unit root tests  176 Cointegration results for Semarang, Medan and Banjarmasin, 1949-2006  178

Table A1.1 Table A1.2 Table A1.3 Table A1.4 Table A1.5 Table A1.6 Table A1.7 Table A1.8 Table A1.9 Table A1.10

Estimation of value added in rail transport, 1890-1939  193 Key indicators for railway transport, 1948-2000  198 Railway transport according to i-o tables  200 Value added of railway transport, 1890-2000  201 Motor vehicles, 1910-1940  206 Cars in operation in Indonesia, 1913-1940  207 Value added by taxis in Indonesia, 1929  208 Value added by road transport, 1930  209 Value added by road transport, 1900-1940  210 Key indicators for road transport, 1949-2000  212

Table A1.11 Road transport according to i-o tables  214 Table A1.12 Value added by road transport, 1900-2000  216 Table A1.13 General water transport statistics, 1891-1940  220 Table A1.14 Statistics on kpm, 1891-1940  223 Table A1.15 Value added by water transport, 1891-1940  227 Table A1.16 Loading and unloading in Indonesian harbours, 1952-2002  229 Table A1.17 Arrival of ships and vessels in selected harbours, 1938-1959  230 Table A1.18 Value added by sea transport according to i-o tables  232 Table A1.19 Value added by inland water transport according to i-o tables  232 Table A1.20 Value added by sea transport and inland water transport according to i-o tables  232 Table A1.21 Value added by water transport, 1891-2000  233 Table A1.22 Indicators for air transport and value added, 1928-1940  237 Table A1.23 Ticket prices, knilm, 1929-1933  238 Table A1.24 Prices for freight, knilm, 1929-1933  238 Table A1.25 Indicators for air traffic, 1948-1973  239 Table A1.26 Government airlines services (domestic and international), 1964-2000  240 Table A1.27 Private airlines services (domestic), 1964-2000  242 Table A1.28 Value added by air transport according to i-o tables  244 Table A1.29 Value added by air transport, 1928-2000  245 Table A1.30 Estimation of value added by communications, 1901-1940  248 Table A1.31 Income of ptt, 1938-1955  251 Table A1.32 Value added by communications according to i-o tables  251 Table A1.33 Key indicators for communications, 1956-2000  252 Table A1.34 Value added by communications, 1901-2000  255 Table A2.1 Profit margins, Hagemeijer and Internatio, 1914-1939  259 Table A2.2 Trade margins based on i-o tables, 1975-2000  261 Table A2.3 Value added in trade sector, 1900-2000  273 Table A3.1 Table A3.2 Table A3.3 Table A3.4 Table A3.5 Table A3.6 Table A3.7 Table A3.8

Government administration and defence, 1951-1954  279 Government administration and defence in Indonesia’s national accounts, 1958-2000  281 Government administration and defense according to Indonesia’s i-o tables  281 Government budget: personnel expenditures, 1969/1970-1999/2000  282 Government budget: other expenditures, 1969/1970-1999/2000  283 Government budget, 1950-1968  284 Number of civil servants, 1930  285 Government payroll, 1926  285

Table A3.9 Table A3.10 Table A3.11 Table A3.12

Government finance, 1867-1939  286 Government budget, 1900-1907  287 Government budget, 1908-1940  288 Value added by government services, 1900-2000  290

Table A4.1 Table A4.2 Table A4.3 Table A4.4

Monthly expenditure on rent, August 1925  293 Monthly rents, 1930-1960  294 Monthly expenditure per family in Jakarta, 1953  294 Value added by housing, 1900-2000  296

Table A5.1 Value added by the financial sector, 1900-1940  300 Table A5.2 Financial sector in Indonesia’s i-o tables, 1971-2000  304 Table A5.3 Value added of financial sector, 1900-2000  304 Table A6.1 Other services in the i-o tables  307 Table A6.2 Value added by other services for benchmark years, 1930-2000  308 Table A6.3 Value added by other services, 1900-2000  309 Table A7.1 Number of people employed and population size, 1905-2005  314

List of figures

Figure 1.1 The three-sector model  24 Figure 1.2 Map of Indonesia with its major cities  35 Figure 2.1 Gross profit margins of Hagemeijer & Internatio, 1914-1939  55 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5

Occupational structure, 1905-2000  72 Economic structure, 1900-2000  80 Economic structure, 1966-2005  80 Development of value added in transport and communications, 1900-2000  82 Development of value added in the service sector, 1900-2000  82

Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 Figure 4.5 Figure 4.6 Figure 4.7

Model of the benefits of transport  94 Schematic representation of the relationship between transport and economic development  97 Transport network evolution  99 Share of prahu shipping in local trade, 1929-1939  102 kpm transportation costs, 1891-1939  103 The kpm shipping network, 1891 and 1940  104 Water transportation costs, 1900-2000  111

Figure 4.8 The railway network of Java and Madura, 1899-1925  114 Figure 4.9 The railway network in Sumatra, 1925  115 Figure 4.10 Rail transport costs, 1890-1957  117 Figure 4.11 Developments in numbers of passengers and freight carried by rail, 1890-2000  119 Figure 4.12 Developments in passenger-kilometres and ton-kilometres, 1890-1900  120 Figure 4.13 Rail transport costs, 1890-2000  121 Figure 4.14 Development of road transport costs, 1890-1995  126 Figure 4.15 Air transport costs, 1930-2000  129 Figure 5.1 Figure 5.2 Figure 5.3 Figure 5.4 Figure 5.5  Figure 5.6 Figure 5.7 Figure 5.8

Foreign trade values in Indonesia, 1900-2003  133 Indonesia’s openness to foreign trade, 1900-2000  134 Foreign trade taxes as percentage of total government revenue  141 Openness and growth, 1900-1997  144 Marketing structure Indonesia, ca. 1900-1940  148 Marketing structure in rural Java, 1982  149 Share of urban self-employed in the total labour force, 1965-2003  154 Relative levels of labour productivity, trade sector versus other service sectors, usa, Brazil, Mexico and Indonesia  157

Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 Figure 6.5 Figure 6.6

Rice price fluctuations, 1920-2006  163 Price fluctuations, Java vs Outer Islands, 1949-2006  165 Marketing structure of rice  168 Functioning of Bulog  169 Fluctuations between markets, 1925-2006  171 Map of Indonesia with its major cities  175

Figure 7.1 From parasite to catalyst  189

Acknowledgements

‘What is this Favour Bank? (…) It’s the most powerful bank in the world, and you’ll find it in every sphere of life’ — Paolo Coelho, the Zahir

In the above passage the Brazilian author Paolo Coelho writes about the Favour Bank. It is a bank in which one makes deposits, not in cash, but in favours. One day, the depositor will ask for a favour himself, and that is the time for someone to pay off his outstanding debts. When I was a teenager I always told people that my ultimate dream was to become rich. The best way to get rich, I thought, was by becoming a banker. Therefore only few would have expected me to choose an academic career, since writing a dissertation clearly does not make you rich in monetary terms. But just like in economics, one should also account for the non-monetary remuneration. Taking this into account writing this thesis has definitely enriched me. Moreover, it enables me at this moment to act as a banker and pay off some of my outstanding debts from my account at the Favour Bank. First of all I thank my supervisor, Jan Luiten van Zanden. He offered me the opportunity to drown myself in the economic development of Indonesia, while at the same time his guidance and suggestions always kept me on track. To broaden my horizon, trips to do research or present papers in Indonesia, Japan, Australia and Uruguay, to name just a few destinations, were always supported. With a smile I recall the numerous hours we spent in traffic jams (macet, ya!) in Jakarta and Bogor. I am particularly grateful to Thomas Lindblad. Sharing an interest in both economics and Indonesia, he supervised me through my ma thesis and drew my attention to a PhD position to do research on the economic development of Indonesia. In the course of my research I profited greatly not only from his comments and suggestions, but also from his extensive network in the field of the economic history of Indonesia. It was a pleasure to have him as a co-promotor. I benefited greatly from Jan-Pieter Smits’ expertise in the research on the service sector. Pierre van der Eng guided me from a distance through the principles of national accounting and the many statistical sources on Indonesia, and gave very

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| Acknowledgements

detailed comments on my work during my stay at anu in Canberra. I am also grateful to the Indonesia Project at anu, and specifically to Chris Manning and Hal Hill for offering me the opportunity to spend a short period in the stimulating research environment there. I am indebted to the personnel of the various libraries and archives where this research was carried out. I especially appreciate the efforts of Rini Hogewoning and Josephine Schrama at the Royal Netherlands Institute of Southeast Asian and Caribbean Studies (kitlv). My numerous requests for excessively heavy statistical yearbooks were met with surprise, but never with complaint. A number of colleagues at the International Institute of Social History (iish) made the sometimes lonely process of writing a dissertation more social. Regrettably I cannot thank them all, but I do want to mention a few of them. During uncountable coffee breaks and on many occasions outside the institute the important and, more often, less important issues in life were discussed with Christiaan van Bochove, Jelle van Lottum and Rob Wadman. Moreover, together we formed the iish cycling team, which was complemented with Aad Blok, Marti Huetink, Frank de Jong and team manager Jacques van Gerwen, for the Amstel Gold Race in 2007 and 2008. Last but not least, Danielle van den Heuvel provided some welcome balance to the gender bias in topics discussed during breaks. The joint work with Ewout Frankema on inequality in Indonesia was a welcome and inspiring sidestep. Our discussions helped to shape my thinking about economic development and have greatly improved this dissertation. Dennie Oude Nijhuis has become a close colleague through the PhD-training program of the N.W. Posthumus Institute. During my visits to Indonesia Menno, Ratih and their children Ananda and Igor always made me feel at home in their house. My friends of ‘Bruusk’ regularly brightened my days with numerous pointless emails. Combined with our regular encounters this was often a welcome distraction from my work. The same holds for my best friend Julian Spierenburg. Our nearly daily phone contact, regular visits to the gym and playing in the same soccer team on Sunday kept me in touch with ‘normal’ life. Special thanks go to my family. They are very much at the basis of this dissertation. In 1995 we made our most exotic trip as a family, to Indonesia. It was then that my interest and fascination for Indonesia were triggered. My parents, John and Geertrui Marks, have always provided a warm, stable and supportive family environment in which I could flourish. Their confidence and encouragement have been a continuous source of strength. With this dissertation I proudly follow in the footsteps of my father. I also want to thank my brother, Geert Jan, and my sister, Vera, for their on-going interest and morale support, but even more for the discussions about other things than work (mainly soccer, my mom would say). From the very beginning, my parents-in-law, Lex and Hetty Wunderink, have made me feel most welcome in their family. Moreover, being convinced of my capacities they challenged me to be ambitious. Therefore it is no exaggeration to say that

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without them my career could have been very different. Furthermore, being slightly ahead of me in the process of writing a dissertation Lex could very well relate to my sometimes changing moods. Over the last few years family and friends provided the necessary and welcome distraction from my work. In this respect I want to mention Rachid Baghat and Ruth ten Broeke. Hopefully I have not bored them too much with talking about my research during family gatherings. My friends Nanko van den Brule and Robert Tielenius Kruijthoff have continuously showed interest in my work, but, if unnecessary, fortunately hardly ever for more than five minutes. I very much enjoyed the company of Sven, Charlotte and their beautiful daughter Hannah de Heer, Stefan and Inger Wunderink, Herman and Diane Wunderink, and Freek and Fia Wunderink on numerous occasions both at home and elsewhere around the globe. They are much more than just family-in-law. Special reference should be made here to my grandmother-in-law An Bouvy, who has taught me not only numerous proverbs, but also, I think unconsciously, many important lessons for life. Unfortunately none of my own grandparents outlived the completion of this dissertation. But I am thankful for their great interest during their lives in both my personal life and my career, and I am sure they would be proud of this book. The last one to thank is my wife, Esther. You are not only my beloved one but also my soul mate. It is your love, unconditional support and encouragement that helped me through the sometimes difficult moments in writing this thesis. And together we enjoyed the many happy moments. To some these words might sound obligatory, but only you know how sincere and true they are. Whatever and wherever the future will bring us, together we have the world in our hands. It is therefore that I dedicate this book to you.

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1

Introduction

1.1

The context In the lecture Simon Kuznets delivered in Stockholm when he received the Nobel Prize in Economic Sciences in 1971, he encouraged researchers not to concentrate only on industrial countries but to analyse less developed countries (ldcs) as well. ‘For the less developed countries the tasks of economic research are somewhat different: the great need is for a wider supply of tested data, which means essentially data that have been scrutinised in the process of use for economic analysis. […] One may hope, but with limited expectations, that the tasks of refining analysis and measurement in the developed countries will not be pursued to the exclusion or neglect of badly needed studies of the less developed countries, studies that would deal with the quantitative bases and institutional conditions of their performance, in addition to those concentrating on what appear to be their major bottlenecks and the seemingly optimal policy prescriptions.’ (Kuznets 1973: 258) By now more than 35 years have passed and a growing number of researchers – some perhaps encouraged by Kuznets – have studied the less developed countries and constructed databases to meet the quantitative needs that Kuznets refers to. This has resulted in quite an impressive body of literature. However, there are still some important gaps to fill. One theme that has not yet received the attention it deserves is the role of the service sector in the economic development of ldcs. As economist Dorothy Riddle argues in her in-depth study on the service sector: ‘Development economists characteristically view services as a “developed” country issue, of little concern to developing nations. The excitement, the dynamism, the key to growth is believed to lie in the manufacturing sector.’ (Riddle 1986: 1) The reason for this is probably that the service sector is often considered to be subordinate. At the beginning of the process of economic development, agriculture is the most important sector. Initially, with low levels of productivity, there is little if any

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| Introduction

surplus above the subsistence requirements, so that economic activity of most members of society falls into the primary sector. As agricultural techniques improve, productivity rises and the size of the surplus grows, enabling the development of a manufacturing or secondary sector, which produces both equipment and consumer goods to satisfy some less basic needs over and above subsistence levels. As the wealth and productive potential of the society grow further, even more sophisticated needs are provided for by the service or tertiary sector (Fisher 1939; Clark 1940; Fuchs 1968; Kuznets 1971; Riddle 1986). Along this line of reasoning the service sector is not particularly important in ldcs, since industrialisation has not yet taken place, or is still only in its infancy. This may explain why most studies on economic development in ldcs have concentrated on agriculture, with some attention to industry, but with only occasional reference to services. I believe, however, that the service sector plays a crucial role in economic development, at least in ldcs. For example, without a well-functioning transport system, trade opportunities will be limited. And if trade opportunities are limited, this will discourage specialisation and industrialisation, which will hamper economic growth. Referring to the case of Indonesia, economic historian Howard Dick, for example, states: ‘In a nation pledged to “Unity in Diversity”, few industries could be more important than interisland shipping. Yet since Independence problems plaguing interisland shipping have continued […]’ (Dick 1987a: back flap) Without a well-functioning financial system, as another example, industrialisation is doomed to fail, because machines cannot be financed. Moreover, good-quality education and health care ensure that an economy has a labour force of the necessary quality. And the government sets the rules of the game in which an economy functions. Or in other words: ‘Agriculture, mining and manufacturing are the bricks of economic development. The mortar that binds them together is the service industry.’ (Shelp et al. 1984: 1) Yet, the service sector is one of the least understood parts of the global economy. It receives only minimal attention in country analyses, policy deliberations, and development funding strategies (Riddle 1986: 1). This neglect of the service sector is also illustrated by the three most common labels for the service sector: ‘tertiary’, ‘residual’ and ‘post-industrial’. Economist Allan Fisher (1935; 1939) introduced the term ‘tertiary’ to refer to the service sector. Since ‘tertiary’ denotes a relative rank or position, he unintentionally assigned services as economic activities to positions of lesser importance. Colin Clark (1940: 375), a British economist and statistician, wrote in 1940 that ‘there remains an important residual which we may describe for convenience as “service

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industries”’. Like Fisher, Clark intended to point out that there were economic activities other than agriculture and manufacturing. However, the term ‘residual’ has the implication of that which is left over. Sociologist Daniel Bell (1973) referred to the service sector as the ‘post-industrial sector’ and to the ‘post-industrial society’ as one in which the service sector is dominant, reflecting the assumptions that service industries did not develop until after industrialisation. But this terminology is based on the development process of only a few West European economies. Hence the role of the service sector deserves a far more prominent place in developmental research than it has received so far. Services are neither of lesser size or importance than other sectors, nor do they have a parasitical dependence on manufacturing activity. By analysing the role of the service sector in the economic development in Indonesia this study aims to show that services play a vital and dynamic role in the economic development of ldcs. Indonesia is an excellent case-study for this kind of research, because of its erratic development path combined with its rich statistical sources. This makes it possible to meet Kuznets’ appeal for studies that deal with the quantitative bases and institutional conditions of their performance. This study will focus on the quantitative bases and institutional conditions of the service sector in order to determine how it contributed to the economic development of Indonesia during the twentieth century.

1.2

Bridging a gap The most intriguing question about the economic development of Indonesia during the twentieth century is why the country’s growth performance has been so erratic and displayed such a high degree of discontinuity. Why was Indonesia at independence so poor after having experienced a comparatively impressive export-led economic expansion in the several decades prior to the worldwide economic depression? Why did the economic growth performance improve so much during the New Order government of President Suharto after the dismal experiences of the Old Order Government of President Sukarno? Does this erratic performance convey a fundamental structural weakness in the Indonesian economy that in turn may even help us in understanding why the country plunged into such a deep economic crisis in the late 1990s, the worst one in the region and the worst in several decades? These questions are all connected with the fundamental question of the nature of long-term economic development in Indonesia. The study of the modern economic history of Indonesia, covering the period from the beginning of the twentieth century until the present day, has so far been less systematic than is possible with the available source material. Indonesia is exceptionally well endowed with rich statistical sources, especially with regard to the late colonial period; these sources offer the potential to support a rigorous and systematic quantitative approach to vital questions concerning the economic growth performance in the long run. The gap between current historiography and avail-

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| Introduction

able sources needs to be bridged by an appropriate methodological framework and a rigorous analysis. Such a methodological framework is provided by the historical national accounts, as discussed in section 1.4. The central research question in this study is: ‘What role has the service sector played in the economic development of Indonesia during the 20th century?’ The service sector in Indonesia is not a complete blank spot in the literature. A number of studies have been written on branches of the service sector, often with a historical perspective. However, a systematic quantitative study of the role of the service sector in the economic development of Indonesia has not yet been undertaken. By filling this lacuna this study aims to contribute to debates about the dynamics of long-term economic growth in general and more specifically in Indonesia.

1.3

Theoretical context: the service sector and economic growth

1.3.1

Definition and classification of services So far I have assumed that intuitively one knows what a service is. A hairdresser or a waitress clearly offers a service. And cars, rice, or computers are obvious examples of goods. But what is it that distinguishes a service from a good? From a scientific point of view, the distinction between goods and services requires more analysis, not just a reliance on common sense, ad hoc definitions, and individual intuition. However, a definition of services within an economic analysis is not so straightforward (Petit 1986: 8). This section will discuss some different perspectives on how to define the service sector. Subsequently, three ways to categorise this sector will be considered. The intellectual godfather of modern economics, Adam Smith (1776: 295) already drew a dichotomy between goods and services. He stressed the perishable characteristic of services: ‘They perish in the very instant of their performance’. This intangible aspect allows for neither storage nor further transaction. Hence, for classical economists, services do not contribute to an increase in the volume of exchange: ‘Services seldom leave any trace or value behind them’ (Smith 1776: 295). According to Marx (1909) services were even associated with unproductive labour. More recent attempts to define the service sector have tried to isolate unique characteristics of services by establishing criteria with analytical usefulness. Economic  On trade, see, for example, Touwen 2001; Lindblad 1994. On transport, see, for example, Dick 1987a; À Campo 1992; Weisfelt 1972. On government, see, for example, Booth 1988.

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historian Ronald Hartwell (1973: 359-360) mentions three main groups of characteristics that have been identified: The first includes lack of durability, unstockability, and producer–consumer intimacy, as well as intangibility; the second is concerned with the unit of production, and argues that services are produced in small units of production that are labour-intensive rather than capital-intensive, with a high ratio of value added to the value of total inputs; the third concentrates on the labour force of the service sector which includes a strategically important, but relatively small professional group (of high-value human capital) and, in comparison with other sectors, a high proportion of female, self-employed and part-time workers. While I recognise the usefulness of the above criteria, they do not give an unambiguous analytical framework for discussion. Other authors have argued that it might be better to think of the tertiary sector as a residual (Horlings 1995: 63; Smits 1995: 19). In this broader definition the sector comprises all activities other than agriculture and industry. The rationale behind this approach is that there is more agreement about what constitutes productive activities that are defined as agricultural or industrial. Economist T.P. Hill (1977) most thoroughly discusses the problems of defining the service sector. He argues that common factors shared by all services include, firstly, that they bring about some change in the condition of some person or good, with the agreement of the person concerned or economic unit owning the good. Secondly, the change is the result of the activity of some other economic unit. Therefore, he concludes: ‘A service may be defined as the change in the condition of a person, or of a good belonging to some economic unit, which is brought about as the result of the activity of some other economic unit’ (Hill 1977: 318). Hill’s definition has been widely used in the literature and is generally applicable. It clearly determines if one is dealing with a good or a service (see for example Griliches 1992; Stibora and De Vaal 1995; Kögel 1999). Therefore, the current study uses this definition as well. Having discussed some different definitions of the service sector, we can now think about how to categorise this sector. A distinctive feature of service activities is their heterogeneity. Therefore there are several ways to separate them into categories. One way is according to the classification of the sociologist Joachim Singelmann (1978). He divides the service sector into four categories. These categories draw a functional distinction between: i. Distributive services, which cover the distribution of commodities, information and passenger transport (i.e. trade, transport, communications). ii. Producer services, which are those services mainly consumed by enterprises. Producer services are an intermediate input in the production process (i.e. banking, insurance, real estate and business and professional services). iii. Social services, which are non-market activities provided by the government, and non-profit organisations (i.e. government, military, medical services, education and religion).

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| Introduction



iv. Personal services, which are those services mainly consumed directly by final consumers (i.e. domestic servants, catering, recreation and entertainment, etc.).

Another method of categorisation is to divide the service sector into three groups. The first group concerns services with a clearly discernible output, price and set of inputs. The value added of these services can be calculated by subtracting intermediate expenses from the value of output. Such activities include, among others, trade, transport and communications. The second group consists of services for which production cannot be measured properly, as for some of these activities a market price does not exist. Total inputs must serve as a proxy for value added. The drawback of this method is that it precludes an analysis of productivity. Government activities are the best example of these kinds of services. Finally, housing is treated separately, since this industry presents a strange case with respect both to the definition of its output and to its combination of no employment and a large contribution to gross national product. A third way to categorise services is based on the International Standard of Industrial Classification (isic), as shown in table 1.1. According to the system of national accounts all activities classified under isic code 6 to 9 are considered to comprise the service sector. To these activities ownership of dwellings or housing has to be added. Because the objective of this research is to reconstruct and analyse the service sector within the framework of national accounts, as discussed in section 1.4, I will use this final classification as starting point.

22

Table 1.1

isic classification of activity

isic Code

Sector

1

Agriculture, Hunting, Forestry and Fishing

2

Mining and Quarrying

3

Manufacturing

4

Public Utilities: – Electricity – Water – Gas

5

Construction

6 61 62

Distribution Wholesale trade Retail trade

7

Transport, Storage and Communication

71 711 712 713

Transport and storage Land transport Water transport Air transport

| Accounting for Services





1.3.2

isic Code

Sector

72

Communications – Postal services – Telecommunications

8 81 82 83

Finance, Insurance, & Real Estate (FIRE) Banking services Insurance services Real estate

9 91 92 93 931 933 94 95 96

Services and Government Public administration and defence Sanitary and similar services Social and related community services Education Health services Recreational and cultural services Personal and household services International and other extra-territorial bodies

Source: United Nations 1993

The service sector and economic growth In 1940 Colin Clark wrote that ‘we find a very firmly established generalisation that a high level of real income per head is always associated with a high proportion of the working population engaged in tertiary industries’ (Clark 1940: 6-7). He therefore concluded that the most salient component of economic progress is the movement of working population from agriculture to manufacture, and from manufacture to commerce and services. This is still a common view among economists. ‘Economic growth’ here means a substantial and sustained long-term growth of real income per head of population. ‘Structural change’ means the transfer of resources among the three sectors of the economy – the primary (agriculture), the secondary (industry) and the tertiary (services) – so that the percentage shares of employment and output are altered. According to Clark, economic growth and structural change go hand in hand, so that, as the economy develops, the service sector becomes a more and more important part of economic activity. The conventional view, introduced by Fisher (1935) and Clark (1940) independently of each other, is that various sectors of an economy develop according to a natural sequence. In the initial stages of economic development, agriculture is the most important sector, because with low levels of productivity all labour is required to produce at a subsistence level. As agricultural techniques improve, productivity rises and surpluses arise, enabling the development of a manufacturing or secondary sector. As wealth and productive potential of the society grow further, even more sophisticated needs are provided for by the service or tertiary sector. This evolution is illustrated in figure 1.1.

23

| Introduction



Figure 1.1 The three-sector model



Source: Gershuny and Miles 1983: 250

Fisher (1935, 1939), who proposed the conceptual breakdown of the economy into three sectors – primary, secondary, tertiary – noted that economies could be classified structurally in terms of wealth, according to the proportions of population employed in agriculture. In his view the share of population employed in this sector was inversely proportional to wealth. Clark (1940) stated that economic progress in the sense of a rise in the average real national income per head of the working population may take place (a) as a result of improvement in real output per head in all or any of the three fields (agriculture, industry, services) or (b) as a result of transference of labour from the less productive to the more productive fields. His argument is that labour will be reallocated from manufacturing industries, which experience high rates of productivity growth but stagnating demand, to services, which experience lower rates of productivity growth but rising demand. Clark’s findings are based on detailed empirical data for a large number of, mostly industrialised, countries. The French economist Jean Fourastié (1949) described the low rate of productivity growth in the tertiary sector, combined with a shift in demand to services, as the great hope for twentieth century employment. In Europe before the industrial revolution the small size of the service sector and its high costs were a barrier to growth. In the case of transport, for example, only a drastic reduction in the cost of transport enabled the mobility of production factors, which was vital for growth. For several branches of the service sector there is an explanation of why they can cause or at least coincide with economic growth.

24

| Accounting for Services

Trade (isic 6): The economic functions of distribution are, for producers, to widen the market; for consumers, to provide ‘place and time utility’; and, for both, to provide information (Hartwell 1973: 380). As manufacturing becomes more localised, commodity production is geographically separated from the consumer market. Raw material producers, manufacturers and consumers, who earlier had lived and worked together, are increasingly separated; therefore market linkages need to develop to complete the circular flow of production, trade and consumption. Transport and communication (isic 7): Historians have argued that ‘a transport revolution’ preceded and accompanied all industrial revolutions; economists, similarly, have shown that modern economic growth is correlated positively with transport facilities and that investment in transport is of strategic importance in inducing and sustaining growth (Kindleberger 1958: 96; Fogel 1964; Fremdling 1975). Improved transport is part of the essential infrastructure of an advanced economy. Not only does it directly lower the costs throughout economies, it also makes markets accessible (by allowing the growth of larger-scale enterprises) and labour mobile. Equally as important as transport services to shift goods and people was the development of other types of communications, which reduce the costs of information to producers and consumers. This sub-sector facilitates a more systematic collection of information and a more effective distribution of it. Financial services (isic 8): Growth generates an increased demand for money, shortterm credit and long-term capital and, hence, institutions which that can fulfil these demands. These are institutions which link surplus- and deficit-spending units, and which facilitate borrowing and lending by substituting the financial intermediary’s liabilities. To meet these financial needs, banks, money and exchange markets, stock exchanges and capital markets all expand. Such institutions lay the foundations of a well-integrated system of public and private finance (Cameron 1967, 1972). Government and other services (isic 9): A notable feature of economies is the growth of the government. Much of this growth can be summed up in the phrase ‘welfare state’, which came into being initially to redress income inequalities and to remedy poverty, but later expanded to include macroeconomic management of economies in the interests of greater efficiency and faster growth. Welfare and growth have become the twin aims of contemporary government and bureaucracy (Hartwell 1973: 378). Economic development provides opportunities alongside older professions. It adds a wide range of new professions (for example, architecture, engineering, industrial management, accountancy, dentistry, etc.). This development is, among others, important because it multiplies the absolute and relative size of the most skilled proportions of human capital in economies, and hence boosts further economic growth. Moreover, this segment of the service sector also comprises consumer ‘goods’ such

25

| Introduction

as culture and recreation, whose demand expands with increasing income and leisure. Despite these convincing arguments about why economic growth and growth of the service sector should coincide, there is substantial discussion about the exact sequence and relationship between the two. Hartwell, for example, argues that a significant characteristic of the industrial revolution was the emerging service sector: ‘For Western Europe it is important to remember that before the industrial revolution, industry already coexisted with agriculture, and that the expansion of industry, even in the new form of factory production, was not entirely new. It was the expansion of the non-agricultural and the non-industrial sector – thus the service sector – that created the most significant break with the past with the onset of industrialisation in the advanced economies.’ (Hartwell 1973: 362) Similar conclusions are drawn for the role of the service sector in the economic development of the Netherlands. Within the research project “Reconstructing National Accounts of the Netherlands and the analysis of the development of the Dutch Economy in the period 1800-1940” both Edwin Horlings (1995) and Jan-Pieter Smits (1995) have shown that the Dutch service sector, especially trade and transport, was of crucial importance to the process of modern economic growth. Kuznets (1966, 1971), in studying the changing composition of output and employment during the growth of the advanced economies, reached several relevant conclusions. Regarding employment, for instance, there has been an unambiguous secular tendency for the share of total agricultural employment to fall, the share of manufacturing employment to rise, and the share of service employment to rise substantially, generally more than manufacturing. Regarding output, however, Kuznets found a secular tendency for the share of agriculture in total output to fall, for the share of manufacturing to rise, and for the share of services to have no systematic relationship with the growth of output. The productivity of agriculture has generally been below the national average, while that of manufacturing and of services have been above it. When the productivities of manufacturing and services are compared, however, the data are more difficult to interpret. So Kuznets’ conclusion is that employment in the service sector indeed rises, but whether this leads to a rise in the share of services in total output is not clear. Economist William J. Baumol (1967) also questioned the so-called three-sector hypothesis. He argues that the share of services in real output is constant over time. According to Baumol’s model, the share of service sector employment is larger in high-income countries, and grows with rising income, because of the low productivity level of the service sector. Victor R. Fuchs (1968), an American economist, has written one of the most comprehensive studies on the expansion of service employment. His findings sup-

26

| Accounting for Services

port Baumol’s cost-disease hypothesis according to which demand shifts play only a minor role and the share of service employment increases mainly because productivity growth in services is lagging. This does not mean that the proportion of real service output increases over time. In the next section I will explain this.

1.3.3

Economic factors affecting the development of the share of services in real output The positive association between economic growth and the share of services in the distribution of the labour force has been noted and documented. Clark (1940) traced the observation of this relationship back to Sir William Petty in the seventeenth century and proposed that the shift of the working population from agriculture to manufacturing and from manufacturing to services in the course of economic growth be called Petty’s Law (see also Zimmerman 1967: 705-706). Kuznets (1966, 1971), Fuchs (1968) and others have suggested that the relative expansion of service employment could be due either to high income elasticities in the demand for services or to slower growth in the productivity of service industries. The common view that services are characterised by relatively high income elasticities is based on the idea that commodities fill one set of human wants (the basic necessities) and services another (the desire for luxuries) (Fisher 1935: 31). This hierarchy of needs, which states that as income grows a higher share of income will be used for the purchase of luxuries (in this case services), is defined by Engel’s Law. The fact is, however, that changing times bring different forms through which wants are satisfied, and it is easy to go astray by identifying luxuries with services. In empirical research on the service sector in France, the United Kingdom and the United States, Kravis et al. (1983) test this relationship between the share of services in gdp and economic growth. Their analysis focuses on final-product services. They find that that, as income rises, the share of expenditure on services indeed rises quite sharply over time, at least when shares are calculated in the current prices of each period. However, when service shares are measured in constant prices, the secular rise in shares disappears completely in the cases of France and the United Kingdom and is sharply reduced for the United States. These results are summarised in table 1.2. The obvious inference is that, as income rose, service prices must have been rising relative to commodity prices. Kravis et al. (1983) point out that the income elasticity of demand is only one factor that influences the changes over time in the division of consumers’ expenditures between services and commodities. Some generalisations can probably be legitimately made about income elasticities for broad categories of wants – for example, that the demand for recreation tends to be highly elastic with respect to income – but such generalisations do not lead to a clear conclusion about shifts in the relative importance of services and commodities in consumer expenditure. Even a broad category of wants can be satisfied in a variety of ways, some involving a service and others involving a commodity. Higher incomes, for example, may lead to the

27

| Introduction

substitution of a commodity for a commodity (meat for bread), or of a service for a service (an expensive restaurant meal for a cheap one), or of a service for a commodity (restaurant food for home-cooked food), or of a commodity for a service (readyto-serve food for household help).

Table 1.2

Changes in service shares over time, France, United Kingdom, and United States Shares of services in gdp Current prices

Constant prices

1959-1960

31.3 %

38.0 %

1977-1978

37.9 %

36.5 %

1957-1958

39.5 %

50.6 %

1967-1968

43.8 %

50.5 %

1977-1978

47.6 %

49.7 %

France

United Kingdom

United States





1947-1948

33.2 %

42.4 %

1957-1958

44.8 %

49.6 %

1967-1968

48.8 %

50.8 %

1977-1978

49.7 %

49.0 %

Source: Kravis et al. 1983: 195

Another set of factors that determines whether the expansion path moves towards services or towards commodities concerns technology. Consider, for example, the possible ways for an individual to satisfy an income-elastic desire for entertainment in the form of a musical experience. The most direct physical sensation associated with the musical experience is going to a concert. Until a century ago this was the only option to have such an experience. Nowadays, various disembodied sources of music are available (cds, dvds, radio, television, internet, etc.), but access to these sources requires the purchase of commodities (cd players, dvd players, computers, cds, dvds, etc.) instead of the purchase of a service in the form of a concert ticket. So there can be a substitution effect between services and goods. These changes are called social innovations or the emerging of a self-service economy (Gershuny 1978). A third factor, with which the income elasticities and the technological factors interact, sometimes in a causative way, is relative prices. The existing structure of relative prices at a given moment may influence the relative size of income elasticities for different means of satisfying a broad want. For example, whether high income elasticity in demand for recreation in case of an increase of income leads to a relative expansion of spending on services or on commodities is likely to depend on which ways of providing the desired form of recreation are the cheapest. The influence that prices may exercise on the income elasticities of close substitutes may vary with the level of income. Relative prices will in turn be influenced by technological change and productivity gaps. If the cost-reducing aspects of techno-

28

| Accounting for Services

logical change affect commodities more often than services, commodity prices will tend to fall relative to services prices. This behaviour of relative prices is more likely as services tend to be produced in a more labour-intensive way than commodities and that wage rates rise relative to the rent of capital with development. The explanation for this is the following. With similar prices for traded goods in all countries, wages in the industries producing traded goods will differ from country to country according to differences in productivity – a standard conclusion from Ricardian trade theory. But in each country the wage level established in the traded-goods industries will also determine wages in the industries producing non-traded goods (mainly services). Because international productivity differences are smaller for such industries, the low wages established in poor countries in the traded-goods industries will also apply to the non-traded-goods industries. The consequence will be low prices in low-income countries for both services and other non-traded goods, and at the same time high prices in high-income countries for both services and other non-traded goods. So both technological and productivity differences cause a rise in service prices relative to commodity prices. Their influence in tilting the balance in favour of the satisfaction of wants through services to the satisfaction through commodities may help to explain the limited expansion of real share of services in final expenditures despite the fact that services often seem to contribute to income-elastic wants. But not only income elasticity is important, also the price elasticity of demand for services. It seems clear, then, that there are no strong a priori grounds for expecting demand for final products classified as services to increase as income rises. A possible fourth cause of a growth in service activity relative to total output is intermediate sub-contracting. Because of the increasing demand for ‘intermediate’ or ‘producer’ services from elsewhere in the economy the service sector will grow. Instead of employing particular sorts of specialised service labour, firms subcontract or outsource work to specialists. Examples include catering, security and cleaning. Dutch economist Tom Elfring (1989), for example, found that in seven oecd countries employment growth in producer services was about twice as high as the average for the entire service sector. This finding is partly a result of measurement problems. In the system of national accounts firms are classified according to their main product. Therefore the performance of identical tasks will be classified as manufacturing employment when carried out by a manufacturing firm, and as a service when carried out by a specialised service firm. For example, book printing by a publisher will be classified as manufacturing, while book printing by a university will be classified as service. Fifthly, an increase in the share of services can be explained by the phenomenon of ‘occupational tertiarisation’. As just mentioned, there is more to service employment than just service industries. And while most attention has concentrated on the industrial dimension, much of the explanation for the growth of tertiary jobs comes from change in occupational structure within industries. In a study on the service sector in developed countries, Jonathan Gershuny and Ian Miles (1983) found, for

29

| Introduction

example, that the ratio of white-collar workers to manual workers increased over time. The proportion of manual workers in the work force is thus reduced even in industries classified as manufacturing. In summary, in the existing literature we find five economic factors that affect the share of services in an economy: 1) Engel’s Law, whereby increasing wealth leads to the development of demand for increasingly sophisticated service functions; 2) Social innovation changes, meaning changes in the mode of provision of particular service functions; 3) A productivity gap, which is the consequence of the relatively low productivity growth (and consequently the relatively fast increase in prices) in some final service industries. This is called the cost-disease; 4) Intermediate sub-contracting in which activities which were part of the production process within one industry are sub-contracted to an intermediate producer service industry; and 5) Occupational tertiarisation whereby the employment structure within industries is changed, normally reducing the proportion of manual workers in the workforce. Some factors increase the share of services in total output, while others have the opposite effect. Since we do not know which are the dominating factors, it is impossible to predict the exact development of the service sector in different countries. With more case studies like this one, it might be possible in future to make better generalisations about the role of the service sector in the economic development of a country. However, a quite widely accepted notion is that productivity in services has the tendency to grow at a slower rate than that of goods. Because of the increasing share of the service sector in the total output of advanced economies, this would mean a slower overall rate of economic growth in countries characterised as service economies. It is certainly possible that this is exactly the phenomenon that advanced economies are experiencing now.

1.3.4

Socio-economic factors affecting the development of the service share in total output Besides purely economic factors, Nanno Mulder (1999) in his dissertation on the service sector in Brazil, Mexico and the usa, also draws attention to the role of socioeconomic factors that might influence the development of the service sector. He describes four possible factors. To begin with, Mulder points out that income distribution plays a role. Lowincome groups have different spending patterns from high-income groups, and as such the distribution of income has important consequences for the overall rate of substitution of agricultural products and manufactures for services in consump-

30

| Accounting for Services

tion. High income inequality increases the consumption of luxury services such as domestic servants and expensive leisure activities. However, the demand for more basic services such as education, health care and telecommunications is constrained, as middle- and low-income groups receive smaller fractions of income. Furthermore, changes in demographic trends and labour force participation affect the development of the service sector. Population growth and age structure have important consequences for the relative demand for education and health care. The necessity of schooling largely depends on the share of young people in the total population, which is determined by birth rates and infant mortality. On the other hand, the share of elderly in the total population affects the demand for health care to a large degree. An increasing labour participation rate is also an important factor for service demand, especially when the increasing participation of women is concerned. That boosts the necessity of laundry services, nursery schools and prepared food and restaurant services, which have traditionally been in the domain of women. Moreover, urbanisation affects the demand for services. City dwellers buy relatively more products in stores, while rural citizens grow a portion of their own food for consumption. Rural people also engage more in barter trade, while urban households have a higher demand for communications and recreational services (Falvey and Gemmell 1996). Another difference between cities and rural areas lies in the alternative sources of subsistence income available in the absence of job opportunities in the formal sector. In cities, if the number of jobs available is low, most people enter the informal service sector, whereas in rural areas surplus labour is concentrated in agriculture. Finally, the role of the government influences the share of services. Not only because government services are part of the service sector, but also because an expanding government increases the demand for services. Usually this involves increased expenditure on health care and public education, because these are considered indispensable for improving people’s well-being and productivity, and as such form a precondition for economic development (Mulder 1999: 16). Having discussed the definition of, categorisation of and theoretical issues concerning the service sector and economic growth, I now shift attention to a framework within which the developments of the service sector relative to other economic sectors can be captured, namely the system of national accounts.

1.4

National accounting: aim, advantages and disadvantages ‘National economies cannot be observed directly, but can only be observed via the national accounts. National accounts statistics make the size, development and composition of these national economies visible by translating them in monetary terms indicating their economic importance. The [system of ] national accounts is therefore often referred to as the barometer of the national economy.’ (Bos 2003: 41)

31

| Introduction

The System of National Accounts (sna) is the internationally agreed standard on how to compile measures of economic activity. It provides a comprehensive accounting framework within which economic data can be compiled and presented in a format that is designed for purposes of economic analysis, decision-taking and policy-making (United Nations 1993). Work on national accounts and international comparisons of real income levels started in the seventeenth century. The oldest known attempt to estimate total economic activity was made by William Petty in 1665 and 1676 for England. In 1696, Gregory King made a rough comparison of performance in France, the Netherlands and the United Kingdom. Individual scholars further developed his approach over a period of 250 years, with substantial clarification of what the scope of the accounts should be, and a larger accumulation of estimates for individual countries. In the 1950s the first standardised system of national accounts was produced, the result of close consultation between statisticians in Western Europe and North America to ensure that the guidelines were properly implemented. The system of national accounts measures the total volume of economic activities in a country by means of three complementary lines of approach: 1)  Output/value added approach This approach sums up all the value added by every producer in the economy in the course of producing goods and services. 2)  Expenditure approach The expenditure approach sums up all final expenditures on goods and services in the economy and adjusts for contribution from exports and imports. 3)  Income approach The income approach sums up all income accruing from production in the economy. This comprises compensation of employees (wages, salaries, etc.), provision for consumption of fixed assets (depreciation, allowances), net operating surplus and indirect taxes. The sna has distinct advantages for historical research. To begin with, the three lines of approach by definition have the same result. This enhances the possibility of (cross)checking the outcome (Van Zanden 1993: 230). Moreover, the results are comparable by other studies set up according to the same approach. In addition, the accounts are compiled for a succession of time periods, thus providing a continuing flow of information. Kuznets therefore states that:

 For an exhaustive survey of the history of national accounting, see Studenski 1958.

32

| Accounting for Services

‘Acceptable long-term records of national income and wealth and of their customarily distinguished components constitute indispensable minimum information in the study of economic growth.’ (Kuznets 1955: vii-viii) Obviously, the historical application of national accounts also has its drawbacks. The concept is geared towards twentieth-century industrial nations, which were highly integrated and market-oriented. For example, the definitions relate only to transactions within the market mechanism. However, the share of non-monetary transactions has decreased in the course of economic development, and the extent to which regions were involved in market-oriented production varied widely (Horlings 1995: 34-35). These non-monetary transactions should be included, although estimating the value is sometimes difficult. Another problematic example is the provision of public services. Government is essentially a non-market organisation; its product cannot be measured in terms of output volume and market price. As a consequence it is very difficult to accurately assess the importance of this sector to economic development. As mentioned before, because of the intangible character of several service sectors, it is not always possible to measure output directly. In those cases, labour input is taken as a substitute. But taking labour input as a substitute for output means that productivity growth in the service sector is implicitly assumed to be 0. This can be seen from the following equation: productivity = output/input Assuming output and input to be substitutes, the outcome of the above equation is always 1, and thus productivity growth is equal to 0. This is obviously a very rigid assumption (Krantz 1994: 21). A further disadvantage of the system of national accounts is that it is questionable whether this concept can be used to analyse the development of a region or country that is neither economically nor politically united (Horlings 1995: 35; Smits 1995: 25). However, the system of national accounts contains no presumptions regarding the homogeneity or the measure of integration of an economy. After all, the same objections can be made against present-day national accounts for India, China or the United States. But it stresses the need for a regional breakdown of macro-economic variables for analytical purposes. Historical national accounting clearly has its shortcomings. But as yet there is no alternative model with which economic growth can be measured more accurately. Carefully constructed national accounts therefore form an indispensable input for economic analysis. Quoting Horlings (1995: 33):

33

| Introduction

‘The historical application of the system of national accounts provides the best mean to chart the quantitative development of an economy without overstating or undervaluing sectors or regions.’ This book will apply the system of national accounts to study quantitatively the development of the service sector for the specific case of Indonesia.

1.5

Indonesia’s economic history and its pecularities This section sketches some broad developments in Indonesia’s economic history for those readers who are not familiar with the country and its history. This will enhance understanding of the subsequent chapters in which basic knowledge of the major events in Indonesian history in the twentieth century is assumed.

1.5.1

Indonesia’s economic history in a bird eye’s view Indonesia is a large archipelago situated between the Indian Ocean and the Pacific Ocean, with more than 17,000 islands, of which roughly 6,000 are inhabited. The largest islands are Java, Kalimantan (the largest part of the island Borneo), Sumatra, Sulawesi and Papua (formerly Irian Jaya, which is the western part of New Guinea). Indonesia’s total land area measures 1.9 million square kilometres, while its sea measures 7.9 million square kilometres. Because Indonesia consists of large stretches of lowland as well as numerous mountainous areas, its tropical climate varies from hot and humid to more moderate in the highlands. Apart from having fertile land suitable for agriculture, Indonesia is rich in a range of natural resources, varying from petroleum, natural gas and coal, to metals such as tin, bauxite, nickel, copper, gold and silver. The size of Indonesia’s population is about 228 million (2008), of which the largest share (roughly 60 per cent) lives in Java. Indonesia has had a turbulent history. Europeans arrived in Indonesia from the sixteenth century seeking to monopolise the sources of valuable nutmeg, cloves and cubeb pepper in Maluku. In 1602 the Dutch established the Dutch East India Company (voc) and became the dominant European power. Following bankruptcy, the voc was formally dissolved in 1800, and the government of the Netherlands established the Netherlands-Indies as a nationalised colony. By the early twentieth century Dutch dominance extended to what was to become Indonesia’s current boundaries (see figure 1.2). From an economic perspective the period 1900-1942 can be characterised as the heyday of the colonial export economy (Touwen 2008). Sugar, coffee, pepper  For the most comprehensive history of Indonesia going back to ca. 1200, see Ricklefs 2001. Comprehensive studies on the economic history of Indonesia include Booth 1998, Hill 2000 and Dick et al. 2002.

34

| Accounting for Services

Figure 1.2

Map of Indonesia with its major cities

© Jelle van Lottum

and tobacco, the old export products, were increasingly supplemented with highly profitable exports of petroleum, rubber, copra, palm oil and fibres. An increasing share of these foreign exports was supplied by the islands other than Java, called the Outer Islands. This resulted in the intensification of internal trade within the archipelago and generated an increasing flow of foreign imports. Agricultural exports were cultivated both on large-scale European agricultural estates and by indigenous smallholders. When the exploitation of oil became profitable in the late nineteenth century, petroleum earned a respectable position in the total export package. The momentum of profitable exports led to a broad expansion of economic activity in the Indonesian archipelago. Improvements in the road system, railway system (in Java and Sumatra) and the integration of the port system in the world market also led to internal economic integration. In the process of integrating Java and the Outer Islands an important contribution was made by the kpm (Koninklijke PaketvaartMaatschappij, Royal Packet Company), serving economic integration as well as imperialist expansion (À Campo 1992). Subsidised shipping lines into remote corners of the vast archipelago carried away export goods, supplied import goods and transported civil servants and military personnel. The world depression of the 1930s turned the tide. The prices of Indonesia’s exports plummeted; by 1935 their value was about 32 per cent of that in 1929 (cei xiia 1991: Table 2B; Ricklefs 2001: 234). The sugar industry in Java collapsed never to recover. In some products, such as rubber, copra and oil, production was stepped up to compensate for lower prices. In reaction to the Depression the Dutch colonial

35

| Introduction

government abandoned its laissez-faire economic policies and introduced protectionist measures. Various import restrictions were launched, making the economy more self-sufficient, as for example in the production of rice, and stimulating domestic integration. Due to the strong Dutch guilder (the Netherlands adhered to the gold standard until 1936), it took a relatively long time before economic recovery took place (Touwen 2008). The Japanese invasion (1942) and subsequent occupation during the Second World War ended Dutch colonial rule, and encouraged the previously suppressed Indonesian independence movement. Two days after the surrender of Japan, on 17 August 1949, the nationalist leaders Sukarno and Hatta, declared independence. The Netherlands tried to re-establish colonial rule, but a bitter armed and diplomatic struggle ended in December 1949, when due to international pressure the Dutch formally acknowledged Indonesian independence. Thus, after independence the Indonesian economy not only had to recover from the hardships of the Japanese occupation and the war for independence, but also from the slow recovery from the 1930s Depression. During the period 1950-1965, there was little economic growth, most of this growth taking place in the years from 1950 to 1957 (Booth 1998: 60). What little growth there was must be attributed to the low initial level in 1950 when gdp was still well below that attained in 1940 (Booth 1998: 53). Growing resentment of foreign domination of the economy led in December 1957 to the expulsion of Dutch nationals and the government takeover of Dutch companies and precipitating the process of economic decolonisation (Lindblad 2002; see also Lindblad 2008). The subsequent growth performance between 1958 and 1965 was poor (Booth 1998: 65). This can be largely attributed to political instability and inappropriate economic policy measures taken by the Sukarno government. Exchange rate problems and an absence of foreign capital were harmful to economic development, and a lack of prudent fiscal and monetary policies resulted in hyperinflation by the mid-1960s. An attempted coup in September 1965 led to a violent army-led anti-communist purge in which approximately half a million people were killed. Politically, General Suharto took over power from President Sukarno in 1966, and was formally appointed president in March 1968. His New Order administration was supported by the West, whose investment in Indonesia was a major factor in the subsequent three decades of substantial economic growth. Supported by a team of experts in the field of economics, Suharto succeeded in reducing inflation and bringing Indonesia on an unprecedented growth path. In the subsequent period industrial output quickly increased, including steel, aluminium and cement but also products such as food, textiles and cigarettes. From the

 Reasonable estimates range from 100,000 to 1,000,000. A figure of roughly half a million is accepted by the Indonesian government (Cribb and Brown 1995: 106).

36

| Accounting for Services

1970s onward the increased oil price on the world market provided Indonesia with a massive income from oil and gas exports. Suharto managed to apply part of these revenues to the development of a technologically advanced manufacturing industry. After 1981 growth dropped. Stagnation in the rise of oil prices, combined with the imposition of opec quotas, reduced income from oil considerably. Moreover, in the early 1980s the world economy suffered from a recession. A number of policy reforms resulted in a more diversified export economy, less reliance on oil and gas and, subsequently, accelerated output growth. Referring to this period of stable economic growth, the World Bank Report of 1993 speaks of an ‘East Asian Miracle’ emphasizing the macro-economic stability and the investments in human capital (World Bank 1993: vi). In the late 1990s, however, Indonesia was the country hardest hit by the Asian financial crisis, which led to popular protests and Suharto’s resignation on 21 May 1998. The Reformasi era following Suharto’s resignation has led to a strengthening of democratic processes, including a regional autonomy program, the secession of East Timor, and the first direct presidential election, in 2004. Political and economic instability, social unrest, corruption, natural disasters, and terrorism, however, have slowed progress.

37

Major dates in Indonesian (economic) history 1800

The bankrupt Dutch East India Company (voc) is formally dissolved and the colonial state is established.

1870

Beginning of a liberal policy of deregulated exploitation of the Netherlands-Indies.

1888

Founding of the shipping line Koninklijke Paketvaart Maatschappij (kpm) that supported the unification and development of the colonial economy.

1901

The ‘Ethical Policy’ is launched.

1914

First World War breaks out; the Netherlands is a neutral country in the war.

1917

Netherlands-Indies trade with Europe cut off by the war.

1929

Great Depression.

1942

February: Japan occupies Indonesia during Second World War, overthrowing the Netherlands-Indies, and installs its own imperial structure.

1945

15 August: Japanese surrender to Allied powers.

1945

17 August: ‘Proclamation of Indonesian Independence’ by Sukarno and Hatta. Sukarno becomes president.

1945-9

Struggle for independence.

1949

27 December: International pressure leads Netherlands Government to transfer power to the United States of Indonesia,

1957

21 February: President Sukarno announces his ‘Conception’ (Konsepsi) of the nature of Indonesia. This will eventually lead to Guided Democracy.

1957

December: Takeover of Dutch enterprises.

1963

1 May: Following pressure from the United Nations and the us government, the Netherlands yields West Irian (Papua) to temporary un supervision.

| Introduction

1.5.2

1965

30 September: An abortive coup in Jakarta results in the murder of six army generals.

1965

1 October: A counter-coup led by General Suharto that leads to the overthrow of Sukarno.

1965

October to 1966, March: A violent anti-communist purge leads to the killing of approximately half a million Indonesians.

1965

13 December: The rupiah is devalued by a factor of 1,000 in an effort to control inflation.

1966

11 March: General Suharto forces Sukarno to delegate presidential powers to Suharto himself.

1967

10 January: New investment laws designed to bring in foreign capital are passed.

1967

7-12 March: A Special Session of the Provisional People’s Consultative Assembly strips Sukarno of his powers and appoints Suharto acting president.

1968

March: Parliament confers full presidential title on Suharto; Sukarno is under effective house arrest.

1970

21 June: Sukarno dies.

1973

International petroleum prices begin to rise steeply.

1979

Second round of steep increases in petroleum prices.

1982

opec meeting agrees on production cutbacks. Sharp increase in domestic petroleum prices.

1997

June: Pacific Ocean trade winds shift heralding the onset of the El Niño; severe drought across much of Indonesia follows in the ensuing months accompanied by highly destructive forest fires.

1997

July: The collapse of the Thai baht starts the East Asian financial crisis; over the ensuing months Indonesia is the country hardest hit.

1998

21 May: After being deserted by his cabinet, Suharto resigns from presidency. Habibie assumes presidency.

Some peculiarities in studying indonesia’s economic history In studying the economic history of a country one is always confronted with some country-specific characteristics. In the case of the reconstruction of the Indonesian service sector a number of peculiarities need to be discussed, since these will have great impact on the study undertaken. To begin with the period between 1942 and the mid-1960s is characterised by intermittent economic and political chaos. Uncontested Dutch colonial rule ended in 1942 with Indonesia’s occupation by the Japanese, although effectively 1941 is often considered as the last full, normal year. The following years are associated by most Indonesians with scarcity, forced labour and brutal physical punishment. The economic decline that took place during this period had both structural and institutional causes (Dick et al. 2002: 164). On 17 August 1945 Indonesian nationalists declared independence. This marked the beginning of a four-year during war of

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| Accounting for Services

independence, which postponed economic recuperation until sovereignty was transferred in December 1949 (Van der Eng 2002: 144). These years of occupation and war not only disrupted the everyday life of most people, but also resulted in a virtual stagnation of data collection. Very meagre information has survived this period, so that little is known about the economic situation during these turbulent years. For this reason economic historians usually deal summarily with this subject (Booth 1998; Dick et al. 2002). Pierre van der Eng (1992, 2002), the pioneer of applying historical national accounting to the case of Indonesia, for example, chose in his first publication on estimates of the Indonesian national income to include these years. In his later publication he omitted the years 1942-1949. Following Van der Eng (2002), I have chosen not to incorporate national accounts estimates for this period in this study. The almost complete lack of data makes it impossible to come up with estimates that can be linked in a meaningful way to either the colonial or the post-independence period. A second peculiarity in the economic history of Indonesia is geographical. Indonesia is assumed to be a united economic space by now. But when the Indonesian nation became independent, the national economy had statistically just been invented. Statistical recognition of a national economy did not, however, mean that it had substantive form (Dick et al. 2002: 10). At that time one can question whether the islands of Indonesia were really parts of a cohesive national economy. Therefore one should be careful when talking about the Indonesian economy. As historian Jeroen Touwen (2008) points out, there are huge differences between densely populated Java, which has been dominant in the economic and political sphere, and the Outer Islands, which has generally been a large, sparsely populated area. Among the Outer Islands it is possible to distinguish between areas which experienced reasonable levels of economic growth stimulated by the export trade (Palembang, East Sumatra and Southeast Kalimantan for example), and areas which stayed behind and profited only slowly from the modernisation that took place elsewhere (Benkulu, Timor and Maluku for example) (Touwen 2001). In the literature, the Outer Islands have remained in the shadow of Java. This is mainly because few primary sources are extant for historians. But Dick et al. rightly argue that ‘It is too readily assumed that little happened because little was recorded’ (Dick et al. 2002: 107). The distinction between Java and the Outer Islands is acknowledged here and where possible elaborated, but it has been beyond the scope of this study to construct regional national accounts enabling a detailed quantitative analysis. A third unique characteristic in studying the economic history of Indonesia is the distinction between the indigenous economy and the dualist economy. Dutch political economist J.H. Boeke (1953) introduced the term ‘economic dualism’, referring to a modern Western and a stagnant Eastern sector. Although the term ‘dualism’ was often used to indicate western superiority, more recently it has been replaced by a more objective analysis of the dualist economy. But in the Netherlands-Indies there was not only the distinction between Europeans and indigenous people, but also a

39

| Introduction

third group, the ethnic Chinese. To fully understand Indonesian economic history it is important to account also for such distinctions.

1.6

Outline of the book The structure of this thesis is based on three pillars: 1) the reconstruction of the service sector within the System of National Accounts (sna); 2) analysis of two leading service sectors in the economic development of Indonesia, namely transport and trade; and 3) analysis of the dynamics between developments in the service sector and economic growth. Chapter 2 deals with the methodology of the reconstruction of the service sector within a national accounting framework. The results of this meticulous exercise are presented in the appendices. Chapter 3 is devoted to the presentation and interpretation of the estimates. In the second part of the book the two leading sectors within the service sector are studied in detail: transport and trade. These two are by far the most important service sectors both if we look at their share relative to total employment and if we consider their contribution to total gdp. Chapter 4 discusses developments in the transportation sector and shows how these have contributed to economic development. Chapter 5 elaborates on the ambiguous role that the trade sector has played in the economic development of Indonesia. On the one hand, the trade sector has been an engine of growth, but on the other hand it has served as the sector of last resort, where those unable to find employment in other sectors ended up. Chapter 6 brings together the findings of chapters 4 and 5 and functions as the third pillar of this study. By analysing market integration in Indonesia it is possible to assess to whether the transport and trade sector have indeed contributed to Indonesia economic development process. Chapter 7 sums up the main findings of this study and challenges the view that the service sector has been ‘tertiary’ in the development process. In the case of Indonesia, accounting for services is a necessary condition for understanding the country’s development path.

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| Accounting for Services

2 National Accounting for Services in Indonesia

2.1

Introduction ‘We need statistics not only for explaining things, but also in order to know precisely what there is to explain. […] It is impossible to understand statistical figures without understanding how they have been compiled. It is equally impossible to extract information from them or to understand the information that specialists extract for the rest of us without understanding the methods by which this is done – and the epistemological backgrounds of these methods. Thus, an adequate command of modern statistical methods is a necessary (but not sufficient) condition for preventing the modern economist from producing nonsense.’ (Schumpeter 1954: 14) This chapter serves precisely the aim that economist and political scientist Joseph Schumpeter is supporting, namely a discussion of the estimation methods used to capture economic activity in the service sector within the system of national accounts. This is a necessary condition for the analysis in the subsequent chapters. This chapter starts with an overview of the history of Indonesian national income estimates, followed by an account of the data sources. After an extensive discussion of the estimation methods, some remarks will be made about the reliability of the estimates.

2.2

History of Indonesian national income estimates Before the Second World War a few tentative estimates of national income of Indonesia were published of which Louis Götzen’s (1933), then head of the Government Tax Accounting Service of the Netherlands-Indies, attempt was the most substantive. He found that the tax burden on Europeans and ‘Foreign Orientals’ (primarily Chinese) was higher than that on Indonesians, when he estimated total income for these population groups. Dutch economist Jacques Polak (1943), who had then just finished his PhD at Princeton University, was the first to prepare estimates resembling the present-day concept of national accounting. Combining the income and the production approaches, he produced estimates by industrial origin for the years 1921-1939 for indigenous Indonesians. To estimate total income for Europeans and

41

| National Accounting for Services in Indonesia

‘Foreign Orientals’ he used income tax data. Despite the fact that he had to make do with sources available in the United States, these estimates are regarded as having a considerable degree of reliability (Arndt and Ross 1970: 33). However, his work was not published upon completion, probably because it showed that average income in the group of Europeans was 45 times higher than average income among indigenous Indonesians (Dick et al. 2002: 141). Daniel Neumark (1954), who was the United Nation’s advisor of the National Planning Bureau (Biro Perancang Negara), published national income estimates for 1951-1952. His estimates were criticised on several methodological and conceptual grounds (Baga 1954: 33-35; Bakker 1954; Hollinger and Tan 1956/57; Muljatno 1957). Moreover, Neumark had to rely on statistical data that were less than satisfactory. In 1958 the un supported the establishment of a special Bureau for Economics and Finance (Biro Ekonomi dan Keuangan) within the National Planning Bureau. Attempts were made to compile national accounts, but estimating national income did not have priority. In one of these attempts Indonesian economist Muljatno Sindhudarmoko (1960) extended Neumark’s work to the years 1953 and 1954, using the same methods and concepts as Neumark. Later he estimated the national accounts for the whole period 1951-1959. Muljatno was very well aware of the shortcomings of his estimates. But he argued: ‘One instrument to obtain a picture about the (structural and functional) state of the economy in a country is the National Accounts. In the beginning it is indeed difficult to obtain reliable estimates for the National Accounts, but we need these calculations as a starting point in order to understand the difficulties. In the end knowing what these difficulties are will enable us to arrive at better estimates.’ (author’s translation of Muljatno 1960: 163). In 1966 the Indonesian Central Bureau of Statistics (Biro/Badan Pusat Statistik, bps) published national income estimates covering the years 1958-1962, and another in 1967 for the years 1960-1964 (bps 1966, 1967). The level of reliability of these estimates, however, left much to be desired (Arndt and Ross 1970: 35). When un technical assistance was resumed at the end of 1967, bps made a new effort to produce national account estimates following the concepts, definitions and methods recommended in the un’s revised 1968 sna. The procedures used for its estimation are basically the ones still employed today. This resulted in revised national accounts for the period 1960-1968 (bps 1970).

 ‘Salah satu alat untuk mendapatkan gambaran tentang keadaan (strukturil dan funksionil) ekonomi dari pada suatu Negara ialah perhitungan Pendapat Nasional. Memang pada mulanja banjaklah kesukaran2 untuk memperoleh angka2 Pendapat Nasional jang mendekati kebenarannja, tetapi kita harus mulai dengan perhitungan2 ini untuk mengetahui kesukaran tsb. agar achirnja dapatlah kita memperoleh angka2 jang makin lebih baik.’

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| Accounting for Services

In 1969 improvements in national accounting were made possible through the first attempt to construct input-output (i-o) tables for Indonesia. Its first i-o table for 1969 was compiled as part of a collaborative project between the National Institute of Economic and Social Research (Lembaga Ekonomi dan Kemasyarakatan Nasional, leknas) and Kyoto University. The final reports were published in 1973 (leknas 1973a, 1973b). A more elaborate i-o table was produced for 1971 in a joint research project also involving the Institute of Developing Economies (ide); it was published in 1977 (ide 1977). This work has become the model for later i-o tables compiled by bps for 1975, 1980, 1985, 1990, 1995 and 2000, which in turn have been the basis for the various national accounts constructed since then. Indonesia’s national accounting system has experienced four major rounds of revisions, each coinciding with a change in the base year: 1971, 1983, 1993 and 2000. The revisions each time yielded significantly higher gdp estimates in the overlapping years. But since detailed supporting tables and explanations of the underlying accounting procedures and assumptions are sparse, it is hard to tell exactly which changes caused the differences. Since the 1980s, Angus Maddison (1989a, 1989b), one of the most influential authors in the field of long-run economic growth, and especially Van der Eng (1992, 2002) have undertaken attempts to reconstruct Indonesian national accounts through extrapolations of existing estimates as far back as 1700. But these important contributions are far from perfect and often rely on some very bold assumptions. Moreover, because of methodological problems their estimates are only in constant prices. The discussion above indicates that historical time series on total output and national income in Indonesia are available. However, the different estimates are incompatible due to changes in definitions as well as the significant degree of underestimation in the past. Simply linking these estimates to form a series would ignore such inconsistencies. Therefore the contribution of this study is to construct historical time series on value added in the service sector for the period 1900-2000 in a consistent and transparent way in both current and constant prices, in which definitions are reconciled.

2.3

Statistical sources Among Asian economies, Indonesia is exceptionally well endowed with detailed statistics on virtually all sectors of the economy. The statistical series were originally set up by the Dutch colonial administrators and some run as far back as to the 1820s. The institutions responsible for the collection, compilation and publication of economic statistics were the Centraal Kantoor voor de Statistiek (cks) in the colonial period and the Biro/Badan Pusat Statistik (bps) after independence (both may be translated as Central Bureau of Statistics). There was a considerable degree of continuity in this work that will ease the problems of linking series from the colonial period to the later period.

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| National Accounting for Services in Indonesia

In the early nineteenth century statistical data were mainly collected in order to get impressions of the taxable base in the Javanese economy. Data on the number of households, for example, were used to allocate the compulsory cultivation of cash crops. Because of inconsistencies across residencies, in collecting data these statistical enumerations failed to provide a comprehensive statistical overview of Java (Van der Eng 1996a). Later these enumerations were standardised and conducted annually. Problems concerning statistical reporting remained, though, caused particularly by the philosophy behind the cultivation system. This system was based on indirect colonial rule (and therefore data collection) through indigenous heads and discouraged extensive direct contact between local colonial administrators and the indigenous population. Since 1834 the aggregated, but imperfect, statistical data, including population and various aspects of the indigenous economy, were published as appendices to various annual reports of the colonial government. Data were largely compiled by local colonial administrators, not by professional statisticians, on the basis of extensive surveys and censuses. Around 1850 it was common knowledge that the accuracy of the data was questionable (Van der Eng 1996a). In the second half of the nineteenth century the colonial administration was extended with specialised departments such as Finance (1855), Public Works (1855), Education, Religion and Industry (1866), Justice (1870), and Agriculture (1905). Since the collection of statistical data was transferred to these departments, annual reports were increasingly compiled with statistical data from them, rather than from local colonial administrators. The available statistical data therefore became increasingly abundant, although their accuracy remained in doubt, because civil servants were generally not trained to collect such data and check their accuracy. Therefore, the annual reports attached three labels to the data: ‘rather accurate’, ‘estimated’ and ‘based on guesses’. Around 1900, most data were collected and compiled by the various departments. But (semi-) governmental bodies, such as the Java Bank, the colony’s central bank, and the state railway company in Java, and private companies, such as the inter-island shipping company kpm, also produced data. Accuracy and coverage therefore depended on the purpose for which data were collected. Annual statistical digests had already been published for the Dutch colonies since 1887, when the first Jaarcijfers voor het Koninkrijk der Nederlanden: Koloniën appeared as a publication of the Statistical Association of the Netherlands. After 1897, this publication was compiled by the Dutch Central Bureau of Statistics. They relied heavily on data from the Koloniaal Verslagen (Colonial Report, kv), but also used other sources. After 1922, it was replaced by the Statistisch Jaaroverzicht (Statistical Abstract, sjo), which after 1931 was in turn replaced by the second volume of the  Verslag van de Direkteur over de Kultures (Report of the Director of Cultivation, 1834-1850), Koloniaal Verslag (Colonial Reports, 1851-1930) and Indisch Verslag (Indian Report, 19311940).

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| Accounting for Services

Indisch Verslag (Indian Report). These publications together comprise a continuous statistical record for the final five decades of the colonial era up until 1941. In 1925 the central bureau of statistics (Centraal Kantoor voor de Statistiek, cks) was established. During the 1930s the cks published several Statistical Pocketbooks in Dutch; the final one of the series was published in English after the war (Statistical Pocketbook of Indonesia, 1941). These publications mainly reproduced material from the Indisch Verslag, Vol. 2, but also contained some additional material. From 1925 to 1941 the cks also published a series of Mededeelingen (Bulletins), many of which contained valuable time series on topics such as international trade, food production and prices. After Indonesian independence it took until 1975 for scholars to become aware of this huge body of data contained in the Dutch colonial publications. Their awareness and interest resulted in the ‘Changing Economy in Indonesia: A Selection of Statistical Source Material from the Early 19th Century up to 1940’ series, numbering 16 volumes. This series provides relatively consistent data on, for example, population, foreign trade and food production. Besides being an invaluable source of data for the quantitative study of Indonesian economic history, the volumes are also an excellent bibliographic guide to statistical sources and to the secondary literature (Booth 1999: 3). During the Japanese occupation (1942-1945), Indonesia was subdivided into three administrative areas. Not much is known about statistical reporting in the Outer Islands. In Java the Japanese authorities continued the cks, which was incorporated in 1944 in the Office for General Research (Chosashitsu). Nevertheless, the publication of statistical data was discontinued, while details on data compilation are minimal. The Indonesian Revolution (1945-1949) caused further disruption. The Chosashitsu was continued by the Republic of Indonesia as the Kantor Penjelidikan Oemoem (kpo), and it was moved to Yogyakarta in 1946. The Dutch re-established the cks in Jakarta in 1947. It gradually resumed statistical reporting, although it was limited to the areas under Dutch control. After the transfer of sovereignty in December 1949, the cks and the kpo were merged to form the Kantor Pusat Statistik (kps). During the 1950s many of the statistical reporting practices established in the late colonial period were resumed. The statistical pocketbooks were again published in the early 1950s and a monthly statistical bulletin (Statistik Konjunktur) was established. As discussed before, in this period a national accounts division was set up to prepare gdp estimates (Neumark 1954; Muljatno 1960; United Nations 1964). Despite the deteriorating economic conditions a number of new initiatives were undertaken in the early 1960s. In 1961 the first national population census since 1930 was carried out, followed by the first agricultural census in 1963 and the first industrial census in 1964. In 1963/64 a National Socioeconomic Survey (Survai Sosial Ekonomi Nasional, Susenas) was introduced. Besides the Central Bureau of Statistics a number of other government organisations collected statistics. Most notably, Bank Indonesia, Indonesia’s central bank

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| National Accounting for Services in Indonesia

(successor of the Java Bank since 1953), published an annual report containing among other items, monetary and balance of payments data, and data on government revenues and expenditures.



Table 2.1



Main bps publications relevant for this study

Population Census

1961, 1971, 1980, 1990, 2000

Inter-census Population Survey

1976, 1985, 1995

Agricultural Census

1963, 1973, 1983, 1993, 2003

Economic Census (Industrial Census)

1964, 1974, 1985, 1995

Input-Output tables

(1971), 1975, 1980, 1985, 1990, 1995, 2000

Statistical Pocketbook/Yearbook of Indonesia (Statistik Indonesia)

Annually (since 1951)

Source: Adapted from Booth 1999: 14. Note: The 1971 Input-Output table was a joint research project between bps and the Japanese Institute of Developing Economies (ide).

Since the late 1960s, with assistance from the United Nations and bilateral agencies, a major revision of the national accounts data for the years 1960-1968 was published. Since then gdp figures have been published on an annual basis. In 1971 another Population Census was held, followed by the first inter-census Population Survey (Supas) in 1976. In the same year a National Labour Survey (Survai Angkatan Kerja Nasional, Sakernas) was carried out. Since 1968 Statistical Pocketbooks of Indonesia have been published annually. Beginning in 1975 to this was added an annual Statistical Yearbook of Indonesia (Statistik Indonesia). Moreover, after a trial in 1971, the national accounts estimates have since 1975 been based on five-yearly Input-Output tables. Over the 1980s and 1990s the range of publication of the bps has steadily increased.

2.4

Estimating value added in services The estimation within the framework of national accounts for the colonial period has to be done from scratch, whereas the period since independence official estimates made by the Central Bureau of Statistics (bps) combined with Input-Output tables produced every five years since 1975 serve as a starting point. In the remainder of this chapter the estimation procedures for the different service sectors are discussed.

2.4.1

Transport and communications According to the System of National Accounts, the output of transportation is measured by the value of the amounts receivable for transporting goods or persons. In economics a good in one location is recognised as having a different quality from the

46

| Accounting for Services

same good in another location, so that transporting from one location to another is a process of production in which an economically significant transformation takes place even if the good remains otherwise unchanged.

2.4.1.1

Rail transport Using the production approach, current price estimates can be derived from the profit-and-loss accounts of the different railway companies. During colonial times the State Railway Enterprise (Staatsspoorwegen, ss) was the most important, but not the only provider of railway services. The two other main providers of railway services were the Deli Spoorweg Maatschappij (dsm) and the Nederlandsch-Indische Spoorweg Maatschappij (nism). The sources give detailed information on total revenues, expenditures and number of passengers and amount of goods transported. Estimates on the cost structure are obtained from annual reports of the above mentioned railway enterprises (i.e. ss, dsm, and nism). With this information it is possible to estimate value added in current prices on an annual basis. Constant price estimates are obtained by deflating the current price series using passenger and ton-kilometre weighted composite indices as the extrapolator. The same procedure can be applied for the period 1950-1960 for which the annual reports of the State Railways are published. From 1960 onwards estimates are taken from Indonesia’s official national accounts. These estimates are constructed following the same method as used for the other periods. Because of the relatively straightforward procedure in estimating value added, it is believed that inconsistencies in estimation methods are not large in this sub-sector. The exact methods, sources and results are presented in appendix 1.

2.4.1.2

Road transport Road transport is much more difficult to estimate, since one cannot simply rely on annual reports. Therefore different methods have to be explored. For the colonial period the following estimation procedures were applied.



Traditional road transport According to the 1930 population census, 166,521 persons (or 0.27 per cent of the total population or 52.7 per cent of people working in the transport sector) were working in the sub-sector road transport. I assume that 15,000 of them were working as taxi drivers (see below) and 65,000 for bus and truck companies (3 per bus/ truck); this would mean that approximately 95,000 people were working as drivers of traditional means of transportation. It is unlikely that they earned significantly more than an unskilled labourer. Therefore it is assumed that on average someone working in this sector earns a wage close to that of an unskilled labourer (cei xiii 1992: 120). This means that the contribution of traditional road transport to gdp was 95.000 * 0.50 guilders per day * 320 days = 15.2 million guilders in 1930.

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| National Accounting for Services in Indonesia



Transport by car The source Statistiek van het Taxi-verkeer in de Stad Soerabaja (Statistics on Taxi Traffic in the City of Surabaya) gives information about the revenues earned by taxis. Gross revenues were estimated at between 15 and 20 guilders per day in 1929, with an average of 17.50 guilders. So if all taxis were in use together they earned 843 x 17.50 = 14,752.50 guilders per day or 5.4 million guilders on a yearly basis. With 258,489 inhabitants this means that on a yearly basis 20.83 guilders per inhabitant is spent on transport by taxi. Moreover, if we look at statistics on automobile services in 1931, we also find average earnings per day per car of 17.17 guilders (Statistical Abstract 1935: 339). There were three kinds of operating expenses for a taxi driver: fuel, rent and maintenance. A taxi used at most 40 litres a day or roughly 14,600 litres a year, so all 843 taxis together used 12,307,800 litres per year. Since a litre of gasoline in 1929 cost 0.23 guilders total expenditure on fuel amounted to around 2,830,794 guilders. Most taxis in Surabaya were owned by Chinese. Of the 843 taxis 471 or 55.9 per cent were Chinese-owned. Renting a taxi for a day usually cost around 10 guilders (Djojosoedarman 1941). Costs for maintenance are not available, but are here assumed to be 5 per cent of total revenue. Total revenue: Cost of fuel: Maintenance (5 %): Value Added:

5,384,662.50 guilders 2,830,794 guilders 269,233.15 guilders 2,284,635.35 guilders (or 2,710.15 guilders per taxi)

Assuming, on average, a constant ratio between number of cars and taxis across Indonesia, and a similar cost structure, value added for transport by car is estimated at roughly 37.2 million guilders in 1929. Table 2.2

Taxis in Surabaya, 1925-1929 Of which taxis

1925 1926 1927 1928 1929

Number of cars 3,119 3,263 3,435

Number 400 800 750

% 12.8 24.5 21.8

4,166

843

20.2

Source: Statistiek van het taxi-verkeer in de stad Soerabaja, Soerabaja Bureau van de Statistiek, 1930.

Table 2.3

Value added by taxis in Indonesia, 1929 Number of cars

Taxis

Value added per taxi

Value added total

Surabaya

4,166

843 (=20.24 %)

2,710.15

2,284,635.35

Indonesia

67,863

13,735 (=20.24 %)

2,710.15

37,223,910.25

Source: See text.

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| Accounting for Services



Trucks and buses No information is available about revenue and operating expenses of trucks and buses. Therefore some very bold assumptions have to be made. I assume that, because more people are needed (for, among other things, loading/unloading, administration, etc.) to operate a bus or truck, the value added of these means of transportation are twice as high as that of a taxi. This is in line with the assumptions made by Neumark (1954: 377) and Muljatno (1960: 176) who both had access to information from the Ministry of Communications and the Ikatan Motor Indonesia (Indonesian Motor Union). The following calculation then gives us the value added of trucks and buses in 1930: Number of trucks * value added per truck (= 2 * value added by a taxi) + number of buses * value added per bus (= 2 * value added by a taxi) = 16,077 * 5,420 guilders + 5.590 * 5,420 guilders = 116,513,740 guilders

Table 2.4

Value added of road transport (in thousands of guilders), 1930 Traditional road transport

Taxis/cars

Trucks/buses

Total road transport

15,200

37,224

116,514

168,938

1930 Source: See text.

Table 2.5

Degree of urbanisation, 1890-1930 Population

Urban population

Rural population

% of total

% of total

Java & Madura 1890

24,035,914

1920

34,984,171

1930

41,718,364

1920

14,366,054

1930

1,162,855

4.8

22,873,059

95.2

2,035,129

5.8

32,949,042

94.2

3,013,306

7.2

38,705,058

92.8

511,303

3.6

13,854,751

96.4

19,008,869

734,097

3.9

18,274,772

96.1

1920

49,350,225

2,546,432

5.2

46,803,793

94.8

1930

60,727,233

3,747,403

6.2

56,979,830

93.8

Outer Islands 1890

Indonesia 1890

Source: cei xi 1991.

To arrive at value added constant price estimates the following procedure is followed. • Traditional road transport is extrapolated based on an urbanisation index (see table 2.5).

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| National Accounting for Services in Indonesia

The underlying reasoning is that urbanisation functions as a proxy for the level of market activity. In a subsistence economy, all people live in rural areas, and there is no need to market their products; hence demand for (traditional forms of) transport is limited. • Taxis/cars are extrapolated based on the number of cars in Indonesia. Since data about the number of registered cars are until 1935 quite inaccurate the number of cars was estimated using the information on imports of cars, and assuming a life time of 10 years for cars (cei ix 1989: 84). Thus: Cars in operation (t) = Imports of cars (t) + Cars in operation (t-1) – 0.10 * Cars in operation (t-1) Value added in current prices is obtained by assuming that value added in this sector followed the development of the cost-of-living index. This index is taken from Van Leeuwen (2007). The constant price series is inflated by this index. The results of these exercises are summarised in appendix table A1.9. The estimation of gross value added at current prices in Indonesia’s post-independence national accounts was rather intransparent. The available information does show that estimation methods were essentially the same as used herein for the colonial period, so that a more or less consistent series is obtained. In nearly all cases, however, the underlying data are not available, so that we have to rely on the aggregated estimates. For the 1960s and the 1970s the following estimation methods were applied by bps: • Bus transport: From 1960 through 1965 the estimates were based on average cost and revenue data of pn Damri, the most important state-owned bus enterprise, and on information on the bus fleet in operation supplied by the Directorate of Road Transport (Badan Lalu Lintas Darat, blld). Gross revenue since 1966 had been calculated using statistics on total number of buses in operation, annual average mileage per bus, average number of passengers per bus and average tariff per passenger-kilometre. This information was obtained from the Police Department, the Private Road Transport Association (Organisasi Angkutan Darat, Organda) and Damri. Average cost percentages were estimated by Organda. Gross value added at constant prices was obtained by extrapolation by an index of the number of buses in operation. • Truck transport: From 1960 through 1965 value added at constant prices was calculated as the product of the total number of trucks in operation according to blld and average costs per truck in 1960 derived from a survey conducted in West Java. From this series current prices were derived using Damri’s index of average wages and salaries per employee

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| Accounting for Services

as an inflator. From 1966, a similar method to that for bus transport was used, i.e. calculating gross revenue as product of ton-kilometres and average tariffs based on the same sources as for buses. Cost percentages were estimated by Organda. Constant prices were obtained using an index of the vehicle fleet in operation. • Becak (cycle rickshaw) transport: The total number of becak in Indonesia was estimated on the basis of the number of those registered in Jakarta in 1966 through 1968, and the ratio of urban population in Indonesia to Jakarta population. These estimates were extrapolated back to 1960 by the growth of urban population. Average revenue, intermediate consumption, and gross value added per becak were derived from a case study conducted in Jakarta in 1968 by the National Income Division. Assuming that the average revenue per becak has followed the development of the cost-of-living index throughout the period, average revenue in 1968 was extrapolated by this index, and the current price average obtained multiplied by the number of becak operated in each year. An unchanged cost structure in this period was also assumed. Constant price estimates were prepared using for extrapolation an index of the total number of becak. These valuable surveys by bps and Organda have, unfortunately, never been published, nor have I been able to locate them in Indonesian archives or libraries. From the 1980s onward information about the estimation methods becomes even scarcer. The sources state that estimation was based on the number of commercial cargoes and passenger vehicles liable for inspection, gathered from the Road Transport Office (Dinas Lalu Lintas Angkutan Jalan Raya, dllajr) annual report, collected by the Transport and Communication Statistics Division of bps. Average output and intermediate input ratios by vehicle types were made available through a survey conducted by bps. None of these reports has been published or are in any other way made available. Due to the very limited data availability, some crude procedures have to be followed, which particularly build on the i-o tables. The years for which i-o tables were published are used as benchmark years, from which estimates for other years are obtained by extrapolation based on a volume index of number of motor vehicles and inflated for the years within. The various key indicators for this procedure are given in appendix tables A1.10 and A1.11. The complete time-series for value added in road transport are presented in table A1.12.

2.4.1.3

Water transport During the colonial period the most important supplier in inter-island shipping was the kpm. In 1930 it was estimated that kpm covered 42.9 per cent of total inter-island shipping traffic or almost 80 per cent of inter-island shipping under the flag of the Netherlands-Indies (Statistiek van de Scheepvaart over het jaar 1930). Since the profitand-loss accounts of this company are available it is possible to estimate its value added for the period 1900-1940.

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| National Accounting for Services in Indonesia

In the 1960s estimates were based on Bank Indonesia’s statistics of Indonesianowned and chartered tonnage in inter-insular and ocean trade. Gross value added at constant prices was obtained by deflating current price estimates by the cost-ofliving index. From the 1980s onwards output and current prices were estimated by multiplying the number of cargoes and passengers transported by tariff per unit of cargo and passenger, respectively. Average output data were derived from shipping enterprise reports, while data on cost structure were based on i-o tables. Cargo and passenger data were provided by the Indonesian National Shipowner Association (insa), bps and other sources. Gross value added at constant prices was calculated by extrapolation using weighted composite indices of cargoes and passengers transported. Just as with the other sub-sectors, these underlying reports and surveys were never published. Apart from loading and unloading statistics, other data on cargo and passengers or systematic data on the number of ships sailing under the Indonesian flag have never been published by bps. So, again, for the period 1950-2000 the i-o tables had to serve as a starting point from which estimates for the other years are arrived at by extrapolation. The details of these estimations procedures are discussed in appendix A1.3. The complete time-series are presented in table A1.21.

2.4.1.4

Air transport Value added in air transport can also be estimated using the production approach. In 1928 the Royal Netherlands-Indies Airline (Koninklijke Nederlandsch-Indische Luchtvaartmaatschappij, knilm) started its operation. Based on its annual reports the value added of air transport can be estimated for the period 1928-1940. For the period after independence the same estimation method has been used. Gross value added was estimated by the production approach, based on output and cost structure data that were obtained through airline enterprises survey by bps. Gross value added at constant prices was computed by using a weighted composite production index of passenger-kilometre and ton-kilometre of cargo transported. It will come as no surprise that these surveys have not been published either. The i-o tables again are the most valuable source for estimation for the period since independence. The results are presented in table A1.28.

2.4.1.5

Communications This sub-sector covers the activities of the post, telegraph and telephone offices. During the colonial period the communications sector was in hands of the stateowned enterprise ptt (Staatsbedrijf der Posterijen, Telegrafie en Telefonie). The contribution to national income is obtained as the sum of wages and salaries, interest and operating surplus. The data available for this sector are, like those for rail and air transport, quite comprehensive and taken from the annual reports of the ptt. The method of estimation throughout the second half of the twentieth century was also the production approach. Output at current prices was gathered from financial reports of these companies. Value added was also from the financial

52

| Accounting for Services

report in the form of summing wages and salaries, profit or loss, depreciation and other components of the value added. Value added and output at constant prices were estimated by extrapolation. The time-series for this sector are presented in table A1.34.

2.4.2

Trade Activities included in this sub-sector are the ones concerned with buying and selling products, either new or used goods, for distribution without changing the characteristics of the products. According to the 1993 System of National Accounts, traders are treated as supplying services rather than goods to their customers by storing and displaying a selection of goods in convenient locations and making them easily available for customers to buy. Their output is measured by the total value of the trade margins realised on the goods they purchase for resale. A trade margin is defined as the difference between the actual or imputed price realised on a good purchased for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold or otherwise disposed of. The margins realised on some goods may be negative if their prices have to be marked down. They must be negative on goods that are never sold. The key is therefore to assess the trade margins on different kinds of goods over time.

2.4.2.1

Trade margins in colonial times Data on trade margins during the colonial period are almost non-existent. Sivasubramonian in his research on the national income of India in the twentieth century and Horlings in his work on the Netherlands between 1800 and 1850 were confronted with similar data problems (Sivasubramonian 2000: 338; Horlings 1995: 342). Smits, on the other hand, gives some very detailed information on trade margins in the Netherlands. According to his calculations for the trading firm Van Eeghen in Amsterdam the gross profit margin was in the 1850s on average between 25 to 30 per cent for imports and the net profit margin between 10 and 12 per cent. Compared to trade margins for the Nederlandsche Handel-Maatschappij (Netherlands Trading Company, nhm), he concludes, this seems to be a rather modest estimate. Furthermore Smits found that the trade margin on imports declined to around 6 per cent in 1890 and 5 per cent in 1913 (Smits 1995: 314-315). For domestic trade Smits based his trade margins on two studies by the Dutch Central Bureau of Statistics (cbs). This resulted in the gross profit margins in table 2.6.

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Table 2.6

Trade margins in the Netherlands, 1913 and 1987

Product

Wholesale

Retail

Wholesale

Retail

1987

1987

1913

1913

Foodstuff

11.2

21.7

17.4

33.7

- General

9.7

19.2

15.1

34.3

- Sweets

17.9

34.7

27.8

53.9

- Fruits & vegetables

14.1

28.7

21.9

44.6

- Alcoholic beverages

13.8

16.0

21.4

24.8

- Tobacco

4.5

14.6

7.0

22.7

- Milk

6.2

20.2

9.6

31.3

- Meat

12.1

34.8

18.8

54.1

- Clothing

21.4

37.0

33.3

57.6

- Furniture

26.8

37.2

41.6

57.7

- Household products

20.6

34.1

32.0

53.0

- Drugstore products

27.1

31.9

42.1

48.1

- Paper

22.3

32.5

34.7

50.6

Raw materials - Agriculture

13.6

10.7

- Textiles

7.8

6.2

- Metals

9.6

7.6

- Wood

28.3

22.4

Construction materials

25.0

19.8

- Chemicals





12.7

Source: Smits 1995: 323.

Another researcher who did find trade margins is French economic historian JeanPascal Bassino. For Vietnam he found a wholesale gross margin of about 35 per cent, corresponding to a net margin of about 20 per cent. For international trade he assumed a net margin of 3 per cent of fob prices for exports and a similar margin on cif prices for imports. A retail margin of 6 per cent was identified for rice. For all other products he assumed a margin of 10 per cent. His calculations result in a revenue of retail service per worker which is extremely low, which does not seem unlikely given the large number of street peddlers etc. in Asian countries, who earn hardly more than a subsistence level. However, for the Netherlands-Indies no direct data on trade margins for the colonial period have been found. The archives of Dutch trading houses, such as Internatio, Handelsvereniging Amsterdam (hva, Trading Association Amsterdam) and the

 Based on unpublished data made available by Bassino as part of his ongoing work to estimate gdp in Vietnam between 1880 and 1954.

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| Accounting for Services

nhm do not yield information that enables the calculation of disaggregated trade margins. In order to estimate an aggregated trade margin, only a very crude method can be adopted. This is by dividing total turnover by gross profit. The annual reports of Internatio and Hagemeijer provide this information, as can be seen in figure 2.1. This method results in trade margins that vary significantly between an average of 17.6 per cent for Hagemeijer and 4.5 per cent for Internatio. It is hard to believe that such large and consistent differences really existed, especially because trends in profitability are fairly similar, as can be seen in figure 2.1. The difference is probably caused by different accounting methods, and the ‘true’ profit margin lies somewhere in between.

Figure 2.1 Gross profit margins of Hagemeijer & Internatio, 1914-1939 45%

8%

40%

7%

35%

6%

30%

5%

25% 4% 20% 3%

15%

2%

10%

1%

5% 0%

0% 1914 1916 1918 1920 1922 1924 1926 1928 1930 1932 1934 1936 1938 Hagemeijer





2.4.2.2

Internatio

Source: De Jong 1995; see also appendix table A2.1.

Trade margins in Indonesia’s national accounts 1951-1952: Neumark When constructing national accounts for Indonesia for 1951 and 1952 Neumark estimated commodities and articles entering into commerce by main groups of articles and commodities. For agricultural commodities he concluded that reliable estimates were not available; he therefore chose a rather rough net margin of 10 per cent, assuming that the proportions of the various crops were traded domestically as given in table 2.7.

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| National Accounting for Services in Indonesia



Table 2.7  Peasant crops, volumes traded at 10 per cent margin Crops

Percentage by volume

Rice

20

Maize

10

Peanuts

 5

Soya





  2.5

Potatoes

90

Fruit & Vegetables

 5

Source: Neumark 1954: 381.

For trade margins on export trade Neumark used a figure for a commission of 2 per cent for all estate crops exported, except for palm oil, kernels and Deli tobacco, since these crops were mostly exported by the producers themselves, and consequently the value of the services of exporting may be retained in the value of the product instead of being added to trade. Export crops grown by peasants were estimated at a margin of 15 per cent, since such crops involve a great deal more collecting and handling than in the case of estate crops. For live animals and products of animals and products of animal origin an export margin of 20 per cent was allocated to trade. Other margins used by Neumark for export trade are given in table 2.8.

Table 2.8  Trade margins for different export commodities Commodity Estate export crops





Trade margin 2%

Peasant export crops

15 %

Live animals and products of animal origin

20 %

Wood, etc.

10 %

Forest products

15 %

Other products of vegetable origin

15 %

Mining productsa

15 %

Source: Neumark 1954: 381. a: Excluding oil products, tin and bauxite, which are exported by the mining companies.

For imported rice, Neumark used a trade margin of 15 per cent since it was mostly handled in bulk and was also mostly higher in price than locally produced rice. Therefore he concluded that a margin of 20 per cent was unlikely. For other imported consumer goods, excluding imported kerosene, which was accounted for elsewhere, a margin of 40 per cent was taken. Margin on imported raw materials and auxilary products, which are mostly purchased in bulk by a comparatively small number of buyers, was estimated by Neumark to be 20 per cent. Other margins used by Neumark can be found in table 2.9.

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| Accounting for Services







Table 2.9  Trade margins used by Neumark on other commodities



Commodity Trade margin Durable consumption and capital goods 25 % (of which 17.5 % value added) Locally manufactured goods 35 % Forestry and forestry productsa 40 % Fish 30 % Cattleb ±75 % Goats and sheep ±25 % Pigs ±75 % Chickens/duckse ±35 % Source: Neumark 1954: 382-384. a: Assumed is that 40 % of charcoal and firewood produced entered into trade. b: Assumed is that 20 % of cattle and buffaloes, 30% of sheep and goats, 50% of pigs, 65%. of poultry and 60% of eggs did not enter into trade. The meat per animal was assumed to be 120 kg for cattle and buffaloes, 40 kg for pigs and 8 kg for sheep and goats.

1953-1954: Muljatno Building on the earlier estimates of Neumark (1954) for the years 1951-1952, Muljatno (1960) reconstructed the National Accounts of Indonesia for the years 19531954. Although Muljatno in many aspects continued the work by Neumark, he was critical about one aspect of his work, namely that he was often unclear about his sources and exact methods of estimation (Muljatno 1960: 162). Muljatno is indeed precise about this. The trade margins used by Muljatno are discussed below. Export trade: According to information from als (Algemene Landbouw Syndicaat, Common Agricultural Syndicate) a commission of 3 per cent was obtained on the yield of exported estate crops and 15 per cent on farm crops. Profit on exported animal husbandry was estimated to be 20 per cent, forestry 10 per cent, and other food crops 15 per cent. Import trade; According to information obtained from yubm (Yajasan Urusan Bahan Makanan), the profit from selling imported rice was 10 per cent. Consumer goods could earn 30 per cent, raw and auxilary materials 20 per cent and capital and durable goods 27.5 per cent. The profit obtained from raw earth oil was directly taken from firms that import these goods.



Domestic trade: 1) Food: For food the estimates were taken from Neumark (1954); he gives the profit from trade in food as about 10 per cent, while the part of the production that was traded as: rice 20 per cent, corn 10 per cent, peanuts 5 per cent, soya beans 2.5 per cent, and vegetables and fruit 5 per cent. The remainder was used for own consumption.

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| National Accounting for Services in Indonesia

2) Fishing: According to information from Ocean Fishing Agency (Djawatan Perikanan Laut), the profit obtained from trading fish varied between 20 and 50 per cent. Therefore 30 per cent was taken as an approximation. 3) Animal husbandry: Of all animal husbandry the following amounts were not traded: cattle 20 per cent, sheep and goats 50 per cent, pigs 50 per cent, chicken 65 per cent and eggs 65 per cent. Profit was calculated not by the number of animals, but from kilograms of meat, excluding chicken and eggs. The figures used are: cattle about 120 kg of meat, a sheep or goat 8 kg and a pig 40 kg. Prices were taken from bps. Profit on trading a chicken was Rp. 3 in 1953 and Rp. 4 in 1954, and 15 per cent on eggs. 4) Forestry: Domestic use of wood per year was estimated to be 36 million m3 with a price between Rp. 23 and Rp. 24 per m3 in 1953 and 1954. Only one-quarter of this was traded, and probably only people in cities actually bought wood. Of this, three-quarters was traded on wholesale markets and the remaining quarter through retail trade. The profit made from the wholesale trade was 20 per cent and from the retail trade 50 per cent. For trade bamboo the profit was only 2 per cent. 5) Manufactures: The value of manufactures was Rp. 16,678,000 in 1953 and Rp. 17,329,000 in 1954. Of this, 15 per cent was traded between industries with the profit of the remainder being 40 per cent. 6) Domestically used sugar: Based on the difference between industry prices and retail prices the profit made from trading sugar was 6 per cent.



Official estimates by bps: 1960s In the 1960s and 1970s bps used the methods as formulated in the System of National Accounts. Estimates were derived from the value of the marketed surplus of the production in agriculture, fishing, forestry, mining, manufacturing and the marketing of exports and imports of merchandise. The marketed proportions were estimated on the basis of information supplied by the Departments of Agriculture and Trade and by other agencies. The proportions used were: for farm food crops 30 per cent; farm non-foods 75 per cent; estate crops 100 per cent; livestock 50 per cent; fishing 75 per cent; forestry 50 per cent; mining 100 per cent; large and medium manufacturing 100 per cent; household industry 50 per cent; and import/export 100 per cent. Throughout the period fixed percentages are used. Fixed trade margins were applied to these marketed surpluses estimated by the Department of Trade. These margins were 20 per cent for exports, 50 per cent for imports and 20 per cent for domestically produced goods. These estimates were derived from the National Sample Survey of 1963.



1970s to the present: estimates based on Input-Output tables With the appearance of the first i-o tables, constructed in 1975 the trade margins are no longer based on irregular surveys, but taken directly from this publication.

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However, gross value added of the trade sub-sector is still estimated by using the commodity flow method. After computing the output of agriculture, mining and quarrying, manufacturing and import commodities marketed through the trade sub-sector, the results were multiplied by ratios of traded merchandise, and trade margins derived from i-o tables (see appendix table A2.2). The conclusion from the preceding discussion of different trade margins is that, over time, trade margins do not seem to fluctuate much. I have therefore chosen to use fixed margins of 12.5 per cent for agricultural goods, 11.5 per cent for manufactured goods, 20 per cent for imports and 15 per cent for exports. These percentages are mainly based on estimates from the i-o tables, and seem in line with the other sources that were discussed. Furthermore, I assume that in 1900 50 per cent of total agricultural output is for own consumption, falling to 10 per cent in 2000. The results of these estimation procedures are summarised in appendix table A2.3.

2.4.3

Government The conventional practice in national income estimation is to evaluate government services – other than those of government enterprises – in terms of expenditure made for them. Government activities can best be split into administrative and commercial activities. The former are valued at the cost of these services, that is, as equivalent to the wages and salaries paid by government administrative departments and the latter on the same basis as other productive enterprises. The government sector includes the public administration under government services. Under commercial activities railways, post and telegraph, opium production, salt production, etc. These major commercial activities are treated separately.



Government administration in the colonial period For the colonial period a few useful sources for the estimation of the government sector are available. To begin with the number of people employed by the government is known for 1930 from the census. Moreover the Colonial Reports give the number of government employees as of 1 March 1932. A direct estimate of the payroll paid by the government can be made for one single year, namely 1926. For that year the total wages and salaries paid to all employees have been published (Colonial Report 1929: 430); unfortunately this has not been published for other years. Additionally, this figure seems to underestimate the total number of persons employed, because it is highly unlikely that the number of civil servants increased from 149,783 in 1926 to 516,176 in 1930. Probably, people working in the desa were not accounted for in the earlier figures. An alternative method has also been applied. From the Netherlands-Indies budgets for several benchmark years the wages paid are taken for the different departments. Assuming that the ratio of wages paid to total expenditure per department is constant we arrive at an estimate of this sub-sector. In table 2.10 figures are taken

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| National Accounting for Services in Indonesia

from a study by the colonial administrator H.M.J. Hart (1932). We see that between 1922 and 1931 salaries made up between 29.5 per cent and 37.1 per cent of total expenditures. This corresponds with my own findings for 1907, when salaries and wages accounted for 34.5 per cent of total expenditures. It therefore seems reasonable to estimate total value added of the government sector for the colonial period as 34.5 per cent of total expenditures to which 5 per cent is added as approximation of depreciation, as is also done in Indonesia’s present-day national accounts. Table 2.10 Salaries and wages paid by the colonial government, 1922-1931 (in million guilders, excluding state enterprises) Total expenditure

Interest

Pensions

Salaries

Salaries as % of total

501

73

38

148

29.5%

1923

436

79

41

145

33.3%

1924

402

85

45

143

35.6%

1925

415

83

48

152

36.6%

1926

431

83

50

160

37.1%

1927

466

84

52

169

36.3%

1928

502

98

55

176

35.1%

1929

502

86

62

182

36.3%

1930

508

81

62

185

36.4%

1931

517

85

65

192

37.1%

1922







Source: Hart 1932: 313.

Government administration in Indonesia’s national accounts since independence In the period 1951-1954 figures about wages and salaries were taken directly from the different ministries. In the national accounts estimates of the 1960s production accounts for the central government were derived from actual routine budget expenditure statements of the Budget Directorate of the Department of Finance. Fixed capital consumption was calculated as 5 per cent of net value added, i.e. compensation of employees. The compensation of employees in local government was calculated as the product of average annual income per employee and employment figures. Employment estimates were based on information from the Department of Interior and on the Census of Civil Servants. For the 1980s and 1990s the contribution of this sector to gross domestic product consisted of routine wages and salaries of central and local government employees, the wage component of the development budget and 5 per cent depreciation. The estimation was based on realised government expenditure gathered from the Ministry of Finance and bps. The available data allow for a consistent estimation of value added in government services. The expenditure on personnel is taken from the budgets, augmented

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| Accounting for Services

by 5 per cent depreciation. The expenditure on personnel was estimated to be, on average, 34.5 per cent of the budget for the period 1900-1940 and 39.3 per cent on average for the period 1950-2000. The results are summarised in appendix table A3.12.

2.4.4

Ownership of dwellings In the sna the contribution of house property to national income is taken as equivalent to the net rental income of dwellings. No distinction is made between owneroccupied houses and rented houses. The rental value of shops and other industrial buildings is not counted as housing, but as part of the product of the respective industries. This treatment of owner-occupied housing is quite remarkable, since there is no employment imputed with the process of production, and therefore capital is the only production factor. Therefore one has to be careful when relating gdp to employment for the purpose of estimating and comparing productivity. In the absence of any proper statistics an option to estimate gross value added is to assume that ownership of dwellings corresponds to a constant percentage of the gross value added of all other activities at both current and constant prices. This is also the method used by bps in the 1960s, which assumed a 2 per cent contribution to gdp. Van der Eng (2002) applied a different method. He estimated gross value added in housing using population and the sub-total of all other sectors as indicators, each with a weight of 0.5. The assumption is that growth of per capita income induces people to invest in the quality of houses, which increases the rental value of dwellings. But it seems that with the available information more reliable estimates can be made. From the 1930 census we learn that there were in Java and Madura a total of 8,784,000 Indonesian dwellings. Of these 352,000 were brick dwellings, while 4,837,000 were classified as ‘other than brick dwellings with permanent roofs’. There were further a total of 48,000 European dwellings (mainly brick), 121,000 Chinese and 11,000 other dwellings. Figures for the rest of Indonesia are not available but can be extrapolated from these data.

Table 2.11

Number of dwellings in Indonesia, 1930 Indonesian European

Number of dwellings in Java & Madura

Chinese

Other

Total

8,784,000

48,000

121,000

11,000

8,964,000

40,891,093

192,571

582,431

52,269

41,718,364

4.7

4.0

4.8

4.8

4.7

18,246,974

47,846

650,783

3,919,715

11,926

135,200

13,314

4,080,155

Estimated total number of dwellings in Indonesia 12,703,715

59,926

256,200

24,314

13,044,155

Population in Java & Madura Ratio population/dwelling in Java & Madura Population in Outer Islands Estimated number of dwellings in Outer Islands

Sources: Author’s calculations based on Volkstelling 1930.

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| National Accounting for Services in Indonesia

63,266 19,008,869

Besides giving the number of dwellings per population group in Java and Madura, the 1930 census also tells us how many people from the different population groups were living in Java and Madura. From this we can calculate how many people on average lived in one house for the different population groups. If we assume that this ratio was the same in the Outer Islands, we can derive the number of dwellings in the Outer Islands by multiplying this ratio by the number of people of the different population groups living in the Outer Islands. This information is also taken from the 1930 census. In this way we arrive at an estimate of the total number of dwellings in Indonesia in 1930. The results are shown in table 2.11. Now that we have an estimate of the total number of dwellings it is possible to calculate the contribution of housing to gdp. To arrive at this estimate information on expenditure on housing is needed. This information can be obtained from household surveys. One such survey is that by the Centraal Kantoor van de Statistiek (cks) in 1928 on 314 urban households. The relevant results are presented in table 2.12. In 1939 cks published a study on 95 labourer households in Jakarta. This survey revealed that rents for these labourers, who can be classified as largely unskilled labourers, varied between 0.50 and 5.00 guilders (cks 1939: 12). Initiated by the Lembaga Penyelidikan Ekonomi dan Masyarakat (Institute of Economic and Social Research) at the University of Indonesia, Ibrahim and Weinreb (1957) conducted a study on living expenditures in Jakarta in 1953. In a sample of 250 urban households they found an average rent for civil servants of Rp. 16.00, for a labourer of Rp. 9.70 and for a trader Rp. 1.40 (see also table appendix A4.3).

Table 2.12 Monthly expenditure on rent in guilders, August 1925 Income class

Number of families

Average expenditure

A (2400) Total



On rent

Source: cks 1928.

Moreover historians Freek Colombijn and Martine Barwegen (2005) give some detailed information on rents in Indonesian cities between 1930 and 1960. Their findings can be found in appendix table A4.2. They found that cheap houses without brick walls, sometimes referred to as ‘indigenous houses’, had rents up to 20 to 30

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| Accounting for Services

guilders. Very cheap houses in Medan, Bandung, Semarang, Malang and Surabaya brought in between 1.00 and 6.00 guilders. Dwellings of 1.00 and 2.00 guilders were usually meant for single coolies. Rents for middle-class residents were in the range of 20 to 80 guilders. Upper-class houses were 80 guilders or more. Table 2.13

Total output housing sector, 1930 Total number of dwellings

Total monthly rent paid

3,776,240

12,219,240

30,548,101

473,000

291,989

764,989

7,649,886

48,000

11,926

59,926

1,498,150

8,964,000

4,080,155

13,019,841

39,696,137

Average rent

Number of dwellings in Java & Madura

Cheap house

2.5

8,443,000

Middle-class

10

Upper-class

25

Total

Number of dwellings in Outer Islands

Yearly rent

476,353,644

Source: See text.

One problem, however, is that we have only fragmentary information on rents, whereas we know that rents fluctuated sharply (Colombijn & Barwegen 2005: 533). Moreover, the available data do not allow the construction of time-series for prices of different categories of houses. I therefore take 1930 as a base year. The population census enables us to divide the houses into three categories: 1) upper-class: European brick dwellings (48,000), 2) middle-class: Indonesian brick dwellings (352,000) and Chinese dwellings (121,000), and 3) cheap houses: others. Multiplying these figures with an average rent of 2.5 guilders for cheap houses, 10 guilders for middle-class houses and 25 guilders for upper class houses we arrive at an estimate of 27.0 million guilders per month for Java and Madura. Assuming that the same share of the Indonesians in the Outer Islands lived in brick dwellings (i.e. 4 per cent), we can extrapolate this figure for Indonesia as a whole. This results in a total annual rent paid of roughly 476 million guilders. This figure, however, also includes maintenance and other costs that are not considered value added. Therefore we have to find a value added/output ratio to arrive at an estimate of the value added of the housing sector in 1930. This will be taken from the Input-Output tables as discussed below.



The housing sector in Indonesia’s official national accounts While in the 1960s and 1970s value added for ownership of dwellings was still estimated as a fixed percentage of total gdp, this method changed in the 1980s. From then on gross value added was estimated based on household consumption expenditure, particularly expenditure on housing, for a base year. Gross value added at constant prices was obtained by using number of housing units as the extrapolator, while gross value added at current prices was estimated by inflating the gross value added at constant prices using the housing component of the consumer price indices as the inflator.

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To convert the rental value of dwellings into value added we have to deduce the costs of maintenance and repair. From the i-o tables we derive these value added/ output ratios, presented in table 2.14. Apparently the ratio remains rather constant. It therefore seems justified to assume a value added/output ratio for 1930 of 85 per cent. Moreover, this ratio comes close to what Horlings (1995: 96) used for the Netherlands, namely 90 per cent. Table 2.14 1975

Housing in Indonesia’s i-o tables (in millions of Rupiah) Value added

338,289

Output

404,914

va/output ratio 1980

1985

83.5%

Value added

1,387,180

Output

1,559,815

va/output ratio

3,345,708

Output

3,846,750 87.0%

Value added

6,262,256

Output

7,200,695

va/output ratio 1995

88.9%

Value added va/output ratio

1990

Value added

23,081,658

Output

26,657,489

va/output ratio 2000

87.0%

Value added Output va/output ratio

86.6% 31,871,905 38,645,602 82.5%

Sources: i-o tables, various issues.

Estimates for the period 1950-2000 are based on the value added estimate of 2000, which is extrapolated based on the number of households in Indonesia. This constant price series is inflated by the housing component of the consumer price index to arrive at current price estimates. In this way, we obtain estimates which are consistent with our estimates for the colonial period. Moreover, these are an improvement upon the housing estimates made by bps, which assume housing to be a fixed percentage of gdp. The results are presented in appendix table A4.4.

2.4.5

Financial sector According to sna 93 the output of financial intermediation companies in banking, insurance services and pension fund services cannot be directly measured since such companies do not normally charge their customers for their services except for some minor incidental services. Banks earn their main source of income by the difference between the interest earned by providing loans and the interest paid on deposits. Pension funds and insurance companies accept contributions and invest them in order to pay their customers. Their output has to be measured indirectly.



The banking system in the Netherlands-Indies, 1900-1940 In the Netherlands-Indies a number of major banking institutions were active. These were the Java Bank, which functioned as the central bank, a few large com-

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| Accounting for Services

mercial banks (i.e. Nederlandsche Handel-Maatschappij, nhm; NederlandschIndische Escompto Maatschappij, niem; and Nederlandsch-Indische Handelsbank, nihb), the Government Pawnshop Service, the savings banks and the Government Credit System, consisting of volksbanken (district or regency banks), desabanken (village banks) and desalumbungs (rice credit-banks). The barriers between the different classifications were actually quite large. Van Laanen, for example, notes that ‘the large banks formed a typical example of nonindigenous corporate enterprises active in Netherlands India. Their contact with the village community as a borrower, given the latter’s slender capital resources, inevitably remained extremely limited. In addition, the banks posed a considerable psychological barrier to potential indigenous clients’ (cei vi 1980: 31). The division is maintained in estimating the value added of the financial sector in the Netherlands-Indies between 1900 and 1940. The procedure adopted is the following. For estimating value added by the ‘big four’ (i.e. the Java Bank, nhm, niem and nihb) the financial report of the Java Bank is taken as a starting point. Although for the others annual reports are actually available, they have a number of short-comings: 1) they are often less detailed, 2) it is often hard to sub-divide income in the Netherlands from income in the Netherlands-Indies, and/or 3) it is hard to sub-divide income from banking and income from trade activities. Therefore I have chosen to use annual reports by the Java Bank, which give a very detailed statement of income and expenditures. Value added for the Java Bank is then divided by the share of credit extension of the Java Bank in total credit extension of the ‘big four’. For the other financial institutions, i.e. the Saving Banks, the Government Pawnshop service and the Government Credit banks, detailed financial accounts are available, which make it possible to estimate value added in a direct way. The data and results are summarised in appendix table A5.1.



Estimation methods for the financial sector, 1950-2000 In the 1950s data on profit and wages for banks and insurance companies were directly taken from the firms. Input from 70 banks, scattered over Indonesia, was obtained, while only a few insurance companies provided information. But based on information from the tax agency, estimates could be made about the income of these insurance companies (Neumark 1954; Muljatno 1960). From the 1960s onward a distinction is made between 1) banking, 2) insurance and 3) other financial services. Banking: In the late 1960s and 1970s income and expenditure statistics covering all state banks and the majority of private banks were collected and compiled by Bank Indonesia. On the basis of this information production accounts were compiled, imputing a service charge defined as interest received minus interest paid. In the 1980s and 1990s data on output and gross value added at current prices was collected directly from Bank Indonesia (bi). From 1989 onwards interest paid

65

| National Accounting for Services in Indonesia

for or received from bi Certificates and foreign loan commitment fees were not regarded as earnings or costs for private bank activities, but as part of activities of the Central Bank in its capacity as monetary authority. Insurance: From the late 1960s onwards the estimation of output and gross value added of insurance at current market prices has been based on data from the annual reports of insurance companies, obtained from the Financial Institution Directorate, Ministry of Finance. Gross value added of life insurance at constant prices has been calculated by extrapolating it by total number of policies. The extrapolation of the output of social insurance is performed by using the number of participants and the number of casualty insurance and the general wholesale price index. Other financial services: In the late 1960s and 1970s value added by village banks and rice credit-banks has been estimated at 50 per cent of interest received on the basis of norms observed in private banks, and of rough estimates of the wages and salaries bill. Constant and current price series have been prepared using indices of the number of debtors of village banks and of prices of agricultural products, both based on statistics compiled by bps. In the 1980s output and gross value added of other financial activities were calculated as a fixed percentage (5 per cent) of banks’ output and gross value added at current as well as constant prices. From the 1990s other financial services has been estimated using annual financial reports from different firms, such as pension funds, pawnshops, exchange traders, etc. A large discrepancy appears to exist between the national account estimates and the estimates in the i-o tables for the year 2000. Van der Eng (2005) attributes this difference to two changes of method. Firstly, since 2000 bps has been able to provide data that include secondary banks. Secondly, and more importantly, the implementation of the so-called Financial Intermediation Services Indirectly Measured (fisim) results in much higher estimates (Lynch 1998). In order to obtain consistent estimates this estimate from the 2000 i-o tables is not used. Since Input-Output tables usually act as an ‘anchor’ for both future estimates, and revisions of earlier national accounts (Van der Eng 2005: 245), I have followed his practice by taking the estimates in the i-o tables as starting point. The intermediary years are extrapolated weighted by total credit extension and inflated by the consumer price index. The results of this exercise are presented in appendix table A5.3.

2.4.6

Other services The remaining services are those for which income is difficult to measure on an annual basis due to lack of useful data. The services are the catering services, the so-called social and community services (such as, medical services, education, and

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| Accounting for Services

entertainment), and other services (such as domestic servants). A very crude estimation procedure for this is assuming that the category ‘other services’ makes up 20 per cent of total value added in services. This is based on information from the i-o tables, which shows that on average this category indeed was roughly 20 per cent of total value added in services (see table 2.15). A different procedure can be followed as well. From the different population censuses information was taken on the number of people working in 1) hotels and restaurants; 2) community services; and 3) other services. It is assumed that those working in sub-categories 1) and 3) earn hardly more than a labourer; this wage is taken from economic historian Bas van Leeuwen (2007: 240-242). In sub-category 2) most people are probably rather well-educated since surgeons, teachers, etc. are part of this. Therefore it is assumed that they earn the equivalent of a craftsman’s wage, also taken from Van Leeuwen (2007: 240-242). This gives the benchmark estimates presented in table 2.16. Table 2.15

Other services in the i-o tables va other services

Total va

Total service va

(1)/(2)

(1)/(3)

(1)

(2)

(3)

1971

282,432

4,270,399

1,713,109

6.6%

16.5%

1975

894,419

13,694,242

4,816,366

6.5%

18.6%

1980

3,436,021

48,330,072

16,199,908

7.1%

21.2%

1985

8,287,882

97,645,877

38,824,139

8.5%

21.3%

1990

18,521,224

207,801,303

84,383,984

8.9%

21.9%

1995

50,377,773

535,564,814

232,727,515

9.4%

21.6%

2000

99,748,684

1,366,500,301

511,411,697

7.3%

19.5%

Sources: i-o tables, various issues.

These benchmark estimates are interpolated based on both government and private expenditure on education taken from Van Leeuwen (2007: 240-242). Constant price estimates are obtained by deflation using the consumer price index (cpi) from Van Leeuwen (2007). The results of this are presented in appendix table A6.1. The contribution of the service sector is obtained by adding up the estimates described in the preceding sections. This yields value added in both current and constant prices. In the next chapter the results of these calculations are used for a quantitative analysis of the Indonesian service sector.

 Remarkably, this is almost exactly the share that Horlings found for the Netherlands in 1850 (Horlings 1995: 96-97)

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| National Accounting for Services in Indonesia

Table 2.16

Value added by other services 1930

Hotel and restaurant

1971

1975

1980

1985

1990

1995

354,753

468,193

752,435

2,255,866

877,188 1,200,927 2,875,664

938,491 1,282,011 1,353,099

2000

Social and community services

169,520

2,929,112

3,102,347

3,059,388

Other services

394,865 1,803,413 2,455,954 3,581,832 4,125,191 4,200,799

5,526,795

4,761,291

363,549

253,018

155,105

Unspecified

990,473

1,608,285 1,878,199

Current daily wage Labourer

0.41

9.70

87.81

642.26

1,323.24

1,954.31

4,961.50

12,354.99

Craftsman

0.88

42.02

406.13

847.78

1,517.83

4,299.49

7,869.97

19,597.58

99.54

21,829

Yearly income (in million fl/Rp)

219,034 1,340,042 3,293,699 6,949,871 17,782,329 46,929,120

Note: Assuming 320 working days a year. The wage for a labourer in 2000 is extrapolated by the growth in the wage of a craftsman. Sources: See text.

2.5

Assessing the reliability of the estimates It is also necessary to briefly assess the reliability of the estimates. Whereas it is rather difficult to make a precise estimate of the margin of error, it is possible to make a qualitative statement on the reliability for the individual series. Since the wider availability of detailed statistics on the different (service) sectors one would assume that the official estimates from bps, at least since the 1970s, have a lower margin of error than those for the colonial period. Therefore the year 1930 is chosen as a benchmark to assess the reliability of the estimates between 1900 and 1960. This margin of error is most probably higher than the one for the bps estimates and can therefore be considered a minimum reliability. Following Horlings (1995: 103-104) and Smits (1995: 60), Feinstein’s (1972: 2122) classification is used to divide service industries according to the quality of the estimates. A specific margin of error is assigned to each service sector. The following categories for the quality of the estimates are distinguished: A: Excellent, margin between 1% to 5% B: Good, margin between 5% to 15% C: Fair, margin between 15% and 25% D: Weak, margin between 25% and 50%

68

| Accounting for Services

The reliability of the sector as a whole is calculated by weighting these margins based on the percentage share of each industry in total tertiary value added in 1930. The results of this procedure for Indonesia are found in table 2.17. Railways, air transport and communication are all classified in category A, because the necessary data could be taken directly from the source. Moreover, the calculations do not require too many manipulations. In category B are grouped water transport, foreign trade, government and the financial services. For these industries information is relatively abundant, and the additional information provides enough coverage to state that the resulting picture is quite reliable. At the same time, however, some rather bold assumptions have to be made. Examples are kpm’s contribution to total value added in water transport, the development of the wage sum of the central government, and the ratio between value added and credit extension in the financial services. Estimates for domestic trade and housing are considered to be fairly reliable. For these sectors there is sufficient data to make estimates for benchmark years, although requiring some additional estimates and assumptions are required. The development of trade margins, for example, is assumed to remain constant. Furthermore, it is difficult to disaggregate the development of house rents to different types of dwellings.

Table 2.17 Quality of Indonesian service sector estimates, 1930 A

B

C

D

Transport - Rail

x

- Road

x

- Water

x

- Air

x

Communication

x

Trade - Foreign

x

- Domestic Government

x x

Housing Financial sector

x x

Others



x

Notes: Quality of estimates: A: Excellent, margin of error between 1% to 5%; B: Good, margin of error between 5% to 15%; C: Fair, margin of error between 15% and 25%; D: Weak, margin of error between 25% and 50%.

If these margins are weighted on the basis of the percentage share of each industry in total tertiary value added in 1930 the result is a margin of error between 15 and 25 per cent. This seems a very acceptable margin of error. Horlings (1995), for example,

69

| National Accounting for Services in Indonesia

estimated the reliability of his service sector estimates for the Netherlands, 18001850 to be between 15 to 30 per cent, whereas Smits (1995) for the period 1850-1913 came to a margin of error between 10 to 15 per cent. In addition, for the analysis of long-term economic development a certain margin in the absolute figures is not too problematic. As long as the estimation methods are consistent, the relative developments of the various industries will be of sufficient reliability.

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| Accounting for Services

3

The Development of the Indonesian Service Sector



A quantitative analysis

3.1

Introduction Horlings (1995: 35) has argued that ‘historical national accounting is a useful tool for measuring economic growth, but cannot be more than a starting point for the analysis of economic development process’. Earlier Ole Krantz (1983: 131), a Swedish economist who worked on the Swedish historical national accounts, concluded that ‘processing national accounts data along methodologically proper lines can create new analytical purposes’. In the preceding chapter and the appendices the reconstruction of the Indonesian service sector within the framework of national accounts has been done. Now that we know how the statistics have been compiled, it is time for the analysis and searching for ‘new analytical purposes’. The aim of this chapter is to provide a first analysis of the quantitative development of the Indonesian service sector between 1900 and 2000. The underlying question that I try to answer is whether Indonesia has transformed in what Kuznets would call a ‘modern’ economy’, i.e. sustained increase in per capita income combined with rapid population growth and sweeping structural changes (Kuznets 1966: 1). According to Kuznets this process is the result of productivity gains in all sectors of the economy and an increase in the scale of production and consumption. Therefore in this chapter I analyse to what extent ‘sweeping structural changes’ took place in both the occupational structure and the production structure. Combining these elements enables us to assess what happened to labour productivity in the different sectors. The remainder of this chapter is organised as follows. First I discuss developments in the occupational structure. In section 3.3 changes in the economic structure are analysed. Section 3.4 examines the development of labour productivity in the service sector in a comparative perspective. Section 3.5 concludes.

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| The Development of the Indonesian Service Sector

3.2

Developments in employment structure According to Kuznets (1971) an indicator of economic development is the share of agriculture in employment and output. He found that, as countries develop, the share of the labour force working in the agricultural sector falls. At first this is due to an increasing share employed in the industrial sector. In a later stage of development economic theory predicts that the share of employment in the service sector will start to rise. For Indonesia various data sources on the labour force are available. The most important are the population censuses, held in 1930, 1961, 1971, 1980, 1990 and 2000. Furthermore, inter-census surveys were conducted in 1976, 1985 and 1995. Moreover, since 1976/7 National Labour Force Surveys (Survai Angkatan Kerja Nasional, Sakernas) are conducted annually with the exception of the years 1981, 1983 and 1984. For 1905 a population count is available, which is considered of poor quality in absolute terms. However, it gives a fairly accurate picture of the relative distribution of the labour force. Together these data give a good picture of long-term developments in employment structure in Indonesia. Figure 3.1 summarises the findings on an aggregated level.



Figure 3.1 Occupational structure, 1905-2000 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1905

1930

1961 Agriculture









72

1971 Industry

Services

1980

1990

2000

Others

Note: The category ‘Others’ mainly consists of ‘activities not adequately defined’. The 1905 figures are adjusted for by-employment (see table 3.2). Sources: 1905: Jaarboek koloniën, 1909/10; 1930: Volkstelling 1930; 1961: Sensus Penduduk 1961; 1971: Sensus Penduduk 1971, Seri D; 1980: Hasil Sensus Penduduk 1980, Seri S; 1990: Hasil Sensus, Seri S. 2000: Statistik Indonesia. See also appendix 7.

| Accounting for Services

As can be seen in figure 3.1, only a small number of people were employed in the service sector at the start of the twentieth century. Not surprisingly, the majority of the labour force was occupied in agriculture. However, one has to be careful when analysing these 1905 data. To begin with, the phenomenon of by-employment, i.e having more than one job, was in this stage of development rather common (see also Alexander, Boomgaard and White 1991). Furthermore, the share of the category ‘others’ in 1905 was strikingly high at 17.1 per cent. This share is most likely not evenly distributed over the primary, secondary and tertiary sector, and probably biased towards the tertiary sector. Table 3.1

By-employment in 1905 population count Java & Madura

Outer Islands

Total

Agricultural workers Land-owners

3,787,564

1,744,040

5,531,604

341,110

152,007

493,117

Landless Renting land Wage labourers

2,599,557

252,934

2,852,491

Total

6,728,231

2,148,981

8,877,212

Non-agricultural workers 31,172

10,485

41,657

Local government

Central government A

322,640

46,219

368,859

B

26,910

10,074

36,984

Religious services

A

8,272

10,325

18,597

B

8,009

5,654

13,663

Teachers

A

10,166

4,415

14,581

B

5,993

2,379

8,372

Trade

A

187,070

24,317

211,387

B

455,202

52,967

508,169

Transport workers

A

63,144

14,853

77,997

B

54,044

12,661

66,705

Industry

A

145,609

46,489

192,098

B

384,891

72,190

457,081

62,866

49,835

112,701

Proto-industry Domestic servants Others

Total work force

100,181

10,057

110,238

A

483,698

63,431

547,129

B

1,625,204

149,013

1,774,217

9,482,712

2,524,296

12,007,008

Note: A: already included as agricultural worker (thus having a secondary job); B: not yet included. Source: Koloniaal Verslag 1907, appendix A.

73

| The Development of the Indonesian Service Sector

The 1905 figures provide some evidence for the prevalence of by-employment. Table 3.1 presents the raw data from this count. If we take all categories classified with an A (indicating already being included under agricultural labourers) and not including the category agricultural wage labourers, it turns out that 18.2 per cent of all peasants in Java and Madura had a secondary job. For the Outer Islands this figure was 9.8 per cent, while for the Netherlands-Indies as a whole it is 16.1 per cent. This was equal to 12.9 per cent, 8.3 per cent and 11.9 per cent of the labour force for Java and Madura, the Outer Islands and the Netherlands-Indies respectively. The question remains to what extent the issue of by-employment distorts the overall picture of the occupational structure. The statistics available from the 1905 population count allow us to take by-employment into account and adjust the figures accordingly. Table 3.2 shows the results of this adjustment when it is assumed that those classified as also employed in agriculture (category A in table 3.1) are assigned for 50 per cent of their time to agriculture and 50 per cent to their secondary job. Table 3.2 gives both adjusted and unadjusted figures. The unadjusted figures consider only the main occupation (category B in table 3.1). It shows that almost 74 per cent of the population in the Netherlands-Indies in 1905 had agriculture as their main occupation. However, if we correct for the fact that a significant number of agricultural workers also worked part of the time in non-agricultural sectors, this percentage declines to 68 per cent. Clearly, taking the phenomenon of by-employment into account does change the overall picture. Table 3.2

Consequence of by-employment in the 1905 population count 1905 (adjusted)

1905 (unadjusted)

No.

%

No.

%

8,162

68.0%

8,877

73.9%

666

5.5%

570

4.7%

1.

Agriculture, hunting, forestry and fishing

2.

Mining and quarrying

3.

Manufacturing

4.

Electricity, gas & water

5.

Construction

6.

Trade, hotels and restaurants

614

5.1%

508

4.2%

7.

Transport & communications

106

0.9%

67

0.6%

8.

Financial sector, real estate and business services

9.

Community, social and personal services

412

3.4%

211

1.8%

0.

Activities not adequately defined

2,048

17.1%

1,774

14.8%

Total

12,007

100.0%

12,007

100%

Note: Adjustment is done by assuming that those with a dual employment are assigned for 50% to agriculture and for 50% to their other profession. Source: Based on table 3.1.

74

| Accounting for Services

Peasant by-employment can be categorised into rural manufacturing industries, petty trade, transport and services. It is believed that the officials who compiled the work force data encountered considerable difficulties in ascertaining the actual number of peasants engaged in the first three categories, so they lumped together a large number of people employed by manufacturers, traders and transporters as being engaged in services or as activities not adequately defined (Fernando 1989: 158). Table 3.3 shows that manufacturing, mainly on a small scale, attracted around 100,000 people who were classified as peasants and as seasonal or part-time workers. Petty trading was slightly more important as secondary employment. Almost 165,000 traders, or 31 per cent of all traders, still had their roots in agriculture. Rural manufacturing and petty trading undertaken as by-employment were usually conducted on a small scale, centred around the peasant household. These activities required only a very small capital input, but consequently generated only a small cash income. Often this was just enough to meet the needs of families, but hardly enough to improve their social standing (Fernando 1989: 155). The transport sector was also a substantial source of by-employment, but because draught animals, carts and boats required a fairly large capital outlay this was beyond the capacity of most peasants. I believe that the extent to which by-employment distorts the overall picture of occupational structure depends very much on the stage of economic development. In initial stages of development most households will depend solely on agriculture. The first steps of economic diversification will be taken alongside the existing agricultural occupation. Only in the later stages of development will a majority of labourers find full-time wage employment outside agriculture; at this point, consequently, by-employment will decrease. Moreover, workers in the non-agricultural sector may have a secondary job in a different sub-sector of the non-agricultural sector. This is probably more often found in later stages of development as a survival strategy of the urban poor. A similar argument is made by Australian labour economist Chris Manning (1998) concerning under-employment in Indonesia. He argues that with economic development under-employment is expected to decline, because of a shift from family work and self-employed jobs in agriculture into non-agricultural wage employment. At later stages of development more flexible work arrangements may lead to an increase in those working less than a full-time working week (Manning 1998: 189, footnote 28). In the specific case of Indonesia I would argue that not taking by-employment into account does change the picture. Evidence suggests that before 1890 distortion of the occupational structure through by-employment is negligible. Arminius (1889) presented an account of the hours worked for the head of the family. Allowing for one day off per week it turns out that in all three cases the men worked more than 7.5 hours per day throughout the entire year. Clearly, this does not leave much time for a secondary job. For the 1970s the evidence is mixed. One study found that

75

| The Development of the Indonesian Service Sector

76

| Accounting for Services

6,581

4,604

1,693

30,278

100,382

Pasuruan

Besuki

East Java

Java

27

29

41

27

14

28

83

24

15

24

27

22

30

31

48

31

20

86

Source: Koloniaal Verslag 1907, appendix A.

6,560

18,318

Kedu

Surabaya

6,968

Semarang

Kediri

5,981

Banyumas

10,840

11,881

Pekalongan

Madiun

22,946

West Java

4,010

3,176

Cirebon

47,158

9,373

Priangan

Central Java

6,416

Batavia

Rembang

3,981

63,691

42,532

8,545

13,455

10,057

6,848

3,627

12,075

2,292

2,070

3,873

197

3,643

9,084

1,598

1,713

1,739

4,034

63

67

82

59

66

73

86

60

82

77

56

61

71

63

61

59

40

88

164,270

38,895

2,552

9,462

8,647

5,886

12,348

65,317

7,957

20,979

14,013

10,158

12,210

60,058

14,199

25,591

8,592

11,676

No. of peasant % of all man- No. of peasant % of all No. of peasant manufacturers ufacturers transporters transporters traders

Residency

Banten

Peasants engaged in by-employment in 1905, by category of employment

Table 3.3

31

24

37

20

16

20

49

27

31

35

19

36

21

45

47

48

25

81

% of all traders

185,309

27,183

702

18,557

5,044

1,925

955

35,451

1,960

6,679

16,446

1,901

8,465

122,675

52,993

23,086

9,327

37,269

21

11

5

19

7

4

52

9

17

8

51

1

10

49

66

22

37

95

No. of peas% of all in ants in services services

126,206

67,282

1,020

17,566

34,852

8,809

5,035

26,424

5,515

6,446

8,654

2,113

3,696

32,500

3,614

3,816

23,380

No. of peasants in unspecific work 1,690

19

22

13

17

27

16

84

10

15

8

25

3

17

30

16

14

51

% of all in unspecific work 14

male heads of agricultural households worked more than 8 hours per day, and their wives worked even longer (Edmundson and Sukhatme 1990: 265-266). A different study found that, in ten villages in Java in 1980-81, of 2,393 persons 1,297 were solely employed in agriculture, 665 were employed in the non-agricultural sector and 431 had mixed employment (Kasryno 1986: 294). This means that 18.0 per cent of the total labour force in these villages was engaged in by-employment, which is roughly equal to the proportion in 1905. The 1930 census is considered to be of quite a high standard (cei xi 1991: 28-29). However, the category ‘activities not adequately defined’ was still large, with 9.6 per cent, and information to correct for by-employment was missing. Nevertheless it is believed that the 1930 employment figures give a fairly accurate picture of the occupational structure. Therefore it is promising that this census seems to support the findings for 1905: agriculture was by far the most important sector with more than two-thirds of the labour force. During the first decades of the twentieth century there seems to be a moderate shift to the manufacturing sector. The number of people employed in the service sector did not change much, nor did the composition of the occupational structure within the service sector. Data on employment are unavailable for the period between 1930 and 1961. The ‘excellently’ prepared census planned for 1940 was abandoned when the Second World War broke out (Van de Graaff 1955: 147). This war and the subsequent struggle for independence seriously reduced data collection. Consequently, it was not until 1961 that a new population census was held. The results of this census reveal some interesting features. Not surprisingly, employment in agriculture was still dominant. What is striking, though, is that also in relative terms employment in this sector was even larger than in 1930. At the same time the share of employment in industry decreased from 11.0 to 7.9 per cent. In 1961 the service sector absorbed 18.3 per cent of the total labour force. This growth of service sector employment is in part probably merely partly a statistical reality, since the category ‘activities not adequately defined’ dropped from to 9.6 per cent in 1930 to 1.9 per cent in 1961. Still this increase is partially real, mainly because of a rapidly growing bureaucracy. This was a consequence of Sukarno’s policy of ‘Socialism a la Indonesia’ which resulted in an expanding central government. Because of this pattern, in which the share of the labour-intensive or traditional sectors in total output increased while that of the modern, capital-intensive sectors declined, Anne Booth (1998: 70-72), an authoritative historian of the Indonesian economy, calls this a period of structural retrogression. After the 1961 population census we see some signs of what Kuznets would call modern economic growth. The share of agricultural employment decreases to 45.3 per cent in 2000. It is striking that between 1980 and 1990, a period that was characterised by relatively slow economic growth and a re-orientation of the economy, this share remained almost constant. Another remarkable feature is that the share of industry in total employment increased only slowly from 7.9 per cent in 1961 to 13.7 per cent in 1990 and 16.9 per cent in 2000.

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| The Development of the Indonesian Service Sector

The case of Indonesia reveals two important findings. Firstly, in an early phase of development service sector employment is already significant and higher than industrial employment. Secondly, growth in service sector employment is not preceded by growth in industrial employment, but rather coincides with or is even followed by it. This contradicts the Fisher-Clark hypothesis of economic development, which states that there is a shift in employment first from agriculture to industry and in a later phase to services (Fisher 1935, 1939; Clark 1940). This argument can be further strengthened if we look at annual growth in employment. Looking at the growth rates of the different sectors in table 3.4, we see that during the twentieth century service sector employment growth is constantly high. Particularly until 1971 this growth is higher than in industry. When industrialisation takes off from the mid-1970s onwards, growth in industrial employment becomes slightly higher than that in service sector employment.

Table 3.4

Annual growth in employment by sector, 1930-2000 Agriculture

Industry

Services

Labour force

1930-1961

1.7%

-0.4%

3.2%

1.5%

1961-1971

0.7%

4.5%

4.5%

2.1%

1971-1980

1.2%

5.4%

5.8%

2.5%

1980-1990

2.1%

5.8%

4.0%

3.3%

1990-2000

-0.4%

4.1%

3.8%

2.1%

Source: Appendix 7.

Horlings (1995) found that the Netherlands did not follow the ‘sectoral model’ (i.e. shifts in employment from primary to secondary to tertiary) either. He argued that, ‘instead of transfers of labour from agriculture into industry and then into services, the structure of the Dutch economy became more advanced without significant growth of industry’ (Horlings 1995: 107). This scenario seems to hold for its former colony as well. In the case of the Netherlands, Smits attributed this development path to important linkages between agriculture and the service sector, especially distributive services (Smits 1990: 90). The story in Indonesia is rather different. It is not so much linkages between agriculture and services that is responsible, but rather the failure of the industrial sector to absorb the large group of labourers pushed out of the agricultural sector and trying to find work in the urbanising regions. A large number of these labourers ended up in low-productivity service sectors. This will be further elaborated upon in chapter 5.

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| Accounting for Services

3.3

Value added in the service sector

3.3.1

Economic structure Table 3.5 shows the development of the sectoral contribution to service sector gdp based on the reconstruction of the service sector as discussed in chapter 2. A number of interesting conclusions can be drawn from this table. Firstly, trade was by far the most important service sector at the beginning of the twentieth century and remained so during colonial times. A possible explanation for this is that the Dutch considered the Netherlands-Indies a ‘win-gewest’ (profit-generating territory), which should produce for the international market. After independence, however, trade remained the leading service sector, although its contribution to total service sector gdp fell from 56 per cent in 1970 to 40.4 per cent in 2000. Secondly, transport and communications, of relatively small importance in 1900, developed gradually, contributing 14.1 per cent to the service sector gdp in 2000. An important factor behind these developments was the technological changes that took place in this sector especially during the first half of the twentieth century. Whereas in 1900 transport took place either by sailing vessel, train for long distances or by becak, dogcart or other forms of traditional transport for shorter distances, in 1940 one could also choose between motor vessels, air transport, automobiles or buses. Nevertheless, the sector’s contribution to the total service sector gdp was reduced between 1939 and 1950. This was mainly due to a fall in rail transport and stagnation in growth of road transport. These developments were linked to the Japanese occupation and the subsequent war of independence between 1945 and 1949 which both caused severe damage to the infrastructure.

Table 3.5

Composition of the service sector, 1900-2000 (current prices) Transport & Government communications

Trade

Financial sector

Housing

Other services

1900

7.0%

9.3%

46.1%

0.6%

35.1%

1.8%

1910

8.4%

8.8%

47.4%

1.2%

31.8%

2.5% 2.6%

1920

10.8%

6.9%

51.1%

1.6%

27.1%

1930

16.4%

12.6%

43.0%

2.2%

20.7%

5.1%

1939

16.4%

9.0%

45.4%

1.6%

23.9%

3.7%

1950

6.1%

22.5%

51.9%

0.9%

18.1%

0.5%

1960

11.1%

22.0%

52.6%

1.1%

12.4%

0.8%

1970

15.3%

8.7%

56.0%

2.8%

15.4%

1.8%

1980

12.5%

11.0%

53.7%

5.0%

9.1%

8.8%

1990

14.6%

12.7%

45.5%

10.6%

7.9%

8.8%

2000

14.1%

17.9%

40.4%

7.1%

8.3%

12.2%

Source: Author’s calculations from appendices 1-6.

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| The Development of the Indonesian Service Sector



Figure 3.2 Economic structure, 1900-2000 (in constant 1993 prices) 100% 90% 80% 70% 60% Services

50%

Industry Agriculture

40% 30% 20% 10% 0% 1900







1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

Source: Van der Eng 2002.

Figure 3.3 Economic structure, 1966-2005 (current prices) 100% 90% 80% 70% 60% Services

50%

Industry Agriculture

40% 30% 20% 10% 0% 1966



80



1970

1974

1978

1982

Source: Timmer and De Vries 2007.

| Accounting for Services

1986

1990

1994

1998

2002

Thirdly, the development of the financial sector is remarkable. The size of the financial sector remained very small until the 1970s, but rapid growth resulted in a contribution of this sector of 10.6 per cent in 1990 and dropping to 7.1 per cent in 2000 as a result of the Asian crisis. Fourthly, the role of the housing sector is striking, contributing between 20.7 and 35.1 per cent to total service sector gdp during the colonial period. This can be explained by the fact that this sector grew very gradually, mainly linked to growth in population. Housing is a necessity good, like agricultural products. Even with low levels of income, this sector therefore made up a relatively large share of total service sector gdp between 1900 and 1939. What can we say about the share of the service sector to total gdp? The reconstruction of Indonesia’s national accounts is an ongoing research project. At this moment estimates in current prices are not available yet for agriculture and manufacturing. Therefore only some rough measures can be applied to get an idea of the importance of the service sector relative to total gdp. First of all we can use the constant price estimates from Van der Eng (2002). Using constant price series for the purpose of analysing economic structure is inferior, because it does not take into account relative price changes. Nevertheless, it does give a hint of the importance of the service sector in the total economy (figure 3.2). From 1966 to 2005, it is possible to provide further evidence about the economic structure of the Indonesian economy, since for this period current price estimates are available for the entire economy (figure 3.3). Figures 3.2 and 3.3 show that during the twentieth century the service sector contributed roughly 40 per cent to total gdp. Apparently, the service sector was already large in the early stages of development. Clearly, this is inconsistent with the linear stage theories (Fisher 1935, 1939; Clark 1940).

3.3.2

Growth in the service sectors Instead of looking at the structure of the service sector, examining the growth paths of the different service sectors also reveals some interesting patterns. Figures 3.4 and 3.5 show the development of value added in the different transport and communications sectors and of the different service sectors respectively. Figure 3.4 illustrates that the transport and communications sector as whole grew steadily, although with small drops in the early 1920s, the early 1930s and the turbulent 1960s. What also becomes clear from this figure is that the different sectors of which the transport and communications sector consists show widely varying development paths. Initially railway transport was the leading sub-sector comprising more than half of the total value added in the transport and communications sector. Growth

 For further details on the project see: http://www.iisg.nl/indonesianeconomy/

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| The Development of the Indonesian Service Sector

Figure 3.4 Development of value added in transport and communications, 1900-2000 (in millions of fl/Rp at constant 1993 prices) 100.000.000 10.000.000 1.000.000 100.000 10.000 1.000 100 1900

1910

1920

1930

1940

1950

Railways Water transport Communication





1960

1970

1980

1990

2000

Road transport Air transport Total transport & communication

Source: Author’s calculations from appendices.

Figure 3.5 Development of value added in the service sector, 1900-2000 (in millions of fl/Rp at constant 1993 prices) 1.000.000.000

100.000.000

10.000.000

1.000.000

100.000

10.000 1900

1910

1920

1930

1940

Total transport & communication Financial sector Trade



82



Source: Author’s calculations from appendices.

| Accounting for Services

1950

1960

1970

1980

Government Ownership of dwelling Total

1990

2000

stagnated in the early 1920s, however, due mainly to increasing competition from road transport. Nevertheless, average annual growth in road transport between 1915 and 1930 was 6.2 per cent. Communications also grew rapidly during the colonial period, with annual average growth of more than 13 per cent in the period 19001930. Developments in water transport were steady, although less impressive. Air transport was possible only beginning in 1928, with the foundation of the Koninklijke Nederlandsch-Indische Luchtvaartmaatschappij (knilm). As this sub-sector was beginning from scratch, it is not surprising that growth rates were high, while the amount of value added generated in this sector was only small. After independence developments in rail transport remained problematic. Though it was the leading sector in 1900, it kept losing ground, becoming the smallest contributor to transport and communications gdp after 1970. Growth is even negative for the period 1960-1973. Air transport, on the other hand, kept growing at impressive rates. Road transport recovered from the cessation of growth during the 1930s and grew continuously from 1950 onwards. A take-off in growth in water transport was reined in after the war of independence by on-going conflicts between the kpm and the Indonesian government. This culminated in the expulsion of kpm from Indonesian waters in December 1957. However, after 1965 growth picked up and the growth spurt between 1968 and 1973 was especially impressive. Developments in communications were relatively moderate, although on average annual growth in this sector was still 5.2 per cent. Together with rail transport, however, it is the only sector for which growth rates are lower after independence than during the colonial period. Figure 3.5 illustrates the growth paths of the sectors of which the service sector consists. On average, annual growth in the service sector was 2.2 per cent between 1900 and 1939, 6.1 per cent between 1950 and 2000 and 3.6 per cent for the whole period. This is somewhat higher than growth in agriculture, and a little lower than growth in industry. But, as we have seen before, different subsectors followed different development paths. To begin with, developments in the financial sector were very erratic. The sector was of only minor importance during the colonial period, with heavily varying growth rates. It took until the late 1960s before growth in this high value added sector took off. The double-digit growth that followed was very impressive, but unfortunately the sudden drop caused by the Asian crisis in 1998 was just as impressive. Growth in transport and communications has already been discussed above. The role of government was especially important in the period 1973-1986. Large oil revenues provided the means for the government to navigate the economic development of Indonesia. Large investments were made in programmes in the education and public health sectors; a large part of the increase also went on salaries of civil servants (Booth 1998: 187). Ownership of dwellings grew gradually with an average annual growth rate of 2 to 3 per cent. This growth was mainly based on the growing population requiring more houses with only a portion due to improvements in the housing conditions.

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| The Development of the Indonesian Service Sector

84

| Accounting for Services

4.0

11.2

1.2

2.9

2.8

1.9

1.3

Government

Financial sector

Ownership of dwellings

Trade

Total service sector

Agricultureb

Industryb 3.8

1.3

-0.1

0.7

1.7

-3.5

-3.5

1.0

2.7

3.6

4.3

1.9

5.7

-0.3

8.4

6.7

5.7

5.1

15.7

3.6

19501960

0.5

0.9

-0.4

0.6

1.9

-1.4

-6.2

-0.1

-5.9

9.7

7.3

6.2

-9.0

19601967

13.5

6.0

10.7

12.2

1.9

32.8

4.3

12.1

10.2

28.9

23.2

8.9

-2.2

19681973

9.4

3.7

11.5

9.2

11.9

16.5

16.7

10.0

6.5

18.5

3.1

14.1

1.8

19731982

7.7

4.3

6.3

3.9

6.2

13.4

6.0

8.0

6.7

6.7

7.8

8.6

8.1

19821986

11.3

3.2

10.5

10.7

10.8

17.1

7.4

7.8

7.7

8.2

9.4

7.3

9.6

19861997

Notes: a: Air transport started only in 1928 with the foundation of the knilm; b: only for the period 1900-1998. Sources: Agriculture and Industry from Van der Eng (2002); other sectors: Author’s estimates from appendices.

3.3

1.6

3.0

2.8

1.4

3.9

4.3

-2.5

4.9

Total transport & communications 6.2

-3.3

Air 13.4

-0.9

15.6

1.4

-0.4

communications

-0.7

Water transport

12.7

-5.0

19301939

10.5

6.7

Road transport

2.1

19151930

transporta

7.5

19001915

Average annual sectoral growth rates, 1900-2000

Railways

Table 3.6

0.0

0.0

-8.4

-13.4

-11.2

-28.8

10.6

3.1

8.4

-13.4

-3.4

4.1

3.7

19972000

2.6

1.6

2.2

2.4

1.4

4.9

2.3

3.6

10.0

0.1

7.3

2.4

19001939

6.3

3.2

6.1

5.7

5.0

10.8

4.9

7.2

5.2

9.8

7.8

10.0

2.3

19502000

3.8

2.1

3.6

3.3

2.2

6.0

4.2

5.3

7.6

3.8

7.3

1.4

19002000

As mentioned before, the trade sector was and is the most important service sector in Indonesia, although the economic growth that Indonesia experienced brought other service sectors to development as well. Remarkably, growth in the trade sector between 1900 and 1939 was limited to an average annual growth of 2.4 per cent. After independence, especially after Suharto came to power, average annual growth in the trade sector has increased to 5.7 per cent. This increase is mainly due to the linkages with industry. No industry can exist without some distribution network. When a good is produced, someone needs to bring it to the market. Therefore it is not surprising to see that growth in trade coincided with the industrial development that has taken place in Indonesia since the 1970s. The developments in the service sector are once more summarised in table 3.6. This table shows the average annual growth rates for the different service sectors. Arguments to support the periodisation in that table are the following: 1930 was the start of the world-wide depression, which affected Indonesia. In 1967/1968 Suharto came to power. This marked not only a change in political leadership, but also a shift in mission, namely to economic development (Dick et al. 2002: 194). The year 1973 saw the first oil boom; the second followed in 1978. The period 1982-1986 is characterised by recession and the re-orientation of the Indonesian economy. This resulted in a resurgence of the economy which was brought to a sudden end by the Asian crisis in 1997.

3.4

Labour productivity The employment figures from section 3.2 can be combined with the service sector estimates in section 3.3. This makes it possible to draw some conclusions about developments in labour productivity. The labour productivity estimates are presented in table 3.7. Since the population count of 1905 is considered of poor quality in absolute terms, resulting in an under-estimation of the number of people in most sectors, a correction had to be made to prevent an over-estimation of labour productivity. Therefore it was assumed that the labour force participation rate was equal to that in 1930 and 1961, namely 34 per cent. Assuming that the 1905 population count does give a reliable picture of the relative distribution of the labour force across sectors, we arrive at better labour productivity estimates. From 1930 onwards estimates are quite reliable. They are based on a well-conducted population census combined with careful estimates of value added in the different sectors. A number of interesting observations can be made.

 I used the formula: Labour force participation rate (=34 per cent) x population in 1905 x relative sectoral share of employment in 1905.

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| The Development of the Indonesian Service Sector

To begin with, labour productivity in the service sector turns out to be, as expected, higher than in agriculture. Labour productivity in industry, however, is, except in 1930, significantly higher than in the service sector, as much as four times higher in 2000. Table 3.7

Labour productivity in Indonesia’s service sector, 1905-2000 (in 1993 Rp per labourer) Agriculture

Industry (excl. oil and gas)

Trade

Transport & communications

Total service sector

Total labour productivity

4,145.7

2,887.8

1,515.1

2,158.8

1,919.9

1905

825.0

1930

978.0

3,288.9

3,894.5

2,924.9

3,612.9

1,428.3

1961

814.2

3,690.8

2,410.6

3,227.2

1,699.4

1,210.2

1971

996.8

3,877.7

1,982.0

3,233.9

1,480.0

1,403.9

1980

1,337.2

5,260.3

3,428.8

5,125.7

2,633.8

2,254.9

1990

1,530.8

7,010.2

4,391.2

6,266.3

4,117.1

3,313.2

2000

2,009.4

9,472.5

3,255.7

6,165.0

4,213.0

4,341.5

Note: gdp estimates in 1993 constant prices. Employment figure for 1905 arrived at by assuming a labour force participation rate equal to that in 1930 and 1961, namely 34 per cent, and that the relative contribution of the 1905 enumeration is reliable. Sources: Employment figures: see appendix 7; gdp estimates: for Agriculture and Industry: Van der Eng (2002). Other sectors: Author’s estimates.

Mulder (1999) came to different results in his study on the service sector in Brazil, Mexico and the United States. He found that productivity in services was indeed highest at the beginning for all three countries, just as in the case of Indonesia. Over the course of time, productivity levels in services and other sectors converged, because of slower growth in productivity in services. In Indonesia such a convergence in productivity cannot yet be found. Labour productivity in manufacturing in Indonesia is still significantly higher than in the other sectors. This suggests that the shift in labour to services that has been taking place raises the overall performance less than does a shift to manufacturing. These findings support similar conclusions drawn by Alexander and Booth (1992), and suggest that the service sector in Indonesia accounts for a much greater share of the non-agricultural labour force than was the case in countries such as France, Italy, Japan or Taiwan at a comparable stage of development (Alexander and Booth 1992: 285). The findings above are strengthened if we look at growth rates in labour productivity. As can be seen in table 3.8, growth in labour productivity in industry was especially high in the 1970s, when industrialisation took off in Indonesia. The decrease in labour productivity in trade between 1961 and 1971 and again between 1990 and 2000 is probably because the labour surplus as a result of the crises that took place in these periods was mainly absorbed in this sector.

 Similar findings were reached by Maddison (1980), Ohkawa (1993) and Syrquin (1986).

86

| Accounting for Services

Growth in labour productivity in transport and communications has been quite steady. This can probably be attributed to the technological developments in this sector and the investments the government has been making in infrastructure. Table 3.8

Average annual labour productivity growth (in percentages), 1905-2000 Agriculture

Industry (excl. oil and gas)

Trade

Transport & communications

Total service sector

Total labour productivity

1905-1930

0.68%

-0.89%

1.21%

2.57%

2.15%

-1.18%

1930-1961

-0.59%

0.37%

-1.54%

0.32%

-2.40%

-0.53%

1961-1971

2.04%

0.50%

-1.94%

0.02%

-1.37%

1.50%

1971-1980

3.32%

3.45%

6.28%

5.25%

6.61%

5.41%

1980-1990

1.36%

2.91%

2.50%

2.03%

4.57%

3.92%

1990-2000

2.76%

3.06%

-2.95%

-0.16%

0.23%

2.74%

Source: Based on table 3.7.

With the inputs so far it is possible to estimate the contribution of structural change to productivity growth. This method is usually called the shift-share method and was introduced by labour economist Solomon Fabricant (1942). The shift-share methodology is still popular in decomposing aggregate productivity growth (see Syrquin 1984 for an overview; for more recent applications, see Van Ark 1996; Mulder 1999; Timmer and Szirmai 2000; Lains 2004). The formula is:

where lp denotes labour productivity, Y output, L the labour force and S the share of labour in each sector. The difference in aggregate labour productivity levels at time 0 and t can be written as:

The first term on the right-hand side represents the intra-sectoral productivity growth, and corresponds to that part of the productivity change which is caused by productivity growth within the sectors. The second term is referred to as the static shift effect, and represents the effect of the change in sectoral employment shares on overall growth. This effect is positive when labour moves to branches with relatively high productivity levels. The third effect measures the dynamic shift effect, and is positive when labour shifts to sectors which improve their productivity per-

87

| The Development of the Indonesian Service Sector

formance. The sum of the second and third term is referred to as the total structural change effect. Table 3.9

Decomposition of labour productivity growth, 1930-2000 1930-1961

Labour productivity growth per year

-0.53

Intra-sectoral growth Structural change

1961-1971 1.50

1971-1980 2.53

1980-1990 3.92

1990-2000 2.74

81.7

55.9

75.3

75.1

59.4

- Total

18.3

44.1

24.7

24.9

40.6

- Static

21.4

55.4

14.5

16.6

35.1

- Dynamic

-3.2

-11.3

10.1

8.3

5.6

Source: Author’s calculations from table 3.8.

The results of this exercise are given in table 3.9, which shows that between 1930 and 1961 labour productivity growth was negative, and that this could be mainly attributed to a fall in intra-industry labour productivity. The structural change, or in this case the structural retrogression, accounted for 18.3 per cent of the fall in labour productivity. Between 1961 and 1971 productivity growth was limited, with only 1.5 per cent average annual growth. Structural change accounted for 44.1 per cent of this labour productivity growth, although it has to be noted that the dynamic effects were negative. Between 1971 and 1980 labour productivity growth is mostly explained by productivity growth within sectors. Only in the final decade of the twentieth century do we again see signs of structural change in which the static effect is dominant. This means that a shift of labour took place to more productive sectors, not accounting for the changes in productivity in these sectors.

3.5

Concluding remarks According to Kuznets (1966) the process of ‘modern economic growth’ is accompanied by important structural changes. The aim of this chapter was to assess whether these changes have taken place in Indonesia by looking at developments in occupational structure, economic structure and labour productivity. With regard to occupational structure, it was shown that the share of agricultural employment decreased slowly, and even increased between 1930 and 1961. Moreover, in an early phase of development, service sector employment was already significant, and far more important than industrial employment. Growth in service sector employment was not preceded by growth in industrial employment, but rather coincided with or was even followed by it. This challenges the linear development theory or the Fisher-Clark hypothesis. The economic structure of the service sector has undergone significant changes. At the beginning of the twentieth century, trade was the most important service sector, followed by housing. This reflected two characteristics of the Indonesian

88

| Accounting for Services

economy. Firstly, a rather low level of income resulted in a relative large share spent on a necessity good such as housing. Secondly, the relatively large trade sector was a consequence of the colony’s role as win-gewest for the Netherlands. After independence, housing lost in importance, and the trade sector contributed less to total service sector gdp, resulting in a more diversified structure. Nevertheless, the trade sector and the transport and communications sector remained the service sectors that contributed most to total gdp. Labour productivity in Indonesia’s service sectors has not been very impressive. Although compared to agricultural productivity it is both higher in level and growing more rapidly, it cannot keep up with developments in the industrial sector. It seems that Indonesia’s major service sectors are still the traditional sectors, which have relatively low value added. Looking at these three measures we see a clear transformation of the economy during the twentieth century, especially during the 1970s. Nevertheless, a decisive transition to a modern economy with sweeping structural changes has not yet taken place in Indonesia. Agriculture is still the largest sector, in terms of both employment and income. Moreover, within the service sector most employment and most income are still in the more traditional service sectors such as transportation and trade, which were already quite important in the colonial period. Therefore we shift our attention in the next two chapters to these apparently key service sectors in the economic development of Indonesia.

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| The Development of the Indonesian Service Sector

4

ROADS TO RICHES?



Transportation and economic development in Indonesia

4.1

Introduction The thousands of islands, often separated by vast distances, that comprise the Indonesian archipelago stretch out over approximately 5,000 kilometres from west to east and almost 2,000 kilometres from north to south. The land area of the country, approximately 1.9 million square kilometres, is spread over more than 13,000 islands. Such a geographical setting requires an efficient transportation network for both political and economic reasons. From a national accounting perspective, the transportation sector usually shows only small variations over time in the contribution to gdp. Krantz (2000) notes that the needs of transport as expressed in economic terms have been relatively constant during both the industrialisation and the modernisation processes. As we saw in the previous chapter, this pattern also holds for Indonesia where the contribution of transport to gdp varies between 2 and 7 per cent. However, this does not mean that no major changes have occurred. On the contrary, some modes of transport have more or less disappeared while others have grown significantly in importance. Another important point that needs to be stressed is that contribution to gdp is not always the best measure on which to assess the importance of an economic sector. In the case of transportation it can be argued that an efficient transport infrastructure is a necessary but not sufficient condition for economic growth. As transportation and development expert Wilfred Owen states: ‘Many factors contribute to economic and social progress, but mobility is especially important because the ingredients of a satisfactory life, from food and health to education and employment, are generally available only if there is adequate means of moving people, goods and ideas.’ (Owen 1987: xi) In the extreme case of no transportation network at all (or infinite transportation costs), local specialisation is impossible and autarky is the only possible economic outcome. If this assumption of infinite transportation costs is loosened it can be shown that transportation developments can be a catalyst for economic growth. Owen (1964, 1987) has shown that many developing countries lack year-round mechanised transport. Movement in these countries is often still by unreliable,

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| Roads to Riches?

high-cost, labour-intensive methods. On the other hand, in advanced economies transportation has developed rapidly with the advent of cheap, mass air travel, high and rapidly rising levels of personal mobility based on car ownership, and containerisation of general freight. All this has encouraged new levels of internationalisation in industry and commerce. For those favoured by these developments the world has shrunk to village scale (Hilling 1996: 1-2). The aim of this chapter is to show this role of transportation in economic development for the specific case of Indonesia during the twentieth century. It will be demonstrated that the transportation sector not only fundamentally changed during this century, but also that declining transport prices over time have enabled further economic development in Indonesia. The remainder of the chapter is organised as follows. Section 4.2 discusses theoretical foundations for the relation between transportation and economic growth. In section 4.3 developments in Indonesia’s transportation system are discussed. Section 4.4 concludes.

4.2

Transportation and economic growth: theoretical framework In the development literature, transportation is usually considered indispensable for economic growth. This idea is treated as an axiom: more efficient transportation modes and networks lead to higher economic growth. Although it is intuitively appealing, intuition is not scientific evidence. In order to obtain a better understanding of the relation between transport and economic growth we need a theoretical framework. Fogel’s theory of social savings and the spatial price equilibrium model provide us with a theoretical foundation.

4.2.1

Fogel’s social savings In his seminal work Railroads and American Economic Growth Nobel Prize winner Robert Fogel (1964) challenged the axiom of indispensability commonly attributed to the railways. Simply showing that more goods and passengers were transported tells only part of the story. It indicates that production in this sector increased. It does not show, however, to what extent it contributed to or, put differently, facilitated economic growth in other sectors. In this respect Fogel states: ‘Evaluation of the axiom of indispensability thus requires not only an examination of what the railroad did but also an examination of what substitutes could have done. Railroads warrant the title of indispensability only if it can be shown that their incremental contribution over the next best alternative directly or indirectly accounted for large part of the output of the American economy during the nineteenth century.’ (Fogel 1964: 10)

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Fogel proposes a way to test this ‘incremental contribution’, namely by the concept of ‘social savings’. He argues that if a certain tonnage of goods moves from one primary market city to a secondary market city carried out by some combination of transportation means at some definite costs, then, with enough data, one could determine both this cost and the alternative cost of shipping exactly the same bundle of goods from the primary to the secondary market in exactly the same pattern without the railway. The difference between these two estimates is the social savings attributable to the railway in the inter-regional distribution of agricultural products. In formula this would give: Social Savings = Cost of transportation without railways – Cost of transportation with railways A word of caution is due here. The true social savings would have been smaller, because society would have adapted to a situation without railways. For example, production might have shifted or improvements in water transport might have taken place. Such adjustments would have reduced the loss in national income. However, due to data constraints, it is not possible to measure this reduced loss in national income caused by the absence of the railways (Fogel 1979). Despite these shortcomings, his method is widely used in the study of economic history. The concept of social savings is used by Fogel to compare the incremental contribution of railways compared to other means of transportation. In this chapter I propose to use the concept to analyse intertemporal improvements in transportation. In other words, what are the social savings of transporting a comparable bundle of goods over the same distance in, for example, 1930 compared to 1990. Or in a formula: Social Savings = Cost of transportation (t1) – Cost of transportation (t2) This would be similar to searching for periods in which the consumer price index increases significantly faster or slower than transportation costs. In these cases there is also a change in the social savings. One has to be careful in interpreting results, though, since an increase in prices can also be due to improvements in quality, speed, safety and reliability of transportation.

4.2.2

A spatial price equilibrium model As mentioned before, in the literature transportation is often considered to be indispensable for economic growth. Another interesting approach to show this is by

 For an overview of early literature see O’Brien 1977, 1983. For recent examples see Leunig 2006 and Summerhill 2005.

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applying a Spatial Price Equilibrium (spe) model. With this model it can be shown that the benefits of infrastructure arise in another market, resulting in more welfare (Lakshmanan et al. 2001). Figure 4.1 gives a representation of spe. The left panel shows the demand and supply curves for a certain good in market A. In autarky equilibrium is given by YA=QA, where Y is demand and Q is supply, and the local market price PA would prevail. The right panel shows demand and supply for the same good in a different market, market B. Now suppose that transport cost between the two markets is equal to t, which is smaller than the autarky price difference between the two markets. It is then profitable and efficient to transport goods from the lower-price region to the higher-price region. In our figure it is assumed that PA > PB and that PA-PB > t.

Figure 4.1 Model of the benefits of transport M arket A

DA

M arket B

SA SB

PA a

b

c d t PB

e

f

g h

DB

2 2 QA QA = Y A Y A





Y B 2 Y B =QB

QB 2

Source: Lakshmanan et al. 2001: 142.

In the after-trade equilibrium (denoted with superscripts 2) in market A, because of the lower price, supply declines to QA2 and demand rises to YA2 leading to excess demand. In market B the opposite occurs. The higher price raises supply to QB2 and  The spatial price equilibrium (spe) model was first presented in an article by Samuelson (1952). Later it was further developed by among others Takayama and Judge (1971) and Takayama and Labys (1986).

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lowers demand to YB2 with excess supply as a result. This makes market A a net importer and market B a net exporter. Now we can answer the question of how large the benefits of transportation are. This can be done with the concepts of consumer and producer surplus. In a competitive market consumers only pay the going market price. Consumers who are willing to pay more benefit from buying at the market price. Their well-being is increased. Thus, consumer surplus is the increase in economic well-being of consumers who are able to buy the product at a market price lower than the highest price that they would be willing and able to pay for the product (Pugel 2004: 22). For producers a similar argument exists. Producers receive the going market price, while producers who would have been willing to supply at a lower price benefit from selling at the market price. This net gain is called producer surplus, the increase in the economic well-being of producers who are able to sell the product at a market price higher than the lowest price that would have drawn out their supply. In market A consumer surplus increases by area a+b+c+d, while producer surplus decreases by area a+b. In market B consumer surplus declines by area e+f while producer surplus rises by e+f+g+h. The ultimate benefits of being able to trade are equal to area c+d+g+h. It is not difficult to see that the lower the transportation costs (t) the larger the net gain in economic welfare (areas c+d and g+h). This gain can mainly be attributed to the increased local specialisation which it enables. But it should be stressed that the benefits are not equally distributed. In market A the consumers gain whereas the producers lose, while the opposite occurs in market B.

4.2.3

Other theoretical foundations In an interesting survey of the benefits of transportation Lakshmanan et al. (2001) mention various effects that transportation can have on the economy. Firstly, the construction of infrastructure itself creates employment and generates income during the construction phase. On the other hand, if such a project is financed by a tax increase or an increase in interest rates due to government borrowing on the capital market, this would have a negative impact on consumption and investment which would counter the initial positive effect. Secondly, as shown above by the spe model, improvement in infrastructure leading to lower transport costs implies tendencies towards local specialisation and larger trade flows. If factors of production are mobile and respond to differences in factor payments substantial shifts in economic activity may occur. This effect is reinforced if economies of scale occur. Thirdly, lower transportation costs can have ‘reorganisational benefits’, such as market expansion, spatial concentration and tighter scheduling. As a result transport infrastructure leads not only to larger trade flows, but also to a more transportintensive way of organizing production.

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Fourthly, Lakshmanan et al. (2001) argue that it is conventional wisdom that improvements in transportation lead to better-functioning labour markets. More workers can be recruited within reasonable commuting distances, leading to a reduction in unemployment and vacancies due to spatial frictions, and a better match between the demand and supply side of the labour market. In the long run the effects are more diffuse. Urban economic theory predicts that a decrease in transport costs will lead to a shift in settlement patterns towards a more diffuse pattern of land use (Fujita 1989). This will lead to an increase in commuting distances. There is indeed overwhelming evidence that commuting distances in many countries have increased considerably, mostly because of voluntary movement of households relocating to another dwelling. Lakshmanan et al. conclude on this basis that it is probable that the welfare-improving effects for households are larger than the productivity-improving effects for firms. Fifthly, better transportation leads to an increase in the number of suppliers and demanders in the market. This can have a favourable effect on consumer welfare because it reduces the probability of collusive behaviour between suppliers. Similar arguments are also made in a United Nations report on the relationship between transport and economic development (United Nations 1999). In this report it is argued that better transport facilities lower production costs in three ways. To begin with, improved transport lowers the delivered costs of inputs to the producer. In a study of two groups of villages in Bangladesh, Ahmed and Hossain (1990) found that output was 31 to 42 per cent higher in the group with better access to transportation. They attributed this difference principally to the lower delivered cost of fertiliser. Furthermore, importance of continuity of input supply increases as the degree of industrial sophistication increases. Finally, improved transport can broaden the labour pool to which a production facility has access. Besides lowering production costs, better transportation also raises producer prices. Clearly lower transportation costs result in lower marketing costs. Moreover, irregular and infrequent transport services require purchasers to hold high levels of stock to ensure that they can guarantee a continuous supply to their customers. With better transportation a producer can lower inventory costs, thus saving money. In this way the risk of spoilage of perishable goods is reduced. Another advantage of improved transportation is that it attracts further investments. In a study by Creightney (1993) it was found that for countries in the early phases of development good-quality infrastructure was preferable to tax incentives for attracting foreign investments. If we add to this improved productivity the possibility of economies of scale it is clear that the transport sector can serve as a catalyst for economic development. A schematic representation of the potential of the transport sector is provided in figure 4.2.

 For a Dutch case study, see Rouwendal and Rietveld 1994.

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Source: United Nations 1999: 21.

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In c re a s e d in v e s tm e n t in tra n s p o rt

Im p ro v e d tra n s p o rt

Low er s p o ila g e a n d h ig h e r d e liv e re d q u a lity

R educed in v e n to rie s

Low er m a rk e tin g c o s ts

R e d u c e d in p u t c o s ts

B e tte r a c c e s s to s k ille d la b o u r

M o re re lia b le s u p p ly o f in p u ts

H ig h e r p ro d u c e r p ric e s

Low er p ro d u c e r c o s ts

G re a te r in v e s tm e n t

H ig h e r p ro d u c tiv ity

E c o n o m ie s o f s c a le in p ro d u c tio n s

Im p ro v e d p ro fita b ility

In c re a s e d o u tp u t

M o re p ro fita b le tra n s p o rt s e rv ic e s

G re a te r d e m a n d fo r tra n s p o rt

Figure 4.2 Schematic representation of the relationship between transport and economic development

We have to bear in mind though that transport does not automatically lead to development. In this respect Gauthier (1970) distinguishes between three possible relationships between transport and development. A positive effect, where an innovation in transport is directly and demonstrably responsible for an expansion in economic activity; a permissive effect, in which transport does not itself stimulate economic growth but is such that is does not inhibit such growth when other stimuli are operating; and a negative effect where the returns on investment in transport are less than from the same investment in direct production.

4.2.4

Evolution of transport networks This section concludes with the discussion of a model published by Taaffe, Morrill and Gould (1963), which offers a theoretical approach to transport network evolution in a Third World context. Although relatively old, this model is still very popular in the transport economic literature. The model is summarised in figure 4.3. In phase A a series of separate trading posts and minor ports along the coast is established. These act as points of interaction where locally produced or traded goods are exchanged for imports or money. In phase B the hinterland is penetrated by trading routes, bringing the traders into contact with new groups of people and different resources. Taaffe et al. argue that this is the most important phase, since later phases typically evolve along these penetration lines (Taaffe et al. 1963: 506). Phase C comprises the extension of these hinterlands through the construction of feeder routes from the trunk lines, while phase D is characterised by the interconnection between the different local systems and the emergence of intermediate urban centres (N1 and N2). In phase E a process of selection starts, because the increasingly integrated networks reduce the need for many ports. Often this means that trade is increasingly concentrated in the largest city or the one with the most favourable port facilities and location. Phase F consists of the development of national trunk-line routes or ‘main streets’. These developments to a large extent explain how transport networks evolved in Indonesia with the first trade settlements on the North coast of Java and from there penetrating the hinterlands, with Jakarta and Surabaya as main ports. Already in the early nineteenth century a ‘main street’ avant-la-lettre was constructed with the Great Mail Road (Jalan Raya Pos) connecting Batavia and Surabaya. In the next section these general theories are used to explain and analyse developments in the transport sector in Indonesia.

 For an excellent article on the Jalan Raya Pos and its impact see Nas and Pratiwo 2002.

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Figure 4.3 Transport network evolution



99



Source: Taaffe et al. 1963: 504.

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4.3

Transport developments in Indonesia, 1900-2000 With the general considerations in mind concerning the relationship between transport and economic development, this section will discuss the developments in the different transportation sectors, namely water transport, road transport, rail transport and air transport, in Indonesia during the twentieth century.

4.3.1

Water transport 1900-1940: monopolisation profits Water transport during the colonial period was characterised by two main features: firstly, the increasing importance of motor vessels, and secondly the leading role of the Koninklijke Paketvaart Maatschappij.

Table 4.1

Registered merchant fleet in the Netherlands-Indies, 1890-1939 (in number and net tonnage (1,000m3)) Java & Madura

Outer Islands

Netherlands-Indies Steamships and motor vessels

Nr.

Ton.

Nr.

Ton.

Nr.

Ton.

Sailing vessels Nr.

Total

Ton.

Nr.

Ton.

1890

1,108

150

691

85

78

77

1,721

158

1,799

235

1900

1,468

166

929

123

116

113

2,281

176

2,397

289

1907

1,640

286

1,155

168

190

247

2,605

207

2,795

454

1920

2,518

516

3,278

90

224

470

5,572

136

5,796

606

1930

2,555

731

3,698

108

327

696

5,926

143

6,253

839

1939

1,506

748

2,798

138

378

702

3,926

184

4,304

886

Note: 1907 is chosen instead of 1910. In 1908 minimum tonnage to qualify for registration was significantly reduced. This severely blurred the figures. It was only in 1915 that the registration figures resumed a more normal pattern (cei ix 1989: 42). Figures are in net tonnage. The net/gross tonnage ratio is approximately 60:100 (cei ix 1989: 70). Source: cei ix 1989: table 1.

Table 4.1 clearly shows that steamships and motor vessels became increasingly important in the merchant fleet. In 1890 only 4.3 per cent of all ships were steamships or motor vessels, although they already comprised almost 33 per cent of total capacity. This increased to 8.8 per cent and 79.2 per cent respectively in 1939. The increase in the importance of steamships and motor vessels did not mean that sailing vessels became unimportant (Sulistiyono 2001: 204). Although from a national accounting perspective their contribution to gdp was marginal, they formed an important link in the transportation chain. The sailing vessels, or prahu, functioned as feeder ships, and thus provided important transport services complementary to those of modern shipping (Dick 1975: 69). For example, between Banjarmasin and East Java, where the kpm had no regular line and in 1921 carried only 200 lasts,

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other vessels carried 10,200 lasts of which 8,700 lasts were carried by prahu (Dick 1987b: 106). Other interesting findings from table 4.1 are the increasing size of steamships and the continually higher average tonnage figure for Java compared to the Outer Islands. This is probably due to the more rapid modernisation of the Java merchant fleet under influence of the large-scale expansion of steam-packet services, which were concentrated in Java (cei ix 1989: 19). The second feature of water transport in colonial Indonesia was the importance of the kpm. Between 1891 and 1916 the number of kpm vessels increased from 28 to 93, while their gross tonnage increased from 82,000 to 450,000 m3 (an average annual growth of 7.1 per cent), and the number of miles sailed from 752,000 to 2,899,000 (5.6 per cent per annum). Between 1916 and 1939 the number of ships increased from 93 to 134, the gross tonnage from 456,000 to 907,000 m3 (3.0 per cent per annum) and the number of miles sailed from 2,899,000 to 4,111,000 (1.5 per cent per annum). Tonnage of the kpm ships amounted between 60 and 80 per cent of the total tonnage of steam and motor vessels and between 50 and 60 per cent of the tonnage of the total Netherlands-Indies merchant fleet (cei ix 1989: 25 and table 6: 70-71). The monopolisation of water transport by kpm was aided by policies pursued by the colonial government (À Campo 1992: 85). The monopoly enabled kpm to use profits from the main trunk lines to cross-subsidise regular scheduled services to all corners of the archipelago (Dick 1987a: 1 and 130). Dick shows how in some instances the company explicitly aimed at aggressively competing prahu shipping. In some areas kpm interfered in trade ‘not to make short-term profits, but to reduce the profitability of prahu shipping to the point where new prahu would no longer be built and the fleet would gradually diminish by attrition’ (Dick 1987b: 107). Due to the Depression of the 1930s kpm’s strategy to push competitors out of the market became less effective. The dramatic decline in commodity prices led to a sudden boom in demand for cheap transport. Prahu shipping benefited, which resulted in a sharp increase in the prahu share of trade in the early 1930s (figure 4.4). In most regions the prahu share reached a peak some time between 1931 and 1933 and then began to decline. Dick (1987b) attributes this decline to a reversal of the process, with kpm regaining its dominant position. The monopolisation of water transport by kpm is also apparent if we look at the average transport costs in constant prices. These average costs are calculated as follows. Firstly, revenue from passenger and freight transport respectively is taken from kpm’s annual reports. Then the number of passengers and the amount of freight is taken from De Boer and Westerman (1941, appendix 10 and 11). Dividing

 A last was an elastic unit whose weight and volume dimensions varied according to the commodity. As a rough rule of the thumb, 1 last =1 cubic metre = 1 ton (Dick 1987b: 106, footnote 2).

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revenue by the volume indices and subsequently dividing them by a cpi (Van der Eng 2002) gives us average transportation costs in constant prices.

Figure 4.4 Share of prahu shipping in local trade, 1929-1939 100 90 80 70 60 50 40 30 20 10 0 1929

1930

1931

Northwest Sulawesi



1932

1933

Gulf of Bone

1934

1935

Southeast Sulawesi

1936

1937 Selayar

1938

1939

Nusa Tenggara

Source: Dick, 1987b: 112-113.

Figure 4.5 shows that both passenger and freight transportation costs decreased quite significantly between 1891 and 1911. The outbreak of the First World War apparently affected transportation rates in the Netherlands-Indies as well. From 1920 onwards transportation costs started to rise. Two phenomena may contribute to rising transportation costs: higher input prices or higher profits. In the case of kpm this last explanation is more plausible, resulting from the monopoly position it had. This is underlined if we look at the profits as percentage of total revenue. Between 1916 and 1939 this ratio was on average 31.2 per cent. It is interesting to note that already in the early twentieth century there was some discussion about kpm’s monopoly. In public discourse the board of kpm repeatedly denied to have a monopoly, but in internal correspondence the term ‘our monopoly’ was widespread. Maritime historian J. à Campo (1992: 271) rightly concludes that it is hard to deny kpm’s monopoly position. If we connect these findings with the theoretical framework of Fogel and the Spatial Price Equilibrium Model we conclude that kpm played a key role in connecting different regions of the archipelago, creating a nation-state and enabling economic development in these regions. The monopoly enabled kpm also to include remote, sparsely populated areas within its network by compensating losses incurred on

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these lines by higher freight tariffs on other lines (cross-subsidies) (Koopmans, Sonneveld and van Winden 1994: 8; Dick et al. 2002: 99).

Figure 4.5 kpm transportation costs, 1891-1939 (in constant 1993 prices) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 1891

1895

1899

1903

1907

1911

1915

Freight



1919

1923

1927

1931

1935

1939

Passages

Sources: Author’s calculations.

Dick adds to this that kpm’s operations were ‘trade-creating’ (Dick 1987a: 11). kpm developed non-contract services to ports and areas which were potentially of commercial significance, but which at the time did not yet justify regular contract lines. Nevertheless, from an economic perspective one could argue that the high and increasing transportation costs since the 1920s, resulting from kpm’s monopoly position, slowed down economic growth, or at least lowered welfare as visualised in the spe model in figure 4.1. However, the wide network of routes, high quality and reliability of services, and great care in cargo-handling, with claims being settled promptly and fairly, were highly valued. Therefore Dick stated that ‘traders do not seem to have shown much dissatisfaction with the costs of shipping by kpm’ (Dick 1987a: 12). Moreover, kpm was not completely free in setting its rates. As a government check upon the monopoly proposals for rate increases had to be submitted to the Department of Economic Affairs for approval. Since increases also meant greater government expenditure for shipment of the large tonnage of official cargoes, this was not just a formality (Dick 1987a: 158).

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Figure 4.6 The kpm shipping network, 1891 and 1940

Source: De Boer and Westermann 1941: appendix 1.



1945-1965: competition and institutional damage The period immediately following the Pacific War and the declaration of Indonesian independence was turbulent, and developments in water transport were no exception. Mainly due to the severe losses incurred by kpm during the war, maritime transport was affected by urgent demands and acute tonnage shortages. Whereas in 1939 the kpm fleet comprised 136 ships, at the end of the war only 26 remained, scattered across the Pacific and Indian Oceans. The initial impulse was to reconstruct the fleet completely and to resume all former operations. After the war, the colonial government stated that priority should be given to the reconstruction of shipping ‘above any other single sector of the economy’ (À Campo 1998: 13). At the end of 1946 kpm operated twenty-two regular lines, a number that doubled within five years, while total route mileage rose from 46,000 to 160,000 geographical miles (À Campo 1998: 6).

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After the refusal by kpm to set up a mixed enterprise, jointly owned by kpm and the Indonesian government, in 1952 the latter established a shipping company of its own, pelni (Pelayaran Nasional Indonesia). Its ultimate aim was to usurp the role of kpm in interisland and short-distance sea transport. pelni started operations with thirteen ships but within five years its fleet had grown to thirty-eight ships totalling 38,000 tons. As most vessels clearly were too small for long-distance shipping, pelni incurred heavy losses, which contrasted painfully with kpm’s continuing profits (À Campo 1998: 26; Dick 1987a: 17). Freight rates were set by the government and pelni tended to conform to kpm’s levels – undercutting would increase losses and overcharging would reduce its market share – but it did not enter into arrangements on routes or schedules. pelni usually consigned new ships to existing kpm routes without prior notification, which resulted in a sub-optimal allocation of tonnage. Contacts at a personal level were pleasant, but the Indonesians did not accept offers for advice or support. ‘They prefer to take their own line. In the Asian perception consultation [with] the Dutch seems to amount to loss of face’ (À Campo 1998: 27). It had become sufficiently clear that cooperation between pelni and kpm was not the Indonesian goal. In the Indonesian cabinet political sentiments increasingly over-ruled economic considerations, much to the despair of pragmatic and competent Indonesian officials (À Campo 1998: 27). kpm had little choice but to continue its pre-independence policy of internal contraction and external expansion. kpm went on reducing its Indonesian activities by laying off personnel, transferring dispatch from its own agencies to commissioned agencies and contracting out other activities. Unprofitable lines were discontinued, while the government no longer allowed kpm to operate foreign charters on regular lines. Despite lavish profits, hardly any investment was made in Indonesia. Investments in new ships that kpm did make were for trade outside Indonesia (Dick 1987a: 15). The kpm-pelni competition rested on the opposing interests of a large profitable ‘colonial’ firm and a poorly performing national company. With the substitution of kpm by pelni being only a matter of time, kpm’s attitude towards the Indonesian economy became ‘to get as much out of it [as it could] as long as it lasted’ (À Campo 1998: 29). A recurrent issue of conflict was rising costs and raising rates. The relative price stability of the early 1950s was spoiled by inflationary measures taken by successive cabinets. kpm insisted that rising costs must be offset by rising freight rates. Regulations, however, made it nearly impossible to pass costs on to shippers. In the meantime there was an increasing urge in politics for nationalisation of the kpm. The development of a national shipping industry through the nationalisation of kpm had been considered since 1945, but Indonesian politicians never succeeded in mapping out a viable procedure. Proposals for a joint venture failed because of kpm’s insistence on majority ownership. The idea of nationalisation had not been dropped altogether, however, and was revived after the unilateral renuncia-

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tion of the 1949 round-table agreements by the government of Indonesia in February 1956. Strained by social unrest and political tensions, the situation was becoming rather paradoxical. The Indonesians wanted to get rid of kpm, yet feared its departure. kpm wanted to stay, but was prepared to relocate. As both sides were acting adversely to their perceived interests, the relationship was inherently unstable. Sunar Suraputra, president of the Central Shipping Authority (Pepuska) characterised the situation as ‘[a]n equilibrium in which both are equally strong, or rather both are equally weak, an equilibrium lacking a solid foundation’ (À Campo 1998: 33-34). kpm calculated that strong measures against it would do much more harm to Indonesia than to itself. At least until the middle of 1957 kpm remained confident that the Indonesian government assessed the situation the same way. Still, it took two important precautionary measures. Firstly, it insured its entire fleet with Lloyds against seizure. Secondly, in November all captains received a sealed letter containing instructions in case of emergency to be opened when they received a coded message. The breakthrough was triggered by a wave of political protest and trade union action. Defeat of a motion calling upon the Netherlands to relinquish sovereignty of Dutch New Guinea brought matters to a head. On 1 December 1957 Dutch aircraft were prohibited from landing, Dutch-language newspapers and magazines were banned, and an official national strike was called for the following day (Dick et al. 2002: 184). On 3 December 1957 local trade union representatives occupied kpm’s head office in Jakarta. Having lost effective control the directors immediately instructed all ships to flee to foreign ports; thirty-four escaped, but twenty-nine were held in Indonesian ports by crews or military guards. Another eleven were seized on the high seas. The Indonesian government, which most probably had approved and, according to some, even coordinated the action, legalised the takeover in retrospect (Dick 1987a: 24). On 7 December kpm held the government responsible, and gave ‘notice of abandonment’ of forty ships to Lloyds in London. The huge claim for 114.5 million guilders, which would have to be paid if the ships were not released within four months, was a great shock that might have serious consequences for Lloyds, as British ambassador McDermott made clear to the Indonesian government. In February 1958 Lloyds sent its representatives to Jakarta for direct negotiations with the Indonesian government. They put the Indonesians under great pressure by threatening to raise insurance rates or even to withdraw all ship insurance, which would have raised food prices or even caused shortages. Prime Minister Djuanda decreed that all ships be released on 20 March 1958, while forbidding kpm to re-enter interinsular shipping. All ships had to leave Indonesian waters on short notice (À Campo 1998: 34-35).

 Penguasaan Pusat Kapal-kapal (Pepuska) was established in September 1950 with the aim of developing an Indonesian shipping business by constructing, selling and hiring ships for Indonesian companies. In 1952 Pepuska was taken over by pelni.

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In the period immediately following the expulsion of the kpm it seemed that water transport was not as negatively affected as might have been expected. The vacuum that had been created was filled quite swiftly (Ali 1966: 35). Within two years total shipping capacity was at a level comparable to that before the expulsion of kpm (tables 4.2 and 4.3). In table 4.2 kpm is compared to pelni and in table 4.3 the magnitude and productivity of the total Indonesian interisland fleet are summarised. Table 4.2

Inter-island freight (in 1,000 m3) and productivity of kpm and pelni, 1950-1960 kpm

pelni

Transported goods

Total gross tonnage

Productivity

1950

3,610

176.6

20.4

1951

4,079

185.9

21.9

1952

3,835

178.5

21.5

1953

3,630

170.1

21.3

1954

3,312

184.9

17.9

Transported goods

Total gross tonnage

Productivity

20.5 36.8 437.7

51.1

8.6

1955

3,176

187.3

17.0

720.2

36.4

19.8

1956

2,999

190.5

15.7

968.4

46.3

20.9

1957

1,006.4

58.0

17.3

1958

808.2

89.7

9.0

1959

1,254.7

134.6

9.3

1960

1,514.9

154.2

9.8

Note: Productivity is measured by dividing transported goods by total gross tonnage of the fleet. Source: Statistical Pocketbook of Indonesia, 1958 and 1961.

Table 4.3

Tonnage, cargo and productivity of inter-island fleet, 1957-64

Year

Tonnage owned (in 1,000 tons)

Tonnage chartered (in 1,000 tons)

Total tonnage

Total cargo

Fleet productivity

pelni

Private

Total

pelni

Private

Total

1957

30.5

21.1

51.6

18.9

28.3

47.2

98.8

in 1,000 tons n.a

n.a

1958

57.7

28.0

85.7

38.4

24.8

63.2

148.9

n.a

n.a

1959

80.8

58.8

139.6

61.1

47.2

108.3

247.9

2,797

11.3

1960

93.4

71.1

164.5

77.6

56.1

133.7

298.2

2,713

9.1

1961

108.8

125.7

234.5

116.1

60.9

177.0

411.5

3,027

7.4

1962

132.1

113.2

245.3

100.8

43.5

144.3

389.6

2,281

5.9

1963

154.0

158.9

312.9

90.2

43.9

134.1

447.0

2,800

6.3

1964

144.2

191.5

335.7

29.6

20.6

50.2

385.9

3,300

8.6

Note: Productivity is measured by dividing transported goods by total gross tonnage of the fleet. Source: Dick 1987a: 28.

However, the most important finding here is the significantly decreasing productivity of water transport after kpm was expelled from Indonesia. Where kpm had

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productivity rates, as measured by tons of goods transported divided by total gross tonnage, of around 20, this fell to levels below 10 for the total Indonesian fleet after 1960. One could attribute this decline to a fall in trade. This is not the case, however. Between 1957 and 1962 domestic trade grew from 10.3 million tons to 11.0 million tons (Sulistiyono, 2003: 237). Dick (1987a: 26), quoting an unpublished un report, attributes the decline to five main factors: 1) Instead of the normal time of three weeks, pelni ships were by 1963 spending three months and by 1966 four months out of commission in docking and repair. 2) About four months were spent idle in port awaiting cargo handling, fresh water supplies, bunkers or clearance. 3) Even when cargo was being handled the rate was about 60 per cent lower than previously normal rates. 4) Sea time was about 10 per cent greater because of fouled bottoms and the disappearance or failure of navigational aids. 5) Load factors had fallen from an acceptable 60 per cent to about 35 per cent because of excessively large and badly routed ships. This shows that it was not so much lack of capital in the form of ships that slowed down developments in the water transport sector. It was lack of organisational knowledge and skills combined with the elimination of efficient networks between traders and shipping companies. These were lost as a result of the troubled nationalisation of this important sector. Or in other words the expulsion of kpm meant severe institutional damage (Marks forthcoming). Dick notes that ‘by eliminating the kpm the Indonesian Government achieved a symbolic political victory, but at the very high cost of destroying the inter-island transport system’ (Dick 1987a: 25). And although shipping capacity was swiftly recovered, the knowledge and efficient networks were not replaced, leading to a highly inefficient and unreliable water transportation sector and therefore disintegrated markets. Interisland shipping services that had facilitated economic growth for years now became an obstacle for further development. This had repercussions in other economic sectors. These findings directly link the troublesome economic de-colonisation and the deterioration in macro-economic performance during the 1960s. This link, I believe, is not sufficiently acknowledged in the literature concerning the economic development of Indonesia. Dick is a notable exception, although he actually blames kpm’s monopoly position rather than the difficult de-colonisation process:  See Bertocchi 1994, Acemoglu, Johnson and Robinson 2001, and Bertocchi and Canova 2002 for the relation between de-colonisation and economic growth.  Divergent opinions in Lindblad 2006, Sulistiyono 2003: 251-252, and Sulistiyono 2006: 123. They conclude that economic slowdown only started to gain ground in the early 1960s, while the take-over and nationalisation of Dutch firms took place in 1957/1959.

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‘It is unfortunate that the aggressive use of monopoly power by the kpm denied Indonesians access to modern shipping until 1941. [...] This undoubtedly contributed to the problems encountered after Independence and must be set against the very substantial economic benefits brought by the kpm.’ (Dick 1987a: 11)



1965-2000: moving forward In the mid-1960s the Indonesian government became aware that inefficiencies in inter-island shipping threatened the Indonesian economy in general. Minister of Sea Communication Ali Sadikin stressed the importance of rationalising domestic shipping (Sulistiyono 2003: 262). Because of simplified licensing procedures shipping companies had sprung up ‘like mushrooms in the monsoon’ (Dick 1987a: 27). Measures taken towards this end did not have immediate effect, however. The political and economic instability also affected developments in inter-island shipping. For example, the tight monetary policies which the government adopted to control inflation reduced the general level of economic activity. Table 4.4 shows how between 1962 and 1967 both freight and passenger transport shrank significantly.





Table 4.4



Table 4.5

Cargo and passengers carried by pelni, 1962-1967 Cargo (m3)

Passengers

1962

1,448,200

408,351

1963

1,041,036

388,442

1964

803,288

343,314

1965

678,268

266,353

1966

425,000

353,817

1967

606,572

221,657

Source: Sulistiyono 2003: 266.

The Indonesian merchant fleet, 1968-2000 Total fleet in grt

Oil tankers in grt

1968

711,500

133,134

1970

642,530

87,736

1975

859,378

87,576

Bulk carriers in grt

General cargo Container ships in grt in grt

Other types in grt

578,366 480,640

74,154

16,881

643,917

111,004

1980

1,411,688

164,341

78,199

963,640

1985

1,936,420

481,268

128,255

912,355

58,888

205,508 355,654

1990

2,179,000

578,000

138,000

931,000

77,000

455,000

1995

2,779,387

745,985

205,305

1,204,936

60,623

562,538

2000

3,394,000

812,000

335,000

1,433,000

92,000

722,000

Note: grt is an abbreviation for gross register tonnage and measures the total internal volume of a vessel. Ships of 100 grt and over. Source: United Nations, Review of Maritime Transport.

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Table 4.6

Average annual growth in grt and loaded cargo, 1968-2000 loaded cargo

grt 1968-1970





-3.3%

1970-1975

5.0%

6.1%

1975-1980

8.6%

3.9%

1980-1985

5.4%

1.6%

1985-1990

2.0%

11.8%

1990-1995

4.1%

9.6%

1995-2000

3.4%

-2.3%

1970-2000

4.5%

4.6%

Source: Author’s calculations from table 4.5, and Statistical Yearbook Indonesia, various issues.

After 1970 inter-island shipping was brought back on a moderate, although far from impressive growth path. Between 1970 and 2000 the total Indonesian merchant fleet increased from 642,530 gross rate tonnage (grt) to 3,394,000 grt, or on average 4.5 per cent annually. The composition of the fleet did not change much. Growth in loaded cargo was more volatile. However, average annual growth for the entire period was at 4.6 per cent, quite similar to that of the merchant fleet. That growth in water transport was only moderate is a consequence of improvements in road transport (discussed below) that have shifted general cargo to road transport. This is especially the case for short distances. At the same time, road/ ferry links have enabled road transport to erode what formerly was the preserve of sea freight (Dick and Forbes 1992: 272). Examples are ferries across the Bali Strait between Ketapang (Java) and Gilimanuk (Bali), and across the Sunda Strait between Merak (Java) and Bakahuni (Sumatra). These developments shifted freight between Java and Bali and between Java and Sumatra from water to road. Road transport is often preferred by traders because door-to-door consignment eliminates doublehandling.



Table 4.7



Productivity in inter-island shipping, 1993-1997 Number of ships

dwt

Tons of cargo

Productivity

1993/94

978

1,050,286

18,667,282

18

1994/95

979

3,646,058

60,683,540

17

1995/96

1,109

4,046,649

66,521,296

16

1996/97

1,393

4,215,945

79,794,447

19

Source: Department of Communications 1999: 18.

As brought forward in the discussion on Fogel’s social savings theory from the viewpoint of performance, it is not so much growth but rather efficiency and low transportation costs that matter. Regulation measures resulted in a rather competitive market which was quite easy to enter. For example, under the second Five-Year devel-

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| Accounting for Services

opment plan (Rencana Pembangunan Lima Tahun, repelita ii) the emphasis was on replacement and expansion of the fleet. To this end the government established a National Fleet Development Corporation (Pengembangan Armada Niaga Nasional, pann). pann provided both rehabilitation loans and new and second-hand dry cargo tonnage. Dick (1985) notes that this modernisation and expansion of the inter-island fleet led firms in the inter-island shipping industry to engage in both price and nonprice competition. As can be seen in figure 4.7, this increased competition resulted in a significant fall in water transportation costs. From 1971 onwards transportation costs in constant prices were at least half of those in 1939. Moreover, productivity was also quite high. In 1982 the majority of shipping firms had a productivity of more than 10 tons of cargo per year per deadweight ton of capacity (Dick 1985: 101). Yet this was still only half of kpm’s productivity in the 1950s (see table 4.2). In the mid-1990s productivity had increased to levels comparable to that of kpm in the 1950s. However, interisland transport continued to be hampered by irregularity in service, which from a development perspective is rather important (Leinbach and Chia 1989: 125).

Figure 4.7 Water transportation costs, 1900-2000 (in constant 1993 prices)

1900







111

1910

1920

1930

1939

1971

1975

1980

1985

1990

1995

2000

Note: Figures are arrived at by dividing revenue by a constructed volume index of passengers and freight transported for the period 1900-1940 and loaded and unloaded cargo for the period 1950-2000 (see appendix). This outcome is divided by the cpi to arrive at constant price estimates. Source: Author’s calculations.

| Roads to Riches?

4.3.2

Rail transport 1900-1940: rise and fall The first railways in Indonesia date back to 1867, when a 26 kilometre section from Semarang to Tanggung (Central Java) was opened to traffic. This line was operated by the private Nederlandsch-Indische Spoorweg Maatschappij (Netherlands-Indies Railway Company, nism). Initially the development of the railway network was rather problematic, however. It proved extremely difficult for private companies to raise enough capital, and therefore the government was obliged to offer additional financial assistance other than the guarantee of interest of 4.5 per cent on the capital invested that had been granted initially (cei ix 1989: 28; Reitsma 1928: 22-23). The difficult start of the nism resulted in a debate about the desirability of state construction and/or state exploitation. The liberal government in the Netherlands had always preferred private enterprises, but in the end State Railways were considered necessary for strategic purposes (Staargaard 1929: 2; Oegema 1982: 14). Eventually, more than ten years after the opening of the first railway, the state became directly involved in the construction of railways. Originally parliament agreed on a law to build a railway line at government expense, but to grant the running of it to a private company. However, when no private company could be found to run the exploitation of the line the government took responsibility for this itself. As a result the Staatsspoorwegen (State Railways, ss) opened its first line between Surabaya and Pasuruan in 1878. After gradual expansion in 1894 a continuous railway line was in place between Batavia and Surabaya, running via Yogyakarta. This reduced the journey between those cities from about two weeks by horse-hauled carriages to 32.5 hours by train. The railway network in Java thus developed quite steadily in the late nineteenth century (table 4.8 and figure 4.8), aided by the fact that, around 1880, the success of the existing railway companies resulted in increased enthusiasm among private investors. Their interest was mainly directed at the construction of ‘tramways’. These tramways were usually related to agricultural developments. Sugar plantations and factories, tobacco and rubber plantations, and forestry companies benefited greatly from these new modes of transport. The lines also acted as feeders to the main lines. Far fewer railways were built in islands other than Java. Apart from a ss line of 47 kilometres in South Sulawesi, which was completed in 1922 and closed down in 1930 due to lack of profits, these railway lines were all located in Sumatra (cei ix 1989: 29). Construction in Sumatra began in 1876 with a tram line of five kilometres from Ulelhee to Kota Raja (now Banda Aceh), although this line was meant for the use of military transport. Gradually this line was expanded and in 1919 it was connected to  The journey actually took three days, because trains did not run at night and the presence of different gauges required passengers and goods to be transferred in both Yogyakarta and Solo.

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another railway system on Sumatra, namely that of the Deli Spoorweg Maatschappij (Deli Railway Company, dsm). The dsm, which opened its first section of railway line in 1886, was the only private company operating in the Outer Islands. The dsm served the fertile Deli region with its large estate agricultural sector. In West Sumatra the first railway section was opened by ss in 1891. In South Sumatra the construction of the railway system did not start until 1911. In 1914 the first section of the Lampung part was completed as was the first section of the Palembang part in 1915. Only in 1927 were these two parts connected (cei ix 1989: 30, see also figure 4.9). Table 4.8

Railway and tramway companies in Java, Madura and Sumatra

Name

Location

Construction period

Length in 1939

Nederlandsch-Indische Spoorweg Mij West Java, Eastern Central and East Java

1867-1924

855 km

Staatsspoor- en Tramwegen in Nederlandsch Indië

1878-1928

2,761 km

Java West Sumatra

1891-1921

263 km

South Sumatra

1914-1932

661 km

Aceh

1876-1917

512 km

Notes

Deli Spoorweg Mij

North Sumatra

1886-1937

554 km

Javasche Spoorweg Mij

Tegal-Balapulang, Northwest Central Java

1885-1886

(24 km) To scs 1895

Bataviasche Ooster Spoorweg Mij

Jakarta-Krawang

1887-1898

(63 km) To ss 1898

Semarang-Joana Stoomtram Mij

Semarang-Cepu, Northwest Central Java

1882-1923

417 km

Semarang-Cheribon Stoomtram Mij

Semarang-Cirebon, Northern Central Java

1897-1914

373 km

Oost-Java Stoomtram Mij

Surabaya area

1889-1924

36 km

Serajoedal Stoomtram Mij

Maos-Wonosobo, Serayu River Valley

1896-1917

126 km

Poerwodadi-Goendih Stoomtram Mij

Purwodadi-Gundih, Central Java

Pasoeroean Stoomtram Mij

Pasuruan area, East Java

1896-1912

32 km

Probolinggo Stoomtram Mij

Probolinggo area, East Java

1897-1912

41 km

Kediri Stoomtram Mij

Kediri-Jombang, East Java

1897-1900

121 km

Malang Stoomtram Mij

Malang area, East Java

1897-1908

85 km

Madoera Stoomtram Mij

Bangkalan-Kalianget, Madura

1898-1913

213 km

1894

(17 km) To sjs

Modjokerto Stoomtram Mij

Mojokerto area, East Java

1898-1907

Babat-Djombang Stoomtram Mij

Babat-Jombang, East Java

1899-1902

(71 km) To ss 1916

Solosche Tramweg Mij

Solo-Boyolali, Central Java

1908-1911

(27 km) To nis

Source: Tim Telaga Bakti Nusantara 1997.

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| Roads to Riches?

78 km

Railway service improved gradually during the first half of the twentieth century. After the opening of new lines, replacement of the 1435 mm gauge with the 1067 mm, and after the ban on running trains at night was lifted in 1912 it was possible to travel from Batavia to Surabaya in 13.5 hours in 1929, gradually reduced to 11 hours and 27 minutes in 1939 (Veenendaal 2004: 77). Figure 4.8 The railway network of Java and Madura, 1899-1925

Source: cei ix 1989: 120-121.

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| Accounting for Services

Figure 4.9 The railway network in Sumatra, 1925

Source: cei ix 1989: 122.

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| Roads to Riches?

Developments in rail transport, 1890-1940

Table 4.9

Java & Madura Track

Outer Islands

Passengers Freight (x1,000) (x1,000 ton)

Track

Passengers (x1,000)

Indonesia Freight (x1000 ton)

Track

Passengers Freight (x1,000) (x1,000 ton)

1890

1,463

14,071

1,208

130

1,386

165

1,593

15,457

1,373

1900

3,183

35,575

3,014

391

2,429

534

3,574

38,004

3,548

1910

4,220

67,459

6,674

925

4,874

960

5,145

72,333

7,634

1920

5,138

165,693

12,157

1,428

15,677

1,986

6,566

181,370

14,143

1930

5,518

117,928

13,108

1,877

15,045

2,718

7,395

132,973

15,826

1939

5,414

76,463

8,014

1,974

11,894

2,767

7,388

88,357

10,781

Source: Author’s calculations from cei ix 1989: table 12.

Table 4.10 Average annual growth of rail transport, 1890-1939 Java & Madura Track

Outer Islands

Passengers Freight

Track

Netherlands-Indies

Passengers Freight

Track

Passengers Freight

1890-1900

7.3

8.8

8.7

10.5

5.2

11.3

7.6

8.5

9.0

1900-1910

2.6

6.0

7.5

8.1

6.5

5.5

3.4

6.0

7.2

1910-1920

1.8

8.5

5.6

4.0

11.2

6.8

2.2

8.7

5.8

1920-1930

0.7

-3.0

0.7

2.5

-0.4

2.9

1.1

-2.8

1.0

1930-1939

-0.2

-4.2

-4.8

0.5

-2.3

0.2

-0.0

-4.0

-3.8

Source: Author’s calculations from cei ix 1989: table 12.

As can be seen in tables 4.9 and 4.10, growth in railway transport was quite impressive between 1890 and 1920. With an average annual growth in passengers of around 8 per cent and a growth in freight of around 7 per cent, railway transport became one of the most important transportation modes, especially in Java. This growth coincided with a significant decrease in transportation costs by rail between 1890 and 1920. If we divide total revenue from passenger transportation and freight respectively by the passenger-kilometres and ton-kilometres and then divide this by a cpi we arrive at a measure of transportation costs in constant prices.10 The results are depicted in figure 4.10. Freight costs and passenger fares were declining between 1890 and 1920. Between 1920 and 1942 prices fluctuated. Apparently, no major technological or institutional changes happened that could further drive down the price of rail transport. Moreover growth in rail transport came to an end, because the introduction of

10 Actual passenger-kilometres and ton-kilometres are not directly available. However, we do have statistics on the number of passengers and volume of freight for Indonesia as a whole. Moreover we know how the average distance travelled by passengers and freight evolved from dsm annual reports. If we multiply these we arrive at estimates of passengerkilometres and ton-kilometres.

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the automobile in Indonesia offered a more comfortable and cheaper alternative to railway transport. Figure 4.10 Rail transport costs, 1890-1957 (constant 1993 prices)

450

1,800

400

1,600

350

1,400

300

1,200 Per ton-km (RHS)

250

1,000

200

800

150

600

100

400

50

Per pax-km (LHS)

200

0

0 1890 1895 1900 1905 1910

1915 1920 1925 1930 1935 1940 1945 1950

1955

Source: Author’s estimations from dsm annual reports.

In his PhD dissertation on the meaning of dsm in the economic development of Sumatra’s Eastcoast, Jacobus Weisfelt states that competition of road transport starting in the early 1920s had significant negative effects on the number of passengers. dsm tried to counter these developments by lowering prices, but without much success (Weisfelt 1972: 96-97). Freight transport by rail was initially less affected by road transport. Bulk transport from the estates in most cases still went by rail. In the case of dsm in Sumatra there was competition from water transport by kpm. But compared to the great number of small road transport firms, kpm was a clear and visible competitor. Neither kpm nor dsm wanted to get involved in fierce competition, and therefore it was decided to share the bulk transport. This explains why prices of freight transport actually increased between 1920 and 1935. Lack of competition and arrangements with possible competitors did not force prices down. Moreover, railway companies in this way could make up for the lower prices for passenger transport due to competition from road transport.

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| Roads to Riches?

But it was not only price competition that was used to secure the position of the railways. Other actions were taken as well, such as the increase in the number of trains, resulting in more certainty in the availability of transport; an increase in the number of stops; less rigorous compliance with rules by, for example, allowing passengers to carry excess luggage (Weisfelt 1972: 99). Similar developments were found in Java. During the 1920s annual reports of the different railway companies all show declining income from passenger transport, which is offset by an improvement in the volume of freight transport mostly due to the good agricultural production in this period (Haarman 1930: 205). The decline in income from passenger transport is explicitly attributed to competition from road transport. For 1933 it was estimated that the negative effect on income of the ss due to competition from automobiles was 9.98 million guilders for passenger transport and 3.04 million guilders for freight transport, or 44 per cent of total revenue of the ss (Van Nus 1935: 2).



1945-1965: consolidation and rehabilitation Following Indonesia’s declaration of independence on 17 August, 1945 the Japanese railway administration handed over the railways to Indonesian freedom fighters on 28 September of that year. When the Dutch returned to Indonesia in 1946, the Staatsspoorwegen/Verenigd Spoorwegbedrijf (ss/vs) was created, which comprised not only the former public railway company, but also all private railway companies.11 The only exceptions were the dsm on Sumatra, which remained a private company until its nationalisation in 1959, and the Bataviasche Verkeers Maatschappij, who offered only local transport in Jakarta and its surroundings. Later the ss/vs became the Djawatan Kereta Api (dka). At the transfer of sovereignty the railways were in an appalling state. Years of neglect and war had resulted in destruction of and damage to the rolling stock, track and other structures. The railways required subsidies to keep operating, many lines could not be run at a profit, obtaining sufficient spare parts for locomotives was a major problem and the track conditions were deplorable.12 Despite these problems rail transport slowly recovered in 1950s. The number of passengers rose substantially from 51 million in 1948 to 158 million in 1960. This volume of passenger transport was similar to the record level in the 1920s. Freight increased from nearly 3.5 million ton in 1948 to 6.5 million ton in 1960. Dick and Forbes (1992: 261) even state that for intercity travel, rail was at the time the fastest and most reliable means of land transport. By 1965 not only were more passengers carried than in the colonial period, the average distance travelled had increased from 20 kilometres to nearly 60 kilometres

11 Both ss/vs and dka made payments to the shareholders of the private corporations for the use of their property (Sutter 1959: 903). 12 See for example Bank Indonesia, annual report, 1957/58: 155-156.

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| Accounting for Services

per passenger. At the same time developments in freight stayed behind. Rail freight succumbed to road competition. Dick (2000) attributes this to massive pilferage and to the fact that transportation by rail requires feeders and transhipment costs at both end of the journey. These developments are illustrated in figure 4.11.

Table 4.11 Developments in rail transport, 1949-2000 Passengers



Freight

Number

Pax-km

Ton

Ton-km (x million)

(x1,000)

(x million)

(x1,000)

1949

65,014

1,532

4,976

434

1960

158,000

-

6,564

1,159

1965

125,000

7,322

4,397

973

1970

50,000

3,378

3,958

855

1980

41,754

6,089

4,859

961

1990

58,212

9,290

12,537

3,190

2000

191,600

19,228

19,544

5,009

Note: Pax-km is an abbreviation for passenger-kilometres. Source: Statistical Yearbook Indonesia, various issues.



Figure 4.11 Developments in numbers of passengers and freight carried by rail, 1890-2000

250,000

25,.000

200,000

20,000 Freight (RHS)

Passengers (LHS) 150,000

15,000

100,000

10,000

50,000

5,.000

0

0 1890

1900

1910

1920

1930

1940

Passengers (x1,000)

1950

1960

Freight (x1,000)

Source: cei ix 1989, and Statistical Yearbook of Indonesia, various issues.

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| Roads to Riches?

1970

1980

1990

2000



1965-2000: losing ground In 1963 all public railways in Indonesia were unified under a new administration, Perusahaan Negara Kereta Api (pnka). In 1973 the pnka was renamed pjka (Perusahaan Jawatan Kereta Api). Dieselisation and the abandonment of most unprofitable lines improved pjka’s financial position, but it continued to require subsidies from the government.

Figure 4.12 Developments in passenger-kilometres and ton-kilometres, 1890-1900 25,000

6,000

5,000

20,000 ton-km (RHS)

4,000 15,000 3,000 10,000 2,000 5,000

pax-km (LHS)

0

1,000

0 1890

1900

1910

1920

1930

1940

Passenger-km (x million)

1950

1960

1970

1980

1990

2000

Ton-km (x million)

Source: Author’s calculations from cei ix 1989, dsm annual reports, and Statistical Yearbook of Indonesia.

These organisational changes could not prevent rail transport experiencing a significant decline during the 1970s. In this period tramway lines were abandoned, as they were no longer economically viable. By the mid-1970s, in the face of vigorous bus competition, passenger traffic had collapsed to only 22 million.13 The rehabilitation of Jakarta’s metropolitan network and the introduction of fast intercity trains eventually helped to revive passenger transport from 58.2 million in 1990 to 191.6 million in 2000. Dick states that this is ‘impressive enough by pre-war standards,

13 Bank Indonesia, annual report, 1976/77: 121.

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but at [current levels] of population and mobility [it is] no more than a niche operation’ (Dick 2000: 195). One important point is not yet accounted for: the significant increase in average distance travelled. In 1939 the average distance travelled by a passenger was around 30 kilometres. This steadily increased after independence to almost 160 kilometres in 1990. Thus, although fewer passengers were carried, they travelled longer distances resulting in a significant increase in passenger-kilometres as can be seen in figures 4.11 and 4.12. This reflects a shift in preference. For shorter distances transport by road is preferred, while rail is considered more convenient for long-distance travel. In conclusion, developments in the Indonesian railways sector were impressive in the first decades of the twentieth century. In this period rail transport played a significant and increasingly important role in carrying both freight and passengers, although this was largely confined to Java. This period is also characterised by a large drop in railway transportation costs, which can function as a catalyst of economic growth. After 1920 rail transport lost ground, mainly due to competition with road transport. Prices rose again and we see a drop in both passengers and freight transport by rail in the 1930s.

Figure 4.13 Rail transport costs in constant prices, 1890-2000

1890







121

1900

1910

1920

1930

1939

1971

1975

1980

1985

1990

1995

2000

Note: Costs are obtained by dividing total output by a volume index and the cpi, and then standardising this to 100 in 1990. Source: Author’s calculations.

| Roads to Riches?

After independence passenger transport picked up again, but freight transport lagged behind. From the early 1980s the number of passengers and the amount of freight carried by the railway sector increased sharply. Combined with the larger distances travelled this resulted in a moderate revival of rail transport. Taking into account the increase in population and in economic activities in other sectors, it seems fair to conclude that today rail transport plays only a marginal role in Indonesia. This also becomes evident if we look at the contribution of railway transport to gdp. As we saw in chapter 3 this was at its peak in the 1920s with more than 3 per cent. In 2000 railways only contributed 0.2 per cent to the gdp. At the same time railway transportation costs have decreased significantly after independence and contributed to economic development in the way discussed in the paragraph above on the theoretical framework.

4.3.3

Road transport 1900-1940: paving the way to development Road developments actually started in the nineteenth century. The most important initiative in this respect was the construction of the Grote Postweg (Great Mail Road) by Governor-General Daendels in 1808. By 1892 the road system in Java comprised approximately 20,000 kilometres. Between 1892 and 1938 the total length of roads in Java increased to only about 27,000 kilometres. The slow growth in building new roads can be explained by the emphasis in the first half of the twentieth century on the improvement of existing roads. During the 1920s a start was made with asphalting, and by 1938 about 32 per cent of the roads were asphalted (cei ix 1989: 26-27). In the Outer Islands developments were slower and were much more fragmented than in Java. Between 1892 and 1938 the length of roads in the Outer Islands increased from 11,000 to 42,000 kilometres, of which approximately 9 per cent was asphalted in 1938. To put these numbers in perspective, the Outer Islands comprise 94 per cent of Indonesia’s total land area, whereas Java and Madura only make up 6 per cent. cei ix (1989) gives some figures about traditional road transport in Java and Madura around 1900. According to this publication the number of passenger vehicles increased to 43,000 and the number of goods vehicles to 113,000. The construction of railways meant that, as noted in the previous section, traditional road transport started to concentrate on short-distance transport, while long-distance transport went by rail. For the period after 1900 hardly any figures on traditional road transport are available. Most probably, traditional means of transport experienced some competition from motorised road transport, but at the same time urbanisation could have increased demand for short-distance transportation and thus for traditional modes of transport. Although there are some accounts of people having a car in the NetherlandsIndies as early as 1890, motorised transport only took hold from 1910 onwards

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(Djojosoemarman 1941: 606). In 1910 there were approximately 1,000 motor vehicles in Java. From 1925 to 1940 the number of passenger cars rose by an annual average of 2.5 per cent and buses and trucks by a staggering 25.1 per cent (cei ix 1989: 28). Strikingly, the increase in buses and trucks is not evenly distributed between Java and the Outer Islands. This category increased significantly in importance relatively to Java in the Outer Islands. cei ix attributes this to the complete or partial lack of rail systems in the Outer Islands (cei ix 1989: 28). This argument is also made by Orrt in his survey of road transport in the early 1930s (Orrt 1933: 489).



1945-1965: severe infrastructural damage In Indonesia the road network severely deteriorated between 1939 and 1959 (Leinbach 1986: 193; Leinbach and Chia 1989: 66). Not only were roads vulnerable to rapid deterioration from monsoon rains, but bridges were not rebuilt and roads were reclaimed by the rainforest. The lack of repair and maintenance had devastating consequences for road transport. Most of the deterioration took place during the Japanese occupation and Indonesian revolution. Growth rates from 1950 onwards look quite impressive, but this is only because the road system had to start from a very low level. In 1949, for example, the number of passenger cars was only onethird of what it had been in 1939; the total number of cars had been reduced to half during the same period. At the end of the Old Order, the road transport system of Indonesia was still in a deplorable state. In 1967 less than 20 per cent of the length of national roads and only 15 per cent of provincial roads was assessed as being in good condition. Of the local roads, which constituted 60 per cent of all roads, none was reckoned to be in good condition (Dick and Forbes 1992: 260). This meant that transportation between villages and market towns was difficult, and sometimes, especially in the wet season, impossible. Dick and Forbes continue: ‘Journeys were slow because of the need to weave between potholes, cross temporary bridges, and, in the wet season, plough through mud’ (p. 261).



Table 4.12 Road conditions, 1967 Roads maintained by government:

Good

20%

Fair

29%

Bad

43%

Very bad Provincial roads:

Good

123



35%

Bad

41%

Source: Bank Indonesia, annual report, 1966/67: 271.

| Roads to Riches?

15%

Fair Very bad

8%

9%

The poor condition of the roads is further illustrated if we look at the plans laid out by the government for the improvement and extension of the network. In 1957 it was estimated that the length of roads had to be extended by 100%, and that modernisation and improvement were needed for most of the roads. The projected costs were 120 billion rupiah (see table 4.13). Table 4.13

Road development plan, 1957

Sumatra Kalimantan

Total length of road system

Road extension

Length of roads to be modernised/improved

Estimated costs in million rupiah

27,860

28,000

28,000

49,000

4,280

18,000

4,000

21,000

East Indonesia

16,180

17,000

16,000

29,000

Java

29,280

12,000

12,000

21,000

Indonesia

77,600

75,000

60,000

120,000

Source: Bank Indonesia, annual report 1957/58: 204.



1965-2000: rehabilitation and growth During the New Order investments in road transport were significant. About 55 per cent of expenditure in transport had been allocated for the development and maintenance of the road system (Leinbach 1986: 196; Dick and Forbes 1992: 264). This high proportion reflects both the size of the task of repairing the road network and the importance of it: the restoration of commerce was believed to depend essentially on improvements in the transport system (Leinbach 1986). Initial investments were directed at emergency repairs in West and South Sumatra as well as in East and West Java (Leinbach 1989: 469). In the 1970s the total number of motor vehicles increased from 0.8 million to 3.9 million, an average annual growth of 15.4 per cent. In the 1980s growth was 7.9 per cent. This trend was dominated by motorcycles, whose share rose to 70 per cent of all motor vehicles. The regional distribution of vehicles in 1968 and 1986 had been fairly stable, with Java accounting for a little more than 75 per cent of all automobiles. Some of the rapid growth in vehicle numbers is due to road improvements. The length of roads increased between 1968 and 1985 by some 2.5 times, and between 1985 and 2000 by about 1.7 times. In the late 1970s Indonesia was still well behind comparable countries, such as India, which had three times the road length per capita and almost eight times as much road per unit of area (Dick and Forbes 1992: 267). Probably more important has been the improvement in the condition of roads. The proportion of asphalted roads rose from 24 per cent in 1970 to 41 per cent in 1985 and 57 per cent in 2000.

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Table 4.14

Average annual growth in motor vehicles, 1949-2000 Cars

Trucks

Buses

Motor cycle

Total

Total excl. Motorcycles

1949-1965

14.1

10.3

11.7

26.0

15.9

12.5

1965-1970

6.3

3.4

4.6

11.1

8.2

5.3

1970-1980

9.4

15.0

12.5

17.8

15.4

11.4

1980-1990

6.8

7.3

16.6

7.8

7.9

8.0

1990-2000

7.9

4.8

3.3

7.6

7.1

6.2

1990-1997

9.1

5.3

3.4

8.6

8.1

6.9

Source: Statistical Yearbook of Indonesia, various issues.

Table 4.15

Number of vehicles per 1,000 inhabitants, 1950-2000 Cars

Trucks

Buses

Motorcycle

Total

Total excl. Motorcycles

1950

0.28

0.22

0.07

0.07

0.65

0.58

1960

1.08

0.79

0.19

1.40

3.47

2.06

1970

2.06

0.88

0.20

3.79

6.94

3.14

1980

4.34

3.21

0.59

18.12

26.25

8.13

1990

7.33

5.71

2.61

33.94

49.59

15.65

2000

14.41

8.10

3.16

64.32

89.98

25.67

Source: Number of vehicles see appendix, population: Maddison 2003.

Table 4.16 Average annual growth in length of road, 1959-2000 Asphalted

Non-asphalted

Total

1959-1965

6.33%

1.82%

0.70%

1965-1970

-0.35%

0.41%

0.21%

1970-1980

10.22%

5.16%

5.15%

1980-1990

7.36%

5.72%

6.36%

1990-2000

4.13%

-0.15%

1.92%

1990-1997

5.01%

-0.61%

2.12%

Source: Statistical Yearbook of Indonesia, various issues.

Table 4.17

Length of road per 1,000 inhabitants, 1954-2000 Asphalted

Non-asphalted

1954

0.17

0.41

Total 0.58

1960

0.14

0.39

0.83 0.79

1965

0.20

0.40

1970

0.18

0.37

0.73

1980

0.40

0.51

0.99

1990

0.73

0.77

1.61

2000

0.96

0.65

1.69

Source: For length of road, see appendix; for population: Maddison 2003.

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| Roads to Riches?

Due to lack of data it is much more difficult to estimate developments in the costs of road transport than in the other transport sectors. Some scattered sources do allow a very rough estimate, though. To begin with, Meijer (1987: 43) states that transporting a ton of rice from Belawan to Medan by dogcart, covering a distance of 21 kilometres, cost 8 guilders around 1890. Transportation of a ton of tobacco over the same distance was estimated at 10 guilders. This implies a rate between 0.38 and 0.48 guilders per ton-kilometre. In a report on the automobile service of the nism, Van den Broeke (1920) gives figures for revenue from freight transport and the number of ton-kilometres served in 1918. These were respectively 7,856 and 18,433 guilders, implying the revenue per ton-kilometre to be 0.43 guilders. For the years 1968 and 1969 we can rely on data collected by Mudge (1972: 185). He found that average freight rates in ton-kilometres for both intra- and inter-provincial transport were Rp. 7.46 and Rp. 8.73 respectively. In a comparison between freight transport in Tanzania and Indonesia, Hine et al. (1997) estimated the average rate per ton-kilometre for 3-axle trucks to be Rp. 70 in 1995. If we, as before, divide these numbers by the cpi (Van der Eng 2002), we arrive at estimates for the costs of road transport for 5 benchmark years (figure 4.14).

Figure 4.14 Development of road transport costs, 1890-1995 (1993 constant prices)

3,722.5

2,211.3

1890

126



1918

Source: See text.

| Accounting for Services

134.1

134.4

63.2

1968

1969

1995

The results illustrate the impact of the introduction of the car. In 1918 transportation by car was not yet widely available and still a costly mode of transport, although it was already significantly cheaper than transportation by dogcart at the end of the nineteenth century. In 1968 road transportation costs were only 5 per cent of those in 1918. Between 1968 and 1995 freight costs per ton-kilometre fell again by 50 per cent, due to the repair and extension of the road network. Developments in road transport have clearly reduced costs and have had great impact on the integration and specialisation of different regions and thus on economic development in Indonesia.

4.3.4

Air transport



1928-1945: introduction of a new technology While the first successful flight with an airplane in Indonesia took place in 1911, it was only in 1928 that an airline company in colonial Indonesia was set up, the Koninklijke Nederlandsch-Indische Luchtvaart Maatschappij (Royal NetherlandsIndies Airlines, knilm). Initially knilm offered services between the main cities in Java. In 1930 it opened a scheduled service to Singapore. knilm’s activities grew steadily. The annual number of passenger kilometres grew from 3.2 million in 1930 to 10.0 million in 1939 or 12.2 per cent on average per year. The growth in the number of passengers was less impressive, from 13,984 in 1930 to 18,792 in 1939. This means that the growth in passenger-kilometres was mainly due to the longer distances travelled by passengers. In the early years freight played only a marginal role in air transport.

Table 4.18

Air transport developments in Indonesia, 1930-2000 Growth in Pax-km

1930-1939

12.2%

Growth in Ton-km

Average load factor, pax

Average load factor, freight

5.8%

x

x

1948-1970

9.7%

x

x

x

1970-1980

18.8%

18.5%

53.8%

49.5%

1980-1990

7.9%

9.6%

54.4%

48.7%

1990-2000

1.4%

0.5%

59.5%

47.6%

1990-1997

7.1%

6.8%

57.4%

47.3%

Source: Author’s calculations from knilm, annual reports and bps, Statistical Yearbook of Indonesia various issues.



1945-1965: a relatively smooth transition Indonesia’s national airline, Garuda Indonesian Airways (gia), was founded in 1949. On 28 December 1949 President Sukarno was a passenger on the company’s first flight, from Yogyakarta to Jakarta (Sutter 1959: 892). In 1950 the 40-year monopoly concession that had been granted to the knilm in 1940 was replaced. In

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| Roads to Riches?

this new concession monopoly rights were granted to Garuda, which was set up as a joint venture between the Indonesian government and the klm. Initially the Indonesian government held 51 per cent of the shares. For the first ten years the Royal Dutch Airline, klm, would manage the new corporation. klm made serious work of this by both making its own personnel immediately available and at the same time beginning intensive training of Indonesians so that they could gradually take over the service. According to Sutter, when, on 31 March 1950, Garuda was officially incorporated it ‘sprang full-blown into the air with a fleet of 27 airplanes, trained personnel, airports, and scheduled flights, with the usual pioneering hardships of any airline having been borne by the predecessors’ (Sutter 1959: 893). In this way a vacuum in air transport after the transfer of sovereignty was avoided. There was some discontent with this construction, however. Many nationalists were dissatisfied with the Dutch hegemony in the company’s management and this issue was repeatedly discussed in parliament (Sutter 1959: 893). In order to resolve this issue, the Indonesian government continued to make plans for earlier nationalisation. klm sold its shares in 1954 to the Indonesian government, but continued to provide technical assistance until 1958. The period 1945-1965 shows a growth in number of passenger carried from 284,000 in 1952 to 433,000 in 1965. Meanwhile passenger-kilometres rose from 159 million to 537 million or 9.1 per cent annually. Air transport seems to be the only transportation sector which was not negatively affected during the Old Order, although it is hard to tell if growth had been higher under a different scenario.



1965-2000: air transport revolution Air transport really took off in the 1970s. With an average annual growth of more than 18 per cent both in passenger-kilometres and ton-kilometres, one could speak of an air transport revolution. In the 1980s growth was moderate compared to earlier periods, but still significant with almost 8 per cent annually for passengers and nearly 10 per cent for freight. This growth path more or less continued until the Asian crisis in 1997. Air transport was severely hit by this crisis. Between 1997 and 1999 both passenger-kilometres and ton-kilometres halved. It is interesting to see that this did not affect the load factor. Apparently, airlines cut back on (unprofitable) routes. Moreover, since 2000 a spectacular growth in air transport can be seen due to the proliferation of low-cost carriers. Overall we see that air transport has grown impressively since its introduction in the late 1920s. This is also reflected in the costs of air transportation in constant prices. As we can see from figure 4.15, prices have declined significantly since the beginning of operations. The Asian crisis caused a major, but temporary, setback. Since the fall of Suharto new airlines have mushroomed. While before 1999 there were five scheduled carriers and a few charter operators, in 2004 there were 23 scheduled airlines operating, and 37 licenses had been issued. Air transport is growing rapidly, with the number of air travellers doubling every three years. In

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2003, 16 million trips were taken, compared with 6.6 million in 1999.14 Apparently, the lack of technological and organisational innovations has put pressure on the costs.

Figure 4.15 Air transport costs in constant 1993 prices, 1930-2000

1930







4.4

1939

1971

1975

1980

1985

1990

1995

2000

Note: Figures are arrived at by dividing revenue by an unweighted volume index of both passengers kilometres and ton-kilometres. This outcome is divided by the cpi and then standardised to 100 in 1990. Source: Author’s calculations.

Concluding remarks The existence of a developed transportation network is a necessary but not sufficient condition for economic growth. It is often termed indispensable for economic growth. In section 4.2 a theoretical foundation for this claim was laid. It was shown that efficient transportation systems have significant effects on economic welfare and economic growth. Cheap and reliable transportation modes enable local specialisation, higher producer prices, lower producer costs and higher productivity, or in Fogel’s terms ‘Social Savings’. If we look at developments of the transportation sector in Indonesia we can distinguish three phases. The first phase was from 1900 until 1940, under Dutch

14 http://go.worldbank.org/PF2AFG64V0 accessed 21 January 2008.

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| Roads to Riches?

colonial rule. During this period a relatively efficient transportation network was constructed. During the first two decades of the twentieth century in particular railways played an important role, although this was largely confined to Java. In this period kpm was important for state formation (À Campo 1992) and succeeded in offering reliable and safe transport over water. From a welfare perspective it can be argued that kpm’s monopoly was not optimal, but at the same time the larger profits made on trunk lines enabled kpm to cross-subsidise less-profitable routes, thus creating both a politically and economically integrated colony. From the 1920s onwards road transport gained significance. The introduction of automobiles, trucks and buses made it possible to move passengers and goods without additional feeder services. Railway transport was especially negatively affected by these developments. Growth stagnated and the railway sector did not really recover until the late 1980s. In 1928 the first airline was established in Indonesia, but its contribution remained marginal during the colonial period. The second phase, from the Japanese invasion in 1942 until the fall of the Sukarno government in 1966, was largely characterised by infrastructural and institutional damage. On-going competition and struggle between kpm and the Indonesian state-owned shipping company pelni escalated into the expulsion of kpm in 1957. Although the problems of capacity were rapidly solved, organisational problems harmed the water transport sector. Over-capacity, unreliable schedules and other inefficiencies negatively affected not only growth in this sector, but also that of the economy as a whole. At the same time railways and roads were severely neglected. Only developments in air transport were satisfying. The third phase is the New Order period from 1966 until Asian crisis in the late 1990s. Significant investments in roads, the re-organisation and deregulation of the water transport sector, and repair of the railways combined with continuing growth in air transport caused what Dick and Forbes (1992) call ‘a quiet revolution’. During the twentieth century we also see a significant decrease in transportation costs, which means that important social savings have been made (Fogel), consumer and producer surplus have increased (Spatial Price Equilibrium Model) and that lower producer costs and higher producer prices combined with economies of scale have led to higher productivity. In conclusion, the Dutch paved the way for developments in the transportation sector, but growth was delayed during the Old Order. Since the 1970s, however, Indonesia has accelerated along this growth path. Nevertheless, there is potential for further growth in the transportation sector and consequently in the Indonesian economy as a whole. Most developments have been biased towards Java and, to a lesser extent, towards Bali and Sumatra. Especially in the Outer Islands but also in Java and Madura transportation networks are still considerably less efficient than in Western countries. Moreover, other problems have risen, such as severe traffic congestion in Java. If such problems can be overcome in the future, prices may decrease and the transport sector may serve as a catalyst of economic growth.

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5

INVOLUTION AND GROWTH



The ambiguous role of the trade sector in the economic developmentof Indonesia

5.1

Introduction A widely held belief in economics is that openness to trade accelerates economic development. Classic economic treatises by luminaries such as Adam Smith and David Ricardo showed early on the potential gains of trading between nations. For elaborations of these theories, Paul Samuelson and Bertil Ohlin were rewarded the Nobel Prize in Economic Sciences in 1970 and 1977 respectively. Nevertheless, strong critics of globalisation continue to exist. Those opponents argue that trade accentuates and deepens poverty, both in rich and in poor countries. Advocates of globalisation, however, claim that trade promotes growth, and in turn growth reduces poverty (Bhagwati and Srinivasan 2002). Much of the evidence in support of and against globalisation has been based on cross-country growth regressions. Srinivasan and Bhagwati argue that ‘In fact, while such regressions can be suggestive of new hypotheses and be valuable aids in thinking about the issue at hand, we would reiterate that great caution is needed in using them at all as plausible “scientific” support’ (Srinivasan and Bhagwati 1999: 38). Therefore they call for nuanced and in-depth studies to get a better understanding of the relationship between trade and economic development. The case of Indonesia is especially interesting. As Booth argues: ‘Indonesia’s involvement in the world economy did transform the local economies of the producing regions through the provision of infrastructure and the growing demand for inputs and services. And yet, the transformation of Indonesia into an open export-oriented economy in the nineteenth and twentieth centuries did not lead to rapid structural change, and sustained economic development.’ (Booth 1998: 203) This observation points to the ambiguous role that the trade sector has played in the process of economic development in Indonesia. On the one hand, Indonesia’s export orientation has enhanced economic growth in some periods, but failed to do so in other periods. At the same time, domestic dynamics transformed the sector from one in which the happy few reaped the benefits to one of last resort. Numerous

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| Involution and Growth

workers who were pushed out of the agricultural sector and whom manufacturing industries failed to absorb found employment in petty trade, which is characterised by low entry barriers and great flexibility. This happened not only in periods of economic turmoil, as for example in the 1960s and after the Asian crisis in 1997/98, but also in the process of urbanisation. The aim of this chapter is to offer further insights into this ambiguous relationship between the trade sector and economic development in Indonesia. The remainder of this chapter will be organised as follows. The first part of the chapter, section 5.2, treats developments related to foreign trade. It will be shown that openness to trade has been instrumental for Indonesia’s economic development. However, this openness was restricted by protective trade policies in a number of periods, affecting Indonesia’s growth pattern. In section 5.3 another important characteristic of Indonesia’s trade sector will be discussed, namely the declining labour productivity in this sector as a result of the enormous influx of labourers unable to find work elsewhere. It will be argued that this process bears a striking resemblance with Clifford Geertz’s famous theory of agricultural involution (Geertz 1963). Section 5.4 concludes.

5.2

Foreign trade: an engine of growth?

5.2.1

A century of foreign trade Before the first Dutch merchant ships arrived in Java in 1596, foreign trade was already a quite common aspect of the indigenous economy: ‘The Indonesian products – cloves, nutmeg, mace, pepper, sandalwood, sapanwood, gold, tin, precious stones, drugs and medicinal products, and rarities such as birds, tortoise shell, and so forth – were shipped to the north and the west, traded in exchange for Indian and Persian textiles, slaves, money, and uncoined metal, and/or Chinese goods – silk and silk cloth, porcelain, lacquered objects, copperwork, paper, medicinal products, sugar, sumptuous handicraft goods – the largest part of which latter were reshipped to the west from the Indonesian staple ports.’ (Van Leur 1934: 121) In the seventeenth and eighteenth centuries the archipelago’s trade came increasingly under European and especially Dutch control and was organised in their interests (Booth 1989: 67). Initially growth in trade was only limited. Hanson, for instance, shows that Indonesia’s growth rate of per capita export values was substantially lower than that of a number of other countries in Asia, Africa and the Americas between 1860 and 1900 (Hanson 1980: 28). This pattern changed around the turn of the twentieth century. While the last decades of the nineteenth century were characterised by slow growth, import and

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exports rose substantially from the late 1890s until 1913. Among imports, there was a rise in consumer goods in particular. Growth in exports can mainly be attributed to sugar and petroleum products, and to a lesser extent to copra, tobacco and tea. Tin and coffee exports declined significantly due to reduced volumes of exports (cei xiia 1991: 17). Booth argues that increased investment in economic infrastructure combined with higher payments to indigenous workers on sugar estates and rapid growth in the plantation labour force in East Sumatra favoured the domestic economy. She concludes that in this period trade led to a higher rate of growth in the domestic economy than would have occurred with less or no involvement in foreign trade (Booth 1990: 289). As a result of the First World War the nominal value of trade rose sharply. This was mainly due to price rises, while increases in volume lagged behind. The total value of trade reached a peak in 1920. During the 1920s the volume of exports grew significantly, but declining prices resulted in lower trade values. The Depression of the 1930s severely affected Indonesia. Both imports and exports declined steadily between 1929 and 1934. After the depreciation of the guilder in 1936, levels picked up, rising up to 1940. Figure 5.1

Foreign trade values in Indonesia, 1900-2003 (in constant 1993 rupiah)

1,000,000

100,000

10,000

1,000

100

10

1 1900

1910

1920

1930

1940

1950

Exports

1960

1970

1980

1990

2000

Imports

Note and sources: Trade figures are taken from cei xiia 1991 and bps, Statistik Indonesia, various issues. These are deflated by linking the following price indices: the export price index for 1900-1940 from van Ark 1988; the import price index for 1913-1939 from cei xiia 1991; the import and export price indices for 1950-1970 from Rosendale 1975; and the linked implicit price indices for 1970-2003 from the national accounts.

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| Involution and Growth

There was some growth in export volume in the early 1950s above the level achieved in the late 1930s (Booth 1998: 205). However, compared to the dramatic expansion of world trade that occurred in the 1950s and 1960s, Indonesia’s trade performance was disappointing. Whereas world trade grew by about 7 per cent per annum between 1953 and 1966, Indonesian export volume grew by less than 1 per cent per annum (Hanson 1980: 14). Only in the latter part of the 1960s did Indonesia’s trade performance improve. Since 1958 foreign trade had been tightly controlled by the state. Exports levels had to be approved and originated from state enterprises, while imports required licences that were held by state trading companies. After the regime change, the New Order government took substantive liberalisation measures to bring the economy on a growth path. These measures also included the trade sector. The liberalisation measures resulted in a dramatic increase in foreign trade as a percentage of gdp. Starting at only 14 per cent in 1965, this proportion increased to more than 20 per cent in 1970, and then more than doubled to 46.8 per cent in 1980. In 1990 the total trade as percentage of gdp reached 54.7 per cent, even rising to over 70 per cent in 2000 (figure 5.2). Figure 5.2

Indonesia’s openness to foreign trade, 1900-2000

0,40 0,35 0,30 0,25 0,20 0,15 0,10 0,05 0 1900

1910

1920

1930

1940

1950

Exports/GDP

1960

1970

1980

1990

2000

Imports/GDP

Note: 5-year moving averages. Source: Import and export figures: see figure 5.1; gdp figures calculated in current prices from Van der Eng 2002.

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| Accounting for Services

In real terms, the value of Indonesia’s export increased substantially during the 1970s and remained stable during the 1980s. However, there was a radical change in the composition of exports. Prior to 1973 Indonesia’s exports were dominated by non-fuel primary products. Within the agricultural sector, natural rubber, coffee, tea, palm oil and timber were traditionally dominant, accounting for about 45 per cent of total export earnings in 1970. The share of crude petroleum exports was still modest being one-third of the total. The performance of manufactured exports was limited in the 1970s with an average share of 12 per cent, because industrialisation was not yet underway and trade policies were pursued that favoured import substitution. After the boom in oil prices starting in 1973, the share of fuels in total exports increased dramatically and reached a peak in 1982 with a share of more than 80 per cent of total export earnings. The improvement in Indonesia’s export performance during the 1970s was not only due to the favourable export prices, but also to policy reforms introduced by the government. In 1978 the rupiah was devalued from Rp. 415 to Rp. 625 per us$. In the same year the government issued a Certificate Export system under which export subsidies were granted to offset tariffs and taxes on imported inputs and the high costs of domestic inputs. The ban on the exportation of logs was introduced in 1980 to encourage investment in processing industries, especially plywood mills. In response to the collapse of the oil prices in the early 1980s and the consequent need to boost earnings from non-oil exports, the government introduced a number of trade policy reforms. The rupiah was devalued again in 1983 by 28 per cent (from Rp. 703 to Rp. 970 per us$) and again in 1986 by 31 per cent (from Rp. 1,134 to Rp. 1,664 per us$). Since then the rupiah has been allowed to depreciate slowly but predictably against the dollar. Moreover, the government introduced a duty drawback program in 1986 to replace the export certificate system. In this new system, producer exporters who exported 85 per cent or more of their total production were granted import inputs free of restrictions and were exempted from import duties (Dick 2002: 212; Prawiro 1998: 269). In addition, regulatory restrictions for exporters were reduced in 1987 and an export ban on raw and semi-processed rattan was imposed in 1988. All these policies resulted in structural changes in Indonesia’s exports. The total value of Indonesia’s exports showed a slow increase during the 1980s, but its composition changed significantly. A large portion of the exports of traditional commodities has changed from primary products to manufactured exports. The share of the agricultural sector in total exports dropped from 48 per cent in 1970 to 11.6 per cent in 1990. Exports of minerals also declined after reaching a peak of 80 per cent of the total in 1982. Its share decreased to about 40 per cent in 1990. Exports of manufacturing goods, on the other hand, grew rapidly. Their share in total exports increased from 14 per cent in 1980 to more than 47 per cent in 1990. From 1987, non-fuel exports have surpassed those of oil and gas. Hill even labels this rise in exports of manufactures ‘a watershed in Indonesia’s modern economic development’ (Hill 2000: 84).

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Exports of manufactured goods consisted mainly of resource-intensive and labour-intensive goods that were consistent with Indonesia’s comparative advantage (Hill 2000: 83). Around 45 per cent of the total manufacturing exports were in resource-based manufacturers and 40 per cent concentrated in the labour-intensive sector. The remaining share comprised the capital-intensive goods. Imports are commonly divided into three categories, consumer goods, raw materials and capital goods. Since 1970 the share of consumer goods in total imports has declined significantly, from about 25 per cent in 1970 to only 4 per cent in 1990 and rising again to 8.6 per cent in 2000. This decrease was partly due to the increased self-sufficiency in food production that was achieved in the mid-1980s (Hutabarat 1992: 93). Table 5.1

Composition of imports into Indonesia by economic categories, 1950-2000 (in current million us$) Consumer goods Value

Raw materials and auxiliary goods

%

Value

%

Capital goods Value

Total

%

1950

191.9

43.7

170.6

38.9

76.5

17.4

1955

190.6

30.2

335.4

53.1

105.1

16.7

439.0 631.1

1960

214.5

37.1

236.3

40.9

126.9

22.0

577.7

1965

230.8

33.2

243.0

35.0

220.9

31.8

694.7

1970

251.1

25.1

376.5

37.6

373.9

37.3

1,001.5

1975

677.5

14.2

1,961.1

41.1

2,131.2

44.7

4,769.8

1980

1,543.4

14.2

4,807.6

44.4

4,483.4

41.4

10,834.4

1980a

1,414.4

13.1

7,931.6

73.2

1,488.4

13.7

10,834.4

1985a

380.5

3.7

8,159.9

79.5

1,718.7

16.8

10,259.1

1990a

876.9

4.0

14,893.1

68.2

6,067.0

27.8

21,837.0

1995a

2,350.4

5.8

29,586.6

72.8

8,691.7

21.4

40,628.7

2000a

2,718.7

8.1

26,018.7

77.6

4,777.4

14.3

33,514.8

Compound annual growth rate: 1950-1960

1.1%

3.3%

5.2%

1960-1970

1.6%

4.8%

11.4%

2.8% 5.7%

1970-1980

19.9%

29.0%

28.2%

26.9%

1980-1990

-4.7%

6.5%

15.1%

7.3%

1990-2000

12.0%

5.7%

-2.4%

4.4%

Note: a: In the early 1980s the classification of imports was revised. This is not accounted for in the timeseries published by bps. After the revision intermediate goods are defined to include all food and beverages intended mainly for industry (such as wheat for the domestic flour milling industry), all fuels and lubricants except those intended for direct household consumption, and all industrial supplies and parts and accessories for capital goods. This meant that many imports that were previously classified as capital goods were now re-classified as raw materials (see also Sundrum 1986: 52-53). Source: bps, Statistik Indonesia, various issues.

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| Accounting for Services

Rice imports had become a large portion of the country’s imports during the 1970s and the early 1980s. In 1980 the imports of rice amounted to 2 million tons with a value of nearly us$ 700 million, about half of the total consumer goods imports (Suprapto 1995: 70). This made Indonesia the largest rice-importing country in the world. The fact that Indonesia achieved self-sufficiency in rice in the mid-1980s explains the steep drop in imports of consumer goods. This decline, however, was offset by an increase in the share of raw material goods and capital goods. The share of raw materials and capital goods amounted to about three-quarters of total import value in 1970 and increased to 96 per cent in 1990. Raw material imports consist mainly of chemicals, spare parts, fuel and lubricants. The major components of capital goods imports include transport equipment, passenger cars, and other machinery. Imports of these goods fluctuated from year to year but showed a tendency to increase. During the 1970s and the early 1980s, the value of raw materials and capital goods imports grew consistently. A massive increase in import-substitution industrialisation of final consumer goods was responsible for this surge in imports. Between 1980 and 1985, especially after the collapse of the oil prices, the value of imports declined. During this period the government issued austerity programs under which a large number of import-intensive projects were postponed and rephased. It was only after 1986, when the oil price declined sharply, that rapid growth in investment and production occurred. This resulted in a rapid growth in imports of raw materials and capital goods between 1985 and 1995. The Asian crisis pushed down imports of both raw materials and auxiliary and capital goods, while imports of consumer goods grew slightly. This decline in imports of productive goods had negative effects on Indonesia’s productive capacity (Ishihara and Marks 2005).

5.2.2

Changes in the direction of trade: regionalisation of trade Significant changes have occurred in the direction of foreign trade during the twentieth century. Whereas around 1900 38.1 per cent of all exports from the NetherlandsIndies were shipped to the Netherlands and 35.5 per cent of all imports originated there, by 1939 these figures had dropped to 14.6 per cent and 20.8 per cent respectively. In this period Europe as a whole lost ground as trading partner, especially to the United States. Booth attributes this increase in the American share of Indonesian imports partly to improved trans-Pacific shipping routes, but also to the fact that income growth and industrial development in Indonesia created a growing demand for both capital and consumer goods produced in the usa (Booth 1998: 209). In Asia initially Singapore and the Malay peninsula were by far the most important markets for Indonesia’s exports and source of imports. After 1920 on the import side this role was taken over by Japan. By 1939 Japan’s share of Indonesian imports accounted for 17.8 per cent of the total and more than 50 per cent of the imports from Asian countries as a whole. This was mainly due to the fact that Japan could manufacture relatively cheaply a range of consumer goods such as cotton cloth,

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| Involution and Growth

household utensils and bicycles which were demanded by those benefiting from the growing economy. Moreover, Japanese imports into the Netherlands-Indies profited from a cheap yen due to depreciation of the yen and the adherence of the guilder to the gold standard. Table 5.2

Exports from the Netherlands-Indies by destination, 1900-1939 1900

1910

1920

1930

1939

35.3%

46.4%

38.8%

49.3%

34.8%

- China, Hong Kong, Macao

7.8%

8.4%

7.4%

8.2%

3.1%

- India (incl. Ceylon)

0.4%

13.1%

9.6%

11.5%

4.2%

- Japan (incl. Formosa)

1.9%

3.8%

6.2%

4.0%

3.4%

- Singapore & Peninsula

25.0%

20.7%

14.8%

23.1%

19.8%

0.2%

0.4%

0.9%

2.6%

4.3%

Asia

- Other Africa

2.9%

4.9%

12.3%

0.7%

4.6%

10.8%

4.6%

13.4%

12.4%

20.9%

2.7%

1.6%

4.5%

2.5%

5.6%

48.2%

39.5%

30.3%

32.7%

27.8%

- uk

4.9%

2.9%

6.4%

8.3%

4.6%

- Netherlands

38.1%

26.9%

15.8%

15.3%

14.6%

5.2%

9.7%

8.1%

9.0%

8.6%

usa Australia Europe

- Rest of Europe Source: cei xiia 1991: 101-103.

Table 5.3

Imports into the Netherlands-Indies by origin, 1900-1939 1900

1910

1920

1930

1939

45.3%

45.2%

34.4%

38.6%

34.3%

- China, Hong Kong, Macao

2.8%

3.8%

3.2%

3.2%

3.5%

- India (incl. Ceylon)

0.6%

11.1%

2.9%

7.1%

3.1%

- Japan (incl. Formosa)

0.2%

1.0%

11.0%

11.3%

17.8%

- Singapore & Peninsula

38.8%

22.6%

11.7%

11.9%

7.8%

- Other

2.9%

6.7%

5.5%

5.0%

2.1%

Africa

0.0%

0.0%

0.1%

0.6%

1.4%

usa

1.5%

1.6%

15.0%

10.6%

14.2%

Australia

1.4%

1.7%

3.5%

2.9%

3.2%

Europe

51.8%

51.5%

46.8%

44.4%

45.4%

- uk

12.7%

12.5%

17.0%

9.9%

7.0%

- Netherlands

35.5%

32.3%

23.9%

18.4%

20.8%

- Rest of Europe

3.6%

6.7%

5.9%

16.1%

17.7%

Asia

Source: cei xiia 1991: 88-90.

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| Accounting for Services

Table 5.4

Exports from Indonesia by destination, 1952-2000 1952

1958

1965

1970

1980

1990

2000

33.5%

48.6%

37.2%

65.0%

66.2%

70.5%

64.7%

- Malaysia

2.7%

4.3%

na

na

0.3%

1.0%

3.2%

- Thailand

na

na

0.5%

0.0%

0.2%

0.7%

1.7%

- Philippines

na

na

2.5%

2.3%

0.8%

0.6%

1.3%

24.7%

26.3%

0.8%

15.5%

11.3%

7.4%

10.6%

na

3.5%

1.2%

1.0%

0.7%

2.4%

2.5%

- Japan

2.7%

1.7%

17.1%

40.8%

49.3%

42.5%

23.2%

- Other (incl. China)

3.5%

12.8%

15.1%

5.4%

3.7%

15.8%

22.3%

Africa

1.0%

0.3%

0.4%

0.1%

0.3%

0.8%

1.8%

25.3%

16.2%

21.3%

13.0%

19.6%

13.1%

13.6%

3.0%

6.4%

7.8%

3.3%

1.5%

1.6%

2.4%

32.8%

25.9%

27.6%

15.7%

7.0%

12.5%

14.8%

2.7%

12.2%

0.8%

1.3%

0.6%

2.0%

2.4%

21.4%

4.0%

12.8%

5.7%

1.9%

2.8%

3.0%

8.7%

9.6%

13.9%

8.7%

4.5%

7.7%

9.4%

Asia

- Singapore - Hong Kong

usa Australia Europe - uk - Netherlands - Rest of Europe

Source: bps, Statistik Indonesia, various issues.

Table 5.5

Imports to Indonesia by origin, 1952-2000 1952

1958

1965

1970

1980

1990

2000

40.4%

46.2%

55.7%

50.2%

63.6%

55.1%

63.9%

- Malaysia

0.2%

0.2%

na

na

0.3%

1.5%

3.4%

- Thailand

na

na

7.5%

1.1%

1.3%

0.8%

3.3%

- Philippines

na

na

na

na

0.8%

0.3%

0.3%

1.8%

1.9%

0.0%

5.7%

8.6%

5.8%

11.3%

na

na

2.0%

2.2%

1.3%

1.3%

1.0%

- Japan

13.5%

12.9%

22.9%

29.4%

31.5%

24.3%

16.1%

- Others (incl. China)

25.0%

31.2%

23.3%

11.8%

19.8%

21.2%

28.5%

1.4%

4.1%

1.0%

2.9%

1.2%

0.8%

2.5%

17.1%

16.2%

9.4%

17.8%

13.0%

11.5%

10.1%

Asia

- Singapore - Hong Kong

Africa usa Australia

1.4%

1.3%

0.5%

2.8%

3.5%

5.4%

5.1%

35.9%

32.1%

31.0%

25.4%

15.9%

22.1%

12.5%

- uk

7.2%

5.1%

3.9%

3.5%

2.4%

2.0%

1.7%

- Netherlands

13.1%

6.2%

3.3%

5.0%

1.1%

2.5%

1.3%

- Rest of Europe

15.6%

20.8%

23.8%

16.9%

12.4%

17.6%

9.6%

Europe

Source: bps, Statistik Indonesia, various issues.

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| Involution and Growth

The decades after independence are characterised by a continuous decline in Europe’s share in Indonesia’s export and import trade, in favour of Asia in particular. In 1990 more than 70 per cent of Indonesian exports went to other parts of Asia, of which Japan alone accounted for over 40 per cent. Booth notes that ‘in 1980 Japan was absorbing a slightly higher proportion of Indonesian exports than had the Netherlands a century earlier’ (Booth 1998: 210). Since the last decade of the twentieth century China gained importance as trading partner for Indonesia. Although China is not separately classified in the statistical yearbooks, the category other Asian countries increased significantly both for imports and for exports. Other important Asian trading partners are South Korea and Taiwan. Economist and Indonesia expert Hal Hill (2000: 85) argues that this re-orientation has not been the result of a conscious commercial strategy, but is due instead to fundamental economic forces. In this respect he lists three factors: 1) the rapid growth of the East Asian region; 2) stronger economic complementarities between low-wage, but resource-rich Indonesia and the resource-poor, high-wage economies of Japan and the Newly Industrialising Economies (nies); and 3) political-institutional changes which have gradually weakened old ties in favour of growing networks based on asean and other regional initiatives.

5.2.3

Trade policy Trade policy and protection are not recent phenomena. The voc imposed import and export duties almost immediately upon arrival in the Netherlands-Indies in the early seventeenth century (cei xiia 1991: 28). During the early decades of the twentieth century duties were in general quite low since the authorities did not want to impose too heavy a burden on the indigenous population. This Liberal Policy, which had its origins in the 1870s, was the result of growing influence of political and economic liberalism in the Netherlands since the 1850s (Fasseur 1978: 157). After the end of the First World War the government was of the opinion that rising costs necessitated an increase in the tax burden. This resulted in a rise of import duties on a number of products, and various hitherto tax-exempted products became dutiable. Protectionist arguments were not yet a real factor and the Netherlands-Indies were considered an open and unprotected economy (cei xiia 1991: 29; Booth 1998: 216). The Depression of the 1930s changed the situation. Now trade policy considerations became more and more important. Protection introduced in 1933 was especially aimed at limiting the influx of cheap Japanese goods, which threatened to displace imports from the Netherlands (Boediono and Pangestu 1986: 2; Booth 1998: 218-222). The main policy instruments at this time were discriminatory tariffs, import quotas and licences, rather than ad valorem tariffs. The policies were effective in raising the share of imports from the West at the expense of Japanese imports.

140

| Accounting for Services

As figure 5.3 shows, after independence trade policy became even more important, especially in increasing tax revenues and allocating scarce foreign resources. The importance of this kind of taxation is illustrated by the fact that government revenue from taxes on trade fluctuated between 32 and 66 per cent of total tax revenue between 1951 and 1957 (Boediono and Pangestu 1986: 3). Following the take-over of Dutch enterprises in 1957, and the subsequent period of ‘Guided Democracy’, trade policies only intensified, with an emphasis on indigenous Indonesian control over all aspects of economic activity. In April 1959 government trading houses obtained monopoly rights to import nine categories of goods which comprised 75 per cent of all imports (Boediono and Pangestu 1986: 5). Private importers could import only non-essential goods and the number of importers was restricted to 400 (Paauw 1963: 212). Moreover, government intervention in the retail trade, which was traditionally handled by Chinese and Indian traders, resulted in disruption in the distribution of goods and a scarcity of most consumer goods. The impact of government intervention in the trade sector is further reflected by the fact that in 1963 and 1964 about 70 per cent of government revenue came from foreign trade taxes (Boediono and Pangestu 1986: 6). This also shows the extreme dependence of government finance on trade taxes.

Figure 5.3 Foreign trade taxes as percentage of total government revenue

60% 50% 40% 30% 20% 10% 0% 1900

1910

1920

1930

1940

1950

1960

1970/71 1980/81 1990/91



Source: 1900-1939: cei ii 1990; 1950-2000: Statistik Indonesia, various issues.

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| Involution and Growth

Thus we can see that during the early 1960s barriers to international trade were extensive. However, as a result of a series of packages introduced by the New Order government, by 1970 many of these barriers had been removed. Most export taxes were reduced, tariffs became the primary instrument of import protection and the tariff structure was simplified (Hill 2000: 114). This leads Hill (2000: 115) to conclude that ‘the late 1960s ushered in a period of economic liberalism in Indonesia’. During the 1970s sentiment changed. Import bans began to re-appear and regulation intensified after the oil boom, mainly to protect non-oil tradable activities. The second oil boom led to further trade restrictions with outright prohibitions and an ‘authorized importer system’ (Tata Niaga Impor). However, the revenue motive of foreign trade regulations was no longer important. The contribution of taxes on trade to total revenue declined from 38.2 per cent in 1968 to only 7.3 per cent in 1982. This fall was mainly due to a significant rise of taxes on oil companies, which provided more than 70 per cent of domestic revenue in 1982 (Boediono and Pangestu 1986: 8). In the mid-1980s trade was still highly regulated. There were extensive restrictions on foreign trade including high tariffs and a multitude of non-tariff import barriers (Bird and Manning 2003: 77). Moreover, import quotas increased mainly to the benefit of cronies close to the ‘first family’ who sought to capture monopoly profits (Basri 2001). When world oil prices fell and slower world economic growth depressed commodity prices in the early 1980s, this also heavily affected Indonesia. Growth slowed, trade and investment fell, debt increased and the government faced a major fiscal challenge because of falling oil revenues. These developments provoked discussion about the ‘high-cost’ economy and the uncompetitive nature of many Indonesian industries. Economists at the University of Indonesia urged extensive deregulation to get the Indonesian economy back on its growth path (Hill 2000: 116). Between 1986 and 2000 a number of policy reforms were implemented. Bird and Manning (2003: 78) divide this period into three phases. Firstly, there was a period of substantial trade and investment liberalisation from 1986 to 1991, followed by increasing signs of reform fatigue and government involvement in costly capitaland technology-intensive projects from 1991 to 1997. The third phase was the period of comprehensive reforms under the imf programme from 1998 onwards. The most important measures taken during this first phase were the devaluation of the rupiah in September 1986, discussed earlier, and a series of trade and investment deregulation packages, which substantially reduced tariff rates and eliminated most quantitative import restrictions (although these were replaced by tariffs). Average tariff rates fell from 27 per cent in 1986 to 20 per cent in 1991, 15 per cent in 1995 and only 7.3 per cent in 2001 (Bird and Manning 2003: 78). Furthermore, Fane and Condon (1996) found that the average Effective Rate of Protection (erp) for the non-oil manufacturing sector declined from 59 per cent in 1987 to 16 per cent in the early 1990s.

142

| Accounting for Services

Hill argues about this period: ‘There can be little doubt that the packages transformed Indonesian industry from a protected, inward-looking sector to one which is increasingly outwardlooking and internationally competitive. […] The reorientation of thinking over this period within the Department of Industry, extending up to the Minister, from protection and control to promotion and export, was clearly evident’ (Hill 2000: 117). This period of far-reaching trade reforms during the late 1980s slowed down in the early 1990s. A number of policy measures taken in the preceding years were reversed and crony capitalism became more widespread again. Moreover, many government monopolies and cartel arrangements remained relatively untouched. For example, a clove monopoly was granted to a private-state joint venture in 1991, tariff protection was granted to a large petrochemical plant in February 1995, and tax exemptions were granted to an automotive company in 1996 (Bird and Manning 2003: 79). Not surprisingly, all three companies were partly owned by then President Suharto’s children. The third phase was triggered by the Asian crisis in 1997/1998. The conditional help by the imf and major donors forced Indonesia to implement comprehensive policy reforms in many sectors and institutions. For international trade these reforms included reducing most tariff rates below 10 per cent, and eliminating most of the remaining Non-Tariff Barriers (ntbs). On the domestic trade side, reforms included removing several monopolies and cartels, including the agricultural monopolies of the State Logistics Agency (Badan Urusan Logistik, bulog). Additionally, many of the investment restrictions on domestic distribution were removed, including opening up wholesale and retail sectors to foreign investment. With respect to trade policy and regional economic development, it is worth mentioning a study by Garcia Garcia (2000). Looking at net rates of protection at a regional level he finds that Indonesia’s trade and price interventions since 1986 have been pro-Java and pro-urban. This has occurred because provinces that have different factor endowments, and productive activities have enjoyed different rates of protection. Garcia Garcia argues that Java, having a high labour/land ratio and produce most of Indonesia’s manufacturing output, has benefited more from trade policies than the Outer Islands which have a low labour/land ratio and a large endowment of natural resources (land, forest, fisheries, mining, oil and gas) and which produce most of the country’s output from natural resources. According to Garcia Garcia, interventions have protected manufacturing ten times as much as they have protected agriculture and forestry. In addition, the oil, gas and mining sectors have been taxed in such as a way as to incur a heavier burden on the Outer Islands compared to Java.

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| Involution and Growth

5.2.4

Foreign trade as engine of growth The preceding sections have discussed the developments in Indonesia’s foreign trade and the way the government steered these through trade policy. The question remains, however, to what extent foreign trade has actually functioned as an engine of growth.

Figure 5.4

Openness and growth, 1900-1997

7%

1970-1980

1990-1997

6% y = 0,0679x + 0,0238 R² = 0,6336

------> GDP growth

5%

4%

1980-1990

1950-1960 1960-1970 1920-1930

3% 1900-1910

2%

1910-1920 1930-1940

y = 0,0841x - 0,0026 R² = 0,7573

1%

0% 0

0.1

0.2 1900-1940

0.3

0.4 1950-1997

0.,5

0.6 -------> Openess

Note: Decadal averages for growth and openness. Openness is measured as imports and exports divided by gdp. Sources: See figure 5.2.

Figure 5.4 gives some direction in this matter. This scatter diagram clearly shows that a greater openness of the economy, as measured by the ratio of total trade and gdp, is associated with higher growth rates. This suggests that foreign trade has indeed played an important role in Indonesia. Furthermore it is interesting to see that similar levels of openness were associated with higher growth rates in the postindependence period compared to the colonial period. Hanson (1980: 51; see also Booth 1998: 227) elaborates on the relation between trade and growth, He lists three conditions which need to be fulfilled in order for trade to contribute significantly to a country’s economic development:

144

| Accounting for Services

1) A large export sector, 2) Rapid export growth, especially in per capita terms, and 3) A comparative advantage in products with growth-promoting or at least nongrowth-retarding production functions. Table 5.6 summarises these conditions for Indonesia for different periods. It shows that in the period 1900-1929 the export sector accounted for a growing proportion of gdp (see also figure 5.2). Moreover, export volume growth per capita accelerated after 1900, and the direct contribution of exports to gdp growth was high. Booth, however, argues that the third factor was not met in this period. Indonesian export staples – sugar, tobacco, tin, rubber and palm oil – lacked ‘growth-promoting production functions’ (Booth 1998: 228), so that international trade failed to generate a broadly based development. Table 5.6

Trade and economic growth in Indonesia, 1900-1997

Growth volume of exports Average ratio of exports/gdp Direct contribution of exports to gdp growtha

1900-1929

1934-1941

1929-1967

1949-1961

1967-1997

5.6

2.2

3.0

2.3

5.6

  0.195

  0.163

  0.094

  0.078

  0.207

42%

8%

2%

5%

19%

Note: a: Calculated as (average ratio exports/gdp) x (volume of exports growth/real gdp growth). Source: Van der Eng 2002: 155.

This changed, however, in the period 1967-1997. During this period growth in the volume of exports and the contribution of exports to gdp were both high. What is more important, though, is that the composition of export products also changed. Whereas in the colonial period agricultural products dominated exports, from independence until the early 1980s oil was the most important export product. Since then the role of oil has been overtaken by manufactured exports (Van der Eng 2002: 155; Hill 2000: 82). Through their backward linkages, these products have had a much greater impact on economic development in Indonesia (Athukorala and Santosa 1997: 89).

5.3

Domestic dynamics in the trade sector: involutionary growth?

5.3.1

Employment and labour productivity So far we have discussed developments in international trade. It was shown that periods in which Indonesia was open to trade were associated with higher growth rates. This underlines the importance of the trade sector as an engine of growth.

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| Involution and Growth

However, domestic dynamics in the trade sector bring to light that the role of this sector in the process of economic development has been ambiguous. In this section I first turn attention to changes in employment in the trade sector. Table 5.7 shows the first stylised fact. Throughout the twentieth century the trade sector has become increasingly important as an employer. Especially in the 1960s and 1990s the growth of number of people working in trade was significantly higher than in other sectors. Table 5.8 shows the effect these changes in the number of people employed in the trade sector had on labour productivity. In the 1930s labour productivity in trading was high: almost four times as high as labour productivity in agriculture and considerably higher than that in industry. However, whereas labour productivity in those other sectors increased, productivity in trade fell dramatically up to 1971. During the 1970s the trade sector clearly benefited from the profitable exports of oil. During the 1980s productivity growth slowed down and even fell in the 1990s. Strikingly, only in 1990 was productivity in trading higher than it was in the 1930s. These developments in labour productivity in trading reflect how the Indonesian trade sector has transformed from one dominated by merchants to one in which peddlers are predominant. This is a process that I would term ‘involution’ in the trade sector. The concept of involution is usually associated with the anthropologist Clifford Geertz (1963). However, it was initially an American anthropologist, Alexander Goldenweiser, who devised it in the 1930s ‘to describe those culture patterns which, after having reached what would seem to be a definitive form, nonetheless fail either to stabilize or transform themselves into a new pattern but rather continue to develop by becoming internally more complicated’ (Geertz 1963: 80-81). This is exactly what, in my opinion, occurs in the trade sector. To see how, it is necessary to discuss how the trade sector was organised during the colonial era and thereafter.

Table 5.7  Occupational structure, 1905-2000 Agriculture



146



Manufacturing

Trade

Other sectors

1905

67.9%

5.6%

5.1%

21.4%

1930

68.4%

10.6%

6.2%

14.8%

1961

71.9%

5.7%

6.7%

15.7%

1971

64.2%

6.5%

10.3%

19.0%

1980

56.4%

9.0%

13.0%

21.6%

1990

55.9%

10.1%

14.6%

19.4%

2000

45.3%

13.0%

20.6%

21.2%

Source: Population censuses.

| Accounting for Services

Table 5.8

Labour productivity in Indonesia’s service sector, 1905-2000 (in 1993 Rp per labourer) Agriculture

Industry (excl. oil and gas)

Trade

Transport & Total service sector communications

1905

825.6

4,102.9

2,878.8

1,548.1

2,122.7

1930

978.0

3,288.9

3,894.5

2,924.9

3,612.9

1961

830.2

3,766.7

2,458.9

3,278.6

1,727.8

1971

972.2

4,406.8

2,001.8

3,212.3

1,480.8

1980

1,322.6

5,289.1

3,425.8

5,101.4

2,623.7

1990

1,277.8

8,078.5

4,202.4

7,077.7

4,171.4

2000

1,677.3

10,830.9

3,115.8

6,964.6

4,252.6

Sources: Employment figures: Population censuses; gdp estimates: for Agriculture and Industry: Van der Eng 2002; other sectors: Author’s estimates.

Table 5.9

Average annual labour productivity growth (in percentages), 1930-2000 Trade

Transport & communications

Total service sector

Total labour productivity

Agriculture

Industry (excl. oil and gas)

1905-1930

0.68

-0.88

1.22

2.58

2.15

-1.18

1930-1961

-0.53

0.44

-1.47

0.37

-2.35

-0.53

1961-1971

1.59

1.58

-2.04

-0.20

-1.53

0.99

1971-1980

3.48

2.05

6.15

5.27

6.56

5.92

1980-1990

-0.34

4.33

2.06

3.33

4.75

3.25

1990-2000

2.76

2.98

-2.95

-0.16

0.19

3.06

Source: Based on table 5.7.

5.3.2

Changes in the organisation of distribution Initially economic activities in Indonesia were organised with the objective of as much benefit as possible for the Netherlands (Gonggrijp 1948; Rutgers 1947). Panglaykim and Palmer (1969) argue that, due to a lack of restraints on Dutch businesses, small firms gradually developed into powerful groups, thereby extending their control over various important links in the marketing channels. These firms, which in many respects resemble existing conglomerates, were very influential in the economy of Indonesia. The most influential commercial companies, known as the ‘Big Ten’, were Internatio, Borsumij, Jacobson van den Berg, Geo Wehry, Lindeteves, Maclaine Watson (British), Moluksche Handelsvereeniging, Tels & Co., Deli Atjeh, and Mirandolle & Voute (Panglaykim 1968: 37; Panglaykim and Palmer 1969: 2). The Dutch controlled both most imports from abroad and the outlets for commercial crops to the world market, exercising their control through the credit system. Panglaykim and Palmer (1969: 4) give a detailed illustration of how this marketing structure functioned: consumer goods were imported from overseas by Dutch commercial houses. These goods were subsequently distributed to Chinese middlemen (wholesalers) who then divided them amongst the smaller middlemen (retailers)

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| Involution and Growth

living in the remote areas. Periodically, these small middlemen went to the various collecting points of the main traffic arteries trading consumer goods, raw materials, equipment and some cash with the farmers in return for their commercial crops. The crops collected this way were then taken to the small towns where the small middlemen lived; there they were sorted and then transported to the cities at regular intervals. All these activities were carried out regularly and continuously. The smaller middlemen who had done the collecting periodically settled accounts with the Chinese wholesale middlemen, taking back with them the finished goods they needed for their next trip to the collecting points. Similarly, in the cities, the Chinese wholesale middlemen carried out the final sorting and grading. They then delivered the agricultural or forest products, ready for export, to the Dutch commercial houses, with whom they settled accounts so that they in turn were able to purchase fresh supplies for the collectors. This structure is illustrated in figure 5.5.

Figure 5.5  Marketing structure Indonesia, ca. 1900-1940

D utch trading house

Settles accounts

Provides working capital

Chinese middlemen (wholesaler)

Provides working capital

Settles accounts

C hinese middlemen (retailer)

Trades consumer goods, equipment, raw materials

For commercial goods

Farmers

The Chinese traders thus served as the link between the unorganised sector, consisting of millions of farmers, and the organised sector of Dutch import and export firms. The under-development of the infrastructure (transportation and communications facilities, finance, etc.) strengthened the position of the various middlemen in the chain making them virtually the only outlet for the farmers’ products. Panglaykim and Palmer therefore conclude that ‘In most cases the near-monopolistic position of the middlemen financed by the big firms left the farmers generally little choice but to accept the traders’ terms’ (1969: 5).

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Now, how can these findings explain the relatively high labour productivity in 1930? Firstly, the organisation of the trade sector made it highly profitable. These high levels of labour productivity do not so much reflect efficiency in the trade sector; it would be more accurate to say they mirror the profits made, although Jonker and Sluyterman (2000: 211, 251) argue that dividends paid by the large trading houses were never impressive. A second point has to be added here. During the colonial era Indonesia was still very much an agrarian economy. Although some industrialisation took place, especially in Java, the majority of the population still lived as peasants, providing for their own needs. Therefore the less productive retail sector was relatively underdeveloped. Goods were usually traded from farmers to Chinese to Dutch trading houses and then on the world market. This point is strengthened if we look at how margins in wholesaling and retailing differ. In an interesting study on trading in rural Java, anthropologist Jennifer Alexander (1987) describes the following marketing structure. The producer usually sells his goods through an agent to a depot. From this depot the goods are further distributed. Either through regional markets, town markets or village markets (or a combination of them) goods are distributed to the consumers. The left hand-side of figure 5.6 corresponds more or less with figure 5.5. Figure 5.6 Marketing structure in rural Java, 1982

W holesale trading

R etail trading R egional M arket (B akul)

A gent

V illage M arket (B akul) D epot (Juragan)

P roducer

R egional M arket (Juragan )

T ow n M arket (Juragan )

T ow n M arket (B akul)

C onsum er

V illage W arung

Source: Alexander 1987: 58.

As table 5.10 shows the largest gain is made by the agent who buys from the producer and sells to the depot, an action categorised as wholesaling. The smaller gains are made in the distribution through village markets and village warung, i.e. in retailing.

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Table 5.10  Trade margins in rural Java, 1982 Market level







Sale price per kg (in Rp)

Producer

25

Agent

28

Depot

60

Regional market

65

District market

75

Village market

90-110

Village warung

95-115

Source: Alexander 1987: 59.

Table 5.11  Employment in trade sector: 1905-2000 Population (x1,000) 1905 1930 1961 1971 1980 1990 2000

29,716 40,891 62,993 76,102 91,217 107,526 na

Population (x1,000) 1905 1930 1961 1971 1980 1990 2000

7,305 18,247 34,026 42,357 55,560 71,722 na

Population (x1,000)



150



1905 1930 1961 1971 1980 1990

37,020 59,138 97,019 118,460 146,776 179,248

2000

205,843

Sources: See table 5.7.

| Accounting for Services

Java & Madura Employed in trade sector (x1,000) Men Women 275 358 325 584 1,666 1,756 1,521 2,507 2,519 3,914 3,733 na na Outer Islands Employed in trade sector (x1,000) Men Women na na 124 58 528 575 262 971 683 1,547 1,346 na na Indonesia Employed in trade sector (x1,000) Men Women 275 358 449 642 2,194 2,331 1,783 3,478 3,201 5,461 5,079 9,686

8,813

Number per 1,000 21 22 26 43 55 71 na

Number per 1,000 na 10 16 20 30 40 na

Number per 1,000 17 18 23 35 46 59 90

The major difference between the distribution chain in the colonial period and the period since independence is that the emphasis has shifted from profitable wholesale trading (i.e. mainly the depot function), which was dominated by the Dutch and to a lesser extent by the Chinese middlemen, to low-value added retailing. When the big business houses were dissolved following nationalisation in 1959, a void was left behind. The newly established state trading corporation ‘lacked the linkages – backward through the chain of middlemen to the villages and forward through their own contacts and ancillary services with world markets – which had constituted much of the secret of the success of the Dutch commercial houses’ (Panglaykim 1968: 57). An increasing number of people have taken the opportunity since then to fill this void. In other words, the trade sector has developed into a sector in which more and more people share the crumbs. Or in Goldenweiser’s definition of involution, the result was ‘progressive complication, variety within uniformity’ (1936: 103).

5.3.3

Involutionary growth Retailing existed already in the colonial period. Alexander and Alexander (1990: 38) note that in 1905 there were 2,800 official marketplaces (pasar) in Java and at least 28,000 village stores (warung) (see also omw, via 1909: App. 7). What has changed, however, is the scale of this retail trade. This is supported by population censuses throughout the twentieth century as well as by an indirect estimate of the size of the informal sector from 1960 onwards. The census of 1930 showed that in Java and Madura one million natives made their living by trading in foodstuffs or preparing food, while another 100,000 lived by trading in miscellaneous goods. A further examination of the census figures reveals that the retail trade was of more importance in Java and Madura than in the Outer Islands. And, within Java, trade was a more common profession in Central and East Java than in West Java. De Vries and Cohen relate this difference to a more differentiated diet. ‘This means a mixed diet that involves a great variety of side-dishes [;...] consequently many people are able to make a living as small traders where such a diet prevails’ (De Vries and Cohen 1937: 268). The ultimate source of this mixed diet was of course rising income, which is also acknowledged by De Vries and Cohen. They rightly argue that the need for petty trade grows in proportion to the increase in the number of native businesses and small industries, such as for example that of sugar, change the society from subsistence farming to a more market-oriented one in which income can be augmented. At the same time, only 6.2 per cent of the population were employed in the trade sector in 1930 (see table 5.11). This share did not change much until the 1960s when it increased from 6.7 per cent in 1961 to more than 10 per cent in 1971. Between 1971 and 2000 the trade sector became the most important non-agricultural employer with 1 out of 5 workers having a job in the trade sector in 2000. Another point that draws the attention is the role of women in the trade sector. It was not only the case that the majority of women were employed in this sector, but

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in Java and Madura women also outnumbered men by a factor of 1.8 in 1930. This was not new either. As early as 1683 voc officials were already noting: ‘Women who, instead of taking up some honest business by which to earn a living decently, seek to make a little money by sitting all day by the road-side selling a few vegetables and other little things of small value, and do this in such multitudes that they jostle each other and create great disorder in the market place, beside depriving one another of profit and the possibility of obtaining a sufficient living from this trafficking.’ (De Vries and Cohen 1937: 264) Manning notes, in this respect, that the trade sector accounted for many more new jobs for women than either manufacturing or services in the period 1971-1990, both in Java and the Outer Islands (Manning 1998: 251). In the Outer Islands Manning attributes this to the expansion of roads and the subsequent beginning of more intensive rural-urban trade links. Trade in Java remained mainly a rural occupation, mostly small-scale. Contrary to the common view, Alexander and Booth (1992: 297-299) found that in the early 1980s most of this petty trade was on a full-time basis, non-seasonal in nature, and in operation for some years. However, because of declining cottage industries, more women crowded into trade, which eroded this privileged position. There are many studies that describe how women, who found it hard to make ends meet in rural Java, in both agriculture and traditional industries, moved into petty trade in the growing cities (see for example Lehrman 1983; and Hetler 1989). But it was not only women who increasingly found employment in petty trade. Since independence the number of men working in trade has been catching up. This is especially due to the ‘informalisation of the urban economy’ (Manning 1998: 103), in which non-waged jobs in petty trade and other services – such as household servants, barbers, service repair shops and tailors – in particular grew rapidly. Anthropologist Benjamin White (1991: 47) came to similar conclusions for early twentieth century Java. He argues that the shift to labour into non-farm activities was due more to ‘push’ than to ‘pull’ factors. The lack of agricultural opportunities to make an adequate living pushed labourers into activities that were easily accessible and had low capital requirements, of which retail trade is a perfect example. This pattern is supported by an indirect estimate of the size of the informal sector which can be arrived at by using an estimation method devised by the International Labour Organization (ilo) (see also Frankema 2008: 171-172). This is a crude but conceptually consistent method of arriving at a proximate estimate of the size of the urban informal sector on the basis of labour force data derived from household surveys, labour force sample surveys and population censuses. The method basically involves a decomposition of the economically active population by employment status. Firstly, the labour force is split up into the categories of own-account workers (self-employed workers and employers), wage earners (including salaried

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employees) and unpaid family workers. Then the category of own-account workers is further subdivided into self-employed working in agriculture (farmers), professional and technical self-employed (i.e. lawyers, technicians, supervisors etc.) and other self-employed. The combined share of the non-agricultural self-employed and unpaid family workers in the total economically active population, corrected for the share of professionals, technicians and employers, is taken as a proxy for the size of the urban informal sector (prealc 1982; ilo 1993). For Indonesia these figures can be retrieved from annual issues of bps, Statistik Indonesia and the ilo, Yearbook of Labour Statistics. The limitations of this method relate to the general lack of possibility to further decompose the heterogeneous category of urban own-account workers. Thus, it may tend to over-estimate the size of the urban informal sector by including people working in micro-enterprises in the formal urban economy, such as one-man retail businesses. On the other hand, this effect is countervailed by workers with a first job in the formal sector and a second job in the informal sector to complement their incomes. The main advantage of this method, however, is that it is based on a uniform concept of employment status, which is relatively comparable over time and across countries. The specific advantage for the case of Indonesia is that the data required to compute this indicator are available for a relatively large amount of benchmark years. The time series for the years 1965-2003 are displayed in figure 5.7. For those years for which detailed information on the professional own-account workers is missing, a linear interpolation technique is used to estimate its share. It should be noted that this group usually constitutes a tiny share of the total labour force in developing countries. In Indonesia in 1976 its share of the total economically active population was 1.9 per cent; it was 3.4 per cent in 1985 and 3.5 percent in 1992. In other words, the interpolation exercise is not likely to cause major errors in the estimation procedure. Nevertheless, for transparency both a crude estimate (without a correction for the professional own-account workers) and a refined estimate is given. It should be noted that the correlation coefficient of both time-series is 0.97, where the absolute levels of the refined estimate tend to be somewhat higher because of the inclusion of the category of unpaid family workers. Figure 5.7 shows that the share of urban informal sector workers in the total labour force almost doubled from 13.8 per cent in 1965 to a maximum of 25.0 per cent in 1999, in the wake of the Asian crises. Since 1999 the share has declined to 22.0 per cent. If we look at this long-term trend in more detail it appears that it was particularly in the economically difficult years of the early 1980s and the final years of Suharto’s presidency before the Asian crisis that the urban informal sector expanded most rapidly. It is also noteworthy that from the 1980s until the early 1990s the trend line appears to be more or less horizontal, fluctuating around 20 per cent. In this same period the share of the trade sector in total employment did not change much either (see table 5.7).

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Figure 5.7

Share of urban self-employed in the total labour force, 1965-2003

Sources: bps, Statistical Yearbook of Indonesia (Statistik Indonesia), various issues 1975-2003; and ilo, Yearbook of Labour Statistics, various issues 1966-1995.

In table 5.12 these levels are compared with those of a selection of the world’s economically most advanced countries. It turns out that in those countries the share of self-employed has declined significantly since the 1930s, typically to a level between 7 and 10 per cent of the total labour force, indicating that the size as well as the direction of the trend of the urban informal sector in Indonesia is markedly different from more advanced countries. Table 5.12

1930/31

Share of urban self-employed in total labour force in a selection of economically advanced countries,1930-1999 usa

Canada

0.08

0.09

0.11

uk

France

Netherlands

Denmark

Sweden

Japan

0.16

0.14

0.17

0.18

0.15

1960/71

0.07

0.08

0.07

0.11

0.11

0.11

0.06

0.13

1993/99

0.07

0.08

0.10

0.08

0.09

0.07

0.08

0.07

Source: Frankema 2008: 172.

The overall trend for Indonesia is very much in line with the literature that states that the urban informal sector has expanded considerably since the 1960s (Thorbecke 1991: 1596; Manning 1998: 103; Booth 2000: 81; Butzer et al. 2003). In my opinion, this exactly reflects the type of involutionary growth in the trade sector as defined

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| Accounting for Services

by Goldenweiser. The trade sector has transformed into an internally more complicated organisation, in which an increasing number of people share the crumbs. This development is also reflected in the relative decline in labour productivity in the trade sector, similar to what has happened in Latin American countries. For instance, in a study by Mulder (1999) of the development of service industries in Brazil and Mexico, it is argued that the rise in the urban informal sector coincided with a marked decline in the relative productivity performance of the trade and commerce sector. After a gradual increase, the ratio of relative productivity levels in Brazilian trade versus that in the usa dropped sharply, from a peak of 34 per cent in 1975 to 13 per cent in 1995 (the end year of Mulder’s analysis). The Mexico-us ratio dropped after a peak of 25 per cent in 1982 to 12 per cent in 1995 (Mulder 1999: 152). Mulder attributes the sharp turn in the mid-1970s (Brazil) and early 1980s (Mexico) to the swelling numbers of petty traders in the urban areas. This explanation is supported by ilo labour survey data (ilo, Yearbook of Labour Statistics 19931995) showing that the lion-share of the urban self-employed in Latin American Countries (lacs) is registered in the trade and commerce sector. In the majority of lacs the share of self-employed (including unpaid family workers) consists of more than half of total employment in the trade sector in the early 1990s. By comparison, in Canada and the usa this share does not exceed 10 per cent. Indeed, the Latin American trade sector functioned as an important safety net for growing surpluses of low-skilled urban labour. These labourers did not benefit from the social benefits and wage increases demanded by labour unions representing formal sector workers (Frankema 2008: 175-180). In the case of Indonesia, Manning (1998: 96) also argues that employment growth of non-wage earners was especially rapid in petty trade. In an extensive study on the informal sector in Indonesia conducted in 1977, Hidayat (1978) estimated that of those employed in the informal sector 50 per cent were working in trade. The literature thus suggests that there have been similar processes of structural change in Latin America and Indonesia (see also Portes and Benton 1984; Tokman 1984). This would imply that relative levels of productivity in the Indonesian trade sector, as opposed to other service sectors, will show a tendency in future to decline as well. Figure 5.8 presents estimates of average labour productivity in various service sectors, while total service sector labour productivity is held constant (set at 1.00). The figure shows that in the usa productivity levels in the trade sector gradually increased in comparison to other service industries, such as transport and communication, financial services, personal and social services, and government services. In Brazil, Mexico and Indonesia a notable decline can be observed. Hence, the development of the urban informal sector in Indonesia displays some remarkable similarities with that in Brazil, Mexico and Chile during the period 1950-2005.

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| Involution and Growth

Figure 5.8

Relative levels of labour productivity, trade sector versus other service sectors, usa, Brazil, Mexico and Indonesia USA ( 1950-1997)

002

002

001

001

001

Mexico (1950-2003)

001

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Trade sector

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Trade sector

Other service sectors

Indonesia (1961-2005)

Brazil (1950-2003) 002

002

001

001

001

Other service sectors

001

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Trade sector

1961 1966 1971 1976 1981 1986 1991 1996 2001

Other service sectors

Trade sector

Other service sectors

Source: Author’s calculations from Timmer and de Vries 2007.

5.4

Concluding remarks The role of trade in economic development has been an on-going debate. The neoclassical theory suggests that exports lead to increasing specialisation, greater economies of scale due to an enlargement of the market size, and more rapid technological change. At the same time, the trade sector in many developing countries also functions as an employer of last resort. Because of its flexibility, low-skilled jobs, limited capital requirements and low entry barriers, this sector absorbs those workers pushed out of the agricultural sector and unable to find work in manufacturing. This chapter has highlighted the developments in Indonesia both in foreign trade and in organisation of the trade sector between 1900 and 2000. The main conclusion is that the Indonesian trade sector fulfilled an ambiguous function. On the one hand it did indeed function as an engine of growth. Both

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| Accounting for Services

during the colonial period and after independence sensible trade policies resulted in periods of strong growth fuelled by economies of scale and technological change. At the same time, the lack of openness to trade may partially explain the stagnation in the 1950s. In sum, there has been a positive association between openness to trade and gdp growth. The domestic dynamics in the trade sector have been rather different, though. It has been shown that in this respect the trade sector has functioned as a safety net for those unable to find (enough) work in agriculture or manufacturing. In the colonial period the trade sector was dominated by the large Dutch trading houses in collaboration with Chinese middlemen. Clearly, retail trade did already exist, possibly even to a larger extent than the official statistics suggest because of by-employment. But it was not yet the sector of last resort. Most people were still working in the agricultural sector, with an increasing number finding employment in the rising manufacturing sector. In the past few decades this has changed. Since the late 1960s especially both the absolute and the relative numbers of people working in the trade sector have increased rapidly, whereas labour productivity is still below levels reached in the 1930s. Moreover, in relative terms labour productivity in the trade sector has declined markedly. A transformation has taken place of a sector dominated by highly profitable wholesale trade in the colonial period into one in which an almost endless chain of traders is involved in the distribution process created an ‘internally complicated organisation’. This process is, in my opinion, well conveyed by the term ‘involution’.

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| Accounting for Services

6

Unity or diversity?



Market integration through trade and transport

6.1

Introduction The motto of Indonesia is Bhinneka Tunggal Ika, which is Old Javanese and is often loosely translated as ‘Unity in Diversity’. Literally it means ‘(Although) in pieces, yet One’. Whether this slogan can be applied to Indonesia’s economy is debatable. It is clear that in Indonesia the emergence of an integrated national economy has been a slow and on-going evolutionary process. Dick et al. (2002: 10) argue that the structure of a national economy came into being only during the presidency of Suharto. They base this finding mainly on the fact that inter-island trade has only risen significantly since the late 1960s (Dick et al. 2002: 24-32). But an increase in inter-island trade is only suggestive evidence of the creation of a ‘national economy’. This chapter aims to give a more satisfactory answer to this question by assessing the process of market integration in Indonesia during the twentieth century using rice price series for a number of cities across the archipelago. In this way it is possible to evaluate whether developments in the two largest service sectors, i.e. trade and transport as discussed in the preceding two chapters, have enhanced economic development. The reasoning behind this is that increased efficiency in these sectors is a necessary, but not sufficient condition for economic development. Only when efficient and affordable transport and trade networks result in integrated and efficient markets can an economy develop to its full potential. Therefore this chapter assesses to what extent the developments in the transport and trade sectors indeed resulted in integrated and efficient markets in Indonesia in the twentieth century. As an instrument to measure market efficiency and market integration I will make use of rice price series, not only because these are relatively abundant for a number of cities across the archipelago and covering more or less the whole twentieth century, but also because rice plays a central role in Indonesia’s economy. Therefore stable rice prices through an integrated market, which is facilitated by efficient transport and trade networks, can be considered of crucial importance for economic development in Indonesia. Rice production accounted for about 50 per cent of total value added in agriculture throughout the twentieth century (Van der Eng 1996b: 259-263). And despite the fact that agriculture as a percentage of total gdp has been declining steadily,

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| Unity or diversity?

especially since the 1970s, almost 10 per cent of gdp is still earned in rice production today. But it is not only as a source of income that rice plays a significant role in the Indonesian economy: on the consumption side, as well, is rice the most important product. In 2001 on average 14 per cent of a family’s budget was spent on rice, varying from close to 30 per cent for the poor to only 2.5 per cent for the very rich (bps, Statistical Yearbook 2001). Since Engel’s Law seems to hold for rice consumption, in earlier stages of development rice was probably even a more important expenditure item than it is today. Considering the importance of rice in the Indonesian economy, it can be argued that a well-functioning rice market is a precondition for economic development. This is in line with the neo-institutional approach developed by North (1981, 1990). According to this school of economics, well-protected property rights and low transaction costs are necessary for efficient markets, which in turn make processes of commercialisation and specialisation possible. Van Zanden (2004) showed that institutional failures resulted in extreme fluctuations in rice prices in Java during the first half of the nineteenth century. In combination with the poor integration of the rice market, this meant that peasants had weak incentives to increase production for the market. This is arguably one of the reasons behind the slow economic development of Java during the nineteenth century. Twentieth-century Indonesia forms an excellent laboratory in which to further analyse the relation between efficient markets and economic growth. Data on rice prices are relatively abundant. Moreover, economic development in Indonesia during the twentieth century can safely be characterised as erratic. Periods of growth alternated with recessions. Taking a long-term perspective enables us to draw conclusions about the role that efficient markets have played in the economic development of Indonesia. Studies empirically testing market efficiency in Indonesia are scarce. Several descriptive studies evaluating rice market performance are available (Timmer 1974; World Bank 1987; Food and Agriculture Organization 1991; Pearsson et al. 1991; Tabor 1992). Prior to the Green Revolution, Mears (1961) conducted a study and concluded that rice markets in Indonesia did not function efficiently. Squires and Tabor (1987) econometrically tested for rice market integration in Java using Granger (1981) causality tests, finding the Javanese rice market to be integrated. Alexander and Wyeth (1994) introduced cointegration tests to study rice market integration in Indonesia between 1979 and 1990. They concluded that markets were integrated during this period. Ismet et al. (1998) tested for market integration for the period 1982-1993 and found that relative to the pre-self-sufficiency period (1982-1984), the post-self-sufficiency period (1985-1993) had a smaller degree of market integration. This chapter adds to the current debate in one important aspect. Whereas prior studies cover only short periods, I analyse the functioning of the rice market in Indonesia from a long-term perspective. Looking at both price stability and market inte-

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| Accounting for Services

gration under the different regimes (i.e. colonial administration, Sukarno, Suharto and post-Suharto) and relating this to economic growth will, I hope, enhance our understanding of Indonesia’s long-term economic development. The underlying hypothesis is that more stable prices and better-integrated markets are conditioned by efficient trade networks and an adequate physical infrastructure. The remainder of the chapter will be organised as follows. Section 6.2 deals with the theoretical relation between stable food prices, market integration and economic development. In section 6.3 inter-temporal price variations in Indonesia’s rice market are discussed. In section 6.4 we shift attention to spatial market integration. Section 6.5 concludes.

6.2

Stable food prices, market integration and economic development The positive relationship between market integration and economic development is widely accepted in economic theory. The neo-classical argument is that expansion and integration of markets lead to improvements in productivity through the spreading of fixed costs, economies of scale and an increasing division of labour. But there is another argument as to why better-integrated markets enhance economic development: through price stabilisation. American economist and expert on the Indonesian rice market C. Peter Timmer (1996) states that ‘where food prices have not been stabilized successfully and food security remains questionable, political stability and economic growth [have] been threatened (1996: 46).’ Timmer (1989a, 1996) discusses a number of reasons why price stabilisation is economically beneficial (see also Dawe 1997). Firstly, unstable prices result in displaced investments in physical capital. Price instability means that investments become riskier. This leads to investments that are lower than would be optimal for the society as a whole. For example, society would benefit from investments in irrigation because it will enhance technological development. With unexpectedly fluctuating prices, such an investment is too risky for an individual farmer, because whether he will profit from it depends on the (uncertain) future price. Secondly, price instability leads to substitution of savings and work for consumption and leisure. Of course this increases the welfare of the farm family, but the shift in allocation of time and resources is not optimal for economic growth. Thirdly, unstable prices cause transaction costs for consumers in re-allocating their budgets when prices change. Compared to rich consumers, poor consumers are likely to value this aspect more. For example, if a food crop constitutes 20-30 per cent of a consumer’s expenditure, then a doubling of prices may require a re-allocation of a quarter of total expenditure. A fourth reason why unstable food prices can influence economic growth is the inter-linkage with macro-economic factors. For example, at the beginning of the

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| Unity or diversity?

modern economic growth process in Indonesia in the late 1960s, rice accounted for one-quarter of gdp and one-third of employment. Hence, instability in rice prices causes macro-economic instability which in turn lowers economic growth. Fifthly, price instability affects the industrial sector. Stability in money wages can be achieved only if food prices are stable. When this is the case, it is likely to induce investments in labour-intensive machinery, improving the efficiency of technology choice in low-wage economies. Besides, if stable food prices contribute to a stable political environment in which investors can form secure long-term expectations, the overall level of investment is likely to be stimulated. The above factors lead Timmer to conclude that ‘food security and economic growth interact with each other in a mutually reinforcing process over the course of development’ (Timmer 2004: 2). An instrument to safeguard stability in food prices is market integration. Given the price inelasticity in demand for rice, deviations from a normal price normally reflect uncontrollable supply shocks (Persson 1999: 7-8). An integrated market can mitigate the effect of such price shocks because it induces trade between surplus and deficit areas. If a market is integrated and a harvest failure drives up prices in market A, arbitrage opportunities arise. Traders from other markets will be attracted by the high prices in market A and start selling their goods there. This will lower prices in market A and increase prices in the other markets until an equilibrium is reached. In other words, there is a ‘spatial cancelling out of harvest disturbances’ (Persson 1999: 9). In conclusion, expansion and integration of markets lead, on the one hand, to improvements in productivity through economies of scale, the spreading of fixed costs and an increasing division of labour. On the other hand, market integration can have a positive effect on economic growth because it enhances price stabilisation. Now let us turn attention to the empirical examination of how prices in the rice market have fluctuated over time in Indonesia.

6.3

Intertemporal rice price stabilisation in Indonesia: government intervention Figure 6.1 shows the monthly fluctuations in the rice prices in Indonesia between 1920 and 2006. Due to data availability the period 1920-1940 only covers Java. It is based on the average price of rice on 120 native markets. From 1949 onwards prices refer to Indonesia as a whole. It is likely that the average levels off the fluctuations  For the relation between macro-economic instability and economic growth, see for example Dawe 1996, Barro and Sala-I-Martin 1995.  For examples of studies of areas where a lack of market integration resulted in famines, see Sen 1981; Ravallion 1987; Von Braun, Teklu and Webb 1999.

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| Accounting for Services

in the individual markets. If a farmer has access only to one or two markets the average price fluctuation will underestimate the true risk faced by a farmer. This is confirmed by the dashed line which represents the Jakarta market for rice. However, although fluctuations in the Jakarta market alone are higher, the trend is the same.

Figure 6.1 Rice price fluctuations, 1920-2006 1 0,8 0,6 0,4 0,2 0 -0,2 -0,4 -0,6 1920

1930

1940

1950 Jakarta









1960

1970

1980

1990

2000

Indonesia average

Note: Fluctuations are expressed as monthly deviations from a 13-month moving average. The period 1920-1940 refers to Java only. Sources: 1920-1939: cks (1938); Statistisch Jaaroverzicht; Korte Berichten voor landbouw, nijverheid en handel (Appendix: Maandstatistieken van het Centraal Kantoor voor de Statistiek. Prijzen en indexcijfers in ni); Maandcijfers betreffende den economischen toestand der inheemsche bevolking op Java en Madoera, deel A; 1949-1956: Mears (1961); 1957-1968: Warta bps; 1969-1984: Statistik Bulog; 1985-2000: Laporan Mingguan Bank Indonesia; 2000-2006: Statistik Ekonomi Moneter Indonesia.

From figure 6.1 we can conclude that price developments of rice have been rather erratic during the twentieth century. It is striking to see fluctuations of only ±10 per cent in the 1920s, decreasing even further in the 1930s. This can be partly attributed to increasing rice imports during the dry season, as between 1900 and 1929 about 9 per cent of Indonesia’s domestic rice supply was imported (see table 6.1). This share was high enough to have an impact on domestic price formation (Van der Eng 1996b: 184; cei iv 1978: 19).

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| Unity or diversity?





Table 6.1



Net rice imports as percentage of domestic supply, 1900-2000 Java

Outer Islands

Total

1900-1909

4.2

9.5

6.1

1910-1919

8.1

11.1

9.2

1920-1929

6.9

11.2

8.6

1930-1939

2.3

9.7

5.2

1950-1959

6.2

1960-1969

7.6

1970-1979

8.2

1980-1989

1.7

1990-1999

1.9

Sources: 1900-1989: Van der Eng 1996b: 183; 1990-1999: faostat.

But the rather small fluctuations also suggest that the distribution system in colonial Java was well enough developed to guarantee a stable spread of the supply of the marketed rice over the entire island (Van der Eng 1996b: 191; see also cei iv 1978: 16). However, price stabilisation did not come as ‘manna from heaven’. Intervention by the colonial government significantly contributed to price stability; as early as 1911 the government intervened in the rice market in reaction to extreme shortages (Creutzberg 1974: 171). But the rice market was in general left to its own devices until the effects of the international crisis after 1929 led the colonial government to introduce measures to protect the domestic rice economy (cei iv 1978: 21; Timmer 1991: 235). The colonial government not only intervened indirectly through trade restrictions and tax policy, it also intervened directly by purchasing rice in surplus areas, in order to avoid rice hoarding for speculation and to guarantee the supply of rice at affordable prices in deficit areas (Van der Eng 1996b: 186; Creutzberg 1974: 119120). The purchased paddy was subsequently sold to government institutes, such as the army, navy, police, prisons, hospitals and government enterprises and to large private companies in the Outer Islands. These measures were backed by the promotion of inter-urban and inter-island transport from surplus areas. For example, rice imports into some parts of the Outer Islands were forbidden to further the shipment from Java to these islands. Moreover, revenues from the rice import tax were used to subsidise the freight rates for food crops (Van der Eng 1996b: 185). In 1939 the government founded the semi-private Food Supply Board (Voedingsmiddelenfonds, vmf), which co-ordinated the stabilisation of rice prices. vmf had a monopoly on rice imports, and it controlled the inter-island shipments of rice through licences. As a result of these policies, net imports dwindled and Java became a net exporter of rice in 1940, whereas Indonesia as a whole became selfsufficient in rice in 1941.

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| Accounting for Services

Figure 6.1 suggests that this re-arrangement of rice trade from dependence on imported rice to domestically produced rice did not have a negative effect on the goal of price stabilisation, with fluctuations in the 1930s being lower than in the 1920s.

Figure 6.2 Price fluctuations, Java vs Outer Islands, 1949-2006 0,8 0,6 0,4 0,2 0 -0,2 -0,4 -0,6 1949

1954

1959

1964

1969

1974

Java



Note: Deviation from 13-month moving average.





Sources: As for figure 6.1.

1979

1984

1989

1994

1999

2004

Outer Islands

During the 1950s and 1960s price fluctuations increased. This could be just a statistical artefact due to the inclusion of markets in the Outer Islands. However, as can be seen in figure 6.2 that is not the case. The difference in monthly deviations from a 13-month centred moving average between Java and the Outer Islands is negligible. And the small difference that appears suggests that prices in Java fluctuate more than in the Outer Islands. Apparently the successors to the vmf did not succeed in stabilising rice prices. This can be attributed both to inefficient organisation and to inefficient policy goals. After independence food logistics management was in the hands of two different institutions. Rice marketing was the responsibility of the Yayasan Urusan Bahan Makanan (yubm), while paddy purchasing activities were done under the authority of the Yayasan Badan Pembelian Padi (ybpp). Under Presidential Decree No. 3/1964 yubm and ybpp were merged into Badan Pelaksanan Urusan Pangan (bpup) with the objective of managing, transporting, processing, storing and distributing food commodities.

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| Unity or diversity?

Besides improving the inefficient organisational structures, the policy goal of the different agencies was no longer to ‘steer’ the rice market, but rather to control the production of milled rice. Rice mills were obliged to work only for the food logistics agencies and unauthorised trade of large quantities of rice was forbidden (Van der Eng 1996b: 187). But the inability of the agencies to meet purchase targets led to shortages in milled rice which were required to stabilise prices. According to Van der Eng this failure to fulfil purchase targets was partly caused by logistical difficulties of transport and distribution (Van der Eng 1996b: 187). As discussed in chapter 4, the Japanese occupation and the subsequent Indonesian struggle for independence had done great damage to Indonesia’s physical infrastructure. Rehabilitation and extension of the infrastructure only really took place from the late 1960s onwards. Moreover, given the fact that unlicensed private trade of large quantities of rice was forbidden, the food logistics agencies were supposed to intervene in the rice market. In practice, however, they distributed mainly to civil servants and military rather than working towards actual price control (Van der Eng 1996b: 188). In the New Order the control of rice was carried out by Komando Logistik Nasional (Kolognas), although 10 May 1967 Kolognas was dissolved and replaced by Badan Urusan Logistik (Bulog). Initially the mission of Bulog was to function as a buffer stockholder and a rice supplier to government employees. It was from November 1978 onwards that Bulog’s main task was broadened to include controlling and stabilising the price of rice, paddy, wheat and other staple foods at both producer and consumer levels. So almost forty years later policies of intervention in the rice market resembled those of the 1930s, when the Dutch intervened massively into domestic rice marketing and price formation (Timmer 1991: 235). This is clearly visible in figure 6.1, where we see that after 1974 rice prices stabilise with fluctuations comparable to those in the 1930s. Since intervention by Bulog in the rice market was limited in this period, Van der Eng attributes this decline in fluctuations to the rehabilitation of communications and the liberalisation of domestic rice trade (Van der Eng 1996b: 192). The beginning of the twenty-first century is again characterised by greater fluctuations in rice prices. This is partly due to the aftermath of the Asian crisis. Furthermore, Bulog was re-organised into a public corporation. As a result of on-going studies into its functioning and under pressure from the imf, measures were undertaken to reform Bulog. Consequently its role of supplying rice to civil officials was ended by law and its role as an agency that stabilised producer and consumer prices was reduced to that of overseeing the floor price for dried paddy. In this respect, Yonekura (2005: 133) lists 4 explicit reforms that were undertaken:  The fluctuations in 1973-1974 were caused by a world food crisis. The shortage of rice in world markets made it impossible for Indonesia, despite abundant foreign exchange from oil revenues, to purchase enough rice to maintain internal price stability (Timmer 1989b: 24).

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| Accounting for Services

1) Limiting Bulog’s activities and duties financed by government funds; 2) Seeking to minimise protection for farmers and minimising Bulog’s financial burden. This has been attained by ending year-round domestic procuring and concentrating it in the harvest seasons. Moreover, procurement prices should be set near import prices; 3) Deregulating and reinforcing market transactions. This means liberalising rice imports by allowing private importers to trade in rice. Additionally, Bulog should import rice on a competitive basis, and its special advantages, support, rights and prerogatives have been abandoned; and 4) Improving governance. In short, the reforms implied an enhanced role for market forces and a limitation of Bulog’s monopoly in the import sector. This resulted in somewhat higher fluctuations in the rice prices (McCulloch and Timmer 2008). Because of the high costs of national price stabilisation schemes many economists are sceptical as to whether food price stability is financially feasible (Newbery and Stiglitz 1979, 1981; Behrman 1984; Williams and Wright 1991). Anderson and Roumasset even state: ‘Government efforts to nationalize grain markets and to regulate prices across both space and time have the effect of eliminating the private marketing and storage sector. Rather than replacing private marketing, government efforts should be aimed at enhancing private markets through improving transportation, enforcing standards and measures in grain transactions, and implementing small-scale storage technology.’ (Anderson and Raoumasset 1996: 62) However, for Indonesia Timmer rejects this condemnation. He argues that in Indonesia the stabilisation of domestic rice prices was made possible by the expanding role of the private marketing sector (Timmer 2004: 5). Figure 6.3, which represents the marketing structure of rice in Indonesia, and figure 6.4, which illustrates the functioning of Bulog, support this. They show that Bulog did not replace the private traders, but rather dictates the ‘rules’ by which or the boundaries within which private traders operate by setting floor and ceiling prices (see figure 6.4). The marketing margin between the floor price (B in figure 6.4) and the ceiling price (A in figure 6.4) affects private traders. A decision to squeeze the margin is also a decision to squeeze the private sector. Rather than acting as a monopolist in rice markets, Bulog is intended to serve as a buyer and seller of last resort (Timmer 1991: 239). Bulog procures quite a small proportion of the marketed crop only, i.e. 3-5 per cent during the 1970s, 8-9 per cent during the 1980s and 4-5 per cent between 1990 and 1997 (Ellis 1993: 429; Piggot et al. 1993: 90; Saifullah 2001: 98). This means that the private market is responsible for moving the bulk of the marketed crop.

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| Unity or diversity?



Figure 6.3 Marketing structure of rice Farmers Padi Padi

Wholesale buyer

Koperasi Unit Desa (KUD)

Small trader Padi

Beras

Rice miller

Dolog/Bulog Beras

Beras

Large traders

Main market

Beras Beras

Beras

Retailers/warung holders

Consumers



Note: Dolog is an acronym for Depot Logistik and refers to the regional offices of Bulog.





Source: Natawidjaja 2001: 75.

It is therefore necessary to assess the role of transport and trade in the integration of the rice market in Indonesia. Spatially integrated rice markets can be achieved only if private traders react to arbitrage opportunities and if transportation is not a major obstacle. Or to quote Timmer: ‘Nearly all price interventions have been attempted through use of the market rather than displacement of it, and this no doubt accounts for much of the success in defending the desired price levels. As a consequence, the private food marketing sector has had a relatively large role, and the structure, conduct,

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| Accounting for Services

and performance of this sector [ form] a crucial factor in the design and implementation of price policy in Indonesia.’ (Timmer 1989b: 39) Figure 6.4 Functioning of Bulog Intervention Bulog

C EILIN G PR IC E

A

Arbitrage opportunities traders C

Efficient bandwith between two cities

C

Arbitrage opportunities traders

B

Intervention Bulog

6.4

Spatial price differences in Indonesia

6.4.1

A simple approach

FLO O R PR IC E

An underlying goal of efforts at price stabilisation is to integrate Indonesia’s rice markets, since integrated markets can contribute in an important way to stable prices (Timmer 1991: 239). A harvest failure in market A would in case of autarky cause an extreme supply shock and a sharp increase in price there. If markets are spatially integrated, however, this effect will be mitigated by an influx of rice from market B. But spatially integrated markets also enhance productivity growth because of economies of scale and division of labour. It is therefore informative to see how prices fluctuate between markets. In figure 6.5 price fluctuations between markets are illustrated by the so-called coefficient of variation (cv). This coefficient is obtained by dividing the standard deviation of the different market prices by the mean of these market prices. The

169

| Unity or diversity?

rationale behind this variable is that in perfectly integrated markets the Law of One Price holds. Thus, in this case the price of rice would be the same in all markets resulting in a standard deviation of 0. In figure 6.5 a cv is computed for 11 cities (Jakarta, Bandung, Semarang, Surabaya, Palembang, Padang, Medan, Pontianak, Makassar, Manado and Banjarmasin). To avoid a bias in the results a mean and standard deviation were only calculated if there were observations for all cities. Since for Padang, Manado and Banjarmasin a relatively large number of observations are missing, I also calculate a cv for 8 cities only (excluding Padang, Manado and Banjarmasin). As can be seen, this does not significantly change the results. For the colonial period the cv for 11 cities covers the period 1927-1931, only. As an extension of these findings for a longer period, a cv for 7 cities is also calculated. These cities are Weltevreden (Jakarta), Bandung, Semarang, Surabaya, Yogyakarta, Surakarta (Solo) and Malang. One has to be careful with this comparison since not all of these cities are included in the cv for 11 cities. More importantly these 7 cities are all in Java, while the cv8 and cv11 cover Indonesia as a whole. However the correlation between the cv11 and cv7 is striking, so it is believed that the cv7 is a good proxy for changes in fluctuations between markets in the colonial period. Keeping this in mind, figure 6.5 to a large extent supports the findings so far. Fluctuations between markets are low in Java, and probably Indonesia as a whole, in the 1920s and 1930s. This notion is in line with a study by Uemura (2002), who concluded that already in the early twentieth century the inter-regional trade of rice and paddy was much developed in Java. This integration is driven by the developments in transport infrastructure, as discussed in chapter 4. Whereas in the late nineteenth century transport of rice relied upon shipment by prahu and carts, the gradually opening of the railway in the early twentieth century and subsequently the improvements in road transport made transport more efficient (Uemura 2002). In the years following independence spatial price differences are extremely large and, although they fell around 1953, they remain variable and in general rather large. After Suharto came to power repair of the infrastructure and a more efficient distribution system resulted in more stable prices. The oil boom caused another disruption in 1973, but afterwards price fluctuations between markets returned to levels comparable to the ones in Java in the 1920s. Alongside a stabilisation of rice prices, as suggested by figure 6.1, these observations indicate that price fluctuations between markets are reduced. It is tempting to interpret this result as a sign of increasing market integration. However, as Ravallion (1987) has shown, if prices at different markets are generated by identical but independent processes, nothing can be inferred about the interlinkage of markets from these kind of results. Thus to see whether rice markets have indeed become better integrated, as this simple approach to market integration suggests, we have to adopt a more advanced method.

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| Accounting for Services



Figure 6.5 Fluctuations between markets, 1925-2006 70%

60%

50%

40%

30%

20%

10%

0% 1925

1935

1945

1955

cv 7 Java













6.4.2

1965

1975

cv 11

1985

1995

2005

cv 8

Note: Fluctuations measured by coefficients of variation. cv7 Java: Weltevreden (Jakarta), Bandung, Semarang, Surabaya, Yogyakarta, Surakarta (Solo) and Malang. cv8: Jakarta, Bandung, Semarang, Surabaya, Palembang, Medan, Pontianak and Makassar. cv11: Jakarta, Bandung, Semarang, Surabaya, Palembang, Padang, Medan, Pontianak, Makassar, Manado and Banjarmasin. Sources: As for figure 6.1.

Advanced testing for market integration: method Two product markets are said to be integrated if the price in the importing market equals the price in the exporting market plus the transportation and other transfer costs of moving the product between the two markets (Baulch 1997: 514). Put differently, if we have two markets trading in a commodity in period t, these markets are integrated if the price in one market, P1t, equals the simultaneous price in the other, P2t, plus transfer costs Kt: P1t = P2t + Kt If (1) holds, there is no incentive to trade. Arbitrage will occur when

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| Unity or diversity?

.

(1)

Several methods have been used to measure market integration. Advocated by Granger and Elliot (1967) simple bivariate correlation coefficients, also called the Law of One Price (lop), was long the most common measure used. Later this method was strongly criticised, most notably by Harriss (1979) and Ravallion (1986). Advances in time-series econometrics led to the development of models that address some of the perceived weaknesses in the correlation coefficient approach. In this respect, Ravallion (1986) proposed a dynamic model of spatial price differentials incorporating time lags. One major drawback remained, however. Both the lop and Ravallion models test whether price changes in one market will be translated on a one-for-one basis to the other market, either instantaneously (lop) or with lags (Ravallion). But prices in different markets will move on a one-for-one basis only if the inter-market price differential is equal to transfer costs. Thus price movements inside the bandwidth set by the transfer costs do not undermine the hypothesis of market integration, whereas these models possibly force us to reject the hypothesis of an integrated market. Palaskas and Harris-White (1993) and Alexander and Wyeth (1994) therefore extended Ravallion’s model using cointegration and Granger causality ordinary least squares (ols) techniques. This allowed testing for more general notions between markets and measures whether prices in two markets vary within a fixed range (Baulch 1997: 518). A limitation of these models, however, is that all models are in fact ‘static’. Markets are either integrated or not. This requires the assumption of a constant market structure throughout the entire sample period. It implies that when observations for different sub-periods are limited, market integration analysis is not feasible (Dercon 1995). Presently the most common approach to test for market integration is using a Vector Error Correction Model applied among others by Persson (1999), Dawson and Dey (2002) and Baten and Wallusch (2003). This model is applied here. It contains the following steps. 1) Test for stationarity (Augmented Dickey-Fuller, adf) As suggested by Engle and Granger (1987), before applying the cointegration tests one must test for a unit root in the individual price series. The standard procedure to test for this unit root is the Augmented Dickey-Fuller test. If the test statistic is below the critical value we cannot reject the null hypothesis of a unit root. An adf is conducted first on the (log)level of the series and subsequently on the first difference. The lag length is determined by minimizing of the Schwarz Criterion.

 See for example Gilbert 1969; Illori 1968; Cummings 1967; Lele 1967, 1971 and Jones 1972.

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| Accounting for Services

Often price series turn out to be integrated of order 1, I(1), which means that the level of the prices is a non-stationary process, while the first difference is a stationary process (Persson 1999: 116). If the results show that each individual time series is I(1) it allows the researcher to apply the Johansen and Juselius (1990) cointegration tests. 2) Cointegration test/Rank test A linear combination of two or more non-stationary series may be stationary. If such a stationary, or I(0), linear combination exists, the non-stationary (with a unit root) time series are cointegrated. The stationary linear combination is called the cointegrating equation and may be interpreted as a long-term equilibrium between the variables. After ensuring that the individual series are non-stationary we are now interested whether the series are cointegrated and, if they are, in identifying the long-term relationship. Testing for cointegration is done following the methodology developed by Johansen (1991, 1995). Johansen’s method is to test the restrictions imposed by cointegration on the unrestricted var. It estimates a matrix π in an unrestricted form, and then tests whether the restrictions implied by the reduced rank of π can be rejected. If π has full rank it means there are as many stationary relations as there are variables. If π has rank 1, it means that there exists one stationary relation among the variables. If π has rank 0, it means that a stationary relation does not exist. Two test statistics are given by Johansen and Juselius to test for this number of cointegrating vectors: the trace test and the maximal eigenvalue test. The rank of π is estimated sequentially from r=0 to r=k-1 until we fail to reject. If both test statistics are greater than the critical values as given in Osterwald-Lenum (1992: 467), the null hypothesis is rejected. But before actually applying the test described above we first have to decide which kind of model to choose. There are five possibilities: (i) without any deterministic variable in both cointegrating equation and in var, (ii) with intercept in cointegrating equation, (iii) intercept both in cointegrating equation and in var, (iv) intercept and linear trend in cointegrating equation and intercept in var, and (v) intercept and linear trend both in cointegrating equation and in var. Since there is no economic explanation for a linear trend assuming long-term equilibrium conditions, we would expect model iii to generate the best outcome. Moreover we would expect π to have rank one. Consider the case that there would be more than one cointegrating relationship, for example two. This would mean that some prices could be generated by the first, some by the second and some by a combination of the first and second. In that case we would not call these markets integrated (Gonzales-Rivera and Helfand 2001). So if we find a rank different from 1 we conclude that markets are not integrated.

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| Unity or diversity?

3) A Vector Error Correction Model If two series are cointegrated we can test for a long-term equilibrium. The procedure is based on maximum likelihood estimation of the vector error correction model (vecm):

(2)

where xt = [P1t, P2t]’, which are I(1), Δxt = xt-xt-1, μ is a (2 x 1) vector of parameters, Γ1,…,Γk+1 and π are (2 x 2) matrices of parameters, D are 11 centred monthly dummies, Ψ is a (2 x 11) matrix of parameters, and εt is a (2 x 1) vector of white noise errors. When π is of reduced rank, that is r 2).

1987-2006

1

Banjarmasin-Surabaya Banjarmasin-Jakarta Banjarmasin-Medan Banjarmasin-Palembang Banjarmasin-Pontianak Banjarmasin-Manado Banjarmasin-Makassar Banjarmasin-Semarang Banjarmasin-Surabaya Banjarmasin-Jakarta Banjarmasin-Medan Banjarmasin-Palembang Banjarmasin-Pontianak Banjarmasin-Manado Banjarmasin-Makassar Banjarmasin-Semarang Banjarmasin-Surabaya Banjarmasin-Jakarta Banjarmasin-Medan Banjarmasin-Palembang Banjarmasin-Pontianak Banjarmasin-Manado Banjarmasin-Makassar

1969-1986

2 4 1 2 2 1 1 2 1 1 1 3 2 3 1 2 2 2 2 2 2 2 1

Banjarmasin-Semarang

1949-1964

Lag length

Cities

Period

1.470 1.894 3.493 4.169 3.118 2.921 3.709 3.994 3.790 4.154

1.153 0.064 1.072 2.193

1.876

1.999

t-value 1.791

0.201 0.243 0.150 0.186 0.154 0.123 0.152 0.200 0.104 0.122

0.242 0.189 0.197 0.285

0.162

0.129

0.148

Gamma

Banjarmasin also presents an interesting case. In the period after independence it was cointegrated only with Semarang and Medan. This changed in the subsequent period, in which it is cointegrated with all other cities in the sample, although it has to be noted that for Semarang and Pontianak the null hypothesis of heterogeneity was rejected. Just as was the case with Medan the coefficients of adjustment in this period were quite high. The period 1987-2006 again shows strong cointegration with all other markets in Indonesia, but significantly lower coefficients of adjustment compared to the preceding period. The findings of this statistical analysis largely support the earlier conclusions regarding market efficiency. In the first years after independence it was difficult to speak of a ‘national’ economy in Indonesia, in which the different regions in Indonesia formed an integrated market. Market integration was in most cases limited to cities in close proximity or those with close trade relations. For many city pairs, however, the hypothesis of cointegration was rejected. This confirms Mears’ statement about the 1950s that ‘there is still no Indonesian common market, with prices in the separate areas differing by only the cost of transport’ (Mears 1961: 11). In the subsequent period a shift took place, not only to more market integration in the long run (thus being cointegrated), but also in the short run. Coefficients of adjustment are high in the years between 1969 and 1987. Apparently the improved infrastructure combined with efficient procurement by Bulog and efficient networks of private traders resulted not only in lower variance in rice prices over time; there was also a quite rapid adjustment when price differentials existed in markets. This efficient functioning of markets is significantly lower in the period 19872006. Although most markets still have a long-term equilibrium, the speed of adjustment is lower. It is probable that the monopoly that Bulog has held since its establishment in 1969 seriously harmed (private) market incentives. Another possibility is that the increased complexity of the distribution networks, as discussed in chapter 5, has made it more difficult to swiftly react to price signals.

6.5

Concluding remarks The economic literature offers theoretical foundations as to why stable prices and market integration lead to economic growth. This chapter has shown how across time and across space market efficiency and market integration changed in Indonesia using rice price series for different cities in Indonesia. It was suggested that under the colonial administration markets were functioning relatively well. Rice price fluctuations were limited and evidence suggests that markets, at least in Java, were integrated. Immediately after independence increased uncertainty, a devastated infrastructure and a lack of political power to tackle these problems affected both price stability and market integration. Not surprisingly this resulted in a stagnating economy.

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| Unity or diversity?

After Suharto came to power, economic policy became one of the priorities of the new government. The two oil booms during the 1970s provided the government with the financial means to get the economy on an unprecedented growth path. Large investments were made in infrastructure, and measures were taken to regulate rice prices. Particularly after the establishment of Bulog in 1969 the government started to heavily regulate rice markets. This resulted in a high degree of price stability and increased market integration, which in turn translated into high growth rates. Since 1987 the goal of stabilisation of rice prices has still been attained, despite a small increase in fluctuations since the beginning of the twenty-first century, caused by the reforms taken to limit the monopoly power of Bulog and give market forces a greater role. This change is also reflected in the market integration analysis. In this last period under study Indonesia’s rice market was clearly integrated. The speed of adjustment coefficients, however, were lower than before, signalling new inefficiencies in the rice market.

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| Accounting for Services

7

Conclusions

7.1

Accounting for services Economic development in Indonesia during the twentieth century was highly erratic. Periods of unprecedented economic growth alternated with dramatic crises. Exportled expansion in the beginning of the twentieth century was followed by stagnation as a result of the worldwide economic depression. The revival that seemed to occur in the second half of the 1930s did not materialise due to the outbreak of the Second World War and the subsequent struggle for independence. The (at best) modest recovery that took place during the 1950s was swept away by the economic turmoil in the mid-1960s. Finally the New Order government of Suharto succeeded in setting Indonesia on a formidable growth path, which was, however, abruptly ended by the Asian crisis in 1997/98. These broad observations are often repeated in the historiography on Indonesian economic development. But until the 1990s an extensive and consistent basis to quantitatively support these developments was missing. A first attempt to overcome this problem was undertaken by Van der Eng (1992) who adopted the system of Historical National Accounts for the study of long-term economic development in Indonesia. An updated version of this path-breaking work was published in 2002 (Van der Eng 2002). This offered the first consistent quantitative estimates of economic growth in Indonesia during the twentieth century. However, whereas Van der Eng’s estimates for the agricultural sector were the result of very detailed work undertaken during his PhD research (Van der Eng 1996b), the estimates for the manufacturing sector and especially the service sector were based on more indirect measures and sometimes bold assumptions. Moreover, his service sector estimates consisted only of constant price series. Therefore it was believed that a careful reconstruction of the service sector within the framework of Historical National Accounts during the late colonial period and since independence could be an important contribution to the study of Indonesian economic development. In turn, the results would enable a systematic analysis of the long-term development of Indonesia during the twentieth century in general, and the service sector in particular. With these aims in mind the argument in this book was logically unfolded as follows: 1) a careful reconstruction of the service sector in Indonesia within a National Accounting framework (chapter 2 and appendices 1-7), which subsequently formed

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| Conclusions

the basis for 2) an analysis of the role of the service sector in the process of economic development in Indonesia (chapters 3-6). In the latter part of the book the emphasis was on the two most important trade sectors: transportation and trade.

7.2

The economic development of the indonesian service sector, ca. 1900-2000 Within the System of National Accounts the service sector is defined as economic activities related to transportation and communications, trade, government, financial services, housing and other services. In estimating these sectors, the methods as prescribed by the sna were adopted as closely as possible. In most cases this resulted in reliable estimates. But due to data limitations rather rough approaches had to be taken in a few cases, notably for the categories ‘other services’ and ‘road transport’. Clearly, these estimates therefore have a larger margin of error, but the consistency in the method of estimation ensures that it does give a good picture of developments in those sectors. Overall the margin of error fluctuates between 15 and 25 per cent, which seems to be acceptable. Horlings (1995), for example, estimated the reliability of his service sector estimates for the Netherlands, 1800-1850, to be between 15 to 30 per cent, whereas Smits (1995) for the period 1850-1913 came to a margin of error between 10 to 15 per cent. The results of these meticulous exercises offer a number of interesting insights. At the beginning of the twentieth century, trade was the most important service sector, followed by housing. This reflected two characteristics of the Indonesian economy. Firstly, a rather low level of income resulted in a relatively large share spent on a necessity good as housing. Secondly, the relatively large trade sector was a consequence of its role as win-gewest for the coloniser, the Netherlands. After independence, housing lost importance, and the trade sector contributed less to total service sector gdp, resulting in a more diversified structure. Nevertheless, trade remained the most important service sector in the twentieth century. Average annual growth in the service sector during the twentieth century was 3.8 per cent, compared to 2.1 and 3.9 per cent in agriculture and industry respectively. Within the service sector, growth was most significant in the transport and communications sector. This is not surprising given the technological innovations in this sector. If we look at occupational structure, the agricultural sector was by far the most important employer during the colonial period, with almost 70 per cent of the labour force working in that sector. Its share actually rose between 1930 and 1961 due to the economic turmoil caused by the Second World War, the subsequent struggle for independence and the first decade under President Sukarno. From 1961 onwards, we see a slow but steady decrease in the share of agricultural employment, to approximately 45 per cent in 2000. Another striking feature is that the share of industry in total employment increased only slowly, from 7.9 per cent in 1961 to 13.7 per cent in

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| Accounting for Services

1990 and 16.9 per cent in 2000. Most labourers who were pushed out of the agricultural sector apparently failed to find employment in the industrial sector. Because of its relatively low entry barriers many of them ended up in the low-productivity service sectors. This is reflected in the fact that growth in employment within the service sector was especially geared to the trade sector. The value added estimates can be combined with employment figures to draw some conclusions about labour productivity. The main conclusion in this respect is that labour productivity in Indonesia’s service sectors, except for the financial sector, has not been very impressive. Productivity in the service sector is both higher in level and growing more rapidly than agricultural productivity, but is outpaced by developments in the industrial sector. It seems that Indonesia’s major service sectors are still the traditional sectors with relatively low value added. Looking at these three measures, i.e. economic structure, occupational structure and labour productivity, we see a profound transformation of the economy during the twentieth century, especially during the 1970s. Nevertheless, Indonesia is still in transition. Agriculture is still the largest sector, both in employment and income. Moreover, within the service sector most employment and most income are still in the more traditional service sectors such as transportation and trade, which were already quite important in the colonial period. Therefore I conclude that a decisive transition to a modern economy with sweeping structural changes has not yet taken place.

7.3

Transport, trade and integrating markets Transportation is considered a necessary but not sufficient condition for economic growth. Without any form of transportation autarky is the only possible outcome. It therefore is often termed indispensable for economic growth. Theory shows that efficient transportation systems have significant effects on economic welfare and economic growth, because cheap and reliable transportation enable local specialisation, higher producer prices, lower producer costs and higher productivity or, in Fogel’s terms, social savings. Looking at developments in the transportation sector in Indonesia during the twentieth century three phases can be distinguished. The first phase was the colonial period. During this period the Dutch laid down a relatively efficient transportation network. Railways played especially an important role during the first two decades of the century, although these were largely confined to Java. Being a large archipelago, water transport was essential not only for economic, but also for political reasons. The Royal Packet Company (kpm) was the leading shipping company being granted all scheduled traffic service by the Dutch government, resulting in a near-monopoly. kpm succeeded in offering reliable and safe transport over water. From a welfare perspective it can be argued that kpm’s monopoly was not optimal, because it resulted in high prices, but at the same time the higher profits made on trunk lines enabled kpm to cross-subsidise less profitable routes, thus creating both

185

| Conclusions

a politically and economically integrated country. Besides the large ships operated by kpm an extensive fleet of indigenous rigged ships, called prahu, were active in Indonesian waters, sometimes in the role of competitors to the kpm, but usually as feeder ships. Road transport gained significance due to the technological innovation of the automobile from the 1920s onwards. The introduction of cars, trucks and buses made it possible to ship passengers and goods without additional feeder services. These developments affected rail transport especially negatively, leading to stagnating growth. The railway sector did not really recover from this until the late 1980s. In 1928 the first airline was established in Indonesia, but its contribution remained marginal during the colonial period. The second phase, from the Japanese invasion in 1942 until the fall of Sukarno in 1966, was characterised by enormous infrastructural and institutional damage. Railways and roads were severely neglected, while continuous competition and struggle between kpm and the state-owned shipping company pelni, escalated into the expulsion of kpm in 1957. Despite the fact that problems of capacity were rapidly solved, organisational problems damaged the water transport sector. Over-capacity, unreliable schedules and other inefficiencies negatively affected not only growth in this sector, but also the economy as a whole. Only developments in air transport were satisfactory. The third phase is the extended New Order period from 1966 until 2000. Major investments in roads, re-organisation and deregulation of the water transport sector, and rehabilitation of the railways combined with continuing growth in air transport caused what Dick and Forbes (1992) call ‘a quiet revolution’. During the twentieth century transportation costs decreased significantly. This means that important social savings have been made (Fogel), consumer and producer surpluses have increased (Spatial Price Equilibrium model) and that lower producer costs and higher producer prices combined with economies of scale have led to higher productivity. In conclusion, the Dutch laid down a relatively efficient transportation network, but the Second World War and the struggle for independence resulted in a physical infrastructure that was in an appalling state. These problems were not solved until the early 1970s. Since then the repair of the existing infrastructure and the construction of new infrastructure spurred growth in the transport sector, which translated into high economic growth. Nevertheless, there is still potential for further growth in the transportation sector and consequently in the Indonesian economy as a whole. Most developments have been biased towards Java and, to a lesser extent, towards Bali and Sumatra. Especially in the Outer Islands, but also in Java and Madura, transportation networks are still considerably less efficient than in Western countries. Moreover, other problems have risen, such as severe congestion in Java. These problems need to be overcome in future in order for the transport sector to remain a catalyst of economic growth. The trade sector has been the largest service sector throughout the twentieth century. But the exact relation between trade and economic growth is a matter of

186

| Accounting for Services

debate. Neo-classical economic theory suggests that exports lead to increasing specialisation, greater economies of scale due to an enlargement of the market size, and more rapid technological change. Anti-globalists, on the other hand, argue that trade favours the rich at the expense of the poor. Moreover, the trade sector in many developing countries functions as an employer of last resort. Because of its flexibility, low-skilled jobs, limited capital requirements and low entry barriers, this sector absorbs those workers pushed out of the agricultural sector and unable to find work in manufacturing. The main conclusion is that the Indonesian trade sector fulfilled an ambiguous function. On the one hand it did indeed function as an engine of growth. Both during the colonial period and after independence careful trade policies resulted in periods of strong growth fuelled by economies of scale and technological change. In sum, there has been a strong positive association between openness to trade and gdp growth. The domestic dynamics in the trade sector have been rather different, however. It was shown that in this respect the trade sector has functioned as a safety net for those unable to find (enough) work in agriculture or manufacturing. In the 1930s the trade sector was dominated by the large Dutch trading houses in collaboration with Chinese middlemen. Clearly, retail trade already existed at this time, perhaps even on a larger scale than the official statistics suggest because of by-employment. But it was not yet the sector of last resort. Most people were still working in the agricultural sector, with an increasing number finding employment in the rising manufacturing sector. This has changed in the last few decades. Since the late 1960s in particular, both the absolute and the relative number of people working in the trade sector has increased rapidly, whereas labour productivity is still below levels reached in the 1930s. This can be attributed to the capital-intensive industrialisation that occurred, which resulted in failure of the manufacturing sector to absorb the labour surplus. Moreover, in relative terms, labour productivity in the trade sector has declined markedly. A transformation has taken place from a sector dominated by the highly profitable wholesale trade in the colonial period to one in which an almost endless chain of traders is involved in the distribution process creating an ‘internally complicated organization’. This process is, in my opinion, very well captured by the term ‘involution’. That transport and trade enhance specialisation, economies of scale and division of labour is often taken as an axiom. The implicit assumption behind this is that efficient transportation and trade networks lead to increased market integration. Therefore the key to assess the contribution of the service sector to economic development is to test whether markets have become integrated in Indonesia. Using rice price series for different cities across Indonesia it was possible to test this hypothesis. Statistical analysis suggests that under the colonial administration markets were functioning relatively well. Rice price fluctuations were limited and markets, at least in Java, were integrated. After independence uncertainty increased, and a devastated infrastructure and lack of political power affected both price stability and market integration. Not surprisingly this resulted in a stagnating economy.

187

| Conclusions

When Suharto came to power in 1966, economic policy became one of the priorities of the new government. One of the economic measures taken was to make large investments in infrastructure. Furthermore the government started to regulate rice markets heavily. Towards this goal it established Bulog in 1969. The measures taken resulted in increased market integration and hence high price stability, which in turn were translated in high growth rates. The goal of stabilisation of rice prices has more or less been attained since the 1970s, despite a small increase in fluctuations since the beginning of the twentyfirst century. These were caused by the reforms taken to limit the monopoly power of Bulog and give market forces a greater role. Markets are still clearly integrated, although the speed-of-adjustment coefficients are lower than before, signalling inefficiencies in the rice market. Altogether the evidence suggests that the Indonesian economy has gradually become more integrated, so that Java and the Outer Islands can be considered a single economic unit. Therefore the conclusion can be drawn that developments in the transport and trade sectors have indeed resulted in more integrated markets and thus that the service sector has played a significant role in the economic development of Indonesia.

7.4

the service sector: tertiary? The role of the service sector in the process of economic development has been a neglected field of research. The emphasis in development economics has for a long time been on the agricultural sector and industrialisation, possibly because in the ‘role model of Western economic development’, Great Britain, developments in these sectors spurred economic growth. However, in general the service sector is at the heart of all economic growth. By stimulating and facilitating production for the market rather than simply for self-sufficiency it enables greater specialisation, division of labour and economies of scale (Eswaran and Kotwal 2002: 403). In this respect it contradicts the linear stage theories of economic development, which argue that service sector development is preceded by manufacturing development. Very few countries have followed this linear developmental mode implied by terms such as ‘tertiary’ and ‘post-industrial’ (see also Szirmai 2005: 109-112, 271272). In my opinion, models based on the assumption of a unidirectional flow of economic activity from agriculture to manufacturing to services are simplistic and inaccurate. Far from being derivative or parasitical, the service sector is a vital force in stimulating and facilitating economic growth. The traditional view of the service sector as a ‘residual’ or ‘tertiary’ sector has been falsified for Indonesia in this book. Similar conclusions were drawn by Horlings (1995) and Smits (1995) for the Netherlands between 1800 and 1913. Apparently the linear stage theories of economic development, which remain persistent in both economic literature and economic policy making, need some adaptation.

188

| Accounting for Services

I would argue that structural change should be redefined as a decreasing share of agricultural employment and income instead of a shift from agriculture to industry to services as implied by the linear stage theories. The relative ‘devaluation’ of the agricultural sector triggers a dynamic process in which the respective shares of industrial and service employment and income start to change. This can result in 1) an equal increase in both sectors; 2) one biased towards industry; or 3) one biased towards services. The outcome of the process is country-specific. In Great Britain, for example, structural change took place in the form of a significant increase in the industrial sector both in employment and in income, followed only later by an expansion of the service sector. But in the Netherlands structural change was the result of an expanding transport and trade sector, while developments in the industrial sector lagged behind. For Indonesia structural change was, as in the Netherlands, biased towards services, but the story is quite different from the Dutch case. A number of factors can explain this. To begin with, its transport sector and its trade sector were already relatively well developed before industrialisation to serve the needs of its coloniser. This meant that in the initial stages of development the service sector was relatively large. Furthermore, Indonesia has a distinct geographical setting, being a large archipelago. This makes it almost impossible to refrain from involvement in the world economy through trade. But it also explains the extensive inter-island trade that takes place. Figure 7.1

From parasite to catalyst Static: Agriculture

Industry

Services (Clark, Fisher, etc.)

Industry

Services

Dynamic: Agriculture

A third explanation for the ‘service bias’ in Indonesia’s economic development lies in a process that is common for developing countries and what in this study is termed ‘involution of the trade sector’. When people were pushed out the agricultural sector from the late 1960s onwards the manufacturing sector failed to absorb the labour surplus. Due to the trade sector’s low entry barriers, many of those labourers found work in that sector. Similar processes can be observed in Latin American countries, such as Brazil and Mexico.

189

| Conclusions Figure 7-1.indd 1

Recently the importance of the service sector in the economic development of developed countries has been acknowledged by several researchers (Horlings 1995; Smits 1995; Broadberry 2007). However, in the economic development literature, studies focusing on service-related economic growth are still rare. A notable exception is a study by Gani and Clemes (2002). For countries forming the Association of Southeast Asian Nations (asean), they found that service sector growth had a significant impact on raising productivity in other sectors and on enhancing the efficiency of resource allocation. I also believe that economic development strategies should place more emphasis on service sector development. Notwithstanding the fact that all sectors of an economy are important, service development is crucial, since resource allocation to the agricultural or industrial sector is premature unless physical infrastructure and financial and social services are already well developed. In other words, services need to be accounted for in the process of economic development. That is the main conclusion of this book.

190

| Accounting for Services

appendix 1

National Accounting for Transport and Communications

According to the System of National Accounts, the output of transportation is measured by the value of the amounts receivable for transporting goods or persons. In economics a good in one location is recognised as having a different quality from the same good in another location, so that transporting from one location to another is a process of production in which an economically significant transformation takes place even if the good remains otherwise unchanged. The transport and communications sector consists of the following sub-sectors: 1) rail transport; 2) road transport; 3) water transport; 4) air transport; and 5) communications. In this appendix the data sources and raw statistical data are given for these sub-sectors, which are subsequently used to estimate time-series in value added.

A1.1

Rail transport The prime source for the reconstruction of railway transport in the framework of the national accounts is Statistiek van het vervoer op de spoorwegen en tramwegen met machinale beweegkracht in Nederlandsch-Indië, Batavia, 1900-1914, and Verslag betreffende het spoor- en tramwegwezen in Nederlandsch-Indië, Batavia, 1915-1930. These are combined with: • Jaarcijfers voor het Koninkrijk der Nederlanden. Koloniën. The Hague, 1897-1921; • Statistisch Jaaroverzicht van Nederlandsch-Indië. Batavia, 1922-1940; • Koloniaal Verslag, The Hague, 1849-1930; • Indisch Verslag, The Hague, 1931-1940. Information on number of passengers, goods transported, total revenues and net profits was obtained from the above listed sources. Estimates on the cost structure are obtained from annual reports of railway enterprises mentioned in the text (i.e. ss, dsm, and nism): • Jaarverslag der n.v. Deli Spoorweg Maatschappij, Amsterdam, 1883-1940; • Verslag over den aanleg en de exploitatie van de Staatsspoorwegen in NederlandschIndië, Batavia, 1887-1915; • Verslag der Staatsspoor- en tramwegen in Nederlandsch-Indië, Batavia, 1915-1941; • Verslag van den raad van beheer der Nederlandsch-Indische Spoorweg Maatschappij aan de algemeene vergadering van aandeelhouders, The Hague, 1869-1929;

191

| Appendix 1

• Verslag n.v. Nederlandsch-Indische Spoorweg Maatschappij, The Hague, 1930-1940. • ara, inv. 2.20.11, Deli Spoorweg Maatschappij, 1883-1970; • ara, inv. 2.20.10, Nederlandsch-Indische Spoorweg-Maatschappij, 1863-1973. The sources above provide the necessary information to estimate value added in rail transport. I arrived at these estimates by adding net profit, salaries and wages, interest and depreciation. Net profit for rail transport is taken directly from the sources; the other elements needed to estimate value added are obtained in an indirect way, by taking the ratio of wages and salaries, interest and depreciation on the one hand and total operating costs on the other hand for the Deli Spoorweg Maatschappij (Deli Railway Company, dsm), since this ratio can be calculated from the sources on an annual basis. Constant price estimates are obtained by dividing value added in current prices by a weighted volume index of passenger transport and goods transport.



Notes for table A1.1 (1) = Revenue from passenger transport in guilders (2) = Revenue from luggage transport in guilders (3) = Revenue from goods transport in guilders (4) = Other profits in guilders (5) = (1) + (2) + (3) + (4) = Total revenue in guilders (6) = Operating costs in guilders (7) = (6) – (5) = Net profit in guilders (8) = Volume of passenger transport (9) = Volume of goods transport, tons (10) = Value added/operating expenses of Deli Spoorweg Maatschappij (dsm) In the annual reports of dsm operation costs are divided into salaries and wages, interest, depreciation and other operating expenses. This makes it possible to construct value added/output ratios for every year. (11) = Value added/output ratio Staatsspoorwegen (ss) For benchmark years a value added/output ratio was estimated for the years 1926 and 1930. These estimates are very robust, due to the lack of disaggrega tion of the data. (12) = Value added in current prices (in millions of guilders) = (6) * (10) + (7) Since the value added/output ratio of the Staatsspoorwegen is very rough I have chosen to use the one of dsm. The decrease of the ratio is mainly caused by a lower share of wages and salaries paid. (13) = Volume-index (1939=100) passenger transport (14) = Volume-index (1939=100) goods transport (15) = Weighted volume-index (1939=100) = (1)/((1)+(3))*(13) + (3)/((1)+(3))*(14) (16) = (12)/(15) * 100 = Value added in constant (1939=100) prices (in millions of guilders)

192

| Accounting for Services

193

| Appendix 1

22,560,945

23,237,234

15,511,545

1910

1914

14,549,522

1909

1913

13,836,537

1908

17,430,816

12,919,877

1907

20,149,727

11,457,549

1906

1912

10,295,801

1905

1911

9,136,572

9,481,241

1904

1902

1903

8,142,549

8,619,960

1901

7,153,142

7,887,674

1900

1898

1899

5,752,183

6,341,490

1897

5,085,552

4,912,250

1894

5,367,082

4,792,390

1893

1896

4,574,474

1895

4,509,124

1892

4,104,497

(1)

134,398

120,591

117,089

101,216

90,589

78,745

70,399

62,680

59,962

48,160

39,605

33,726

27,734

22,595

21,605

17,152

9,611

7,323

5,041

4,836

4,720

4,171

3,769

3,285

3,039

(2)

32,858,975

32,105,576

29,920,837

27,291,329

24,774,581

21,957,697

21,349,767

19,670,112

18,039,506

17,347,037

15,779,089

14,572,639

14,382,937

14,586,046

13,811,086

12,842,971

11,085,379

10,673,211

9,474,060

9,252,673

9,253,929

7,899,420

7,870,519

7,490,136

6,425,671

(3)

Estimation of value added in rail transport, 1890-1939

1891

1890

Table A1.1 (4)

2,767,194

2,387,791

2,185,088

1,981,408

1,542,860

1,512,095

1,509,533

1,346,956

1,288,179

1,170,810

1,138,940

1,312,643

1,081,848

1,042,585

1,005,738

874,638

871,260

763,956

699,420

611,551

449,884

532,527

514,644

484,282

474,528

(5)

58,997,801

57,174,903

52,372,741

46,804,769

41,919,575

38,098,059

36,766,236

33,999,625

30,845,196

28,861,808

26,438,875

25,055,580

24,112,479

23,793,775

22,726,103

20,887,903

18,307,740

17,196,673

15,545,603

14,954,612

14,620,783

13,228,508

12,963,406

12,486,827

11,007,735

(6)

32,247,172

29,333,226

26,488,515

23,018,083

21,558,456

20,571,779

19,357,870

18,307,116

17,087,154

15,343,512

14,606,568

14,068,333

13,652,558

12,887,250

11,543,027

10,441,842

9,559,072

8,591,344

7,753,243

6,691,121

6,591,920

6,339,248

6,218,241

5,528,158

5,478,026

(7)

26.750.629

27.841.677

25.884.226

23.786.686

20.361.119

17.526.280

17.408.366

15.692.509

13.758.042

13.518.296

11.832.307

10.987.247

10.459.921

10.906.525

11.183.076

10.446.061

8.748.668

8.605.329

7.792.360

8.263.491

8.028.863

6.889.260

6.745.165

6.958.669

5.529.709

(8)

108.080.420

106.130.815

93.501.912

81.349.772

72.106.134

67.961.792

63.392.277

58.492.861

51.788.604

48.182.279

44.280.256

42.546.070

39.936.638

38.624.387

37.103.918

30.464.281

24.871.059

21.177.246

19.627.205

19.130.397

18.605.753

18.268.587

17.388.300

17.034.265

15.026.445

194

| Accounting for Services

(1)

14,150,000

14,697,000

15,296,000

1939

11,249,000

1936

1938

11,706,000

1935

1937

14,805,000

12,940,000

1934

1932

1933

23,427,000

18,027,000

1931

29,282,000

1930

(2)

228,580

228,326

231,122

222,535

223,776

240,587

285,564

301,431

246,622

206,323

179,891

178,276

166,157

145,978

318,000

312,000

297,000

259,300

258,300

309,900

355,200

393,900

505,000

644,800

34,472,000

36,455,527

1928

1929

38,511,736

38,620,168

1927

1925

1926

38,249,245

38,954,946

1924

47,515,274

40,765,628

54,392,687

1921

1923

47,244,109

1920

1922

30,512,179

35,947,627

1919

1917

1918

25,510,979

28,827,895

1916

24,870,914

1915

(3)

39,228,000

35,121,000

35,873,000

29,755,100

29,236,600

31,547,200

35,941,100

48,625,100

59,697,600

75,346,000

92,653,000

88,218,632

80,639,449

70,509,312

75,648,575

68,581,668

58,443,496

59,412,986

66,465,368

57,545,946

49,590,649

44,051,755

40,486,427

38,371,385

34,198,789

(4)

4,176,000

3,234,000

3,136,000

2,907,000

3,734,000

3,039,000

3,007,000

3,688,000

4,061,000

4,247,000

4,397,000

8,178,948

7,879,212

9,048,851

5,143,436

5,866,702

11,161,676

11,805,359

13,481,833

7,062,783

5,465,402

4,696,261

3,703,074

3,744,726

3,275,286

(5)

59,018,000

53,364,000

53,456,000

44,170,400

44,934,900

47,836,100

54,108,300

70,734,000

87,690,600

109,519,800

131,522,000

133,081,687

127,367,155

118,301,021

119,969,492

112,921,391

110,611,387

119,019,183

134,641,319

112,099,460

91,210,001

79,440,086

73,195,672

67,793,247

62,490,967

(6)

39,807,000

38,763,000

35,270,000

34,110,000

36,702,000

39,609,000

44,945,000

58,181,000

67,209,000

76,237,000

77,902,000

79,098,899

76,314,046

73,424,991

74,596,870

72,986,608

79,903,644

96,281,330

101,192,190

86,080,880

57,310,403

47,570,418

38,441,216

33,576,620

31,957,599

(7)

19.211.000

14.601.000

18.186.000

10.060.400

8.232.900

8.227.100

9.163.300

12.553.000

20.481.600

33.282.800

53.620.000

53.982.788

51.053.109

44.876.030

45.372.622

39.934.783

30.707.743

22.737.853

33.449.129

26.018.580

33.899.598

31.869.668

34.754.456

34.216.627

30.533.368

(8)

87.978.000

84.214.000

83.333.000

68.561.000

66.845.000

74.169.000

81.679.000

87.022.000

110.479.000

135.024.000

146.696.000

142.724.346

139.910.600

136.068.219

133.534.004

127.750.526

133.918.581

157.194.014

177.445.578

173.236.234

149.932.194

131.007.306

129.066.888

116.748.946

106.763.606

195

| Appendix 1

2.494.621

2.743.208

3.049.640

1897

1898

1899

7.583.821

8.636.831

9.339.439

9.887.736

10.223.288

1912

1913

1914

6.658.367

1910

72%

6.638.384

1908

1909

1911

73%

5.453.317

6.130.907

1906

1907

73%

67%

71%

72%

71%

72%

72%

70%

70%

4.615.770

5.020.730

1904

73%

74%

74%

78%

79%

78%

1905

3.968.061

4.116.090

1902

1903

3.451.030

2.168.221

3.766.739

77%

2.149.407

1895

1896

1900

75% 76%

1.879.623

2.005.084

1893

1894

1901

78% 76%

1.552.859

75% 79%

1.426.459

1891

1892

79%

(10)

1.308.897

(9)

Continued

1890

Table A1.1 (11)

(12)

39.69

40.73

37.45

33.43

30.13

27.36

26.65

24.76

21.72

20.33

19.18

18.25

17.95

17.69

17.81

16.45

14.22

13.19

11.79

11.29

11.04

10.27

10.20

9.37

8.75

123

121

106

92

82

77

72

66

59

55

50

48

45

44

42

35

28

24

22

22

21

21

20

19

17

(13)

94

91

86

80

70

61

61

57

50

46

43

38

37

35

32

28

25

23

20

20

19

17

14

13

12

(14)

106

103

94

85

75

68

66

61

54

49

46

42

40

38

36

30

26

23

21

21

19

19

16

15

14

(15)

(16)

42.15

42.12

35.32

28.32

22.48

18.54

17.46

14.99

11.66

10.06

8.73

7.67

7.17

6.73

6.34

5.01

3.75

3.09

2.46

2.32

2.15

1.92

1.67

1.45

1.23

196

| Accounting for Services 61% 53% 49% 55% 54% 57% 62% 65%

18.668.310

19.066.396

15.817.032

15.258.800

15.745.600

8.261.900

7.655.700

7.211.000

7.640.000

10.083.400

9.750.400

10.828.300

1928

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

66%

64%

64%

65%

66%

66%

15.735.678

17.116.242

1926

66%

62%

59%

59%

64%

64%

66%

1927

14.510.358

13.343.874

15.668.386

14.036.364

1922

1923

1924

16.150.092

1925

14.599.897

1920

1921

68%

13.104.118

13.937.480

1918

1919

71% 71%

12.133.113

12.656.957

1916

(10) 69%

1917

(9)

10.508.007

1915

60%

50%

(11)

(12)

37.87

33.92

34.50

27.49

25.77

26.07

29.79

34.71

46.79

66.31

85.23

87.98

84.68

78.16

79.21

70.25

64.95

70.17

86.01

71.75

60.44

53.82

52.26

48.46

43.26

100

96

95

78

76

84

93

99

126

153

167

162

159

155

152

145

152

179

202

197

170

149

147

133

121

(13)

100

90

93

71

67

71

76

145

141

146

176

172

158

145

145

134

123

130

149

135

129

121

117

112

97

(14)

100

92

94

73

69

75

81

133

137

148

174

169

158

149

147

138

135

151

173

163

146

132

129

120

107

(15)

(16)

37.87

31.11

32.28

19.95

17.85

19.46

24.17

46.10

63.91

98.24

147.92

149.06

134.11

116.16

116.52

96.95

87.77

106.25

148.62

116.83

88.39

71.27

67.57

58.29

46.41

In Indonesia’s official national accounts railway transport is estimated first in current prices using the state railway enterprise annual reports. Gross value added at constant prices is then obtained by extrapolation, using a passenger and ton-kilometre weighted composite indices as the extrapolator. Some key indicators for railway transport between 1950 and 2000 are presented in table A1.2. The sources used are: • bps, Statistical Yearbook of Indonesia, several volumes; • bps, Seri Statistik pengangkutan kereta api, 1961-1972; • bps, Statistik angkutan kereta api 1990; • bps, Statistik perhubungan, 1999.



Notes for table A1.2 (1 = (2) = (3) = (4) = (5) = (6) = (7) = (8) = (9) =

Number of passengers transported (x 1,000) Tons of goods transported (x 1,000) Passenger-kilometres (millions) Ton-kilometres (millions) Average haul freight (km) Average distance travelled per passenger (km) Length of railway Number of locomotives Tons of baggage

 The name of the state railway enterprise has changed several times throughout the second half of the twentieth century. In chronological order the name was: dka (Djwatan Kereta Api), pnka (Perusahaan Nasional Kereta Api), pjka (Perusahaan Jasa Kerata Api), Perumka (Perusahaan Umum Kereta Api) and pt Kereta Api.

197

| Appendix 1

198

| Accounting for Services 5,391 5,881

106,963

103,323

97,235

111,144

125,712

151,316

1950

1951

1952

1953

1954

1955

3,510

54,000

50,000

49,000

39,000

27,000

1970

1971

1972

1973

1968

1969

75,000

68,000

1967

92,000

123,000

1963

1966

130,000

1962

117,000

144,000

1961

125,000

158,000

1964

6,000

146,000

1959

1960

1965

5,836

124,000

1958

4,971

4,562

4,202

3,958

4,025

3,307

2,939

3,860

4,397

4,841

5,127

5,599

6,494

6,564

6,158

6,548

136,253

140,357

1956

1957

6,822

6,304

6,042

5,464

4,976

51,084

65,014

1948

1949

(2)

(1)

3,344

3,545

3,378

3,407

4,028

4,971

6,003

7,322

6,329

6,548

7,057

7,201

5,056

4,016

3,437

3,003

3,482

3,785

1,532

(3)

Table A1.2 Key indicators for railway transport, 1948-2000

1,039

949

855

860

739

665

881

973

1,045

1,072

1,157

1,245

1,159

1,046

1,069

1,044

1,053

976

902

789

827

723

434

(4)

228

226

216

214

223

226

232

220

220

210

207

192

(5)

86

72

68

63

59

66

65

59

54

53

54

50

(6)

6,637

6,637

6,637

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,640

6,616

6,925

5,103

3,617

(7)

879

934

970

1,004

1,100

1,164

1,189

1,236

1,254

1,251

1,209

1,218

1,132

1,141

1,165

1,150

1,118

1,065

1,063

1,045

1,004

940

865

737

584

(8)

92,658

108,681

104,384

105,493

154,775

167,000

403,000

481,000

324,000

333,000

359,000

409,000

123,890

115,360

92,179

(9)

199

| Appendix 1

160,300

191,600

1999

2000

19,186

158,600

169,800

1997

1998

18,421

153,700

1996

16,368

19,544

19,286

18,217

16,868

115,866

15,690

144,500

98,200

1993

13,726 14,988

1995

73,057

1992

12,537

8,577

7,589

1994

62,228

1991

11,768

55,542

58,212

52,251

1988

1989

48,565

1990

10,317

48,659

6,752

6,423

5,066

1986

1983

4,971 4,700

1987

46,261

1982

46,742

43,697

1981

4,859

46,693

43,264

1980

5,174

4,500

3,819

3,449

4,064

1985

41,754

1979

(2) 4,728

1984

31,445

40,469

1978

22,277

23,039

1976

1977

22,521

1975

(1)

28,292

1974

(3)

19,228

17,829

16,196

15,518

15,223

15,500

13,610

12,377

10,459

9,767

9,290

8,426

7,863

7,515

7,545

6,774

6,379

6,106

6,294

6,166

6,089

5,758

4,759

3,809

3,522

3,409

3,468

(4)

5,009

5,035

4,963

5,030

4,700

4,172

3,854

3,955

3,778

3,470

3,190

2,921

2,360

1,758

1,464

1,333

1,173

916

885

970

961

1,021

1,015

853

703

916

1,118

256

261

272

262

254

247

235

252

252

253

(5)

(6)

100

111

95

98

99

113

160

152

150

153

148

144

135

132

144

143

146

142

151

131

158

151

123

(7)

6,370

6,370

6,708

6,708

6,708

6,701

6,699

6,699

6,699

6,699

6,699

6,699

6,699

6,637

6,637

6,637

6,637

(8)

805

812

835

835

790

790

798

760

692

667

679

677

622

600

469

527

787

(9)

160,000

152,000

150,000

153,000

148,000

144,000

135,000

132,000

144,000

143,000

146,000

142,000

151,000

131,000

158,000

151,000

123,000

Table A1.3 Railway transport according to i-o tables (in millions rupiah) Value added

1975

6,138

1980 1985

Revenue

Value added/ Operating surplus output ratio (%)

Wages & salaries

Depreciation

338

Indirect taxes

18,710

32.8

-1,238

7,036

1

21,874

51,299

42.6

-16,317

31,968

6,219

4

52,721

111,756

47.2

-9,812

46,517

16,016

0

1990

105,788

233,692

45.3

4,565

83,901

17,322

0

1995

263,609

567,239

46.5

20,775

192,620

50,214

0

2000

743,740

2,258,074

32.9

188,610

433,923

86,047

35,161

In table A1.4 the data above are used to calculate time-series for value added in rail transport between 1900 and 2000. Value added for the colonial period is taken from table A1.1. For the period after 1950 I rely on the Input-Output tables and extrapolate the missing years based on a volume index and subsequently correcting for inflation using a cpi index. For the colonial period it was only possible to construct a volume index based on the number of passengers and goods transported without taking into account the average distance travelled. Since independence data are available on passengerkilometres and ton-kilometres. Constant price estimates are arrived at by taking an unweighted average index of the two volume indices.



Notes for table A1.4 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) = (9) = (11) =

200

Value added in current prices (million guilders/rupiah) For the period until 1940 value added estimates in current prices are taken from table A1.1. Bold indicates the numbers taken from the input-output tables (table A1.3). Other years are calculated by extrapolation based on the volume index (8) and corrected for inflation using the cpi index (11) by van Leeuwen (2007) Number of passengers (x 1,000) Freight (ton x 1,000) Unweighted volume index (1993=100) of (2) and (3) Passenger-kilometres (in millions) Ton-kilometres (in millions) Unweighted volume index (1993=100) of (5) and (6) Average unweighted index (1993=100) = ((4) + (7))/2 Value added in constant prices (1993=100) (millions fl/Rp) cpi (Van Leeuwen 2007), 1993=100 The sharp decrease after 1966 is because in that year 1000 rupiah was converted into 1 new rupiah as a consequence of the hyperinflation from which Indonesia suffered during that time. This leads to sharp fluctuations in both current price value added estimates as the cpi index.

| Accounting for Services

201

| Appendix 1

11.29

11.79

13.19

14.22

16.45

17.81

17.69

17.95

18.25

1894

1895

1896

1897

1898

1899

1900

1901

1902

1903

21.72

24.76

26.65

27.36

30.13

33.43

37.45

40.73

39.69

43.26

48.46

1906

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

19.18

11.04

1893

20.33

10.27

1892

1905

10.20

1891

1904

8.75

9.37

1890

(1)

116,749

106,764

108,080

106,131

93,502

81,350

72,106

67,962

63,392

58,493

51,789

48,182

44,280

42,546

39,937

38,624

37,104

30,464

24,871

21,177

19,627

19,130

18,606

18,269

17,388

17,034

15,026

(2)

12,133

10,508

10,223

9,888

9,339

8,637

7,584

6,658

6,638

6,131

5,453

5,021

4,616

4,116

3,968

3,767

3,451

3,050

2,743

2,495

2,168

2,149

2,005

1,880

1,553

1,426

1,309

(3)

Table A1.4 Value added of railway transport, 1890-2000

122.7

109.3

108.5

105.7

96.5

86.6

76.4

69.5

67.1

61.9

55.0

50.9

46.8

43.3

41.2

39.5

37.0

31.6

27.1

23.9

21.4

21.1

20.1

19.3

17.1

16.2

14.6

(4)

(5)

(6)

(7)

(8)

219,807

195,686

194,242

189,302

172,791

155,063

136,800

124,522

120,149

110,914

98,428

91,097

83,735

77,563

73,789

70,705

66,350

56,555

48,522

42,720

38,362

37,710

35,927

34,478

30,650

29,091

26,177

(9)

0.014

0.013

0.013

0.014

0.015

0.013

0.012

0.012

0.013

0.012

0.011

0.010

0.010

0.012

0.011

0.012

0.010

0.010

0.010

0.013

0.009

0.009

0.010

0.011

0.012

0.011

0.011

(10)

202

| Accounting for Services

(1)

152.7

(9)

(10)

0.016

0.013

0.010

0.010

0.009

0.010

0.010

0.011

0.012

0.015

0.017

0.017

0.017

0.018

0.018

0.018

0.019

0.021

0.023

0.027

0.032

0.019

0.019

0.015

0.024

168,848

156,832

158,690

125,398

120,308

130,609

142,392

211,540

236,780

267,414

306,440

299,093

283,711

268,374

265,301

249,751

245,742

273,474

311,681

293,026

266,669

241,867

235,949

1944

(8)

1943

94.3

87.6

88.6

70.0

67.2

72.9

79.5

118.1

132.2

149.3

171.1

167.0

158.4

149.8

148.1

139.4

137.2

(7)

0.017

10,828

9,750

10,083

7,640

7,211

7,656

8,262

15,746

15,259

15,817

19,066

18,668

17,116

15,736

15,668

14,510

13,344

14,036

163.6 174.0

(6)

1942

87,978

84,214

83,333

68,561

66,845

74,169

81,679

87,022

110,479

135,024

146,696

142,724

139,911

136,068

133,534

127,751

133,919

157,194

16,150

14,600

135.0 148.9

(5)

0.011

37.87

1939

173,236

177,446

13,937

13,104

(4) 131.7

0.012

33.92

1938

131,007

149,932

(3) 12,657

1941

34.50

(2)

129,067

1940

27.49

1937

1931

1936

46.79

1930

25.77

66.31

1929

1935

85.23

1928

26.07

87.98

1927

1934

84.68

1926

34.71

78.16

1925

29.79

79.21

1924

1932

70.25

1923

1933

70.17

64.95

1922

71.75

86.01

1921

1919

1920

53.82

60.44

1918

52.26

1917

203

| Appendix 1

323

373

452

1953

1954

1955

1,321

1,543

1,864

4,824

10,222

21,283

68,973

636

1,692

3,652

4,069

4,684

4,466

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1959

1960

628

1,004

1958

556

273

1952

626

175

1951

1957

146

1950

1956

52

91

1948

1949

39,000

49,000

50,000

54,000

68,000

75,000

92,000

125,000

117,000

123,000

130,000

144,000

158,000

146,000

124,000

140,357

136,253

151,316

125,712

111,144

97,235

103,323

106,963

65,014

51,084

4,562

4,202

3,958

4,025

3,307

2,939

3,860

4,397

4,841

5,127

5,599

6,494

6,564

6,000

5,836

6,158

6,548

6,822

6,304

6,042

5,464

5,881

5,391

4,976

3,510

36.0

39.2

38.4

40.3

41.9

41.7

53.0

66.2

67.4

71.2

76.5

86.7

91.4

84.0

76.5

83.7

85.1

91.6

80.3

74.0

65.9

70.4

68.7

52.6

39.2

3,344

3,545

3,378

3,407

4,028

4,971

6,003

7,322

6,329

6,548

7,057

7,201

5,056

4,016

3,437

3,003

3,482

3,785

1,532

1,039

949

855

860

739

665

881

973

1,045

1,072

1,157

1,245

1,159

1,046

1,069

1,044

1,053

976

902

789

827

723

434

(6)

33.0 32.0 33.4 32.0

25.6 27.6 27.9

34.1

34.9

44.3

53.7

53.7

56.2

60.4

66.6

67.4

61.6

58.2

61.4

62.0

63.8

55.7

50.8

45.0

48.5

47.4

32.9

(8)

25.7

26.3

28.0

35.5

41.3

40.0

41.2

44.4

46.6

43.4

39.1

40.0

39.1

36.0

31.0

27.6

24.1

26.6

26.1

13.1

(7)

57,244

59,771

57,306

59,139

61,077

62,498

79,277

96,249

96,207

100,622

108,265

119,345

120,656

110,247

104,324

109,895

111,042

114,284

99,732

91,012

80,584

86,925

84,946

58,868

70,248

(9)

(10)

8.13

7.62

7.34

6.50

5.56

2.48

0.93

79.84

19.73

9.30

4.16

1.50

1.09

0.887

0.734

0.504

0.459

0.401

0.303

0.285

0.268

0.254

0.152

0.130

0.106

0.058

(5)

0.082

(4)

1947

(3)

1946

(2) 0.033

(1)

1945

204

| Accounting for Services

307,900

504,000

622,300

743,740

1998

1999

2000

287,400

1997

263,609

1996

152,145

1992

1995

125,080

1991

179,100

105,788

1990

219,300

100,475

1989

1994

85,788

1988

1993

60,371

52,721

1985

69,892

38,247

1984

1987

30,793

1983

1986

26,031

1982

1979

21,874

15,939

1978

24,468

10,900

1977

1981

7,975

1976

1980

6,138

6,723

1975

5,274

1974

(1)

4,037

1973

(2)

191,600

160,300

169,800

158,600

153,700

144,500

115,866

98,200

73,057

62,228

58,212

55,542

52,251

48,565

48,659

46,693

46,742

46,261

43,697

43,264

41,754

40,469

31,445

23,039

22,277

22,521

28,292

27,000

(3)

19,544

19,286

18,217

19,186

18,421

16,868

16,368

15,690

14,988

13,726

12,537

11,768

10,317

8,577

7,589

6,752

6,423

5,066

4,700

4,971

4,859

5,174

4,500

3,819

3,449

4,064

4,728

4,971

(4)

158.0

143.1

142.9

141.5

136.4

126.6

111.2

100

85.0

75.1

69.4

65.7

59.7

52.6

49.6

45.8

44.8

39.8

37.3

38.1

37.0

37.7

31.0

24.5

22.9

25.1

30.4

30.5

19,228

17,829

16,196

15,518

15,223

15,500

13,610

12,377

10,459

9,767

9,290

8,426

7,863

7,515

7,545

6,774

6,379

6,106

6,294

6,166

6,089

5,758

4,759

3,809

3,522

3,409

3,468

(5)

5,009

5,035

4,963

5,030

4,700

4,172

3,854

3,955

3,778

3,470

3,190

2,921

2,360

1,758

1,464

1,333

1,173

916

885

970

961

1,021

1,015

853

703

916

1,118

(6)

134.2 135.8 139.7 149.6

128.8 136.2 141.2

128.9

120.9

107.4

100.0

87.5

79.2

73.7

68.4

60.8

52.6

48.9

44.8

42.3

37.2

35.9

37.0

36.2

36.6

31.7

25.6

23.1

25.7

29.9

267,957

250,121

243,294

240,295

230,938

216,506

192,407

179,100

156,688

141,897

131,979

122,456

108,851

94,166

87,657

80,166

75,700

66,595

64,273

66,240

64,910

65,603

56,785

45,761

41,345

46,106

53,633

(9) 54,555

(8) 30.5

126.9

121.4

115.2

103.7

100.0

90.0

83.4

78.0

71.1

61.9

52.6

48.3

43.7

39.8

34.6

34.5

35.8

35.4

35.6

32.4

26.6

23.2

26.4

29.5

(7)

(10)

269.38

259.77

215.58

136.59

128.06

118.76

108.45

100

91.09

84.73

77.52

71.86

67.52

62.48

57.21

54.03

51.63

46.74

42.21

38.75

35.67

30.90

25.66

23.75

21.41

17.86

15.00

10.66

A1.2

Road transport Road transport is more difficult to estimate than, for example, rail transport since no annual reports are available to rely on. Hence more indirect methods are used to obtain value added in this sector. Sources make it possible to estimate value added in road transport for the year 1930. Firstly, I tried to find out how many cars there were in Indonesia. Based on the number of cars imported, the number of cars registered and average revenue statistics, current price estimates can be derived. These estimates will probably be rather robust since figures, at least until 1935 when the registration system improved, are quite inaccurate. Therefore I derived the number of cars in operation by the following formula: Cars in operation (t) = Imports of cars (t) + Cars in operation (t-1) – 0.10 * Cars in operation (t-1). This method has the advantage of it relying on import statistics, which are in general quite accurate. And since Indonesia did not have its own automobile industry during the colonial period, all cars had to be imported. Statistics on motor vehicles for road traffic and import of cars are presented in table A1.5. Estimates of the cars in operation in Indonesia are given in table A1.6.

205

| Appendix 1

Table A1.5

Motor vehicles, 1910-1940 Motor vehicles for road traffic Cars

Trucks

Motorcycles

Imports of motor vehicles for road traffic Busses

Cars

Trucks

Motorcycles

1910 1911 1912 1913

1,330

x

x

1914

1,180

x

x

1915

777

x

287

1916

2,608

x

500

1917

2,768

1918

1,763

197

587

1919

2,857

669

710

1920

4,999

1,555

1,149

1921

4,740

1,931

1,327

1922

949

1,865

215

590

1923

x

x

x

x

3,169

61

491

1924

x

x

x

x

3,487

289

621

1925

38,709

4,676

7,215

224

7,537

859

991

1926

46,569

6,253

9,306

1,698

10,236

2,146

1,522

1927

54,889

8,040

11,106

3,043

9,694

3,033

2,531

1928

60,056

10,749

13,420

5,200

11,895

4,404

2,696

1929

67,863

16,077

14,788

5,590

12,321

5,902

2,700

1930

57,749

14,100

10,595

5,403

6,025

3,191

2,098

1931

59,495

14,876

11,275

6,318

3,903

1,796

1,040

1932

x

x

x

x

1,808

721

414

1933

60,065

12,007

16,172

7,341

1,950

1,221

551

1934

36,690

7,507

10,305

5,531

1,959

1,564

344

1935

43,446

9,602

11,781

6,639

3,842

1,201

476

1936

46,720

10,298

11,804

7,114

4,426

1,539

559

1937

49,437

11,524

12,517

8,889

5,947

3,379

1,140

1938

54,720

9,655

13,239

7,216

6,617

3,089

1,640

1939

56,067

10,164

13,959

6,826

5,470

1,820

1,367

1940

56,352

10,922

14,544

6,459

4,415

3,796

1,044

Source: cei ix 1989.

206

| Accounting for Services



Table A1.6 Cars in operation in Indonesia, 1913-1940 Number of cars in operation

Imports of cars

Index (1930=100)

1913

1,330

1,330

2.4

1914

2,377

1,180

4.2

1915

2,916

777

5.2

1916

5,233

2,608

9.3

1917

7,477

2,768

13.3

1918

8,493

1,763

15.2

1919

10,500

2,857

18.7

1920

14,449

4,999

25.8

1921

17,744

4,740

31.7

1922

17,835

1,865

31.8

1923

19,220

3,169

34.3

1924

20,785

3,487

37.1

1925

26,244

7,537

46.8

1926

33,856

10,236

60.4

1927

40,164

9,694

71.7

1928

48,043

11,895

85.7

1929

55,559

12,321

99.2

1930

56,028

6,025

100

1931

54,329

3,903

97.0

1932

50,704

1,808

90.5

1933

47,583

1,950

84.9

1934

44,784

1,959

79.9

1935

44,148

3,842

78.8

1936

46,720

4,426

83.4

1937

49,437

5,947

88.2

1938

54,720

6,617

97.7

1939

56,067

5,470

100.1

1940

56,352

4,415

100.6



Note: Number of cars in operation derived by the following formula: Cars in operation (t) = Imports of cars (t) + Cars in operation (t-1) – 0.10 * Cars in operation (t-1). Imports of cars taken from cei ix 1989.

207

| Appendix 1

The next step is to come up with an estimate of value added per car, truck and bus. For this I used the source Statistiek van het Taxi-verkeer in de Stad Soerabaja (Statistics on Taxi-Traffic in the City of Surabaya), which gives information about the revenues earned by taxis. From this source I calculated average value added per taxi per year to be around 2,700 guilders. Assuming, on average, a constant ratio between number of cars and taxis across Indonesia, and a similar cost structure, value added for transport by car comes to roughly 37.2 million guilders in 1929 (see table A1.7). Table A1.7 Value added by taxis in Indonesia, 1929 Number of cars

Taxis

Value added per taxi

Value added total

Surabaya

4,166

843 (=20.24 %)

2,710.15

2,284,635

Indonesia

67,863

13,735 (=20.24 %)

2,710.15

37,223,910

For value added by trucks and buses I had to rely on the same source, since no information is available about revenue and operating expenses of trucks and buses. Therefore I assumed that, because more people are needed (for among others loading/unloading, administration, etc.) to operate a bus or truck, the value added of these means of transportation is twice as high as that of a taxi. This is exactly in line with the assumptions made by Neumark (1954: 377) and Muljatno (1960: 176) who both had access to information from the Ministry of Communications and Ikatan Motor Indonesia (Indonesian Motor Union). The following calculation then gives us the value added of trucks and buses in 1930: Number of trucks * value added per truck (= 2 * value added by a taxi) + Number of buses * value added per bus (= 2 * value added by a taxi) = 16,077 * 5,420 guilders + 5.590 * 5,420 guilders = 116,513,740 guilders Now we only need an estimate for value added in traditional road transport. For this I relied on the 1930 population census. According to this census 166,521 persons were working in the sub-sector road transport. Based on the number of cars, bus and trucks in operation in 1930 (see above) I assumed that 15,000 of them worked as taxi drivers, and 65,000 for bus and truck companies (3 per bus/truck). This means that approximately 95,000 people were working as drivers of traditional means of transportation. It is unlikely that they earned significantly more than an unskilled labourer. Therefore it is assumed that on average someone working in this sector earns a wage close to that of an unskilled labourer (cei xiii 1992: 120). This means that the contribution of traditional road transport to gdp was 95.000 * 0.50 guilders per day * 320 days = 15.2 million guilders in 1930. Adding up value added by cars, trucks, buses and traditional modes of transport I arrived at a total value added in current prices in road transport of nearly 170 million in 1930 (see table A1.8).

208

| Accounting for Services

Table A1.8 Value added by road transport, 1930

1930 Source: See text

Traditional road transport 15,200

Taxis/cars

Trucks/buses

Total road transport

37,224

116,514

168,938

To arrive at value added constant price estimates the following procedure is used. • Traditional road transport is extrapolated based on an urbanisation index. The underlying reasoning for this is not that in urban areas the demand for traditional forms of road transport is higher than in rural areas, but that urbanisation functions as a proxy for the level of market activity. In a subsistence economy all people live in rural areas and there is no need to market their products and hence demand for (traditional forms of) transport is limited. • Taxis, cars, buses and trucks are extrapolated based on the number of cars in Indonesia. From these constant price series I obtained value added in current prices by assuming that value added in this sector followed the development of the cost-of-living index. This index is taken from Van Leeuwen (2007). The constant price series is inflated by this index. The results of these exercises are summarised in appendix table A1.9. The estimation of gross value added at current prices in Indonesia’s post-independence national accounts was rather intransparant. The available information does show that estimation methods were essentially the same as used for the colonial period, so that a more or less consistent series is obtained. In nearly all cases, however, the underlying data are not available, so that I have to rely on the aggregated estimates. Due to this very limited data availability some crude procedures have to be followed, which particularly build on the Input-Output tables. The years for which i-o tables were published are used as benchmark years from which estimates for other years are obtained by extrapolation, based on a volume index of number of motor vehicles and inflated for the years within. The various key indicators for this procedure are given in appendix tables A1.10 and A1.11. The complete time-series for value added in road transport are presented in table A1.12.

209

| Appendix 1

210

| Accounting for Services

11,932

12,008

12,084

12,160

12,464

1918

1919

1920

1921

11,856

1916

1917

11,780

11,476

1911

11,704

11,400

1910

1915

11,324

1909

1914

11,248

1908

11,552

11,172

1907

11,628

11,096

1906

1913

11,020

1905

1912

10,868

10,944

1904

1902

1903

10,716

10,792

1901

10,640

1900

Traditional road transport

11,789

9,600

6,976

5,642

4,968

3,476

1,938

1,579

884

Taxis

Constant prices (1930=100) (in thousands of guilders)

Table A1.9 Value added by road transport, 1900-1940

36,900

30,048

21,836

17,661

15,550

10,882

6,065

4,943

2,766

Trucks/buses

61,153

51,808

40,896

35,311

32,449

26,214

19,782

18,226

15,277

11,552

11,476

11,400

11,324

11,248

11,172

11,096

11,020

10,944

10,868

10,792

10,716

10,640

Total

0.027

0.032

0.019

0.019

0.015

0.014

0.013

0.013

0.014

0.015

0.013

0.012

0.012

0.013

0.012

0.011

0.010

0.010

0.012

0.011

0.012

0.010

cpi(1930=100) (Van Leeuwen 2007)

113,145

119,884

64,394

56,166

38,066

29,594

21,843

17,367

12,710

13,584

11,505

10,189

9,933

10,319

9,531

8,198

7,517

7,571

8,201

7,601

7,947

6,199

Current prices (in thousands of guilders)

211

| Appendix 1

14,592

14,896

15,200

15,504

15,808

16,112

1928

1929

1930

1931

1932

1933

17,328

17,632

17,936

18,240

1937

1938

1939

1940

17,024

14,288

1927

1936

13,984

1926

16,416

13,680

1925

16,720

13,376

1924

1935

13,072

1923

1934

12,768

1922

Traditional road transport

37,439

37,250

36,355

32,845

31,040

29,331

29,753

31,613

33,686

36,095

37,224

36,912

31,918

26,684

22,493

17,436

13,809

12,770

11,849

Taxis

Constant prices (1930=100) (in thousands of guilders)

119,195

117,336

96,297

136,595

124,915

145,138

78,515

106,366

116,000

126,616

116,514

129,442

85,766

80,966

83,588

71,805

43,224

39,970

37,089

Trucks/buses

174,874

172,521

150,284

186,768

172,979

191,188

124,685

154,091

165,494

178,215

168,938

181,250

132,276

121,938

120,065

102,920

70,410

65,812

61,706

Total

0.011

0.013

0.010

0.010

0.009

0.010

0.010

0.011

0.012

0.015

0.017

0.017

0.017

0.018

0.018

0.018

0.019

0.021

0.023

cpi(1930=100) (Van Leeuwen 2007)

108,459

133,014

88,702

109,031

94,350

108,409

72,632

98,220

119,383

153,628

162,447

150,205

130,621

123,198

126,230

108,838

103,803

104,131

106,902

Current prices (in thousands of guilders)

Table A1.10 Key indicators for road transport, 1949-2000 Roads Asphalted

Non-asphalted

14,357

35,073

Unspecified

Total

1949 1950 1951 1952 1953 1954

49,430

1955 1956 1957 1958 1959

13,583

37,251

28,474

79,308

1960

13,583

37,251

28,474

79,308

1961

14,538

36,484

28,239

79,261

1962

14,566

36,585

28,138

79,289

1963

19,658

34,297

25,462

79,417

1964

20,017

41,992

20,116

82,125

1965

20,877

42,273

20,116

83,266

1966

20,444

43,320

20,533

84,297

1967

20,444

43,320

20,533

84,297

1968

20,444

43,320

20,533

84,297

1969

20,444

43,320

20,533

84,297

1970

20,444

43,320

20,533

84,297

1971

23,347

39,497

26,534

89,378

1972

26,712

43,037

25,714

95,463

1973

29,089

42,912

25,995

97,996

1974

29,583

43,937

27,738

101,258

1975

33,051

44,856

26,774

104,681

1976

48,369

65,619

7,811

121,799 122,794

1977

49,319

65,017

8,458

1978

59,029

62,086

7,600

128,715

1979

57,746

62,889

8,427

129,062 146,498

1980

59,622

75,316

11,560

1981

65,827

79,860

11,580

157,267

1982

69,488

88,272

10,547

168,307 188,079

1983

75,999

98,266

13,814

1984

81,336

103,062

14,057

198,455

1985

84,363

111,016

11,984

207,363

1986

90,787

121,568

11,856

224,211

1987

99,467

117,048

10,829

227,344

212

| Accounting for Services

Number of motor vehicles 1949

Passenger cars

Trucks

Buses

Motorcycles

Total

17,626

15,949

2,756

4,584

40,915

1950

22,164

17,629

5,870

5,546

51,209

1951

31,046

21,649

7,643

7,663

68,001

1952

39,435

27,085

8,474

16,468

91,462

1953

41,026

27,767

8,644

21,082

98,519

1954

59,606

41,751

9,415

58,504

169,276

1955

61,104

43,128

9,620

67,194

181,046

1956

63,583

44,901

10,280

76,656

195,420

1957

73,219

51,410

11,498

99,079

235,206

1958

73,533

44,843

9,090

105,101

232,567 244,592

1959

74,819

46,552

9,882

113,339

1960

103,254

75,488

17,885

133,444

330,071

1961

129,262

69,837

17,852

152,228

369,179

1962

136,328

72,738

18,785

173,417

401,268

1963

143,189

77,264

23,146

196,223

439,822

1964

157,474

83,571

19,541

220,953

481,539 501,693

1965

165,955

83,798

18,021

233,919

1966

179,494

92,891

19,584

281,779

573,748

1967

184,954

94,892

18,840

287,522

586,208

1968

201,743

93,417

19,612

308,404

623,176

1969

218,866

94,065

19,367

368,724

701,022

1970

238,918

102,365

23,541

440,365

805,189

1971

259,282

115,082

22,797

516,949

914,110

1972

277,210

209,593

26,488

615,220

1,128,511

1973

307,739

144,060

30,368

720,011

1,202,178

1974

336,018

165,719

31,175

908,247

1,441,159

1975

337,911

196,416

35,133

1,192,051

1,761,511

1976

420,488

222,250

39,790

1,417,801

2,100,329

1977

479,155

278,979

60,769

1,717,807

2,536,710

1978

536,569

333,353

58,583

1,998,051

2,926,556

1979

581,531

393,109

69,770

2,307,215

3,351,625

1980

639,464

473,831

86,284

2,671,978

3,871,557

1981

719,336

589,439

113,509

3,207,499

4,629,783

1982

791,019

657,104

135,151

3,764,442

5,347,716

1983

685,940

717,873

160,260

4,135,677

5,879,750

1984

926,994

790,881

191,654

4,556,095

6,465,624

1985

990,651

845,338

227,304

4,794,517

6,857,810

1986

1,063,959

882,331

256,574

5,118,907

7,321,771

1987

1,170,103

953,694

303,378

5,554,305

7,981,480

213

| Appendix 1

Table A1.10 Continued Roads Asphalted

Non-asphalted

Unspecified

Total 254,934

1988

111,649

128,929

14,356

1989

121,313

133,522

16,340

271,175

1990

130,262

138,863

19,602

288,727 319,370

1991

142,053

146,157

31,160

1992

150,930

146,239

28,272

325,441

1993

159,329

155,119

30,444

344,892

1994

164,866

159,220

32,792

356,878

1995

171,508

135,505

20,214

327,227

1996

180,614

139,233

16,530

336,377

1997

192,668

132,237

16,562

341,467

1998

168,072

155,390

31,901

355,363

1999

203,374

136,210

16,367

355,951

2000

203,214

136,590

16,147

355,951

Table A1.11 Road transport according to i-o tables (in million of rupiah)

Value added

Revenue

Value added/ output ratio (%)

Operating surplus

Wages & salaries

Depreciation Indirect taxes

1975

419,663

628,452

66.8

289,414

80,300

41,205

8,744

1980

1,269,735

2,058,973

61.7

680,842

345,177

217,397

26,320

1985

3,169,333

5,569,754

56.9

1,667,171

801,474

633,557

67,131

1990

6,740,710

10,964,070

61.5

3,501,815

1,751,845

1,306,503

180,547

1995

16,210,519

24,896,045

65.1

9,719,649

3,592,806

2,636,997

261,067

2000

21,768,975

48,398,100

45.0

7,631,520

5,651,838

7,768,813

716,804

The information on the length of roads and number of motor vehicles is taken from: • bps, Statistical Yearbook of Indonesia, several volumes; • bps, Statistik perhubungan, 1999; • bps, Statistik Dalam 50 Tahun Indonesia Merdeka, 1995. In table A1.12 the statistics discussed before are used to calculate time-series estimates of value added in road transport.



214

| Accounting for Services

Number of motor vehicles Passenger cars

Trucks

Buses

Motorcycles

Total 7,770,949

1988

1,073,106

892,581

385,731

5,419,531

1989

1,182,253

952,461

434,903

5,722,291

8,291,908

1990

1,313,210

1,024,296

468,550

6,082,966

8,889,022

1991

1,494,607

1,087,940

504,720

6,494,871

9,582,138

1992

1,590,750

1,126,262

539,943

6,941,000

10,197,955

1993

1,700,454

1,160,539

568,490

7,355,114

10,784,597

1994

1,890,340

1,251,986

651,608

8,134,903

11,928,837

1995

2,107,299

1,336,177

688,525

9,076,831

13,208,832

1996

2,410,526

1,454,585

724,914

10,296,077

14,886,102

1997

2,639,523

1,548,397

611,402

11,735,797

16,535,119

1998

2,772,531

1,592,572

627,969

12,651,813

17,644,885

1999

2,897,803

1,628,531

644,667

13,053,148

18,224,149

2000

3,038,913

1,707,134

666,280

13,563,017

18,975,344



Notes for table A1.12 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) =

215

Value added in current prices (million guilders/rupiah) Value added for the colonial period is taken from table A1.9. Bold indicates the numbers taken from the i-o tables. Other years are calculated by by extrapolation based on the volume index (8) and corrected for inflation using the cpi index (11) by Van Leeuwen (2007). Number of motor vehicles Volume index of number of motor vehicles (1993=100) Value added in constant (1930=100) prices Value added index (1930=100) Value added in constant (1993=100) prices Value added in constant prices corrected for decreasing weight of traditional transport (million fl/Rp) Constant price estimates are obtained by extrapolation using the volume index of motor vehicles. In the period 1900-1930 this method would severely under-estimate traditional road transport, since road transport by motor vehicle was still only marginal. A correction has been made for this by extrapolating the constant (1993=100) price estimate for 1993 by the value added index (5). cpi (Van Leeuwen 2007)

| Appendix 1

Table A1.12 Value added by road transport, 1900-2000 (1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

1900

7.2

10.6

6.3

18,501

0.010

1901

8.6

10.7

6.3

18,633

0.012

1902

8.1

10.8

6.4

18,765

0.011

1903

8.5

10.9

6.4

18,897

0.012

1904

8.1

10.9

6.5

19,029

0.010

1905

7.9

11.0

6.5

19,162

0.010

1906

8.4

11.1

6.6

19,294

0.011

1907

9.5

11.2

6.6

19,426

0.012

1908

10.1

11.2

6.7

19,558

0.013

1909

9.3

11.3

6.7

19,690

0.012

1910

9.4

11.4

6.7

19,822

0.012

1911

10.3

11.5

6.8

19,955

0.013

1912

11.6

11.6

6.8

20,087

0.015

1913

14.2

1,330

0.0

15.3

9.0

4,536

23,297

0.014

1914

16.5

2,377

0.1

21.8

12.9

8,107

33,246

0.013

1915

17.7

2,916

0.1

28.0

16.6

9,947

42,682

0.013

1916

25.9

5,233

0.2

35.4

20.9

17,847

53,917

0.014

1917

37.6

7,477

0.2

42.7

25.3

25,503

65,081

0.015

1918

52.2

8,493

0.2

49.2

29.1

28,966

74,998

0.019

1919

64.7

10,500

0.3

56.3

33.4

35,814

85,921

0.019

1920

124.9

14,449

0.4

64.8

38.4

49,282

98,811

0.032

1921

111.1

17,744

0.5

73.0

43.2

60,521

111,386

0.027

1922

85.5

17,835

0.5

79.2

46.9

60,830

120,714

0.023

1923

87.9

86.1

51.0

131,355

0.021

1924

103.3

93.2

55.2

142,177

0.019

1925

147.6

31,144

0.9

102.9

60.9

106,222

156,944

0.018

1926

172.5

41,807

1.2

120.1

71.1

142,589

183,087

0.018

1927

162.3

51,247

1.5

121.9

72.2

174,787

185,943

0.018

1928

172.9

63,992

1.9

132.3

78.3

218,255

201,708

0.017

1929

248.5

77,226

2.3

152.9

90.5

263,395

233,231

0.017

1930

224.5

75,531

2.2

168.9

100

257,614

257,614

0.017

1931

155.4

75,523

2.2

178.2

1932

117.8

1933

88.8

66,931

2.0

216

| Accounting for Services

257,584

0.015

165.5

239,198

0.012

154.1

228,282

0.011

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

1934

69.7

57,822

1.7

124.7

197,213

0.010

1935

106.5

60,389

1.8

191.2

205,967

0.010

1936

90.8

64,132

1.9

173.0

218,734

0.009

1937

122.1

69,850

2.0

186.8

238,237

0.010

1938

99.9

71,591

2.1

150.3

244,175

0.010

1939

109.6

73,057

2.1

172.5

249,175

0.013

1940

115.9

73,733

2.1

174.9

251,480

0.011

1941

0.012

1942

0.017

1943

0.016

1944

0.024

1945

0.033

1946

0.058

1947

0.082

1948

0.106

1949

189

36,331

1.1

123,914

0.130

1950

292

45,663

1.3

155,742

0.152

1951

452

60,338

1.8

205,794

0.254

1952

936

74,994

2.2

255,781

0.268

1953

1,020

77,437

2.3

264,114

0.285

1954

1,550

110,772

3.2

377,809

0.303

1955

1,693

113,852

3.3

388,314

0.401

1956

2,339

118,764

3.5

405,067

0.459

1957

3,070

136,127

4.0

464,287

0.504

1958

3,155

127,466

3.7

434,747

0.734

1959

4,730

131,253

3.8

447,663

0.887

1960

8,567

196,627

5.7

670,634

1.09

1961

11,643

216,951

6.3

739,952

1.50

1962

16,739

227,851

6.6

777,129

4.16

1963

49,773

243,599

7.1

830,840

9.30

1964

119,052

260,586

7.6

888,778

19.73

1965

259,426

267,774

7.8

913,294

79.84

1966

1,144,871

291,969

8.5

995,815

0.93

1967

13,714

298,686

8.7

1,018,725

2.48

1968

38,300

314,772

9.2

1,073,589

5.56

217

| Appendix 1

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

1969

90,783

332,298

9.7

1,133,365

6.50

1970

116,421

364,824

10.6

1,244,301

7.34

1971

143,152

397,161

11.6

1,354,593

7.62

1972

192,080

513,291

15.0

1,750,676

8.13

1973

192,610

482,167

14.1

1,644,522

10.66

1974

278,947

532,912

15.5

1,817,597

15.00

1975

419,663

569,460

16.6

1,942,251

17.86

1976

603,059

682,528

19.9

2,327,891

21.41

1977

802,546

818,903

23.9

2,793,023

23.75

1978

983,400

928,505

27.1

3,166,842

25.66

1979

1,331,822 1,044,410

30.5

3,562,158

30.90

1980

1,269,735

35.0

4,091,391

35.67

1,199,579

1981

1,635,688 1,422,284

41.5

4,850,968

38.75

1982

1,983,369

1,583,274

46.2

5,400,055

42.21

1983

2,169,785

1,564,073

45.6

5,334,567

46.74

1984

2,925,787 1,909,529

55.7

6,512,810

51.63

1985

3,169,333 2,063,293

60.2

7,037,251

54.03

1986

3,582,764 2,202,864

64.2

7,513,284

57.21

1987

4,311,321

2,427,175

70.8

8,278,339

62.48

1988

4,513,591

2,351,418

68.6

8,019,956

67.52

1989

5,249,553 2,569,617

74.9

8,764,164

71.86

1990

6,740,710 2,806,056

81.8

9,570,584

77.52

1991

8,105,945 3,087,267

90.0

10,529,708

84.73

1992

9,193,035

95.0

11,108,461

91.09

3,256,955

1993

11,696,900 3,429,483

100

11,696,900

100

1994

13,439,300

3,793,934

110.6

12,939,929

108.45

1995

16,210,519

4,132,001

120.5

14,092,970

118.76

1996

16,631,700 4,590,025

133.8

15,655,148

128.06

1997

18,240,400 4,799,322

139.9

16,368,995

136.59

1998

22,461,500 4,993,072

145.6

17,029,816

215.58

1999

20,594,800

5,171,001

150.8

17,636,676

259.77

2000

21,768,975

5,412,327

157.8

18,459,764

269.38

218

| Accounting for Services

A1.3

Water transport During the colonial period the most important player in shipping transport was the Koninklijke Paketvaart Maatschappij (kpm). In 1930 it was estimated that kpm covered 42.9 per cent of total intra-island shipping traffic or almost 80 per cent of intra-island shipping under the flag of the Netherlands-Indies (Statistiek van de Scheepvaart over het jaar 1930). Since the profit and loss accounts of this company are available it is possible to estimate its value added. The main sources for estimating water transport between 1900 and 1940 are the following: • • • • • • •

• •



Jaarcijfers voor het Koninkrijk der Nederlanden. Koloniën, The Hague, 1897-1921; Statistisch Jaaroverzicht van Nederlandsch-Indië, Batavia, 1922-1940; Koloniaal Verslag, The Hague, 1849-1930; Indisch Verslag, The Hague, 1931-1940; ara-ii, Archive of Koninklijke Paketvaart Maatschappij, uncoded items, 18921973 (2.20.58.01); ara-ii, Archive of Koninklijke Paketvaart Maatschappij and Koninklijke Java China Paketvaart Lijnen (kpm/kjcpl), balances and annual reports (2.20.59); Knaap, G.J. (1989), Changing Economy in Indonesia. A selection of statistical sources material from the early 19th century up to 1940. Volume 9: Transport 1819-1940, Edited by P. Boomgaard, Amsterdam: Royal Tropical Institute; á Campo, J.N.F.M. (1992), Koninklijke Paketvaart Maatschappij. Stoomvaart en staatsvorming in de Indonesische archipel, 1888-1914, Hilversum: Verloren; Departement der Marine, Statistiek van de scheepvaart, Batavia, 1910-1939.

Notes for table A1.13 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) = (9) = (10)=

219

Number of steamers and motor vessels Burden of steamers and motor vessels (1,000 m3) Number of sailing vessels, European rigging Burden of sailing vessels, European rigging (1,000 m3) Number of sailing vessels, indigenous rigging Burden of sailing vessels, indigenous rigging (1,000 m3) Total number of sailing vessels Total burden of sailing vessels (1,000 m3) Total number of vessels Total burden of vessels (1,000 m3)

| Appendix 1

Table A1.13 General water transport statistics, 1891-1940 (1)

(2)

(3)

(4)

(5)

(6)

1891

77

70

192

87

1,605

76

1892

82

81

185

81

1,572

76

1893

82

77

181

79

1,627

78

1894

80

81

185

77

1,668

79

1895

81

82

201

81

1,720

81

1896

84

87

200

74

1,838

87

1897

81

90

183

65

1,826

94

1898

85

94

174

58

1,859

95

1899

104

110

176

63

1,951

107

1900

116

113

177

57

2,104

119

1901

145

141

179

58

2,269

132

1902

157

145

165

51

2,272

129

1903

176

157

145

50

2,308

134

1904

181

185

129

40

1,867

115

1905

183

194

137

43

2,316

145

1906

190

217

133

46

2,171

129

1907

190

247

278

63

2,327

144

1908

255

283

446

60

11,773

290

1909

255

268

234

57

10,068

249

1910

274

265

610

63

11,785

293

1911

314

303

408

54

8,888

235

1912

204

329

121

23

4,873

118

1913

152

225

54

22

4,756

157

1914

196

389

51

26

3,780

112

1915

216

395

44

24

5,508

143

1916

233

436

45

26

5,162

123

1917

235

442

41

15

5,040

119

1918

210

366

49

17

5,714

123

1919

220

430

44

27

5,833

131

1920

224

470

38

13

5,534

123

1921

224

479

33

10

5,491

125

1922

225

479

x

x

x

x

1923

226

507

x

x

x

x

1924

230

516

x

x

x

x

1925

250

515

x

x

x

x

1926

249

542

x

x

x

x

1927

309

583

x

x

x

x

1928

317

626

x

x

x

x

1929

323

684

x

x

x

x

1930

327

696

x

x

x

x

220

| Accounting for Services

(1)

(2)

(3)

(4)

(5)

(6)

1931

347

733

x

x

x

x

1932

311

714

x

x

x

x

1933

297

683

x

x

x

x

1934

309

676

x

x

x

x

1935

308

674

x

x

x

x

1936

x

x

x

x

x

x

1937

315

663

x

x

x

x

1938

347

726

x

x

x

x

1939

378

702

x

x

x

x

1940

475

1,859

x

x

x

x

(7)

(8)

(9)

(10)

1891

1,797

163

1,874

233

1892

1,757

157

1,839

238

1893

1,808

157

1,890

234

1894

1,853

156

1,933

237

1895

1,921

162

2,002

244

1896

2,038

161

2,122

248

1897

2,009

159

2,090

249

1898

2,033

153

2,118

247

1899

2,127

170

2,231

280

1900

2,281

176

2,397

289

1901

2,448

190

2,593

331

1902

2,437

180

2,594

325

1903

2,453

184

2,629

341

1904

1,996

155

2,177

340

1905

2,453

188

2,636

382

1906

2,304

175

2,494

392

1907

2,605

207

2,795

454

1908

12,219

350

12,474

633

1909

10,302

306

10,557

574

1910

12,395

356

12,669

621

1911

9,296

289

9,610

592

1912

4,994

141

5,198

470

1913

4,810

179

4,962

404

1914

3,831

138

4,027

527

1915

5,552

167

5,768

562

1916

5,207

149

5,440

585

1917

5,081

134

5,316

576

1918

5,763

140

5,973

506

221

| Appendix 1

(7)

(8)

(9)

(10)

1919

5,877

158

6,097

588

1920

5,572

136

5,796

606

1921

5,524

135

5,748

614

1922

5,399

129

5,624

608

1923

5,396

122

5,622

629

1924

5,231

123

5,461

639

1925

4,833

113

5,083

628

1926

5,387

126

5,636

668

1927

5,021

118

5,330

701

1928

5,430

132

5,747

758

1929

5,693

139

6,016

823

1930

5,926

143

6,253

839

1931

5,837

145

6,184

878

1932

5,725

145

6,036

859

1933

5,716

148

6,013

831

1934

5,669

149

5,978

825

1935

5,024

137

5,332

811

1936

x

x

x

x

1937

3,069

140

3,384

803

1938

3,635

155

3,982

881

1939

3,926

184

4,304

886

1940

4,292

205

4,767

2,064



Notes for table A1.14 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) = (9) = (10)= (11)= (12)= (13)= (14)= (15)= (16)= (17)=

222

Number of kpm motor vessels Number of kpm steamers Burden of kpm vessels (1,000 m3 gross) Number of passengers transported by kpm kpm sea miles Depreciation on fleet Depreciation on buildings Revenue from government freight Revenue from government passages Revenue from private freight Revenue from private passages Total income from shipping services Total income kpm Operating expenses on shipping Value added/total cost ratio Value added/output ratio (13) * (16) = Value added kpm, current prices in thousands of guilders

| Accounting for Services

Table A1.14 Statistics on kpm, 1891-1940 (1)

(2)

(3)

(4)

(5)

(6)

1891

-

28

82

122

752

217,460

1892

-

30

87

150

808

388,825

1893

-

31

93

175

880

652,807

1894

-

31

93

179

963

762,691

1895

-

32

101

180

968

635,000

1896

-

31

102

213

1,026

820,556

1897

-

34

114

190

1,044

767,454

1898

-

34

122

193

1,137

765,719

1899

-

33

120

179

1,144

637,129

1900

-

36

134

197

1,164

748,431

1901

-

38

138

208

1,158

705,784

1902

-

45

169

240

1,244

720,812

1903

-

46

177

259

1,426

859,537

1904

-

45

176

294

1,429

977,281

1905

-

46

179

289

1,486

956,229

1906

-

47

187

366

1,540

983,554

1907

-

52

203

408

1,615

1,001,711

1908

-

60

241

449

1,731

1,098,654

1909

-

66

277

497

1,927

1,278,214

1910

-

68

278

565

2,045

1,390,750

1911

2

71

299

644

2,133

1,344,374

1912

2

78

362

680

2,265

1,455,267

1913

2

85

390

663

2,375

1,744,704

1914

4

86

425

680

2,405

1,961,193

1915

7

88

466

617

2,631

2,156,315

1916

7

86

456

689

2,899

2,178,873

1917

7

86

456

774

3,183

2,180,566

1918

7

85

442

667

2,713

2,104,997 1,997,750

1919

7

88

464

887

2,843

1920

7

91

483

991

2,837

2,386,853

1921

7

98

509

884

2,880

2,575,884

1922

7

100

539

736

2,916

2,896,306

1923

6

100

560

680

3,038

3,604,545

1924

6

100

551

742

3,248

3,800,070

1925

6

100

551

946

3,331

3,927,700

1926

8

107

592

1,167

3,586

3,927,700

1927

8

115

640

1,010

3,840

4,080,781

1928

10

125

739

1,075

4,138

6,536,228

1929

17

120

766

1,203

4,495

6,997,747

1930

32

113

808

1,024

4,436

7,381,862

1931

32

112

817

684

3,994

5,706,394

223

| Appendix 1

(1)

(2)

(3)

(4)

(5)

(6)

1932

34

110

816

528

3,589

5,678,451

1933

33

105

806

444

3,554

5,470,500

1934

33

98

780

421

3,567

5,393,175

1935

35

94

784

445

3,663

5,329,819

1936

35

93

762

418

3,679

5,586,200

1937

38

93

779

605

4,052

5,955,033 6,543,706

1938

42

89

872

527

3,931

1939

49

85

907

516

4,111

5,567,717

1940

53

85

914

501

4,216

5,552,969

(7)

(8)

(9)

(10)

(11)

(12)

1891

189,355

1,305,546

1,414,484

795,866

3,705,252

1892

200,294

1,339,761

1,526,459

880,057

3,946,571

1893

229,605

1,501,048

1,984,469

1,075,553

4,790,676

1894

247,400

1,452,828

2,185,012

1,068,886

4,954,126

1895

281,287

1,489,334

2,153,749

1,000,612

4,924,983

1896

271,981

1,866,395

2,139,056

1,049,937

5,327,368

1897

241,948

1,436,583

2,415,712

1,157,639

5,251,882

1898

339,124

1,545,448

2,504,261

1,352,854

5,741,687

1899

303,024

1,175,181

3,170,760

1,320,205

5,969,170

1900

299,765

1,095,922

3,463,100

1,494,394

6,353,180

1901

389,482

1,259,301

3,750,336

1,589,798

6,988,917

1902

385,309

1,494,815

3,952,052

1,606,462

7,438,637

1903

375,574

1,450,456

4,009,465

1,630,795

7,466,289

1904

417,060

1,348,348

4,105,594

1,678,244

7,549,247

1905

344,545

1,265,623

4,210,888

1,736,567

7,557,624

1906

337,212

1,354,125

4,643,040

1,883,786

8,218,163

1907

343,785

1,234,460

4,021,228

2,164,757

7,764,230

1908

318,851

1,465,894

5,301,207

2,259,121

9,345,074

1909

401,509

1,362,523

5,876,994

2,489,247

10,130,272

1910

564,530

1,442,571

7,456,094

3,133,826

12,597,021

1911

66,015

601,582

1,412,909

7,971,268

3,706,359

13,692,118

1912

105,924

599,682

1,446,622

8,917,185

3,965,959

14,929,448

1913

117,737

704,398

1,536,449

10,272,910

4,262,923

16,776,680

1914

193,796

809,000

1,817,000

11,842,000

4,243,000

18,711,000

1915

313,872

1,176,058

1,622,883

15,182,677

4,174,154

22,155,772

1916

334,817

2,239,000

1,746,000

19,318,000

4,724,000

28,027,000

1917

385,321

3,121,000

1,804,000

25,247,000

5,460,000

35,632,000

1918

502,015

1919

599,285

4,002,286

2,048,062

35,542,516

7,987,968

49,580,832

1920

822,829

5,053,138

2,400,661

31,537,587

9,771,903

50,299,163

1921

1,055,871

6,338,339

2,709,698

32,025,543

10,908,710

51,982,291

224

| Accounting for Services

(7)

(8)

(9)

(10)

(11)

(12)

4,624,794

2,299,738

30,991,878

9,575,835

47,492,245

1,297,110

4,392,117

2,030,782

31,061,559

9,025,515

46,509,973

1,387,415

4,381,299

2,055,695

32,307,367

9,779,409

48,523,770

1925

1,679,071

4,088,384

2,096,960

35,205,190

11,606,713

54,756,492

1926

1,679,071

3,904,765

2,787,175

37,253,059

14,041,663

57,986,662

1927

2,648,304

4,391,500

3,108,760

39,588,824

15,136,398

62,225,483

1928

2,397,605

4,474,503

3,040,447

42,333,620

15,746,711

65,595,281

1929

2,856,856

4,565,211

3,209,750

46,233,878

17,796,062

71,804,901

1930

962,333

4,802,763

3,173,193

39,670,366

14,864,853

62,511,175

1931

276,282

3,585,348

2,518,051

30,274,412

10,370,360

46,748,170

1932

193,984

2,327,177

1,900,431

24,790,511

8,150,459

37,168,576

1933

197,611

2,473,773

2,038,919

26,353,775

6,700,006

37,566,473

1922

1,847,183

1923 1924

1934

197,365

2,391,355

2,133,935

25,342,059

6,447,971

36,315,320

1935

229,647

2,475,049

1,892,303

25,624,318

6,406,359

36,398,029

1936

341,888

2,527,767

1,749,088

24,988,731

6,251,467

35,517,052

1937

1,927,240

3,104,249

1,800,006

34,821,814

9,316,171

49,042,239

1938

642,476

3,654,020

1,749,185

34,267,547

8,391,457

48,062,209

1939

16,625

4,655,064

1,790,065

38,806,177

8,402,428

53,653,735

1940

123,020

5,531,174

1,949,004

45,659,603

7,201,612

60,341,393

(15)

(16)

(17)

(13)

(14)

1891

4,754,992

1892

4,968,863

3,804 3,975

1893

5,827,842

4,662

1894

6,625,076

5,300

1895

6,137,533

4,910

1896

6,718,108

5,374

1897

6,619,349

5,295

1898

7,174,197

5,739

1899

7,110,442

5,688

1900

7,753,525

6,203

1901

8,205,544

6,564

1902

8,260,978

6,609 6,970

1903

8,712,135

1904

8,984,223

7,187

1905

9,294,163

7,435

1906

9,593,581

7,675

1907

10,055,842

8,045

1908

10,756,401

8,605

1909

11,405,565

9,124

1910

14,023,505

11,219

1911

15,442,000

12,354

225

| Appendix 1

(13)

(14)

(15)

(16)

(17)

1912

17,559,000

14,047

1913

20,051,000

16,041

1914

21,285,000

17,028

1915

24,497,000

19,598

1916

35,911,000

19,707,893

28,729

1917

52,767,000

24,064,247

42,214

1918

50,386,798

26,114,875

40,309

1919

52,413,850

33,274,714

41,931

1920

52,388,080

45,563,231

41,910

1921

55,963,124

47,552,561

44,770

1922

32,025,543

1923

40,144,045

1924

37,994 79.6%

37,208

40,959,894

81.3%

38,819

1925

53,406,993

41,867,137

83.2%

42,726

1926

58,571,854

44,787,854

46.8%

85.3%

46,857

1927

61,989,663

47,360,963

47.7%

87.7%

49,592

1928

66,110,880

51,602,850

46.6%

89.3%

52,889

1929

70,223,854

57,114,910

88.6%

56,179

1930

61,398,851

56,306,932

84.6%

49,119

1931

47,304,652

51,090,210

47.6%

81.0%

37,844

1932

37,693,727

42,626,301

47.1%

85.6%

1933

33,481,474

39,224,451

1934

32,745,630

36,164,337

26,197

1935

33,023,884

35,336,287

26,419

1936

23,763,013

30,155 26,785

47.3%

28,414

1937

58,760,247

28,829,962

46.1%

71.1%

47,008

1938

57,056,917

31,187,765

46.3%

65.9%

45,646

1939

63,674,116

31,421,947

46.4%

66.8%

50,939

1940

69,693,883

35,218,859

42.0%

64.2%

55,755



Notes for table A.15 (1) = (2) = (3) =

226

Value added kpm, current prices/80% = Value added water transport, current prices in thousands of guilders Volume index (burden 1,000 m3), 1939 =100 (1)/(2) * 100 = Value added water transport, constant prices (1939 = 100) in thousands of guilders

| Accounting for Services



227

Table A1.15 Value added by water transport, 1891-1940 (1)

(2)

(3)

1891

4,755

26.3

18,081

1892

4,969

26.9

18,498

1893

5,828

26.4

22,066

1894

6,625

26.7

24,767

1895

6,138

27.5

22,286

1896

6,718

28.0

24,001

1897

6,619

28.1

23,553

1898

7,174

27.9

25,734 22,499

1899

7,110

31.6

1900

7,754

32.6

23,770

1901

8,206

37.4

21,964

1902

8,261

36.7

22,521

1903

8,712

38.5

22,636

1904

8,984

38.4

23,412

1905

9,294

43.1

21,557

1906

9,594

44.2

21,683

1907

10,056

51.2

19,624

1908

10,756

71.4

15,056

1909

11,406

64.8

17,605

1910

14,024

70.1

20,008

1911

15,442

66.8

23,111

1912

17,559

53.0

33,101

1913

20,051

45.6

43,973

1914

21,285

59.5

35,785

1915

24,497

63.4

38,620

1916

35,911

66.0

54,388

1917

52,767

65.0

81,166

1918

50,387

57.1

88,227

1919

52,414

66.4

78,977

1920

52,388

68.4

76,594

1921

55,963

69.3

80,755

1922

47,492

68.6

69,207

1923

46,510

71.0

65,513

1924

48,524

72.1

67,280

1925

53,407

70.9

75,348

1926

58,572

75.4

77,687

1927

61,990

79.1

78,349

1928

66,111

85.6

77,275

1929

70,224

92.9

75,599

1930

61,399

94.7

64,838

| Appendix 1

(1)

(2)

(3)

1931

47,305

99.1

47,736

1932

37,694

97.0

38,879

1933

33,481

93.8

35,697

1934

32,746

93.1

35,167

1935 1936

33,024 35,517

91.5 x

36,078 39,030

1937

58,760

90.6

64,834

1938

57,057

99.4

57,381

1939

63,674

100

63,674

1940

69,694

In the 1960s estimates were based on Bank Indonesia’s statistics of Indonesianowned and chartered tonnage in inter-insular and ocean trade. Gross value added at constant prices was obtained by deflating current price estimates by the cost of living index. From the 1980s onwards output and current prices were estimated by multiplying the number of cargoes and passengers transported by tariff per unit of cargo and passenger, respectively. Average output data were derived from shipping enterprise reports, while data on cost structure were based on Input-Output tables. Cargo and passenger data were provided by the National Shipowner Association (insa), bps and other sources. Gross value added at constant prices was calculated by extrapolation using weighted composite indices of cargoes and passengers transported. Just as with the other sub-sectors, these underlying reports and surveys have never been published. It is also remarkable that, besides loading and unloading statistics, other data on cargo and passengers or systematic data on the number of ships sailing under the Indonesian flag have never been published by bps. So, again, for the period 1950-2000 the i-o tables serve as starting point from which estimates for the other years are arrived at by extrapolation (tables A1.18-A1.20). Other informative, available statistics (tables A1.16 and A1.17) on shipping in Indonesia from 1950 until 2000 are taken from: • bps, Statistical Yearbook of Indonesia, several volumes; • bps, Statistik perhubungan, 1999; • bps, Statistik Dalam 50 Tahun Indonesia Merdeka, 1995.

228

| Accounting for Services

Table A1.16 Loading and unloading (x1,000 tons) in Indonesian harbours, 1952-2002 Loading 1952

Unloading

Inter-island

International

Total

Inter-island

International

Total

3,417

2,870

6,287

3,417

2,537

5,954

5,200

2,500

7,700

5,200

3,100

8,300

1953 1954 1955 1956 1957 1958

4,881

2,142

7,023

4,881

2,311

7,192

1959

5,267

2,220

7,487

5,267

2,513

7,780

1960

5,740

2,137

7,877

5,740

2,777

8,517

1961

5,813

2,407

8,220

5,813

3,349

9,162

1962

5,496

2,081

7,577

5,496

2,496

7,992

1963

5,674

2,365

8,039

5,777

1,859

7,636

1964

5,858

2,250

8,108

6,073

22,345

28,418

1965

6,048

2,346

8,394

6,384

2,165

8,549

1966

8,200

2,452

10,652

6,630

2,628

9,258

1967

8,868

2,581

11,449

6,948

2,669

9,617

1968

8,975

2,910

11,885

7,877

2,556

10,433

1969

11,067

28,335

39,402

8,473

3,861

12,334

1970

13,207

33,208

46,415

9,694

4,666

14,360

1971

14,166

42,425

56,591

12,078

5,406

17,484

1972

14,632

60,077

74,709

12,980

6,234

19,214

1973

17,483

70,977

88,460

16,839

8,940

25,779

1974

14,973

57,776

72,749

10,734

10,328

21,062

1975

13,042

53,166

66,208

13,480

9,209

22,689

1976

15,770

67,152

82,922

16,913

9,654

26,567

1977

18,424

65,763

84,187

18,827

11,968

30,795

1978

16,129

60,845

76,974

26,576

10,841

37,417

1979

20,292

60,295

80,587

28,655

10,981

39,636

1980

22,298

61,166

83,464

32,764

13,354

46,118

1981

24,593

59,463

84,056

35,356

13,758

49,114

1982

25,465

57,372

82,837

39,284

16,296

55,580

1983

26,285

62,402

88,687

40,075

16,868

56,943

1984

30,930

66,801

97,731

47,670

12,427

60,097

1985

36,967

54,814

91,781

47,531

15,886

63,417

1986

45,816

63,589

109,405

56,290

20,302

76,592

1987

49,227

74,946

124,173

63,235

20,408

83,643

229

| Appendix 1

Table A1.16 Continued Loading Inter-island

Unloading

International

Total

Inter-island

International

Total

135,433

62,925

21,601

84,526

139,725

72,444

22,798

95,242

178,822

88,009

26,105

114,114

189,054

94,504

34,903

129,407

215,678

111,664

38,178

149,842

140,861

234,861

112,462

41,973

154,435

111,131

155,869

267,000

123,332

48,857

172,189

178,554

131,692

310,246

136,068

72,803

208,871

160,953

132,693

293,646

141,150

74,178

215,328

147,769

131,289

279,058

148,055

67,196

215,251

113,487

133,700

247,187

119,792

47,138

166,930

1999

113,633

139,340

252,973

122,368

43,477

165,845

2000

127,740

141,528

269,268

137,512

45,040

182,552

1988

53,308

82,125

1989

56,879

82,846

1990

69,332

109,490

1991

75,674

113,380

1992

87,107

128,571

1993

94,000

1994 1995 1996 1997 1998

2001

135,298

154,435

289,733

156,042

51,660

207,702

2002

137,949

163,340

301,289

170,201

53,660

223,861

Table A1.17 Arrival of ships and vessels in selected harbours, 1938-1959 Djakarta No.

Semarang m3

Surabaja

Belawan

No.

m3

No.

m3

No.

m3

1938

5,917

16,904

4,130

13,856

19,436

15,005

3,318

9,994

1939

6,456

17,298

6,650

13,827

22,021

15,789

3,274

10,083

1940

7,002

15,444

5,934

10,844

18,016

13,574

3,299

7,022

1950

3,423

14,635

3,098

6,272

4,762

10,163

1,993

5,982

1951

4,040

13,315

2,072

6,479

5,134

10,349

2,873

6,529

1952

4,785

15,325

2,224

7,261

5,238

10,526

3,255

7,492

1953

4,716

16,400

2,081

8,030

4,641

11,405

2,355

5,952

1954

4,628

15,618

1,785

8,591

4,788

12,631

1,941

5,290

1955

4,989

15,773

1,821

7,432

5,015

12,641

3,559

9,658

1956

5,128

15,337

1,703

6,998

6,445

13,602

3,349

9,264

1957

5,329

16,062

1,736

7,517

6,737

12,416

2,537

7,333

1958

5,301

12,559

1,567

4,656

7,008

8,190

1959

7,524

11,934

1,769

5,039

7,850

9,495

230

| Accounting for Services

Table A1.17 Continued Palembang No. 1938

1,967

Pontianak

Balikpapan

Makassar

m3

No.

m3

No.

m3

No.

m3

7,089

3,299

581

2,348

5,348

9,317

6,863

1939

1,955

7,558

4,483

624

2,897

5,885

8,393

6,751

1940

2,132

7,897

3,738

549

2,641

6,961

9,217

5,425

1950

3,337

14,009

2,357

656

2,016

3,066

3,551

5,394

1951

3,220

12,388

2,677

696

2,081

4,990

4,873

5,565

1952

3,991

13,005

2,883

648

2,045

6,146

3,964

6,342

1953

4,417

13,283

3,245

564

3,724

8,272

3,315

6,326

1954

4,187

13,338

3,313

706

2,875

8,190

3,089

5,849

1955

2,823

8,167

3,515

707

2,506

8,240

2,926

5,492

1956

3,658

10,476

3,312

628

192

708

2,198

4,430

1957

4,925

14,608

2,939

632

946

3,291

2,444

4,384

1958

4,774

14,509

3,448

495

2,868

5,440

2,311

2,064

1959

3,917

9,881

1,762

484

2,435

5,797

2,331

2,935

Manado 1938

Other

Total

No.

m3

No.

m3

No.

m3

1,152

1,607

57,181

66,724

108,065

143,971

1939

1,188

1,886

58,865

66,693

116,182

146,394

1940

1,209

1,906

57,667

53,030

110,855

122,652

1950

1,162

1,427

80,741

39,325

106,440

100,929

1951

1,685

1,446

116,226

45,083

144,881

106,840

1952

1,535

1,014

114,730

47,464

144,650

115,223

1953

1,929

1,205

133,965

59,896

164,388

131,333

1954

1,784

1,141

73,380

39,176

101,770

110,530

1955

1,564

1,095

135,693

55,726

164,411

124,931

1956

1,769

1,090

140,579

48,667

168,333

111,200

1957

1,753

1,615

144,901

44,507

174,247

112,365

1958

746

202

143,194

39,437

171,217

87,552

1959

1,468

598

133,251

42,697

162,307

88,860

231

| Appendix 1



Notes for tables A1.18-A1.20 (1) = (2) = (3) = (4) = (5) =

Value added Revenue Value added/output ratio (%) Operating surplus Wages and salaries

(6) = Depreciation (7) = Indirect taxes Table A1.18 Value added by sea transport according to i-o tables (in million rupiah) (1) 1975

30,044

(2)

(3)

(4)

124,448

24.1

2,970

(5) 17,470

(6) 9,576

(7) 28

1980

155,090

373,178

41.6

51,444

70,634

29,616

3,396

1985

459,891

988,548

46.5

160,695

191,041

103,075

5,080

1990

1,363,576

2,730,419

49.9

739,662

183,968

417,280

22,666

1995

2,992,684

5,435,042

55.1

1,272,425

943,738

651,200

125,321

2000

6,914,009

26,596,337

26.0

3,242,053

1,459,412

1,780,221

432,325

Table A1.19 Value added by inland water transport according to i-o tables (in million rupiah) (1)

(2)

(3)

(4)

(5)

(6)

(7)

1975

131,704

170,158

77.4

82,893

34,281

13,137

1,394

1980

161,978

260,720

62.1

50,380

87,201

23,080

1,317

1985

321,993

512,018

62.9

110,573

162,778

45,737

2,905

1990

711,684

1,076,469

66.1

378,460

199,433

115,608

18,183

1995

1,139,906

1,681,200

67.8

618,885

313,522

164,262

43,238

2000

1,927,582

4,589,625

42.0

375,854

736,168

797,194

18,366

Table A1.20 Value added by sea transport and inland water transport according to i-o tables (in million rupiah) (1)

(2)

(3)

1975

161,748

294,605

54.9

(4)

(5)

(6)

85,863

51,751

22,712

(7)

1980

317,068

633,898

50.0

101,824

157,835

52,696

4,713

1985

781,884

1,500,566

52.1

271,268

353,819

148,812

7,985

1990

2,075,260

3,806,888

54.5

1,118,122

383,401

532,888

40,849

1995

4,132,590

7,116,242

58.1

1,891,310

1,257,260

815,462

168,559

2000

8,841,592

31,185,962

28.4

3,617,907

2,195,580

2,577,415

450,691

1,421

In table A1.21 the statistics discussed before are used to estimate value added in water transport for the period 1900-2000.

232

| Accounting for Services



Notes for table A1.21 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) =

Value added in current prices (million guilders/rupiah) For the colonial period value added is taken from table A1.15. Bold indicates the numbers taken from the Input-Output tables. Other years are calculated by extrapolation based on the volume index (6) and corrected for inflation using the cpi index (11) by Van Leeuwen (2007). Volume index loading (1993=100) (calculated from table A1.16) Volume index unloading (1993=100) (calculated from table A1.16) Volume index burden 1,000m3 (1939=100) Volume index number of ships arriving in Indonesian ports (1939=100) ‘Chained’ volume index using (2), (3), (4), (5) For the years 1957-2000 an average of (2) and (3) is used. This is linked to the index (5) for the period 1938-1957. Then this index is again chained with index (4). Value added in constant 1993 prices (million guilders/rupiah) cpi (Van Leeuwen 2007)

Table A1.21 Value added by water transport, 1891-2000 (1) 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914

233

(2)

4.75 4.97 5.83 6.63 6.14 6.72 6.62 7.17 7.11 7.75 8.21 8.26 8.71 8.98 9.29 9.59 10.06 10.76 11.41 14.02 15.44 17.56 20.05 21.29

| Appendix 1

(3)

(4) 26.3 26.9 26.4 26.7 27.5 28.0 28.1 27.9 31.6 32.6 37.4 36.7 38.5 38.4 43.1 44.2 51.2 71.4 64.8 70.1 66.8 53.0 45.6 59.5

(5)

(6)

(7)

(8)

0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.9 0.9 1.0 1.0 1.1 1.1 1.2 1.2 1.4 2.0 1.8 1.9 1.8 1.5 1.3 1.6

25,185 25,726 25,294 25,618 26,375 26,807 26,915 26,699 30,266 31,239 35,779 35,130 36,859 36,751 41,291 42,372 49,074 68,422 62,045 67,125 63,991 50,803 43,669 56,965

0.011 0.012 0.011 0.010 0.009 0.009 0.013 0.010 0.010 0.010 0.012 0.011 0.012 0.010 0.010 0.011 0.012 0.013 0.012 0.012 0.013 0.015 0.014 0.013

1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957

234

(1) 24.50 35.91 52.77 50.39 52.41 52.39 55.96 47.49 46.51 48.52 53.41 58.57 61.99 66.11 70.22 61.40 47.30 37.69 33.48 32.75 33.02 35.52 58.76 57.06 63.67 69.69

142.9 324.4 341.8 412.7 271.5 580.9 681.1 774

(2)

(3)

2.7

3.9

3.3

5.4

| Accounting for Services

(4) 63.4 66.0 65.0 57.1 66.4 68.4 69.3 68.6 71.0 72.1 70.9 75.4 79.1 85.6 92.9 94.7 99.1 97.0 93.8 93.1 91.5 91.0 90.6 99.4 100

(5)

93.0 100 95.4

(6) 1.7 1.8 1.8 1.6 1.8 1.9 1.9 1.9 1.9 2.0 1.9 2.1 2.2 2.3 2.6 2.6 2.7 2.7 2.6 2.6 2.5 2.5 2.5 2.7 2.9 2.8

(7) 60,748 63,234 62,261 54,695 63,558 65,504 66,369 65,720 67,990 69,071 67,882 72,206 75,773 81,934 88,960 90,689 94,905 92,851 89,825 89,176 87,663 87,150 86,798 95,229 102.382 97.688

91.6 124.7 124.5 141.5 87.6 141.5 144.9 150.0

2.7 3.7 3.7 4.2 2.6 4.2 4.3 4.4

93,797 127,672 127,469 144,862 89,682 144,883 148,339 153,550

(8) 0.013 0.014 0.015 0.019 0.019 0.032 0.027 0.023 0.021 0.019 0.018 0.018 0.018 0.017 0.017 0.017 0.015 0.012 0.011 0.010 0.010 0.009 0.010 0.010 0.013 0.011 0.012 0.017 0.016 0.024 0.033 0.058 0.082 0.106 0.130 0.152 0.254 0.268 0.285 0.303 0.401 0.459 0.504

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

(1) 1,107 1,269 1,690 2,461 6,096 13,576 75,192 126,861 1,717 4,797 11,464 28,065 37,201 47,069 62,779 101,048 116,764 161,748 196,083 231,060 255,155 323,242 317,068 456,864 524,650 608,512 725,156 781,884 959,733 1,166,449 1,323,714 1,518,700 2,075,260 2,428,008 3,000,493 3,488,500 4,088,700 4,132,590 5,030,900

(2) 3.0 3.2 3.4 3.5 3.2 3.4 3.5 3.6 4.5 4.9 5.1 16.8 19.8 24.1 31.8 37.7 31.0 28.2 35.3 35.8 32.8 34.3 35.5 35.8 35.3 37.8 41.6 39.1 46.6 52.9 57.7 59.5 76.1 80.5 91.8 100 113.7 132.1 125.0

(3) 4.7 5.0 5.5 5.9 5.2 4.9 18.4 5.5 6.0 6.2 6.8 8.0 9.3 11.3 12.4 16.7 13.6 14.7 17.2 19.9 24.2 25.7 29.9 31.8 36.0 36.9 38.9 41.1 49.6 54.2 54.7 61.7 73.9 83.8 97.0 100 111.5 135.2 139.4

(4)

(5) 147.4 139.7

(6) 4.3 4.1 4.4 4.7 4.2 4.2 10.9 4.6 5.3 5.6 5.9 12.4 14.5 17.7 22.1 27.2 22.3 21.4 26.3 27.9 28.5 30.0 32.7 33.8 35.6 37.3 40.3 40.1 48.1 53.5 56.2 60.6 75.0 82.1 94.4 100 112.6 133.7 132.2

(7) 150,880 143,029 154,695 164,527 146,537 145,948 381,180 158,896 183,673 193,647 206,101 431,933 506,899 617,757 771,854 948,127 778,170 747,968 915,898 973,045 994,268 1,046,163 1,140,740 1,178,974 1,242,951 1,301,791 1,404,581 1,397,890 1,677,582 1,866,897 1,960,495 2,113,401 2,616,912 2,865,627 3,294,158 3,488,500 3,927,708 4,663,186 4,612,830

(8) 0.734 0.887 1.09 1.50 4.16 9.30 19.73 79.84 0.93 2.48 5.56 6.50 7.34 7.62 8.13 10.66 15.00 17.86 21.41 23.75 25.66 30.90 35.67 38.75 42.21 46.74 51.63 54.03 57.21 62.48 67.52 71.86 77.52 84.73 91.09 100 108.45 118.76 128.06 136.59

1997

5,003,900

118.8

139.4

129.1

4,503,619

1998

6,881,500

105.2

108.1

106.7

3,721,165

215.58

1999 2000

8,073,200 8,841,592

107.7 114.6

107.4 118.2

107.6 116.4

3,751,882 4,061,596

259.77 269.38

235

| Appendix 1

A1.4

Air transport The value added of air transport can also be estimated with the production approach. In 1928 the Dutch Netherlands-Indies Airlines (Koninklijke Nederlandsch-Indische Luchtvaartmaatschappij, knilm) started its operation. Based on its annual reports value added of air transport could be estimated for the period 1928-1940. The annual reports were found in the National Archive: • knilm, annual reports, ara, Ministerie van Koloniën, Regeringscommissarissen, Nummer toegang: 2.10.46.01, inv. nr. 121-124. Other sources used for estimation of this sector were the following information: • Statistisch Jaaroverzicht van Nederlandsch-Indië, Batavia, 1922-1940; • Koloniaal Verslag, The Hague, 1849-1930; • Indisch Verslag, The Hague, 1931-1940; • Nederlandsch-Indische luchtreisgids, Weltevreden, 1929-1934.



Notes for table A1.22 (1) = Passenger kilometres available (2) = Passenger kilometres transported (3) = Ton kilometers available (4) = Ton kilometers transported (5) = Freight capacity used = (3)/(4) * 100 % (6) = Passenger capacity used = (1)/(2) * 100 % (7) = Number of flights (8) = Hours flown (9) = Distance flown (10)= Total costs (11)= Income from passenger transport (12)= Income from freight transport (13)= Income from other sources (14)= Total income (15)= (14) – (10) = Profit For three years it was possible to estimate a value added/total cost ratio. For the years 1932, 1933 and 1934 this ratio was respectively 47.4%, 39.9% and 38.5%. Therefore for the period 1929-1940 and average value added/total cost ratio of 40% was assumed. This leads to the value added estimates in current and constant prices in table A1.21. (16)= Value added in current price = (14) – 0.6 * (10) (17)= Weighted volume index (1939=100) (18)= Value added in constant (1939) prices

236

| Accounting for Services

Table A1.22 Indicators for air transport and value added, 1928-1940 (1)

(2)

(3)

(4)

1930

6,003,426

3,172,577

550,005

222,786

40.5

882,816

379,132

42.9

1931

7,767,456

3,483,080

1,030,559

399,845

38.8

1929

(5)

1932

7,333,760

2,612,051

961,057

319,714

33.3

1933

7,073,696

2,703,824

916,741

331,296

36.1

1934

7,424,128

3,243,674

1,008,948

401,926

39.8

1935

8,540,594

3,239,296

1,157,287

363,369

31.4

1936

11,938,468

4,133,092

1937

14,623,052

4,861,863

1,675,862

485,825

29.0

1938

16,968,656

5,302,272

1,941,002

556,547

28.7

1939

16,490,000

6,416,528

1,914,688

663,323

34.6

(6)

(7)

(8)

(9)

(10)

2,366

3,063

488,850

1,084,486

1930

52.8

2,704

5,011

801,760

1,585,929

1931

44.8

2,755

5,678

919,794

1,590,674

1932

35.6

2,931

5,284

858,358

1,445,896

1933

38.2

2,471

5,171

863,698

1,458,079

1934

43.7

3,018

5,646

956,466

1,037,775

1935

37.9

2,780

5,587

986,894

1,044,918

1936

34.6

2,871

5,669

1937

33.2

2,905

5,677

1938

31.2

3,182

8,655

2,224,427

1939

38.9

3,178

10,174

2,783,004

1940

1929

1,203,504 1,537,516

1,650,826

1940 (11)

(12)

1929

280,672

10,933

792,881

(13)

1,084,486

(14)

(15) 0

1930

499,084

34,677

1,057,739

1,591,500

5,571

1931

498,212

33,762

1,199,252

1,731,226

140,552

1932

355,291

24,021

1,210,160

1,589,473

143,576

1933

346,899

24,191

1,246,989

1,618,079

160,000

1934

365,351

23,973

648,450

1,037,775

0

1935

286,616

17,390

624,192

928,198

-116,720

1936

345,646

17,883

769,127

1,132,655

-70,848

1937

482,317

19,122

1,063,472

1,564,911

-85,915

1938

607,426

37,753

1,200,139

1,845,318

-379,109

1939

823,060

52,798

1,882,473

2,758,331

-24,673

1940

237

| Appendix 1

Table A1.22 Continued (16)

(17)

(18)

1929

433,794

34.0

147,423

1930

639,943

49.9

319,619

1931

776,821

54.7

424,638

1932

721,935

41.2

297,311

1933

743,231

42.6

316,968

1934

415,110

51.2

212,412

1935

301,248

50.7

152,821

1936

410,553

64.4

264,367

1937

574,415

75.7

434,686

1938

510,662

82.7

422,363

1939

1,088,529

100

1,088,529

Table A1.23 Ticket prices, knilm, 1929-1933 Price

Distance

Price per km

Batavia – Bandoeng

f. 17.50

110 km

15.9 cents

Batavia – Semarang

f. 70,-

400 km

17.5 cents

Batavia – Soerabaja

f. 115,-

670 km

17.2 cents

Batavia – Palembang

f. 93.50

585 km

16.0 cents

Price per kg

Distance

Price per km

Batavia – Bandoeng

f. 0.20

110 km

0.02 cents

Batavia – Semarang

f. 0.75

400 km

0.02 cents

Batavia Soerabaja

f. 1.20

670 km

0.02 cents

Batavia – Palembang

f. 1,-

585 km

0.02 cents

Table A1.24 Prices for freight, knilm, 1929-1933

For the period after independence the same estimation method has been used. Gross value added was estimated by the production approach, based on output and cost structure data that were obtained through airline enterprises survey by bps. Gross value added at constant prices was computed by using a weighted composite production index of passenger-kilometre and ton-kilometre of cargo transported. It will be no surprise that these surveys have not been published either. I have not been able to find annual reports of any of the airlines, although it is questionable whether this would lead to more reliable estimates than the ones made by bps. The i-o tables again are the most valuable source for estimation for the period since independence. The key indicators presented in table A1.25 through A1.27 were taken from the following sources:

238

| Accounting for Services

• • • •

bps, Statistical Yearbook of Indonesia, several volumes; bps, Statistik perhubungan, 1999; bps, Statistik Dalam 50 Tahun Indonesia Merdeka, 1995; Statistik Perhubungan Udara tahun 1964-1969.

Table A1.25 Indicators for air traffic, 1948-1973 Number of km flown (x1,000)

1948

7,689

Passengers

Freight and excess baggage

Pax-km

(x 1,000)

(x 1,000 m. ton-km)

(x1,000)

6,587

mail in kg

Goods and luggage in tons

111,905

1,122

3,542

1949

9,133

7,911

125,325

1,584

4,608

1950

9,371

9,009

148,216

1,343

5,065

1951

9,180

9,584

5,625

159,535

1,516

5,625

1952

9,585

9,630

5,382

159,372

1,756

5,382

1953

10,430

10,369

5,935

168,400

1,477

5,935

1954

12,393

11,387

5,679

180,088

1,545

5,679

1955

13,335

14,960

5,867

236,275

1,677

5,867

1956

13,715

16,815

6,447

269,000

1,785

6,447

1957

14,469

17,585

6,557

280,000

1,916

6,557

1958

7,610

11,546

4,036

194,000

1,402

4,036

1959

8,950

14,726

4,349

257,000

1,351

4,349

1960

9,414

15,452

4,255

259,000

1,195

4,255

1961

272,000

1962

303,000

1963 1964 1965 1966 1967 1968

451,455

1969

540,413

1970

827,449

1971

1,039,339

1972

1,284,553

1973

1,775,181

239

| Appendix 1

Table A1.26 Government airlines services (domestic and international), 1964-2000 Aircraft-km

Aircraft departures

in 000

number

Aircraft hours flown

Pax carried

Pax-km

Available seats-km

number

in 000

in 000

1964

13,823

37,402

483,639

471,140

678,798

1965

13,699

37,019

433,197

537,045

848,575

1966

12,522

32,364

372,614

494,413

817,223

1967

14,930

40,154

410,829

528,258

978,637

1968

16,497

47,511

451,455

510,455

1,034,317

1969

16,572

19,421

48,365

540,413

533,429

1970

20,255

22,295

51,367

827,449

872,542

1971

24,436

24,743

60,092

1,039,339

1,103,488

1972

32,475

32,983

76,485

1,284,553

1,314,286

1973

39,066

42,202

87,348

1,775,181

1,762,052

2,426,554 3,228,377

1974

47,249

64,729

104,181

2,217,464

2,214,600

4,198,993

1975

50,498

72,739

112,504

2,488,688

2,116,710

3,875,870

1976

65,553

91,563

142,184

3,103,019

3,108,036

5,992,324

1977

72,594

105,704

157,182

3,787,865

3,915,360

7,159,394

1978

78,101

115,204

169,103

4,433,028

4,246,510

7,915,172

1979

77,942

110,668

170,213

4,294,434

4,543,427

8,286,446

1980

88,542

124,818

193,292

5,060,936

6,006,964

11,309,083

1981

117,604

144,018

207,315

6,072,901

7,817,946

14,320,063

1982

126,559

144,300

215,360

5,917,730

7,976,342

16,024,098

1983

114,989

142,963

214,609

5,560,987

7,867,350

14,997,489

1984

122,886

146,223

216,052

5,530,678

8,687,000

16,749,674

1985

98,523

142,423

218,844

5,502,026

8,871,713

16,902,170

1986

104,683

150,647

229,878

6,047,518

10,509,807

19,896,247

1987

117,104

155,059

247,215

6,697,554

10,923,744

19,899,893

1988

123,500

163,455

241,244

7,474,163

13,297,710

22,500,923

1989

126,275

169,143

266,321

7,920,092

12,807,198

21,794,730

1990

131,504

166,444

251,157

8,435,042

13,934,333

23,632,281

1991

138,994

176,717

240,089

9,177,307

14,940,805

23,894,521

1992

160,123

190,565

287,714

9,403,308

17,230,319

30,388,942

1993

172,273

161,791

287,667

9,287,088

17,517,586

31,861,947

1994

171,436

157,271

287,342

9,985,481

19,372,695

33,511,782

1995

179,231

167,403

286,675

10,934,883

20,353,278

35,620,740

1996

189,718

205,683

307,070

11,570,793

20,550,975

37,143,069

1997

192,871

204,116

316,683

11,634,993

21,190,349

37,784,291

1998

126,526

130,878

204,153

7,336,876

14,175,025

24,373,363

1999

106,569

106,052

176,371

6,769,091

13,465,780

20,323,022

2000

111,298

113,437

183,052

7,671,045

15,087,597

21,419,129

240

| Accounting for Services

Per load factor

Freight

Performed ton-km

Available ton-km

%

ton

Weight load factor

in 000

in 000

%

1964

69.4

48,922

84,939

57.6

1965

63.3

57,981

105,210

55.1

1966

60.5

52,090

102,147

51.0

1967

54.0

56,821

117,042

48.5

1968

49.4

56,399

136,399

41.3 49.0

1969

66,351

135,394

1970

93,786

169,268

55.4

115,562

211,167

54.7

1971

8,028

1972

54.2

22,595

137,277

278,754

49.2

1973

54.6

18,251

178,633

358,127

49.9

1974

52.7

23,745

228,218

463,456

49.2

1975

54.6

25,879

203,411

423,469

48.0

1976

51.9

33,772

304,743

687,580

44.3

1977

54.7

38,807

383,110

788,232

48.6

1978

53.7

43,958

442,156

926,930

47.7

1979

54.8

42,669

467,996

990,737

47.2

1980

53.1

59,336

624,408

1,256,440

49.7

1981

54.6

65,971

854,547

1,821,892

46.9

1982

49.8

73,814

878,563

2,066,771

42.5

1983

52.5

72,432

860,400

1,872,440

46.0

1984

51.9

74,745

922,658

2,114,926

43.6

1985

52.5

73,656

918,921

2,178,345

42.2

1986

52.8

78,886

1,114,448

2,486,499

44.8

1987

54.9

105,422

1,297,892

2,802,627

46.3

1988

59.1

114,316

1,609,897

3,052,175

52.7

1989

58.8

115,425

1,561,641

2,987,062

52.3 52.7

1990

59.0

141,296

1,709,740

3,241,809

1991

62.5

171,624

1,819,802

3,298,254

55.2

1992

56.7

164,241

2,076,586

4,177,301

49.7

1993

55.0

168,993

2,201,103

4,606,613

47.8

1994

57.8

193,025

2,644,842

4,927,192

53.7

1995

57.1

201,882

2,558,654

4,959,793

51.6

1996

55.3

208,093

2,552,234

5,093,567

50.1

1997

56.1

207,867

2,596,251

5,159,277

50.3

1998

58.2

133,747

1,643,509

3,242,137

50.7

1999

66.3

121,277

1,455,066

2,559,774

56.8

2000

70.4

143,465

1,690,026

2,751,596

61.4

241

| Appendix 1

Table A1.27 Private airlines services (domestic), 1964-2000 Aircraft-km

Aircraft departures

Aircraft hours flown

Pax carried

Pax-km

Available seats-km

in 000

number

hours

number

in 000

in 000

1964 1965 1966 1967 1968 1969

975

4,891

44,581

1970

3,107

5,260

13,532

123,865

1971

4,155

7,799

13,946

161,392

118,265

1972

4,429

8,652

13,561

160,840

128,022

187,750

1973

4,403

8,133

13,478

172,076

138,536

195,338

1974

5,912

12,437

13,561

226,065

159,467

243,228

1975

5,630

11,436

13,478

190,288

146,546

228,787

1976

5,046

11,343

17,696

190,642

154,340

216,417

1977

6,214

14,516

21,195

231,312

136,736

208,786

1978

7,151

19,262

25,625

273,862

171,721

256,236

1979

8,891

21,013

30,769

374,061

212,700

313,445

1980

7,153

15,370

24,460

311,337

224,145

309,157

1982

15,128

24,949

41,372

596,644

472,376

686,637

1983

14,674

29,833

41,261

644,270

552,094

789,948

1984

19,155

36,784

53,360

1,162,917

715,030

1,090,522

1985

21,691

34,308

52,756

782,540

657,655

984,830

1986

20,237

33,054

47,369

716,834

625,694

897,237

1987

17,978

33,123

52,356

710,614

615,692

915,488

1988

18,883

35,265

54,289

766,637

648,914

925,137

1989

16,934

26,735

46,425

679,825

637,434

902,978

1990

15,714

30,953

49,167

588,789

512,492

800,805

1991

26,391

39,059

66,681

1,215,020

1,070,569

1,826,986

1992

33,264

57,863

86,676

1,683,718

1,446,247

2,246,470

1993

48,091

75,371

100,024

2,687,723

2,158,381

4,031,152

1994

51,203

81,095

112,854

3,527,121

2,930,451

4,968,313

61,667

1981

1995

60,756

95,975

125,892

4,610,816

3,675,888

5,674,915

1996

102,134

99,436

131,945

5,150,889

3,967,855

5,798,977

1997

98,883

92,633

120,862

4,809,408

3,744,643

5,545,655

1998

28,072

46,938

60,057

2,258,403

1,794,105

2,672,832

1999

17,879

34,305

39,161

1,534,470

1,277,084

1,714,727

2000

23,946

41,710

56,263

1,994,254

1,693,067

2,517,672

242

| Accounting for Services

Per load factor

Freight

Performed ton-km

Available ton-km

Weight load factor

%

ton

in 000

in 000

%

1964 1965 1966 1967 1968 1969

426

1,568

2,256

69.5

1970

1,051

5,649

9,064

62.3

1971

1,299

9,813

14,736

66.6

1972

68.2

1,746

11,118

15,844

70.2

1973

70.9

1,526

12,431

15,995

77.7

1974

65.6

2,606

14,389

22,641

63.6

1975

64.1

1,947

13,172

21,048

62.6

1976

71.3

1,805

15,557

30,948

50.3

1977

65.5

2,115

13,151

22,543

58.3

1978

67.0

1,710

14,909

21,920

68.0

1979

67.9

3,079

20,875

31,401

66.5

1980

72.5

2,940

18,166

27,277

66.6

1982

68.8

5,552

40,694

64,918

62.7

1983

69.9

5,174

49,004

74,114

66.1

1984

65.6

5,521

62,836

95,818

65.6

1985

66.8

4,782

54,062

97,966

55.2

1986

69.7

4,769

50,121

87,512

57.3

1987

67.3

4,803

50,962

83,989

60.7

1988

70.1

5,062

52,914

82,619

64.0

1981

1989

70.6

5,902

53,229

80,432

66.2

1990

64.0

6,611

44,860

71,554

62.7

1991

58.6

9,655

93,334

170,813

54.6

1992

64.4

9,205

123,846

210,325

58.9

1993

53.5

17,578

212,518

426,556

49.8

1994

59.0

24,612

269,920

550,948

49.0

1995

64.8

44,560

373,960

648,313

57.7

1996

68.4

50,703

392,269

709,038

55.3

1997

67.5

49,435

376,479

620,749

60.6

1998

67.1

33,753

181,975

303,277

60.0

1999

74.5

30,988

139,493

202,700

68.8

2000

67.2

26,977

173,041

306,564

56.4

243

| Appendix 1

The data from the Input-Output tables are presented in table A1.28.



Notes for table A1.28 (1) = (2) = (3) = (4) = (5) = (6) = (7) =

Value added Revenue Value added/output ratio (%) Operating surplus Wages and salaries Depreciation Indirect taxes

Table A1.28 Value added by air transport according to i-o tables (million Rp) (1)

(2)

(3)

(4)

(5)

(6)

(7)

1975

56,609

114,911

49.3

31,444

9,339

15,781

45

1980

151,109

438,552

34.5

82,298

24,449

44,215

147

1985

225,700

799,975

28.2

31,395

51,632

141,065

1,608

1990

1,073,639

3,035,319

35.4

234,452

253,909

575,429

9,849

1995

2,811,539

8,155,203

34.5

548,485

695,453

1,538,871

28,730

2000

4,429,709

25,296,986

17.5

783,194

1,377,522

1,918,923

350,071

The statistics presented above are transformed in time-series estimates of value added in air transport. These figures are presented in table A1.29 below.



Notes for table A1.29 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) =

244

Value added in current prices (million guilders/rupiah) Bold indicates the numbers taken from the Input-Output tables. Other years are calculated by extrapolation based on the volume index and corrected for inflation using the cpi index (11) by Van Leeuwen (2007). For the years 1975, 1985 and 1990 this results in estimates that diverge a little from the trend. This is probably a consequence of using a cpi index to inflate the estimates. For the long-term trend it does not seem have a large impact. Passenger kilometres (x1,000) Ton kilometres (x1,000) Volume index pax-km (1993=100) Volume index ton-km (1993=100) Average volume index (1993=100) Value added in constant 1993 prices (million fl/Rp) cpi (Van Leeuwen 2007)

| Accounting for Services

Table A1.29 Value added by air transport, 1928-2000 (1)

(2)

(3)

(4)

(5)

(6)

(7)

1928

(8) 0.017

1929

0.43

0.009

0.009

122

0.017

1930

0.64

3,173

379

223 0.016

0.016

0.016

210

0.017

1931

0.78

3,483

400

0.018

0.017

0.017

226

0.015

1932

0.72

2,612

320

0.013

0.013

0.013

175

0.012

1933

0.74

2,704

331

0.014

0.014

0.014

182

0.011

1934

0.42

3,244

402

0.016

0.017

0.017

219

0.010

1935

0.30

3,239

363

0.016

0.015

0.016

208

0.010

1936

0.41

4,133

0.021

278

0.009

1937

0.57

4,862

486

0.025

0.020

0.022

296

0.010

1938

0.51

6,996

557

0.036

0.023

0.029

387

0.010

1939

1.09

10,037

663

0.051

0.027

0.039

519

0.013

0.079

1,049

0.011

1940

0.021

15,609

0.079

1941

0.012

1942

0.017

1943

0.016

1944

0.024

1945

0.033

1946

0.058

1947

0.082

1948

8

111,905

0.6

0.6

7,518

0.106

1949

11

125,325

0.6

0.6

8,419

0.130

1950

15

148,216

0.8

0.8

9,957

0.152

1951

27

159,535

0.8

0.8

10,717

0.254

1952

29

159,372

0.8

0.8

10,706

0.268

1953

32

168,400

0.9

0.9

11,313

0.285

1954

37

180,088

0.9

0.9

12,098

0.303

1955

64

236,275

1.2

1.2

15,873

0.401

1956

83

269,000

1.4

1.4

18,071

0.459

1957

95

280,000

1.4

1.4

18,810

0.504

1958

96

194,000

1.0

1.0

13,033

0.734

1959

153

257,000

1.3

1.3

17,265

0.887

1960

190

259,000

1.3

1.3

17,399

1.09

1961

273

272,000

1.4

1.4

18,273

1.50

1962

847

303,000

1.5

1.5

20,355

1963 1964

245

4.16 9.30

5,764

471,140

| Appendix 1

48,922

2.4

2.0

2.2

29,221

19.73

  (1)

  (2)

  (3)

(4)

(5)

(6)

(7)

(8)

1965

27,078

537,045

57,981

2.7

2.4

2.6

33,915

79.84

1966

289

494,413

52,090

2.5

2.2

2.3

30,870

0.93

1967

825

528,258

56,821

2.7

2.4

2.5

33,303

2.48

1968

1,813

510,455

56,399

2.6

2.3

2.5

32,589

5.56

1969

2,373

533,429

67,919

2.7

2.8

2.8

36,515

6.50

1970

4,301

934,209

99,435

4.7

4.1

4.4

58,607

7.34

1971

5,743

1,221,753

125,375

6.2

5.2

5.7

75,368

7.62

1972

7,245

1,442,308

148,395

7.3

6.1

6.7

89,080

8.13

1973

12,380

1,900,588

191,064

9.7

7.9

8.8

116,157

10.66

1974

21,933

2,374,067

242,607

12.1

10.1

11.1

146,174

15.00

1975

56,609

2,263,256

216,583

11.5

9.0

10.2

135,326

17.86

1976

42,237

3,262,376

320,300

16.6

13.3

14.9

197,285

21.41

1977

58,085

4,052,096

396,261

20.6

16.4

18.5

244,611

23.75

1978

70,202

4,418,231

457,065

22.5

18.9

20.7

273,559

25.66

1979

90,722

4,756,127

488,871

24.2

20.3

22.2

293,618

30.90

1980

151,109

6,231,109

642,574

31.7

26.6

29.1

385,248

35.67

1981

192,434

7,817,946

854,547

39.7

35.4

37.6

496,591

38.75

1982

226,033

8,448,718

919,257

42.9

38.1

40.5

535,498

42.21

1983

248,593

8,419,444

909,404

42.8

37.7

40.2

531,816

46.74

1984

302,362

9,402,030

985,494

47.8

40.8

44.3

585,656

51.63

1985

225,700

9,529,368

972,983

48.4

40.3

44.4

586,507

54.03

1986

396,412

11,135,501

1,164,569

56.6

48.2

52.4

692,916

57.21

1987

472,944

11,539,436

1,348,854

58.6

55.9

57.3

756,945

62.48

1988

623,723 13,946,624

1,662,811

70.9

68.9

69.9

923,768

67.52

1989

642,274 13,444,632 1,614,870

68.3

66.9

67.6

893,780

71.86

1990

1,073,639 14,446,825 1,754,600

1991 1992 1993

73.4

72.7

73.1

965,704

77.52

1,913,136

81.4

79.3

80.3

1,061,666

84.73

1,120,217 18,676,566 2,200,432

94.9

91.2

93.0

1,229,855

91.09

899,536

16,011,374

2,413,621

100

100

100

1,321,800

100

1,602,000 22,303,146 2,914,762

113

121

117.1

1,547,268

108.45

1995

1,811,539 24,029,166 2,932,614

122

122

121.8

1,610,132

118.76

1996

2,277,100 24,518,830 2,944,503

125

122

123.3

1,629,835

128.06

1997

2,543,400 24,934,992 2,972,730

127

123

124.9

1,651,542

136.59

1998

3,664,100 15,969,130

1,825,484

81

76

78.4

1,036,246

215.58

1999

3,672,900 14,742,864

1,594,559

75

66

70.5

931,825

259.77

2000

4,429,709 16,780,664 1,863,067

85

77

81.2

1,073,796

269.38

246

| Accounting for Services

1994

1,321,800 19,675,967

A1.5

Communications During the colonial period the communications sector was in hands of the stateowned enterprise ptt (Staatsbedrijf der Posterijen, Telegrafie en Telefonie). The data available for this sector are, like those for rail and air transport, quite comprehensive and are taken from the annual reports of the ptt: • Verslag omtrent den Post- en Telegraafdienst in Nederlandsch-Indië, Batavia, 18761907; • Verslag omtrent den Post-, Telegraaf- en Telefoondienst in Nederlandsch-Indië, Batavia, 1908-1941. Based on these profit and loss accounts it is possible to come up with an estimate of the value added of this sub-sector.



Notes for table A1.30 (1) = Revenues from mail, in thousands of guilders (2) = Revenue from telephone & telegraph, in thousands of guilders (3) = Other revenues, in thousands of guilders (4) = (1) + (2) + (3) = Total revenue (5) = Operating expenses (6) = (4) – (5) = Net profit (7) = Value added/operating costs ratio The value added/operating costs ratio could be calculated for the period 1924 1938, because information on the expenditure structure was given in the Ver slag omtrent den Post-, Telegraaf- en Telefoondienst in Nederlandsch-Indië in 1938, p. 72. (8) = (6) + (5)*average (7) = Value added, current prices in thousands of guilders (9) = Volume-index number telegrams (10) = Volume-index number pieces of mail (11) = Weighted volume-index (12) = (8)*(12)/100 = Value added in constant prices in thousand of guilders

247

| Appendix 1

Table A1.30 Estimation of value added by communications, 1901-1940 (1)

(2)

(3)

(4)

(5)

(6) (000)

(000)

(000)

(000)

(000)

(000)

1901

2,130

1,043

2

3,175

3,101

74

1902

2,014

1,100

3

3,117

2,501

616

1903

2,051

1,020

2

3,073

4,867

-1,794

1904

2,153

1,152

3

3,308

2,710

598

1905

2,268

1,221

2

3,491

4,099

-608

1906

2,401

1,453

2

3,856

3,748

108

1907

2,429

1,932

8

4,369

4,234

135

1908

2,377

2,073

2

4,452

4,497

-45

1909

2,588

2,280

3

4,871

5,079

-208

1910

2,728

2,750

2

5,480

6,235

-755

1911

3,176

3,277

9

6,462

7,982

-1,520

1912

2,819

3,404

12

6,235

8,339

-2,104 -5,970

1913

3,208

3,669

11

6,888

12,858

1914

3,974

4,804

116

8,894

10,310

-1,416

1915

4,161

5,283

85

9,529

13,025

-3,496

1916

4,682

6,064

142

10,888

13,109

-2,221

1917

4,935

6,726

148

11,809

14,757

-2,948

1918

5,287

8,749

169

14,205

16,640

-2,435

1919

6,462

11,530

128

18,120

20,040

-1,920

1920

7,357

15,784

203

23,344

27,671

-4,327

1921

9,716

17,401

344

27,461

35,833

-8,372

1922

10,459

15,281

587

26,327

32,800

-6,473

1923

11,695

15,109

712

27,516

32,790

-5,274

1924

12,874

15,334

833

29,041

29,853

-812

1925

13,254

16,260

676

30,190

29,562

628

1926

13,836

16,478

995

31,309

30,707

602

1927

14,410

17,267

1,080

32,757

32,055

702

1928

15,245

18,470

1,180

34,895

34,352

543

1929

15,823

20,407

36,230

35,725

505

1930

15,819

20,064

35,883

36,098

-215

1931

15,240

18,238

33,478

35,037

-1,559

1932

14,345

15,892

30,237

31,848

-1,611

1933

13,431

14,023

27,454

28,286

-832

1934

13,102

12,818

25,920

25,055

865

1935

12,651

11,969

24,620

22,270

2,350

1936

12,866

11,383

24,249

21,663

2,586

1937

13,458

12,378

25,836

21,305

4,531

1938

13,226

12,174

25,400

22,574

2,826

1939

13,584

13,960

27,544

23,005

4,539

1940

12,995

16,910

29,905

23,772

6,133

248

| Accounting for Services

(7)

(8)

(9)

(10)

(000)

(1939=100)

1901

2,545

35.9

(1940=100) 30.4

(1939=100) 18.7

(1940=100) 17.8

1902

2,609

32.9

27.8

20.3

19.2

1903

2,085

28.7

24.3

21.4

20.3

1904

2,758

31.4

26.6

22.7

21.6

1905

2,659

32.9

27.9

24.3

23.0

1906

3,095

38.9

32.9

25.8

24.5

1907

3,510

44.7

37.8

27.0

25.6

1908

3,540

47.9

40.6

31.6

30.0

1909

3,840

53.1

44.9

31.7

30.1

1910

4,214

61.5

52.1

32.8

31.1

1911

4,841

70.9

60.0

33.4

31.7

1912

4,542

80.4

68.1

39.5

37.5

1913

4,278

83.8

70.9

40.2

38.1

1914

6,801

86.8

73.5

41.9

39.7

1915

6,885

88.4

74.8

43.1

40.9

1916

8,227

101.0

85.5

44.9

42.6

1917

8,813

113.3

96.0

47.6

45.1

1918

10,828

138.9

117.6

51.9

49.2

1919

14,052

145.0

123.5

55.7

52.8

1920

17,727

163.2

138.2

62.3

59.1

1921

20,187

139.1

117.8

62.0

58.8

1922

19,669

115.5

97.8

61.8

58.6

20,859

111.8

94.7

60.8

57.7

1924

1923 81.5

22,981

118.0

99.9

59.7

56.6

1925

79.7

24,189

129.7

109.8

64.3

61.0

1926

78.6

25,075

134.6

114.0

65.2

61.8

1927

77.3

26,250

134.8

114.1

70.5

66.8

1928

77.8

27,922

134.8

114.1

74.2

70.3

1929

78.5

28,977

136.4

115.5

81.1

76.9

1930

78.6

28,555

125.1

105.9

87.6

83.1

1931

80.9

26,366

107.4

91.0

84.7

80.3

1932

81.2

23,772

93.0

78.7

86.1

81.6

1933

80.7

21,712

87.2

73.8

75.8

71.9

1934

81.6

20,833

83.5

70.7

76.3

72.3

1935

81.8

20,099

78.5

66.5

70.0

66.4 70.7

1936

78.1

19,852

78.4

66.4

74.5

1937

79.8

21,511

91.2

77.2

81.9

77.7

1938

79.7

20,818

89.0

75.4

93.5

88.6

1939

22,874

100

84.7

100.0

94.8

1940

25,079

118.12

100

105.5

100

249

| Appendix 1

(11)

(12)

1939=100

1940=100

1901

24.4

21.9

1939=100 (000)

1940=100 (000)

1902

24.7

22.3

620.0

1903

23.8

21.6

645.3

557.4 581.2

1904

25.8

23.3

496.7

450.7

1905

27.3

24.7

710.5

643.0

1906

30.7

27.7

725.9

657.1

1907

34.8

31.0

951.3

856.0

1908

39.2

34.9

1,221.2

1,087.3

1909

41.7

37.0

1,387.4

1,235.4

1910

47.2

41.6

1,602.6

1,422.7

1911

52.4

46.1

1,989.4

1,754.3 2,229.6

1912

61.9

54.2

2,537.8

1913

63.5

55.6

2,812.1

2,463.3

1914

66.5

58.2

2,714.6

2,379.9

1915

68.4

59.9

4,521.7

3,959.1

1916

76.6

66.8

4,712.2

4,122.7 5,495.7

1917

85.5

74.4

6,298.8

1918

106.1

91.8

7,535.2

6,559.1

1919

112.9

98.1

11,486.0

9,938.8

1920

131.1

113.0

15,869.5

13,787.6

1921

111.5

96.7

23,243.7

20,034.7

1922

93.7

81.9

22,508.7

19,511.5

1923

89.6

78.5

18,427.7

16,104.0 16,382.3

1924

91.4

80.1

18,686.4

1925

100.3

87.9

21,004.6

18,418.3

1926

102.9

90.2

24,262.7

21,250.4

1927

105.5

92.6

25,813.8

22,612.2

1928

107.4

94.3

27,698.2

24,304.7

1929

112.3

98.6

29,978.9

26,331.1

1930

108.6

95.9

32,529.2

28,581.4

1931

97.1

86.1

31,007.0

27,371.4

1932

89.7

80.1

25,599.2

22,704.1 19,040.7

1933

81.6

72.9

21,326.5

1934

79.8

71.5

17,717.2

15,817.0

1935

74.2

66.4

16,631.4

14,895.7

1936

76.4

68.7

14,904.9

13,352.6

1937

86.3

77.4

15,157.1

13,628.4 16,657.0

1938

91.4

82.3

18,574.0

1939

100

89.7

19,017.7

17,128.9

1940

112.6

100

22,874.2

20,510.3

250

| Accounting for Services

The method of estimation throughout the second half of the twentieth century was also the production approach. Output at current prices was gathered from financial reports of these companies. Value added was also from the financial report in the form of summing wages and salaries, profit or loss, depreciation and other components of the value added. Value added and output at constant prices were estimated by extrapolation. Table A1.31 Income of ptt, 1938-1955

1938 1939 1940

Post 13,226 13,584 12,995

Telegraph 4,311 5,544 7,884

Telephone 7,863 8,416 9,026

Indonesia 25,400 27,544 29,905

1948 1949 1950 1951 1952 1953 1954 1955

22,804 27,392 38,217 65,877 95,207 138,872 155,217 166,215

11,319 13,981 27,439 41,650 47,660 48,017 49,419 79,658

13,103 20,163 32,829 63,723 85,453 103,537 114,951 126,733

47,226 61,536 98,485 171,250 228,320 290,426 319,587 372,606

Total Java and Madura

33,733 44,423 71,138 122,683 169,193 217,538 241,302 276,887

Note: Until 1940 guilders, from 1948 onwards Rupiah (x 1,000)



Notes for table A1.32 (1) = (2) = (3) = (4) = (5) = (6) = (7) =

Value added Revenue Value added/output ratio Operating surplus (%) Wages and salaries Depreciation Indirect taxes

Table A1.32 Value added by communications according to i-o tables (million rupiah) (1)

(2)

(3)

(4)

(5)

(6)

(7) 486

1975

33,538

53,963

62.1

9,097

18,368

5,586

1980

150,328

265,193

56.7

19,285

56,602

73,637

805

1985

561,841

835,448

67.3

270,956

180,609

108,196

2,080

1990

1,541,568

2,124,786

72.6

729,047

363,181

425,912

23,428

1995

5,740,649

8,020,618

71.6

2,506,591

1,537,261

1,616,398

80,399

2000

18,260,265

24,378,623

74.9

10,196,767

3,557,469

4,129,613

376,416

251

| Appendix 1

Table A1.33 Key indicators for communications, 1956-2000 Letters sent ( x1,000) Domestic

International

Telephone calls Connections

(x 1,000 minutes)

Telex production Domestic International (x 1,000 pulses) (minutes)

1956 1957

24,797

1958

26,590

1959

33,061

1960

221,831

5,335

37,771

1961

208,364

6,292

45,126

1962

219,749

6,440

45,049

1963

207,545

7,375

46,055

1964

194,029

6,483

55,104

1965

200,370

8,551

153,131

77,510

2,532

2,892

1966

154,175

6,754

158,043

50,690

3,375

30,547

1967

123,548

5,408

169,605

35,832

4,171

129,735

1968

123,198

4,762

170,808

26,873

5,086

187,949

1969

133,407

4,755

139,206

26,591

6,202

256,773

1970

141,689

6,505

144,981

31,636

7,666

404,957

1971

158,824

8,204

152,146

40,354

9,235

647,518

1972

172,059

8,648

168,208

40,699

11,262

924,060

1973

155,534

9,416

178,029

52,808

14,078

1,408,893

1974

152,749

12,172

193,428

56,730

17,401

1,872,659

1975

163,866

11,521

208,954

57,626

22,628

2,592,205

1976

176,829

10,445

189,427

58,862

28,284

2,928,455

1977

193,998

12,005

193,383

59,858

30,773

3,884,996

1978

212,295

11,888

220,990

61,048

35,894

4,510,950

1979

204,646

16,459

202,141

61,877

43,270

5,507,959

1980

234,840

15,669

369,843

72,024

56,904

6,946,184

1981

231,760

17,723

427,185

77,199

82,279

8,837,634

1982

257,001

14,033

475,459

84,528

271,864

10,132,802

1983

286,966

22,101

503,253

72,345

336,400

11,013,554

1984

330,333

27,124

536,102

77,929

378,443

12,446,469

1985

357,152

24,757

602,356

80,381

421,185

12,643,377

1986

382,311

29,393

658,341

91,935

435,364

12,732,283

1987

402,215

29,169

737,588

106,513

471,890

11,180,447

1988

429,497

30,106

803,287

117,453

518,409

9,922,001

1989

456,221

30,353

893,145

130,133

559,626

8,838,313

1990

436,782

31,372

1,043,919

82,871

587,471

12,581,541

1991

493,542

34,709

1,276,593

73,407

694,192

7,667,594

1992

555,340

34,709

1,541,987

62,591

625,798

5,873,214

252

| Accounting for Services

Telegram production Number of telegrams (x 1,000) Domestic

Number of words (x 1,000)

International

Interlocal

International

1956 1957

3069

1224

57,369

41,991

1958

3198

1082

63,132

37,464

1959

3857

1084

78,409

35,646

1960

3,860

1,078

85,724

35,523

1961

3,921

1,061

91,822

34,798

1962

4,210

984

92,995

32,255

1963

2,732

997

101,516

34,970

1964

1,735

813

38,643

27,599

1965

2,860

504

154,475

24,075

1966

2,857

453

156,656

27,390

1967

1,772

422

119,880

26,220 26,460

1968

2,337

418

154,140

1969

2,081

473

55,832

30,270

1970

2,133

474

57,201

30,690 29,730

1971

2,390

461

61,512

1972

2,753

470

80,695

30,510

1973

3,410

347

105,166

23,839

1974

3,756

503

112,054

15,203

1975

3,642

475

107,567

14,694

1976

4,048

400

123,744

13,240

1977

4,404

351

134,402

11,529

1978

4,905

304

150,103

9,682

1979

5,503

268

167,885

7,930

1980

6,455

232

190,901

6,790

1981

6,924

181

205,372

5,698 4,548

1982

7,142

141

214,669

1983

7,859

105

240,074

3,328

1984

8,419

81

265,683

2,504

1985

9,087

68

285,490

2,182

1986

10,377

60

320,988

1,972

1987

11,090

57

320,891

1,828

1988

11,668

63

371,268

1,765

1989

12,825

61

410,038

1,588

1990

14,087

59

443,601

1,440

1991

13,582

41

400,310

968

1992

11,327

30

357,499

688

253

| Appendix 1

Table A1.33 Continued Letters sent ( x1,000)

Telephone calls Connections

(x 1,000 minutes)

Telex production

Domestic

International

Domestic International (x 1,000 pulses) (minutes)

1993

638,483

87,749

1,848,678

92,419

574,441

3,734,337

1994

678,830

92,137

2,439,670

238,834

502,176

4,273,243

1998

588,133

34,462

1999

465,949

29,871

2000

413,625

25,249

1995 1996 1997

The statistics above are transformed in estimates of value added in communications in table A1.34.



Notes for table A1.34 (1) = (2) = (3) = (4) = (5) =

254

Value added in current prices (guilders/rupiah) For the colonial period value added is taken from table A1.30. Bold indicates the numbers taken from the Input-Output tables. Other years are calculated by extrapolation based on the volume index (2) and corrected for inflation using the cpi index (5) by Van Leeuwen (2007). Volume index (1993=100) Value added in constant 1930 prices Value added in constant 1993 prices For the colonial period value added in constant prices is taken from table A1.30 and recalculated with 1993 as base year. For the years after independence estimates are obtained through extrapolation based on the volume index (2). cpi (Van Leeuwen 2007)

| Accounting for Services

Telegram production Number of telegrams (x 1,000)

Number of words (x 1,000)

Domestic

International

Interlocal

International

1993

10,066

44

298,704

1,167

1994

10,158

38

280,387

1,051

1995

5,278

36

165,221

1,045

1996

5,919

31

143,341

940

1997

2,989

28

98,739

792

1998

86,333

779

1999

56,830

554

2000

35,621

440

Table A1.34 Value added by communications, 1901-2000 (1)

(2)

(3)

(4)

(5)

620

5,767

0.012

1901

2.5

1902

2.6

645

6,003

0.011

1903

2.1

497

4,620

0.012

1904

2.8

711

6,609

0.010

1905

2.7

726

6,752

0.010

1906

3.1

951

8,848

0.011

1907

3.5

1,221

11,359

0.012

1908

3.5

1,387

12,905

0.013

1909

3.8

1,603

14,906

0.012

1910

4.2

1,989

18,505

0.012

1911

4.8

2,538

23,605

0.013

1912

4.5

2,812

26,156

0.015

1913

4.3

2,715

25,250

0.014

1914

6.8

4,522

42,058

0.013

1915

6.9

4,712

43,830

0.013

1916

8.2

6,299

58,588

0.014

1917

8.8

7,535

70,088

0.015

1918

10.8

11,486

106,837

0.019

1919

14.1

15,870

147,609

0.019

1920

17.7

23,244

216,200

0.032

1921

20.2

22,509

209,364

0.027

1922

19.7

18,428

171,404

0.023

1923

20.9

18,686

173,811

0.021

1924

23.0

21,005

195,373

0.019

255

| Appendix 1

(1) 1925

(2)

24.2

(3)

(4)

(5)

24,263

225,678

0.018

1926

25.1

25,814

240,105

0.018

1927

26.2

27,698

257,633

0.018

1928

27.9

29,979

278,847

0.017

1929

29.0

32,529

302,568

0.017

1930

28.6

31,007

288,410

0.017

1931

26.4

25,599

238,110

0.015

1932

23.8

21,326

198,367

0.012

1933

21.7

17,717

164,796

0.011

1934

20.8

16,631

154,696

0.010

1935

20.1

14,905

138,637

0.010

1936

19.9

15,157

140,983

0.009

1937

21.5

18,574

172,765

0.010

1938

20.8

19,018

176,892

0.010

1939

22.9

22,874

212,763

0.013

1940

25.1

28,245

262,718

1941

0.011 0.012

1942

0.017

1943

0.016

1944

0.024

1945

0.033

1946

0.058

1947

0.082

1948

38

0.106

1949

49

0.130

1950

79

620,000

0.152

1951

137

665,000

0.254

1952

183

700,000

0.268

1953

232

740,000

0.285

1954

256

780,000

0.303

1955

298

828,000

0.401

1956

862

910,545

0.459

1957

947

28.9

926,089

0.504

1958

1,378

29.4

928,596

0.734

1959

1,666

29.5

1,113,891

0.887

1960

2,052

35.4

1,189,347

1.09

1961

2,809

37.8

1,223,419

1.50

1962

7,814

38.9

1,305,021

4.16

256

| Accounting for Services

(1) 1963

(2)

(3)

(4)

(5)

17,471

41.5

1,162,910

9.30

1964

37,050

36.9

1,136,924

19.73

1965

149,954

36.1

1,505,152

79.84

1966

1,756

47.8

1,124,115

0.93

1967

4,653

35.7

777,817

2.48

1968

10,448

24.7

733,559

5.56

1969

12,204

23.3

718,413

6.50

1970

13,784

22.8

795,603

7.34

1971

14,311

30.1

948,578

7.62

1972

15,276

32.1

1,010,095

8.13

1973

20,017

37.9

1,193,286

10.66

1974

28,182

40.5

1,273,836

15.00

1975

33,538

40.9

1,287,246

17.86

1976

58,000

43.2

1,360,772

21.41

1977

73,000

45.6

1,436,246

23.75

1978

98,000

48.6

1,528,244

25.66

1979

123,000

50.7

1,595,542

30.90

1980

150,328

58.9

1,852,454

35.67

1981

225,000

62.2

1,958,610

38.75

1982

350,000

66.6

2,095,676

42.21

1983

404,400

66.3

2,087,048

46.74

1984

439,500

72.4

2,278,727

51.63

1985

561,841

76.6

2,411,521

54.03

1986

637,200

86.4

2,720,204

57.21

1987

803,800

94.9

2,988,461

62.48

1988

912,500

102.1

3,213,680

67.52

1989

1,025,400

111.7

3,517,204

71.86

1990

1,541,568

98.0

3,085,570

77.52

1991

1,580,600

95.7

3,012,313

84.73

1992

1,966,100

87.2

2,743,751

91.09

1993

3,147,700

100

3,147,700

100

1994

4,161,600

3,788,400

108.45

1995

5,740,649

4,397,100

118.76

1996

5,679,900

5,256,500

128.06

1997

7,033,300

6,173,400

136.59

1998

10,100,000

6,471,300

215.58

1999

12,453,900

7,034,500

259.77

2000

18,260,265

7,853,500

269.38

257

| Appendix 1

258

| Accounting for Services

Appendix 2

National Accounting for Trade

Activities included in this sub-sector are the ones concerned with buying and selling products, either new or used goods, for distribution without changing the characteristics of the products. According to the 1993 System of National Accounts traders are treated as supplying services rather than goods to their customers by storing and displaying a selection of goods in convenient locations and making them easily available for customers to buy. Their output is measured by the total value of the trade margins realised on the goods they purchase for resale. A trade margin is defined as the difference between the actual or imputed price realised on a good purchased for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold or otherwise disposed of. The margins realised on some goods may be negative if their prices have to be marked down. They must be negative on goods that are never sold. The key is therefore to assess the trade margins on different kind of goods over time. Table A2.1 gives aggregated trade margins from two trading houses in the period 1914-1939. Table A2.2 shows trade margins derived from the Input-Output tables. Table A2.1 Profit margins, Hagemeijer and Internatio, 1914-1939 Trade ( in millions) Total export

Total import

Turnover (x1,000)

Purchases (x1,000)

Hagemeijer

Internatio

Hagemeijer

Internatio

1914 1915 1916 1917

674 770 865 778

412 390 419 485

1.934 1.988 2.921 1.957

46.034 67.451 89.098 100.022

1.664 1.662 2.093 1.177

43.419 64.530 84.858 94.560

1918 1919 1920 1921 1922 1923 1924 1925 1926 1927

676 2.152 2.228 1.191 1.142 1.378 1.543 1.802 1.585 1.645

557 740 1.225 1.193 756 644 698 840 895 903

2.362 2.990 6.510 4.624 4.084 3.290 3.690 4.759 4.320 4.833

90.969 119.848 146.216 123.937 82.294 84.337 104.617 120.650 118.972 131.413

1.950 2.369 5.810 4.537 3.846 2.544 2.907 3.830 3.584 4.151

84.678 112.527 141.737 120.178 78.071 80.642 100.237 115.501 113.285 125.591

259

| Appendix 2

1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

Trade ( in millions) Total export Total import 1.580 1.003 1.446 1.108 1.161 888 750 592 544 384 471 330 490 291 450 277 540 287 953 498 660 490 748 478

Turnover (x1,000) Hagemeijer Internatio 5.821 136.522 5.035 134.148 3.806 87.035 3.395 66.941 3.072 50.397 3.063 45.854 3.997 50.402 3.499 50.242 4.135 64.524 104.823 106.650 6.752 130.155

Gross margin (x1,000) Hagemeijer Internatio 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

320 326 828 780 412 621 700 87 238 746 783 929 736 682 1.058 919 612 539 541 453 565 507 708 908 1.151 1.544

2.615 2.921 4.240 5.462 6.291 7.321 4.479 3.759 4.223 3.695 4.380 5.149 5.687 5.822 6.220 5.388 3.735 2.957 1.811 512 377 2.632 3.549 5.485 5.259 7.779

Source: De Jong 1995

260

| Accounting for Services

Purchases (x1,000) Hagemeijer Internatio 4.763 130.302 4.116 128.760 3.194 83.300 2.856 63.984 2.531 48.586 2.610 45.342 3.432 50.025 2.992 47.610 3.427 60.975 99.338 101.391 5.208 122.376

Gross profit margin Hagemeijer Internatio 16,5% 16,4% 28,3% 39,9% 17,4% 20,8% 10,8% 1,9% 5,8% 22,7% 21,2% 19,5% 17,0% 14,1% 18,2% 18,3% 16,1% 15,9% 17,6% 14,8% 14,1% 14,5% 17,1%

22,9%

5,7% 4,3% 4,8% 5,5% 6,9% 6,1% 3,1% 3,0% 5,1% 4,4% 4,2% 4,3% 4,8% 4,4% 4,6% 4,0% 4,3% 4,4% 3,6% 1,1% 0,7% 5,2% 5,5% 5,2% 4,9% 6,0%

261

| Appendix 2

1-07 1-08 1-09 1-10 1-11 1-12 1-13 1-14 1-15 1-16 1-17 1-18 1-19 1-20 1-21

1-06

1-01 1-02 1-03 1-04 1-05

1975 i-o Code

Paddy Handpounded rice Maize Root crops Fruit & Vegetables Fruit Vegetables Beans Groundnut Soybeans Rubber Sugar Coconut Palm oil & vegetable oil Tobacco Coffee Tea Clove Nutmeg other spices Other crops Livestock Slaughtering Poultry and its products Wood/Logging

Commodity

1.8% 7.5% 1.3% 6.1% 26.1% 17.5% 32.6% 5.1% 5.5% 4.4% 10.5% 7.6% 16.1% 3.9% 14.8% 12.9% 16.4% 49.3% 12.2% 9.2% 76.0% 9.8% 5.6% 5.1% 30.8%

Wholesale trade

0.0% 7.0% 1.1% 4.6% 24.1% 15.4% 30.6% 2.4% 4.3% 0.6% 0.0% 2.2% 4.2% 2.8% 7.6% 2.4% 3.8% 0.1% 5.0% 0.9% 4.8% 0.2% 4.6% 2.8% 4.7%

Retail trade

1971

million of Rp 463,796 379,801 37,229 107,805 165,054 70,900 94,154 41,757 15,712 22,719 143,716 39,524 59,848 68,751 63,813 45,097 29,055 16,145 2,543 11,677 11,964 49,916 64,140 49,942 149,117

Output

Table A2.2 Trade margins based on i-o tables, 1975-2000 (1975 i-o classification code)

11.3% 9.2% 0.9% 2.6% 4.0% 1.7% 2.3% 1.0% 0.4% 0.6% 3.5% 1.0% 1.5% 1.7% 1.6% 1.1% 0.7% 0.4% 0.1% 0.3% 0.3% 1.2% 1.6% 1.2% 3.6%

2.6% 0.0% 6.6% 5.7% 16.7% 20.5% 13.8% 18.1% 4.5% 4.8% 6.5% 11.7% 8.9% 5.5% 21.0% 40.2% 18.8% 44.3% 15.7% 13.1% 30.1% 9.0% 5.3% 13.6% 30.0%

Output as Wholesale % of total trade

0.0% 8.5% 7.0% 4.8% 16.7% 20.5% 13.7% 7.5% 3.1% 0.4% 0.0% 4.6% 4.0% 1.9% 3.2% 19.5% 4.4% 0.1% 6.2% 3.2% 3.2% 1.0% 4.6% 9.2% 2.8%

Retail trade million of Rp 1,364,487 616,536 169,415 408,960 567,137 247,672 319,465 178,315 82,286 78,244 255,646 83,856 158,651 118,712 122,080 88,848 56,148 41,931 10,254 16,663 28,411 111,708 207,056 127,708 317,759

Output

1975

10.5% 4.7% 1.3% 3.1% 4.4% 1.9% 2.5% 1.4% 0.6% 0.6% 2.0% 0.6% 1.2% 0.9% 0.9% 0.7% 0.4% 0.3% 0.1% 0.1% 0.2% 0.9% 1.6% 1.0% 2.4%

Output as % of total

262

| Accounting for Services

3-37 3-38

2-26 3-27 3-28 3-29 3-30 3-31 3-32 3-33 3-34 3-35 3-36

Other mining Processing and preserving food Vegetable oil Milling and polishing of rice Other cereal milling Sugar industry Manufacture of other food products Manufacture of beverages Manufacture of cigarettes Spinning industry Manufacture of textile, leather and clothing Manufacture of made up textile goods except wearing apparel Wearing apparel Manufacture of footwear and leather products Manufacture of wood and wooden products Manufacture of paper and printing Manufacture of paper and cardboard Manufacture of paper and cardboard products Printing and publishing

Other forest products Fishing Sea fishing Inland water fishing Drying and salting of fish Coal mining and metal ore mining Crude oil and gas mining

1-22 1-23

2-24 2-25

Commodity

1975 i-o Code

1971

8.6% 20.7% 2.4% 1.5% 10.3% 4.9% 8.8% 7.5% 7.1% 1.4% 7.4% 4.1% 3.6% 20.5% 2.8% 6.1% 1.3% 0.0% 7.4%

4.9% 3.7% 24.7% 17.3% 41.9% 143.7% 18.0% 27.5%

4.0% 13.9% 5.9% 7.7% 27.2% 0.0% 0.0%

Retail trade

58.8% 26.6% 5.8% 7.5% 18.9% 5.6% 12.1% 22.0% 7.8% 25.4% 12.2%

16.7% 18.7% 13.7% 9.1% 30.5% 0.0% 14.2%

Wholesale trade

12,153 77,203 17,366 34,819 40,241 5,229 3,032 31,980

31,095 9,777 68,372 213,015 17,855 64,642 82,053 18,999 85,376 25,965 235,106

21,826 222,786 94,719 48,836 79,230 308,399 495

Output

0.3% 1.9% 0.4% 0.8% 1.0% 0.1% 0.1% 0.8%

0.8% 0.2% 1.7% 5.2% 0.4% 1.6% 2.0% 0.5% 2.1% 0.6% 5.7%

0.5% 5.4% 2.3% 1.2% 1.9% 7.5% 0.0%

11.9% 3.9% 10.2% 22.9% 24.7% 67.3% 9.0% 17.3%

39.9% 27.7% 6.2% 2.2% 12.0% 9.3% 9.1% 15.3% 6.1% 3.3% 7.7%

29.8% 21.6% 35.3% 5.6% 16.0% 0.2% 0.0%

Output as Wholesale % of total trade

8.9% 3.7% 7.3% 0.8% 6.1% 0.7% 0.5% 7.9%

5.1% 22.5% 3.9% 2.1% 5.8% 7.0% 7.9% 9.6% 6.0% 0.2% 4.8%

0.7% 13.0% 15.6% 4.7% 15.4% 0.0% 0.0%

Retail trade

14,404 158,419 46,037 115,452 121,230 19,637 10,354 91,240

96,766 62,024 67,450 1,145,061 166,202 136,902 253,957 33,021 315,635 95,184 509,459

42,087 398,014 166,308 92,366 139,340 97,598 2,464,583

Output

1975

0.1% 1.2% 0.4% 0.9% 0.9% 0.2% 0.1% 0.7%

0.7% 0.5% 0.5% 8.8% 1.3% 1.1% 1.9% 0.3% 2.4% 0.7% 3.9%

0.3% 3.1% 1.3% 0.7% 1.1% 0.7% 18.9%

Output as % of total

263

| Appendix 2 12.3% 75.7%

Manufacture of transport equipment Other manufactures

3-49 3-50

3-41 3-42 3-43 3-44 3-45 3-46 3-47 3-48

11.4% 20.5% 15.5%

All agricultural products

All manufacturing products

Total

149.6% 31.4% 41.7% 34.8% 43.2% 12.2% 59.1% 55.5% 5.5% 284.8% 15.5% 39.5% 354.4%

Manufacture of fertilizers Chemical industry Manufacture of drugs and medicine Manufacture of cosmetics Manufacture of plastic goods Manufacture of petroleum Manufacture of rubber products Manufacture of ceramic and earthenware Cement industry Manufacture of basic iron and steel Manufacture of non ferrous basic metal Manufacture of metal products Manufacture of machinery and equipment

3-39 3-40

Wholesale trade

Commodity

1975 i-o Code

1971

5.6%

5.4%

5.8%

1.8% 20.1%

0.1% 11.3% 33.2% 29.9% 12.7% 5.0% 4.3% 3.0% 0.0% 0.0% 0.0% 2.7% 61.1%

Retail trade

4,107,310

1,862,008

2,240,940

194,169 14,839

3,232 254,050 8,157 9,374 4,763 1,999 12,123 42,725 6,425 5,230 17,729 55,314 17,965

Output

100%

45.3%

54.6%

4.7% 0.4%

0.1% 6.2% 0.2% 0.2% 0.1% 0.0% 0.3% 1.0% 0.2% 0.1% 0.4% 1.3% 0.4%

11.5%

12.1%

10.6%

9.0% 82.3%

0.0% 34.7% 15.9% 24.2% 38.2% 12.7% 39.7% 56.1% 66.3% 330.1% 48.0% 38.6% 173.8%

Output as Wholesale % of total trade

4.5%

3.6%

5.7%

3.9% 34.9%

0.0% 12.8% 15.9% 24.7% 7.4% 4.8% 6.7% 2.8% 0.0% 0.0% 0.0% 1.3% 30.8%

Retail trade

13,037,230

7,546,850

5,490,380

717,409 37,303

34,972 208,393 32,448 30,549 29,201 340,137 43,474 95,802 34,441 15,309 48,791 171,964 118,331

Output

1975

100%

57.9%

42.1%

5.5% 0.3%

0.3% 1.6% 0.2% 0.2% 0.2% 2.6% 0.3% 0.7% 0.3% 0.1% 0.4% 1.3% 0.9%

Output as % of total

264

| Accounting for Services 21.8% 14.0%

Root crops

Fruit & Vegetables

Fruit

Vegetables

1-04

1-05

Sugar

Coconut

Palm oil & vegetable oil

Tobacco

Coffee

Tea

Clove

Nutmeg

Other spices

Other crops

Livestock

Slaughtering

1-08

1-09

1-10

1-11

1-12

1-13

1-14

1-15

1-16

1-17

1-18

1-19

5.5%

Soybeans

6.7%

9.5%

13.2%

14.2%

15.7%

21.1%

16.8%

34.3%

17.9%

5.8%

10.0%

13.2%

13.0%

5.2%

Groundnut

Rubber

6.8%

6.7%

7.2%

Beans

1-07

1-06

17.6%

Maize

1-03

0.3%

Handpounded rice

1-02

2.6%

Paddy

Wholesale trade

1-01

1975 i-o Code Commodity

Table A2.2 Continued, 1980-1985 1980

5.0%

0.4%

2.9%

4.1%

6.2%

0.1%

2.7%

4.5%

1.2%

1.8%

3.3%

4.0%

0.0%

0.4%

3.5%

7.9%

13.8%

20.5%

16.9%

5.4%

6.9%

7.6%

0.0%

Retail trade

746,300

597,149

121,904

18,404

25,294

290,118

194,556

527,021

235,068

335,142

412,592

339,869

958,076

174,970

226,994

446,957

749,193

648,457

1,397,650

714,215

382,654

1,373,920

3,436,221

million of Rp

Output

1.6%

1.3%

0.3%

0.0%

0.1%

0.6%

0.4%

1.1%

0.5%

0.7%

0.9%

0.7%

2.1%

0.4%

0.5%

1.0%

1.6%

1.4%

3.0%

1.5%

0.8%

2.9%

7.4%

6.5%

9.5%

12.7%

15.7%

17.6%

16.6%

39.4%

14.2%

7.3%

10.1%

12.3%

13.0%

4.9%

5.0%

6.3%

13.5%

21.2%

18.0%

6.1%

6.9%

1.5%

2.6%

Output as Wholesale % of total trade

4.8%

0.8%

2.2%

6.2%

0.3%

2.7%

0.4%

0.1%

0.9%

3.3%

3.1%

0.0%

0.4%

3.5%

7.6%

13.7%

20.0%

17.4%

5.6%

5.6%

6.1%

0.0%

Retail trade million of Rp

Output

2,203,565

1,290,105

568,322

33,387

446,994

220,389

651,481

533,302

843,934

829,798

905,254

293,282

426,630

521,524

1,052,752

1,479,885

2,102,367

3,582,252

1,798,023

855,554

172,090

7,140,749

1985

2.4%

1.4%

0.6%

0.0%

0.5%

0.2%

0.7%

0.6%

0.9%

0.9%

1.0%

0.3%

0.5%

0.6%

1.1%

1.6%

2.3%

3.8%

1.9%

0.9%

0.2%

7.7%

Output as % of total

265

| Appendix 2 38.3%

Other forest products

Fishing

Sea fishing

1-22

1-23

8.5% 15.5% 7.0% 14.2%

Other mining

Processing and preserving food

Vegetable oil

Milling and polishing of rice

Other cereal milling

Sugar industry

Manufacture of other food products

Manufacture of beverages

Manufacture of cigarettes

Spinning industry

Manufacture of textile, leather and clothing

Manufacture of made up textile goods except wearing apparel

Wearing apparel

Manufacture of footwear and leather products

2-26

3-27

3-28

3-29

3-30

3-31

3-32

3-33

3-34

3-35

3-36

2.5%

5.8%

22.1%

12.6%

4.6%

10.9%

0.4%

10.6%

13.0%

3.5%

0.0%

Crude oil and gas mining

2-25

0.1%

Coal mining and metal ore mining

27.8%

7.3%

40.4%

2-24

Drying and salting of fish

Inland water fishing

27.0%

Wood/Logging

33.7%

Poultry and its products

1-21

13.0%

Wholesale trade

1-20

1975 i-o Code Commodity

9.3%

6.4%

7.9%

5.7%

0.1%

6.2%

16.3%

9.3%

9.0%

5.9%

0.5%

5.5%

5.4%

17.7%

0.0%

0.0%

26.9%

5.8%

17.7%

17.1%

0.1%

0.4%

8.7%

Retail trade

1980

162,603

52,709

52,092

1,332,169

385,981

1,222,091

109,842

1,044,158

331,423

244,685

3,010,180

235,967

223,408

371,851

13,238,896

430,759

285,104

273,254

452,748

1,011,106

53,630

1,571,682

577,475

million of Rp

Output

0.3%

0.1%

0.1%

2.9%

0.8%

2.6%

0.2%

2.2%

0.7%

0.5%

6.5%

0.5%

0.5%

0.8%

28.4%

0.9%

0.6%

0.6%

1.0%

2.2%

0.1%

3.4%

1.2%

13.1%

5.1%

12.2%

7.5%

1.8%

6.9%

20.6%

12.6%

5.4%

11.2%

2.9%

9.6%

17.4%

62.3%

0.0%

1.0%

28.5%

7.6%

38.2%

26.4%

26.7%

31.0%

13.0%

Output as Wholesale % of total trade

1985

8.1%

5.5%

5.8%

5.2%

0.7%

5.2%

13.7%

9.0%

7.2%

6.0%

0.8%

5.4%

10.9%

0.1%

0.0%

0.0%

27.9%

5.1%

17.7%

17.2%

2.0%

3.1%

8.7%

Retail trade

188,143

631,910

95,656

2,519,123

916,469

3,413,506

258,759

2,006,750

815,481

585,181

7,840,130

1,003,460

591,101

858,846

15,477,361

390,998

660,412

615,389

857,141

2,132,942

129,902

1,482,206

1,379,855

million of Rp

Output

0.2%

0.7%

0.1%

2.7%

1.0%

3.7%

0.3%

2.2%

0.9%

0.6%

8.4%

1.1%

0.6%

0.9%

16.6%

0.4%

0.7%

0.7%

0.9%

2.3%

0.1%

1.6%

1.5%

Output as % of total

266

| Accounting for Services 71.3% 12.8% 8.8% 10.2%

Cement industry

Manufacture of basic iron and steel

Manufacture of non ferrous basic metal

Manufacture of metal products

Manufacture of machinery and equipment

Manufacture of transport equipment

Other manufactures

All agricultural products

All manufacturing products

Total

3-44

3-45

3-46

3-47

3-48

3-49

3-50

9.7%

42.8%

37.2%

34.8%

52.5%

38.4%

21.3%

Manufacture of rubber products

3-42

8.8%

Manufacture of plastic goods

Manufacture of petroleum

18.7% 16.3%

Manufacture of cosmetics

3-41

31.2%

Manufacture of drugs and medicine

1.6% 27.4%

Printing and publishing

Chemical industry

23.4%

Manufacture of paper and cardboard products

Manufacture of fertilizers

20.1%

Manufacture of paper and cardboard

3-40

85.6%

Manufacture of paper and printing

3-38

3-39

38.9%

Manufacture of wood and wooden products

24.9%

Wholesale trade

3-37

1975 i-o Code Commodity

1980

3.4%

2.6%

5.0%

19.3%

2.7%

4.9%

1.0%

0.0%

0.0%

0.0%

5.4%

9.1%

3.4%

13.0%

16.4%

8.5%

0.0%

11.8%

0.2%

0.3%

7.5%

0.3%

Retail trade

46,583,485

30,816,484

15,767,001

203,393

1,440,869

1,163,067

495,562

379,978

363,702

215,569

130,481

1,623,112

262,608

227,511

137,804

970,037

319,784

231,911

42,963

93,611

368,485

671,373

million of Rp

Output

100%

66.2%

33.8%

0.4%

3.1%

2.5%

1.1%

0.8%

0.8%

0.5%

0.3%

3.5%

0.6%

0.5%

0.3%

2.1%

0.7%

0.5%

0.1%

0.2%

0.8%

1.4%

9.5%

8.5%

11.9%

14.9%

3.0%

14.0%

24.2%

19.7%

30.6%

34.1%

8.0%

5.7%

20.0%

18.4%

25.5%

19.1%

0.4%

15.5%

23.6%

32.1%

22.6%

28.1%

Output as Wholesale % of total trade

3.2%

2.2%

5.6%

5.3%

1.8%

2.0%

0.9%

0.0%

0.0%

0.0%

0.2%

2.2%

4.5%

12.9%

13.9%

6.8%

0.3%

8.0%

0.3%

0.2%

3.9%

0.8%

Retail trade

Output

30.6%

0.5%

2.2%

2.3%

1.3%

0.9%

0.9%

0.7%

1.4%

11.5%

0.7%

0.3%

0.6%

2.5%

1.3%

0.5%

0.2%

0.3%

1.0%

2.8%

Output as % of total

93,166,433

100%

64,620,295 69.4%

28,546,138

466,266

2,024,504

2,115,895

1,166,481

866,517

854,943

678,970

1,314,322

10,685,012

680,983

286,122

543,333

2,291,166

1,198,114

434,410

167,500

302,266

904,176

2,563,007

million of Rp

1985

267

| Appendix 2 12.0% 6.5%

Root crops

Fruit & Vegetables

Fruit

Vegetables

1-04

1-05

Sugar

Coconut

Palm oil & vegetable oil

Tobacco

Coffee

Tea

Clove

Nutmeg

other spices

Other crops

Livestock

Slaughtering

1-08

1-09

1-10

1-11

1-12

1-13

1-14

1-15

1-16

1-17

1-18

1-19

2.4%

Soybeans

6.1%

3.3%

7.2%

8.9%

7.5%

20.5%

4.1%

2.4%

5.0%

5.2%

4.3%

3.0%

Groundnut

Rubber

3.8%

7.0%

Beans

1-07

1-06

9.4%

Maize

1-03

3.8%

Handpounded rice

1-02

0.8%

Paddy

Wholesale trade

1-01

1975 i-o Code Commodity

Table A2.2 Continued, 1990-1995

7.5%

0.7%

4.4%

0.2%

1.8%

0.3%

0.2%

0.0%

2.4%

0.0%

0.0%

0.3%

2.8%

7.8%

10.5%

17.5%

14.2%

4.8%

4.5%

0.0%

1990 Retail trade

3,414,980

2,248,388

1,376,288

594,700

184,897

728,692

418,220

1,062,708

1,193,046

924,878

932,278

1,151,707

1,044,854

2,524,774

3,736,004

4,037,691

7,773,695

2,656,676

1,600,424

14,081,838

million of Rp

Output

1.7%

1.1%

0.7%

0.3%

0.1%

0.4%

0.2%

0.5%

0.6%

0.5%

0.5%

0.6%

0.5%

1.2%

1.8%

2.0%

3.8%

1.3%

0.8%

6.9%

7.0%

10.8%

7.0%

3.3%

11.0%

30.7%

6.7%

1.7%

5.4%

13.3%

3.3%

3.2%

2.8%

3.9%

5.9%

11.9%

9.1%

6.5%

3.8%

1.4%

Output as Wholesale % of total trade

8.3%

1.9%

2.9%

0.1%

3.2%

0.3%

0.1%

0.0%

2.6%

0.0%

0.0%

0.9%

2.8%

6.1%

8.9%

13.1%

11.1%

4.4%

4.6%

0.0%

Retail trade

Output

12,573,324

5,626,265

2,550,513

590,038

514,872

1,409,436

1,235,161

2,780,401

3,044,150

3,783,402

3,768,286

1,799,522

1,430,150

3,673,195

7,567,590

8,546,637

16,114,227

4,423,516

3,276,902

23,514,310

million of Rp

1995

2.4%

1.1%

0.5%

0.1%

0.1%

0.3%

0.2%

0.5%

0.6%

0.7%

0.7%

0.3%

0.3%

0.7%

1.4%

1.6%

3.1%

0.8%

0.6%

4.5%

Output as % of total

268

| Accounting for Services 28.9%

Other forest products

Fishing

Sea fishing

1-22

1-23

5.0% 10.7%

Vegetable oil

Milling and polishing of rice

Other cereal milling

Sugar industry

Manufacture of other food products

Manufacture of beverages

Manufacture of cigarettes

Spinning industry

Manufacture of textile, leather and clothing

Manufacture of made up textile goods except wearing apparel

Wearing apparel

Manufacture of footwear and leather products

3-28

3-29

3-30

3-31

3-32

3-33

3-34

3-35

3-36

Manufacture of wood and wooden products

9.3%

Processing and preserving food

3-27

3-37

5.6%

Other mining

2-26

21.2%

0.9%

4.4%

14.0%

12.4%

5.3%

12.1%

3.0%

12.0%

25.1%

23.7%

0.0%

Crude oil and gas mining

2-25

1.4%

Coal mining and metal ore mining

20.3%

7.1%

14.0%

2-24

Drying and salting of fish

Inland water fishing

20.4%

Wood/Logging

1-21

17.8%

Poultry and its products

4.9%

Wholesale trade

1-20

1975 i-o Code Commodity

0.6%

8.5%

5.8%

4.7%

5.5%

0.7%

5.4%

15.0%

9.0%

8.1%

7.5%

1.0%

3.5%

12.0%

0.0%

0.0%

0.0%

29.6%

5.1%

19.1%

18.2%

1.4%

1.6%

5.0%

1990 Retail trade

8,907,254

956,383

3,245,514

573,429

10,971,070

3,204,806

7,020,399

554,147

6,447,790

1,937,550

1,388,726

15,590,172

2,808,780

2,514,694

3,123,989

22,945,458

2,550,556

1,329,052

1,301,116

2,083,365

4,713,533

342,145

3,167,509

3,246,238

million of Rp

Output

4.3%

0.5%

1.6%

0.3%

5.4%

1.6%

3.4%

0.3%

3.1%

0.9%

0.7%

7.6%

1.4%

1.2%

1.5%

11.2%

1.2%

0.6%

0.6%

1.0%

2.3%

0.2%

1.5%

1.6%

13.5%

11.2%

4.0%

4.5%

5.2%

1.8%

2.6%

12.3%

10.7%

4.9%

15.5%

2.3%

13.2%

21.2%

23.1%

0.0%

1.0%

23.8%

3.0%

22.3%

16.3%

2.0%

14.0%

5.1%

Output as Wholesale % of total trade

17.5%

8.4%

4.5%

2.2%

4.5%

0.3%

2.7%

10.6%

7.7%

7.2%

9.6%

0.7%

3.7%

13.3%

0.0%

0.0%

0.0%

15.2%

2.1%

14.3%

10.5%

6.3%

1.2%

1.9%

Retail trade

Output

22,608,605

5,028,319

10,612,323

1,264,633

33,676,663

11,055,347

17,710,696

2,782,640

27,770,392

9,551,683

5,284,685

28,680,691

8,794,176

17,340,164

9,918,888

28,095,680

9,550,051

1,958,002

3,843,541

6,098,895

11,900,438

2,380,332

8,976,488

9,571,347

million of Rp

1995

4.3%

1.0%

2.0%

0.2%

6.4%

2.1%

3.4%

0.5%

5.3%

1.8%

1.0%

5.5%

1.7%

3.3%

1.9%

5.4%

1.8%

0.4%

0.7%

1.2%

2.3%

0.5%

1.7%

1.8%

Output as % of total

269

| Appendix 2 14.4% 7.0% 8.5% 8.1%

Manufacture of ceramic and earthenware

Cement industry

Manufacture of basic iron and steel

Manufacture of non ferrous basic metal

Manufacture of metal products

Manufacture of machinery and equipment

Manufacture of transport equipment

Other manufactures

All agricultural products

All manufacturing products

Total

3-43

3-44

3-45

3-46

3-47

3-48

3-49

3-50

3.0%

20.4%

29.9%

15.3%

9.7%

25.9%

20.1%

10.2%

Manufacture of rubber products

3-42

12.5%

Manufacture of plastic goods 5.6%

34.7%

Manufacture of cosmetics

Manufacture of petroleum

11.6%

Manufacture of drugs and medicine

3-41

12.8%

Chemical industry

Printing and publishing

3-40

7.9% 8.0%

Manufacture of paper and cardboard products 0.5%

5.2%

Manufacture of paper and cardboard

Manufacture of fertilizers

6.5%

Manufacture of paper and printing

Wholesale trade

3-39

3-38

1975 i-o Code Commodity

3.7%

3.0%

5.5%

13.1%

3.4%

3.4%

1.3%

0.0%

0.0%

0.0%

1.5%

2.2%

3.4%

4.6%

24.3%

8.8%

7.1%

0.4%

6.6%

0.1%

0.1%

2.2%

1990 Retail trade

0.6%

2.9%

3.5%

1.6%

0.9%

1.6%

0.5%

0.8%

1.6%

9.3%

0.8%

0.1%

0.7%

3.6%

1.1%

0.7%

0.3%

1.1%

2.1%

204,854,695

100%

151,668,788 74.0%

8.5%

8.8%

7.6%

9.9%

2.8%

19.8%

22.2%

6.9%

9.6%

27.3%

12.8%

5.7%

6.4%

14.0%

15.1%

6.9%

13.0%

0.1%

4.7%

6.8%

5.6%

5.5%

Output as Wholesale % of total trade

53,185,907 26.0%

1,220,286

6,005,865

7,075,613

3,196,928

1,903,732

3,370,672

1,089,005

1,638,342

3,203,479

19,051,251

1,692,206

285,908

1,521,450

7,325,117

2,299,640

1,365,030

711,669

2,246,768

4,323,467

million of Rp

Output

3.4%

3.1%

4.3%

5.7%

1.0%

2.7%

1.4%

0.0%

0.0%

0.0%

0.8%

1.1%

3.8%

4.3%

10.2%

4.7%

3.9%

0.1%

2.3%

0.3%

0.1%

0.8%

Retail trade

Output

524,417,643

402,711,040

121,706,603

6,140,095

19,753,331

23,539,136

7,599,829

4,242,259

9,449,836

2,499,886

5,964,397

11,367,831

26,059,038

10,834,478

1,539,221

3,891,757

33,353,035

5,170,538

4,457,789

2,667,154

7,626,528

14,751,470

million of Rp

1995

100%

76.8%

23.2%

1.2%

3.8%

4.5%

1.4%

0.8%

1.8%

0.5%

1.1%

2.2%

5.0%

2.1%

0.3%

0.7%

6.4%

1.0%

0.9%

0.5%

1.5%

2.8%

Output as % of total

Table A2.2 Continued, 2000 2000 1975 i-o Code

Commodity

Wholesale Retail trade trade

Output

Output as % of total

million of Rp 1-01

Paddy

1-02

Handpounded rice

1-03

Maize

1-04

Root crops

1-05

Fruit & Vegetables

1-06

2.2%

0.0%

56,850,086

3.7%

12.7%

11.8%

10,700,060

0.7%

9.5%

14.9%

14,682,509

0.9%

16.2%

15.5%

36,730,962

2.4%

Fruit

17.5%

16.1%

13,943,195

0.9%

Vegetables

15.4%

15.1%

22,787,767

1.5%

Beans

7.2%

5.0%

7,035,499

0.5%

Groundnut

5.3%

5.3%

3,553,623

0.2%

Soybeans

9.0%

1.0%

2,397,887

0.2%

1-07

Rubber

4.3%

0.0%

11,972,081

0.8%

1-08

Sugar

9.7%

0.2%

5,190,566

0.3%

1-09

Coconut

8.4%

8.7%

6,911,272

0.4%

1-10

Palm oil & vegetable oil

1.0%

0.2%

5,298,764

0.3%

1-11

Tobacco

4.2%

1.8%

970,166

0.1%

1-12

Coffee

17.9%

0.6%

1,943,888

0.1%

1-13

Tea

11.0%

9.6%

600,524

0.0%

1-14

Clove

5.0%

5.3%

1,553,382

0.1%

1-15

Nutmeg

1-16

other spices 16.7%

6.6%

8,628,666

0.6%

9.4%

2.6%

10,813,696

0.7%

1-17

Other crops

1-18

Livestock

1-19

Slaughtering

10.9%

9.1%

26,724,474

1.7%

1-20

Poultry and its products

11.1%

4.9%

35,732,657

2.3%

1-21

Wood/Logging

14.3%

1.4%

17,340,028

1.1%

1-22

Other forest products

3.6%

0.3%

8,875,750

0.6%

1-23

Fishing

19.0%

13.0%

38,880,989

2.5%

Sea fishing

22.0%

14.0%

22,138,438

1.4%

Inland water fishing Drying and salting of fish

5.3%

3.1%

5,648,732

0.4%

19.8%

15.9%

11,093,820

0.7%

2-24

Coal mining and metal ore mining

2.0%

0.0%

51,377,070

3.3%

2-25

Crude oil and gas mining

0.0%

0.0%

129,638,467

8.3%

2-26

Other mining

16.1%

0.2%

15,799,613

1.0%

3-27

Processing and preserving food

19.2%

11.2%

41,969,313

2.7%

3-28

Vegetable oil

12.8%

3.6%

48,416,945

3.1%

270

| Accounting for Services

2000 1975 i-o Code

Commodity

Wholesale Retail trade trade

3-29

Milling and polishing of rice

11.7%

3-30

Other cereal milling

3-31

Sugar industry

3-32

Manufacture of other food products

3-33 3-34 3-35 3-36

Output

Output as % of total

million of Rp 3.5%

65,671,746

4.2%

14.4%

8.3%

11,776,009

0.8%

7.6%

6.5%

7,388,986

0.5%

7.8%

9.1%

83,972,019

5.4%

Manufacture of beverages

10.6%

14.7%

7,568,598

0.5%

Manufacture of cigarettes

10.5%

4.0%

35,837,164

2.3%

Spinning industry

3.6%

2.4%

29,500,124

1.9%

Manufacture of textile, leather and clothing

7.8%

5.9%

101,911,975

6.5%

Manufacture of made up textile goods except wearing apparel

2.9%

2.9%

3,232,462

0.2%

Wearing apparel

9.6%

6.5%

29,707,788

1.9%

Manufacture of footwear and leather products

11.9%

10.1%

15,640,346

1.0%

3-37

Manufacture of wood and wooden products

12.9%

5.9%

56,413,812

3.6%

3-38

Manufacture of paper and printing

7.0%

2.7%

55,989,500

3.6%

Manufacture of paper and cardboard

6.1%

1.3%

33,511,472

2.2%

Manufacture of paper and cardboard products

7.7%

6.3%

8,850,620

0.6% 0.9%

Printing and publishing

8.7%

3.6%

13,627,408

3-39

Manufacture of fertilizers

3.1%

3.5%

7,141,254

0.5%

3-40

Chemical industry

6.6%

4.2%

99,724,451

6.4%

Manufacture of drugs and medicine

1.1%

4.4%

9,816,743

0.6%

Manufacture of cosmetics

11.8%

15.5%

3,999,697

0.3%

Manufacture of plastic goods

6.8%

4.0%

31,041,928

2.0%

3-41

Manufacture of petroleum

2.6%

1.1%

110,549,652

7.1%

3-42

Manufacture of rubber products

6.5%

3.6%

26,390,348

1.7%

3-43

Manufacture of ceramic and earthenware

6.8%

5.8%

16,057,561

1.0%

3-44

Cement industry

20.6%

39.3%

7,763,818

0.5%

3-45

Manufacture of basic iron and steel

3.6%

0.0%

20,117,948

1.3%

3-46

Manufacture of non ferrous basic metal

6.7%

0.0%

13,611,665

0.9%

3-47

Manufacture of metal products

4.7%

2.0%

27,529,413

1.8%

3-48

Manufacture of machinery and equipment

9.6%

5.1%

94,102,803

6.0%

3-49

Manufacture of transport equipment

16.4%

1.2%

59,205,120

3.8%

3-50

Other manufactures

13.7%

10.4%

23,841,034

1.5%

All agricultural products

10.5%

6.7%

307,436,021

19.7%

All manufacturing products

7.8%

4.1%

1,249,266,409

80.3%

Total

8.4%

4.6%

1,556,702,430

100%

271

| Appendix 2

The conclusion is that over time trade margins do not seem to fluctuate too much. Therefore I have chosen to use fixed margins of 12.5 per cent for agricultural goods, 11.5 per cent for manufactured goods, 20 per cent for imports and 15 per cent for exports. These percentages are mainly based on estimates from the i-o tables, and seem in line with other sources. Furthermore, I assume that in 1900 50 per cent of total agricultural output is for own consumption falling to 10 per cent in 2000. For estimates of agricultural and industrial value added I relied on the estimates by Van der Eng (2002). These estimates, however, are in constant prices and therefore were first transformed in current price estimates using a cpi. Then from these value added estimates output was calculated by dividing value added by a value added-output ratio for which the average ratio of the i-o tables from 1975-2000 was taken.



Notes for table A2.3: (1) = Agricultural value added in constant 1983 prices (billion fl/Rp) (Van der Eng 2002) (2) = Industrial value added in constant 1983 prices (billion fl/Rp) (Van der Eng 2002) (3) = Agricultural value added in current prices (million fl/Rp) = ((1) * (10))/100 (4) = Industrial value added in current prices (million fl/Rp) = ((2) * (10))/100 (5) = Output in agriculture in current prices = (3) / Value added-output ratio = (3) * 0.77 0.77 is the average value added output ratio in the i-o tables from 1975 to 2000. (6) = Output in industry in current prices = (4) / Value added-output ratio = (3) * 0.48 0.48 is the average value added output ratio in the i-o tables from 1975 to 2000 (7) = Import (in million fl/Rp) (8) = Export (in million fl/Rp) (9) = cpi (1993 = 100) (10) = cpi (1983=100) (11) = Value added in current prices (million fl/Rp) = (5) * 12.5% * # + (6) * 11.5% + (7) * 20% + (8) * 15 % (#: assumption that in 1900 50 per cent of agricul tural output is for self consumption falling to 10 per cent in 2000). (12) = Value added in constant 1993 prices (million fl/Rp) = (11) / (9)* 100

272

| Accounting for Services

Table A2.3 Value added in trade sector, 1900-2000 (1)

(2)

(3)

(4)

(5)

1900

3,715

1,392

773

290

1,004

(6) 603

1901

3,686

1,314

951

339

1,235

706

1902

3,564

1,296

852

310

1,106

645

1903

3,769

1,385

942

346

1,224

721

1904

3,839

1,324

860

297

1,117

618

1905

3,881

1,269

838

274

1,089

571

1906

4,060

1,281

930

293

1,207

611

1907

4,113

1,348

1,065

349

1,383

727

1908

4,037

1,372

1,102

375

1,431

780

1909

4,283

1,373

1,096

351

1,424

732

1910

4,523

1,498

1,158

383

1,504

799

1911

4,701

1,656

1,326

467

1,722

973

1912

4,697

1,746

1,527

567

1,983

1,182

1913

4,807

1,898

1,428

564

1,854

1,174

1914

4,889

1,752

1,408

505

1,829

1,051

1915

4,995

1,709

1,409

482

1,829

1,004

1916

4,931

1,860

1,499

565

1,947

1,178

1917

5,070

1,719

1,648

559

2,140

1,164

1918

5,283

1,720

2,198

716

2,854

1,491

1919

5,442

1,849

2,269

771

2,947

1,606

1920

5,137

1,897

3,483

1,286

4,523

2,680

1921

4,969

1,892

2,827

1,077

3,672

2,243

1922

5,347

1,931

2,647

956

3,437

1,991

1923

5,394

2,034

2,390

901

3,103

1,877

1924

5,698

2,084

2,325

850

3,019

1,771

1925

5,761

2,131

2,241

829

2,910

1,727

1926

6,064

2,342

2,353

909

3,056

1,893

1927

6,418

2,440

2,407

915

3,126

1,906

1928

6,520

2,557

2,399

941

3,116

1,960

1929

6,294

2,774

2,304

1,015

2,992

2,115

1930

6,528

2,821

2,330

1,007

3,027

2,098

1931

6,396

2,361

2,040

753

2,650

1,569

1932

6,419

2,231

1,714

596

2,226

1,241

1933

6,309

2,256

1,489

532

1,934

1,109

1934

6,025

2,551

1,307

554

1,698

1,153

1935

6,345

2,850

1,320

593

1,714

1,235

1936

6,655

3,284

1,338

660

1,737

1,375

1937

7,099

3,669

1,519

785

1,973

1,636

1938

7,101

3,795

1,562

835

2,029

1,739

1939

7,247

3,985

2,073

1,140

2,692

2,374

1940

7,563

4,478

1,739

1,030

2,259

2,146

273

| Appendix 2

(1)

(2)

(3)

7,869

4,732

1,999

(4)

(5)

(6)

1,202

2,596

2,504

1949

6,272

2,873

1950

6,410

2,953

17,449

7,993

22,661

16,651

20,897

9,627

27,138

20,056

1951

6,858

3,406

37,280

18,515

48,416

38,573

1952

6,901

3,328

39,584

19,089

51,408

39,770

1953 1954

7,054

3,428

42,994

20,894

55,837

43,528

7,724

3,607

50,028

23,363

64,972

48,672

1955

7,473

4,144

64,096

35,543

83,241

74,048

1956

7,549

3,883

74,146

38,139

96,294

79,456

1957

7,558

4,469

81,483

48,180

105,822

100,376

1958

7,835

3,412

122,986

53,558

159,722

111,580

1959

8,222

3,315

156,037

62,912

202,646

131,067

1960

8,406

3,294

196,499

77,001

255,193

160,418

1961

8,523

3,679

272,736

117,728

354,203

245,267

1962

9,097

3,538

809,633

314,882

1,051,471

656,004

1963

8,474

3,274

1,686,326

651,526

2,190,034

1,357,346

1964

9,046

3,270

3,817,412

1,379,940

4,957,678

2,874,875

1965

9,029

3,322

15,421,532

5,673,976

20,027,964

11,820,783

1966

9,448

3,407

188,960

68,140

245,403

141,958

1967

8,811

3,409

466,983

180,677

606,471

376,410

1968

9,589

3,830

1,141,091

455,770

1,481,936

949,521

1969

9,921

4,549

1,379,019

632,311

1,790,934

1,317,315

1970

10,728

5,133

1,684,296

805,881

2,187,397

1,678,919

1971

10,767

5,868

1,755,021

956,484

2,279,248

1,992,675

1972

11,015

6,639

1,916,610

1,155,186

2,489,104

2,406,638

1973

12,201

7,333

2,781,828

1,671,924

3,612,764

3,483,175

1941 1942 1943 1944 1945 1946 1947 1948

1974

12,354

8,256

3,965,634

2,650,176

5,150,174

5,521,200

1975

12,273

8,670

4,688,286

3,311,940

6,088,683

6,899,875

1976

12,971

9,104

5,940,718

4,169,632

7,715,218

8,686,733

1977

13,213

10,149

6,712,204

5,155,692

8,717,148

10,741,025

1978

14,301

10,853

7,851,249

5,958,297

10,196,427

12,413,119

1979

14,669

12,024

9,696,209

7,947,864

12,592,479

16,558,050

1980

15,877

13,722

12,114,151

10,469,886

15,732,664

21,812,263

274

| Accounting for Services

(1)

(2)

(3)

(4)

(5)

(6)

1981

16,803

15,094

13,929,687

12,512,926

18,090,503

26,068,596

1982

16,629

15,593

15,015,987

14,080,479

19,501,282

29,334,331

1983

17,696

15,812

17,696,000

15,812,000

22,981,818

32,941,667

1984

18,513

17,730

20,447,194

19,582,388

26,554,797

40,796,641

1985

19,300

19,267

22,308,623

22,270,479

28,972,238

46,396,831

1986

19,799

20,789

24,231,612

25,443,254

31,469,626

53,006,778

1987

20,224

22,679

27,032,411

30,313,887

35,107,027

63,153,931

1988

21,167

25,192

30,574,555

36,388,444

39,707,215

75,809,258

1989

22,267

28,227

34,231,358

43,393,746

44,456,309

90,403,637

1990

23,028

32,062

38,189,054

53,170,812

49,596,174

110,772,525

1991

23,756

35,983

43,060,212

65,222,917

55,922,353

135,881,076

1992

25,331

40,064

49,359,743

78,068,325

64,103,562

162,642,343

1993

25,792

44,963

55,176,915

96,189,501

71,658,331

200,394,794

1994

25,968

50,825

60,247,482

117,917,371

78,243,483

245,661,189

1995

27,184

57,074

69,064,490

145,003,926

89,694,143

302,091,512

1996

28,062

64,058

76,879,641

175,495,547

99,843,690

365,615,723

1997

28,149

67,921

82,252,964

198,468,990

106,822,032

413,477,063

1998

28,130

56,756

129,733,879

261,755,281

168,485,557

545,323,502

1999 2000 (7)

(8)

(9)

(10)

(11)

1900

195.9

255.2

0.010

0.208

209.55

2,155,346

(12)

1901

229.2

265.5

0.012

0.258

244.69

2,028,947

1902

203.0

274.4

0.011

0.239

226.22

2,024,899

1903

187.1

295.6

0.012

0.250

243.03

2,079,561

1904

207.8

309.1

0.010

0.224

231.01

2,206,309

1905

218.8

330.9

0.010

0.216

229.83

2,276,203

1906

234.9

330.9

0.011

0.229

245.98

2,298,105

1907

247.3

364.6

0.012

0.259

279.10

2,305,244

1908

280.6

470.7

0.013

0.273

311.64

2,442,106

1909

281.6

455.1

0.012

0.256

304.20

2,541,963

1910

345.3

452.6

0.012

0.256

330.33

2,760,307

1911

400.5

521.6

0.013

0.282

387.30

2,938,088

1912

434.8

596.7

0.015

0.325

448.22

2,950,317

1913

493.3

683.9

0.014

0.297

464.23

3,343,900

1914

429.5

684.7

0.013

0.288

436.58

3,242,978

1915

399.4

770.9

0.013

0.282

439.03

3,330,566 3,463,549

1916

446.3

868.1

0.014

0.304

492.19

1917

496.7

793.2

0.015

0.325

504.10

3,318,182

1918

567.5

679.8

0.019

0.416

590.97

3,039,046

1919

793.2

2,167.5

0.019

0.417

880.69

4,518,253

275

| Appendix 2

(7)

(8)

(9)

(10)

1920

1,310.8

2,238.9

0.032

0.678

1921

1,244.4

1,195.9

0.027

1922

842.3

1,153.0

0.023

1923

651.4

1,380.5

1924

706.5

1,557.3

1925

862.6

1926

924.1

1927

927.1

1928

1,030.2

1929 1930

(11)

(12)

1,234.07

3,893,937

0.569

954.24

3,587,747

0.495

823.06

3,557,052

0.021

0.443

782.88

3,780,577

0.019

0.408

803.54

4,213,370

1,813.4

0.018

0.389

861.42

4,737,228

1,600.5

0.018

0.388

873.30

4,815,095

1,656.2

0.018

0.375

890.62

5,080,912

1,589.9

0.017

0.368

908.35

5,280,323

1,166.0

1,487.8

0.017

0.366

929.98

5,435,894

922.3

1,200.0

0.017

0.357

840.31

5,035,577

1931

609.9

822.1

0.015

0.319

632.42

4,241,094

1932

409.9

615.1

0.012

0.267

491.69

3,939,522

1933

331.4

527.0

0.011

0.236

425.65

3,858,493

1934

291.6

564.5

0.010

0.217

410.61

4,048,214

1935

277.9

505.3

0.010

0.208

410.52

4,222,444

1936

287.3

630.7

0.009

0.201

450.06

4,789,851

1937

516.0

1,012.3

0.010

0.214

602.97

5,999,731

1938

497.4

714.4

0.010

0.220

572.02

5,562,689

1939

529.9

787.1

0.013

0.286

717.82

5,369,172

1940

437.6

940.3

0.011

0.230

661.70

6,154,726

1941

475.6

1,086.7

0.012

0.254

761.53

6,414,127

1942

0.017

1943

0.016

1944

0.024

1945

0.033

1946

0.058

1947

0.082

1948

0.106

1949

0.130

2.782

3,886

2,988,560

1950

1,728

3,047

0.152

3.260

5,484

3,598,548

1951

3,383

4,918

0.254

5.436

10,111

3,979,070

1952

10,855

10,664

0.268

5.736

12,894

4,808,864

1953

8,739

9,610

0.285

6.095

13,165

4,620,655

1954

7,216

9,928

0.303

6.477

14,345

4,737,922

1955

6,888

10,618

0.401

8.577

18,978

4,733,429

1956

9,807

10,209

0.459

9.822

21,345

4,649,049

1957

9,160

11,052

0.504

10.781

24,663

4,893,898

1958

5,851

8,612

0.734

15.697

29,908

4,076,109

1959

5,227

9,944

0.887

18.978

36,253

4,086,644

276

| Accounting for Services

  (7)

  (8)

(9)

(10)

1960

49,000

52,000

1.09

23.376

1961

64,000

45,000

1.50

1962

72,000

69,000

4.16

1963

300,000

291,000

9.30

1964

932,000

874,000

1965

1,360,000

1966

69,800

(11)

(12)

59,653

5,459,304

32

80,697

5,394,823

89

198,503

4,771,441

199

465,608

5,005,410

19.73

422

1,116,611

5,660,593

1,251,000

79.84

1,708

3,721,697

4,661,498

40,300

0.93

20

59,766

6,392,894

1967

143,000

74,400

2.48

53

141,268

5,702,190

1968

326,600

227,900

5.56

119

351,707

6,322,752

1969

402,600

245,200

6.50

139

442,512

6,810,553

1970

529,000

428,800

7.34

157

576,467

7,855,017

1971

607,000

507,000

7.62

163

649,974

8,530,623

1972

766,000

729,000

8.13

174

784,490

9,645,185

1973

1,315,600

1,189,000

10.66

228

1,199,699

11,256,665

1974

2,293,700

3,105,100

15.00

321

2,071,885

13,808,073

1975

2,778,000

2,850,600

17.86

382

2,385,544

13,359,692

1976

3,222,100

3,429,600

21.41

458

2,933,214

13,700,949

1977

3,817,200

4,465,800

23.75

508

3,548,960

14,945,477

1978

4,558,800

4,787,800

25.66

549

4,092,376

15,946,875

1979

7,554,700

9,628,700

30.90

661

6,143,854

19,884,368

1980

10,079,800

13,849,200

35.67

763

8,214,348

23,031,433

1981

13,802,200

14,927,900

38.75

829

9,860,835

25,446,706

1982

15,681,700

13,345,200

42.21

903

10,529,951

24,946,579

1983

19,625,900

19,847,000

46.74

1,000

13,080,631

27,983,439

1984

19,844,700

22,999,300

51.63

1,104

14,885,425

28,832,130

1985

19,835,200

21,533,900

54.03

1,156

15,574,846

28,825,754

1986

21,036,210

20,009,900

57.21

1,224

16,624,552

29,059,176

1987

27,955,800

29,874,300

62.48

1,337

21,056,352

33,700,613

1988

31,171,400

34,665,600

67.52

1,444

24,381,003

36,109,637

1989

38,601,000

42,505,000

71.86

1,537

29,249,193

40,702,761

1990

50,945,700

51,953,100

77.52

1,658

36,052,534

46,507,769

1991

61,375,700

62,263,800

84.73

1,813

43,280,648

51,081,460

1992

70,336,600

76,384,400

91.09

1,949

51,184,086

56,193,592

1993

78,383,000

85,296,200

100

2,139

59,327,189

59,327,189

1994

89,780,000

94,537,400

108.45

2,320

68,955,308

63,582,807

1995

125,656,902

119,592,500

118.76

2,541

87,677,135

73,827,352

1996

140,811,996

137,533,300

128.06

2,740

101,870,930

79,548,123

1997

176,599,794

174,871,305

136.59

2,922

120,957,762

88,555,909

1998

413,058,111

506,244,809

215.58

4,612

116,688,500

54,127,352

1999

301,654,008

390,560,100

259.77

5,557

140,588,700

54,120,986

2000

423,317,900

542,992,400

269.38

5,763

155,184,400

57,608,022

277

| Appendix 2

278

| Accounting for Services

Appendix 3

National Accounting for Government Services

The conventional practice in national income estimation is to evaluate government services – other than those of government enterprises – in terms of expenditures made for them. Government activities can best be split into administrative and commercial activities. The former are valued at the cost of these services, that is, as equivalent to the wages and salaries paid by government administrative departments and the latter on the same basis as other productive enterprises. The government sector includes public administration under government services. Railways, post and telegraph, opium production, salt production, etc. are included under commercial activities. These major commercial activities are treated separately.

A3.1

Government administration in Indonesia’s National Accounts since independence Figures about wages and salaries were taken directly from the different ministries in the period 1951-1954. These are given in table A3.1.

Table A3.1

Government administration and defence, 1951-1954 (x1,000 rupiah) 1951

Central government and defence

1952

1953

1954

3,110,698

4,054,956

3,711,056

4,382,004

Local government

828,100

1,249,800

2,181,451

2,687,272

Government income from property excluding estates

246,100

581,300

368,971

418,667

Source: Muljatno 1960: 192-193.

In the national accounts estimates of the 1960s production accounts for the central government were derived from actual routine budget expenditure statements of the Budget Directorate of the Department of Finance. Fixed capital consumption was calculated as 5 per cent of net value added, i.e. compensation of employees. For local government, compensation of employees was calculated as the product of average annual income per employee and employment figures. Employment estimates were based on information from the Department of Interior and on the Census of Civil Servants.

279

| Appendix 3

For the 1980s and 1990s the contribution of this sector to gross domestic product consisted of routine wages and salaries of central and local government employees, the wage component of the development budget, and 5 per cent depreciation. The estimation was based on realised government expenditure gathered from the Ministry of Finance and bps. Van der Eng (1996, 2002) used gross public expenditure, deflated with the index of retail prices as an indicator. He argued that using employment in this sector as an indicator, assuming that productivity remained unchanged, may be a better option. But, apart from the fact that there are no consistent data on employment in the public sector, the impression exists that during the 1950s and 1960s the payroll of the public service expanded significantly, although many civil servants spent part of their ‘official’ working hours in second jobs in order to augment their ‘official’ income. Official estimates of the contribution of government administration and defence to total gpd are given in table A3.2. Table A3.3 presents the estimates from the Input-Output tables. Comparing tables A32 and A3.3, we see rather large differences between the national account estimates on the one hand and the ones based on i-o tables on the other. This is caused by the fact that in the national account estimates health and educational services by the government are included under government administration and defence, whereas in the i-o tables these are classified as educational and health services. Table A3.4 and A3.5 show the government budget between 1969 and 2000. For the period 1950-1968 only aggregated information on the government budget was found. Using the rather stable ratio of personnel expenditures as percentage of total routine expenditures, which averages 39.3 per cent with a standard deviation of 6.4 per cent between 1969 and 2000 (table A3.5, column (7)), it is possible to make a rough estimate for the contribution of the government sector in this earlier period.

280

| Accounting for Services

Table A3.2 Government administration and defence in Indonesia’s National Accounts, 1958-2000



Year

Billion Rp

1958





15.1

Year

Billion Rp

1980

3,142.3

1959

15.1

1981

3,904.7

1960

17.6

1982

4,428.7

1961

26.4

1983

5,711.5

1962

33.8

1984

6,469.9

1963

120.5

1985

7,925.1

1964

195.6

1986

8,307.3

1965

845.5

1987

8,911.8

1966

16.2

1988

9,446.2

1967

40.6

1989

11,174.2

1968

88.0

1990

12,801.4

1969

136.0

1991

14,621.6

1970

183.0

1992

17,309.4

1971

214.0

1993

22,458.0

1972

290.0

1994

22,754.9

1973

405.0

1995

26,555.2

1974

585.0

1996

29,752.9

1975

864.3

1997

32,127.9

1976

1,074.3

1998

40,641.0

1977

1,394.2

1999

56,745.0

1978

1,685.4

2000

69,460.2

1979

2,199.6

Source: Pendapatan Nasional Indonesia, various issues.

Table A3.3 Government administration and defense according to Indonesia’s i-o tables (in millions Rp) 1971 Salaries and wages (1) Depreciation (2) Value added (3) (2)/(1) * 100%

1975

1985

177,003

669,779

2,344,690

6,071,428

8,850

35,252

123,405

303,571

185,853

705,030

2,468,094

5.0%

5.3%

5.3%

Source: Input-output tables, various issues.

281

1980

| Appendix 3

1990

9,690,485 18,829,796 484,524

6,374,999 10,175,009 5.0%

1995

5.0%

954,595

2000 42,351,925 2,147,072

19,784,391 44,498,997 5.1%

5.1%

Table A3.4 Government budget: personnel expenditures, 1969/1970-1999/2000 (in billion Rp) Personnel expenditures Rice allowances Salaries and pensions

Food allowances

Other domestic personnel expenditures

Overseas personnel expenditure

1969/1970

Total

103.84

1970/1971

131.43

1971/1972

163.34

1972/1973

200.38

1973/1974

268.86

1974/1975 1975/1976 1976/1977

114.9

424.8

45.7

36.9

14.3

636.6

1977/1978

126.2

672.9

47.8

31.5

14.8

893.2

1978/1979

132.8

760.3

51.3

33.6

23.6

1,001.6

1979/1980

179.9

1,053.9

109.9

47.1

29.1

1,419.9

1980/1981

252.0

1,482.9

193.2

61.2

34.0

2,023.3

1981/1982

253.3

1,660.4

240.5

79.5

43.4

2,277.1

1982/1983

289.9

1,749.0

254.9

78.6

45.7

2,418.1

1983/1984

346.1

1,996.0

261.3

87.6

66.0

2,757.0

1984/1985

407.0

2,206.6

271.4

89.7

72.1

3,046.8

1985/1986

402.0

3,072.6

300.4

161.1

82.2

4,018.3

1986/1987

406

3,330

288

177

110

4,311

1987/1988

451

3,561

299

176

130

4,617

1988/1989

518

3,833

327

185

135

4,998

1989/1990

588

4,826

373

243

171

6,201

1990/1991

640

5,570

382

263

198

7,053

1991/1992

922

6,299

393

279

209

8,102

1992/1993

891

7,595

479

315

274

9,554

1993/1994

834

9,145

493

418

255

11,145

1994/1995

1,038

10,490

801

396

344

13,069

1995/1996

734

11,047

560

370

290

13,001

1996/1997

768

13,002

101

480

103

14,454

1997/1998

788

13,698

1,174

671

938

17,269

1998/1999

1,606

19,089

1,687

1,161

937

24,480

1999/2000

2,004

26,881

2,289

1,438

1,011

33,623

Source: Statistik Indonesia, various issues.



Notes for table A3.5 (1) = (2) = (3) =

282

Total material expenditures Subsidies to autonomous regions a.  Personnel expenditures; b.  Non-personnel expenditures; c.  Total Total interest and debt repayments

| Accounting for Services

(4) = (5) = (6) = (7) = Table A3.5

Others Total routine expenditures Development expenditures Personnel expenditures as percentage of total routine expenditures

Government budget: other expenditures, 1969/1970-1999/2000 (in billion Rp) (1)

1969/1970

50.29

1970/1971

62.57

1971/1972

67.12

1972/1973

95.42

1973/1974

110.14

(2)a

(2)b

(2)c

(3)

(5)

(6)

(7)

44.12

14.44

(4) 3.85

216.5

334.67

48.0%

56.16

25.60

12.41

288.2

457.93

45.6%

66.80

46.60

5.23

349.1

544.99

46.8%

83.90

53.40

5.00

438.1

736.32

45.7%

108.60

70.70

155.00

713.3

1,164.2

37.7%

1974/1975 1975/1976 1976/1977

339.7

313.0

189.5

150.9

1,629.7

2,054.5

39.1%

1977/1978

376.8

478.4

228.3

172.2

2,148.9

2,156.8

41.6%

1978/1979

419.5

522.3

534.5

265.8

2,743.7

2,555.6

36.5%

1979/1980

569.0

669.9

684.1

718.9

4,061.8

4,014.2

35.0%

1980/1981

670.6

976.1

784.8

1,345.2

5,800.0

5,916.1

34.9%

1981/1982

922.7

1,209.1

931.1

1.637,6

6,977.6

6,940.1

32.6%

1982/1983

1,041.2

1,315.4

1,224.5

997.1

6,996.3

7,359.6

34.6%

1983/1984

1,057.1

1,547.0

2,102.6

948.1

8,411.8

9,899.2

32.8%

1984/1985

1,182.8

1,888.3

2,776.5

539.5

9,433.9

9,951.9

1985/1986

1,367.1

2.247,6

241,4

2.489,0

3,323.1

754.0

11,952

1986/1987

1,367

2,410

239

2,649

5,058

174

13,559

32.3% 52.4%

8,332

49.6% 41.2%

1987/1988

1,329

2,592

224

2,816

8,205

515

17,482

9,477

1988/1989

1,492

2,779

259

3,038

10,940

271

20,739

12,251

37.5%

1989/1990

1,702

3,338

228

3,566

11,939

923

24,331

13,834

39.2%

1990/1991

1,830

3,961

276

4,237

13,395

3,483

29,998

16,656

36.7%

1991/1992

2,373

4,520

314

4,834

13,434

1,484

30,227

21,765

41.8%

1992/1993

2,928

4,996

387

5,383

14,524

1,216

33,605

26,906

43.3%

1993/1994

3,032

6,575

334

6,909

17,163

2,041

40,290

28,428

44.0%

1994/1995

4,296

6,756

432

7,188

18,422

204

43,179

29,164

45.9%

1995/1996

5,175

7,807

420

8,227

22,109

1,923

50,435

28,781

41.3%

1996/1997

8,109

8,874

484

9,358

27,491

3,149

62,561

35,952

37.3%

1997/1998

8,999

10,520

541

11,061

31,112

21,169

89,610

38,359

31.0%

1998/1999

11,058

13,512

682

14,194

55,798

42,187

147,717

67,869

25.7%

1999/2000

10,862

18,379

791

19,170

39,994

63,232

166,881

78,311

31.2%

Source: Statistik Indonesia, various issues.

283

| Appendix 3

Table A3.6 Government budget, 1950-1968 (in million of Rp)



Receipts





A3.2

Expenditures

Balance

1950

6,990.2

8,726.3

-1,736.1

1951

11,810.9

10,625.1

1,185.8

1952

12,246.8

5,025.4

7,221.4

1953

13,590.5

15,658.5

-2,068.0

1954

11,788.7

13,390.7

-1,602.0

1955

14,226.5

16,316.5

-2,090.0

1956

18,451.5

20,015.0

-1,563.5

1957

20,570.7

25,610.2

-5,039.5

1958

23,272.7

35,313.0

-12,040.3

1959

30,570.9

44,350.4

-13,779.5

1960

53,648

60,544

-6,896

1961

62,218

88,522

-26,304

1962

74,020

122,078

-48,058

1963

162,130

329,800

-167,670

1964

283,386

681,330

-397,944

1965

960,766

2,526,320

-1.565,554

1966

13,142

29,433

-16,291

1967

84,900

87,555

-2,655

1968

185,283

185,283

0

From 1966 on calculated in million of new Rp. (1000 Rp old = 1 Rp new). Source: Statistical Pocketbook of Indonesia, 1967.

Government administration in the colonial period For the colonial period a few useful sources for the estimation of the government sector are available. To begin with the number of people employed by the government is known for 1930 from the census. These results can be found in table A3.7. Moreover the Colonial Reports give the number of government employees as of 1 March 1932. A direct estimate of the payroll paid by the government can be made for one single year, namely 1926. For that year the total wages and salaries paid to all employees have been published (Indisch Verslag 1929: 430). Unfortunately this has not been published for other years. Additionally, this figure seems to under-estimate the total number of persons employed, because it is unlikely that the number of civil servants increased from 149,783 in 1926 to 516,176 in 1930. Probably, people working in the desa are not accounted for in the figures published in the Colonial Report.

284

| Accounting for Services

Table A3.7 Number of civil servants, 1930 Natives Desa Local government

Europeans

Chinese

Others

Total

274,802

14

53

22

274,891

44,665

1,833

360

174

47,032

Autonomous regions

23,141

175

111

48

23,475

Central Government

69,939

8,235

2,360

200

80,734

Police

34,340

1,510

92

41

35,983

Army

37,704

8,015

21

5

45,745

7,320

949

42

5

8,316

491,911

20,731

3,039

495

516,176

Marine Total government Source: Volkstelling 1930.

Table A3.8 Government payroll, 1926 Number of civil servants 1

Council of the Netherlands-Indies

2

Council of the chief of departments

Salaries per year (x fl 1,000)

30

45.1

2

24.6

2a

Gov. Delegate for general affairs

1

18.0

3

General Secretariat

209

484.0

4

General Audit Office

361

687.0

5

Salary Office

19

75.6

6

Department of Justice

6,602

10,609.6

7

Department of Finance

14,741

16,190.0

8

Department of Civil Service

38,938

34,831.6

9

Department of Education and Culture

15,310

32,494.1

10

Department of Agriculture, Industries and Commerce

3,809

7,542.5

11

Department of Public Works

7,568

8,236.6

12

Department of State Enterprises

57,737

42,816.1

13

Department of War

973

1,900.4

14

Department of Navy

3,469

3,644.1

15

Local and self-government Total

Source: Indisch Verslag 1929: 430.

285

| Appendix 3

14

201.6

149,783

159,800.9

Table A3.9 Government finance, 1867-1939 Receipts Ordinary 1867

Extraordinary

137,538

Expenditures Total

Ordinary

137,538

95,555

Extraordinary

Total 110,411

1870

123,525

123,525

105,296

1880

146,838

146,838

135,103

11,833

146,936

115,765

1890

136,287

136,287

119,854

7,883

127,737

1900

151,809

151,809

137,433

8,682

146,115

155,646

155,646

157,308

8,915

166,223

221,516

221,516

213,670

17,757

231,427

1912

270,550

270,550

247,795

21,230

269,025

1913

311,354

311,354

287,835

39,236

327,071 343,943

1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911

1914

281,726

281,726

295,323

48,620

1915

309,734

309,734

306,335

41,552

347,887

1916

343,127

343,127

331,575

41,474

373,049 420,403

1917

360,139

360,139

371,473

48,930

1918

398,872

852

399,724

442,287

70,286

512,573

1919

535,563

7,534

543,097

623,613

97,573

721,186

1920

756,101

261

756,362

921,740

138,695

1,060,435

1921

791,267

496

791,763

866,086

189,930

1,056,016

1922

751,930

648

752,578

759,230

92,028

851,258

1923

650,052

396

650,448

645,978

64,815

710,793

1924

710,355

7,584

717,939

617,644

48,494

666,138

1925

752,095

1,754

753,849

643,592

39,262

682,854 751,069

1926

805,220

2,633

807,853

704,993

46,076

1927

768,709

10,343

779,052

722,820

53,038

775,858

1928

826,158

9,759

835,917

784,848

60,917

845,765

1929

840,904

7,625

848,529

832,548

72,045

904,593

1930

740,393

15,159

755,552

825,388

68,152

893,540

1931

634,369

17,640

652,009

736,285

30,777

767,062

1932

465,361

35,768

501,129

606,989

24,151

631,140

1933

404,796

55,840

460,636

526,236

27,826

554,062

286

| Accounting for Services

Receipts

Expenditures

Ordinary

Extraordinary

Total

Ordinary

Extraordinary

Total

1934

406,320

48,047

454,367

488,906

19,550

508,456

1935

432,184

34,667

466,851

465,663

14,769

480,432

1936

469,006

66,155

535,161

490,490

20,490

510,980

1937

471,392

54,270

525,662

470,896

71,682

542,578

1938

511,445

39,388

550,833

510,960

59,986

570,946

vi

1939 Source: Indisch Verslag, various issues, cks (1939).

Table A3.10 Government budget, 1900-1907 i

ii

iii

iv

v

1900

1,107,680

5,330,193

12,823,727

29,558,353

16,625,491

1901

1,107,420

5,362,231

10,297,405

30,281,315

17,278,249

1902

1,123,890

5,541,384

11,649,090

30,068,058

18,003,540

1903

1,124,140

5,630,611

13,009,546

30,772,778

19,810,608

1904

1,123,490

5,955,601

13,435,890

30,101,519

20,152,240

1905

1,122,440

5,983,198

13,270,492

22,292,955

20,795,790

6,992,358

1906

1,104,300

5,838,221

15,410,604

23,045,786

19,601,294

6,381,702

1907

1,111,240

5,872,796

16,336,649

23,433,286

23,027,364

7,187,541

vii

viii

ix

x

Total

1900

21,889,118

25,253,903

4,574,458

117,162,923

1901

22,669,461

27,268,621

4,785,753

119,050,455

1902

25,723,182

27,994,626

5,134,330

125,238,100

1903

26,721,799

28,150,426

5,220,117

130,440,025

1904

28,216,572

28,287,344

5,076,679

132,349,335

1905

25,569,655

28,025,980

5,152,044

1906

26,192,727

26,273,912

4,834,830

1,138,710

129,822,086

1907

27,170,840

26,606,911

4,970,851

1,292,230

137,009,708

i = Government and High Colleges ii = Department of Justice iii = Department of Finance iv = Department of Civil Services v = Department of Education, Cults and Industry

287

| Appendix 3

129,204,912

vi = Department of Agriculture vii = Department of Civil Public Works viii = Department of War ix = Navy Department x = Local government

Table A3.11 Government budget, 1908-1940 ii

iii

iv

v

vi

1908

1,110,980

i

6,002,615

17,730,065

24,091,032

10,716,134

6,645,104

1909

1,148,840

6,102,626

21,188,674

24,528,562

11,756,634

7,067,076

1910

1,166,920

6,505,504

23,992,872

24,897,460

12,890,728

7,391,301

1911

1,444,480

7,046,986

30,076,777

26,555,959

13,921,006

7,991,465

1912

1,307,640

7,682,807

29,844,653

28,590,155

16,260,293

8,644,705

1913

1,371,170

8,062,705

29,585,420

32,091,121

16,981,653

10,458,668

1914

1,324,930

9,084,711

31,286,037

35,550,097

18,924,656

11,684,330

1915

1,319,029

9,522,594

29,698,700

40,001,850

20,917,487

12,905,184

1916

1,320,804

9,854,301

30,760,807

37,182,005

27,603,334

14,291,610

1917

1,403,074

11,007,972

32,185,233

41,546,031

29,252,121

14,749,292

1918

1,708,379

11,537,739

33,190,046

41,759,959

32,053,540

16,395,573

1919

1,644,521

12,774,770

34,654,777

47,007,875

34,933,974

19,771,855

1920

1,835,152

13,490,692

43,737,311

55,677,457

39,502,101

20,335,434

1921

2,089,376

15,498,421

52,774,383

74,677,840

47,830,680

24,588,399

1922

2,187,669

17,020,922

109,763,587

77,407,440

52,161,488

28,226,385

1923

2,124,638

15,357,588

101,729,730

57,450,394

59,008,667

20,667,580

1924

2,246,150

17,040,799

89,549,092

58,179,240

56,278,470

17,869,507 18,777,201

1925

2,276,809

17,165,583

83,476,261

72,313,883

58,712,035

1926

2,689,903

20,535,396

80,460,180

77,989,793

65,698,280

21,215,120

1927

3,172,531

21,454,875

84,333,030

89,399,212

69,900,855

24,124,971

1928

3,494,882

24,576,825

64,429,167

96,778,378

75,196,520

25,979,347

1929

2,947,114

25,375,631

90,322,996

102,900,983

75,824,400

28,984,169

1930

3,694,968

25,038,884

99,341,279

115,943,331

81,561,057

32,601,911

1931

3,480,392

25,416,877

81,362,155

116,786,211

87,211,800

31,386,820

1932

3,469,923

13,794,785

68,274,423

78,113,389

37,031,250

1933

2,956,898

19,990,021

75,215,410

63,964,792

33,255,511 18,711,352

1934

2,712,205

16,068,881

74,446,396

75,819,036

62,575,730

17,506,355

1935

2,060,278

14,109,488

69,213,656

70,104,200

47,824,881

21,536,390

1936

1,948,797

13,694,671

35,774,065

57,659,855

45,320,355

14,152,312

1937

1,898,562

13,951,856

35,502,467

47,428,295

43,773,198

13,702,543

1938

1,956,724

15,480,197

55,120,563

77,229,740

38,721,185

14,789,826

1939

2,247,183

17,783,231

43,900,360

93,630,518

45,716,005

16,017,640

2,462,478

17,976,241

41,853,060

121,283,535

49,647,270

20,556,275

1940 Source:

Begroting Nederlandsch-Indië. Appendix to the Handelingen van de Tweede Kamer der Staten Generaal, various issues. i = Government and High Colleges vii = Department of Civil Public Works ii = Department of Justice viii = Department of Government Industries iii = Department of Finance ix = Department of War iv = Department of Civil Services x = Navy Department v = Department of Education and Cults xi = Local government vi = Department of Agriculture, Industry and Commerce a: In 1935 the Department of Civil Public Works was merged with the Department of War.

288

| Accounting for Services

vii

viii

ix

x

xi

1908

25,977,160

19,340,691

26,963,362

4,961,027

4,235,723

1909

27,332,416

19,301,966

27,117,438

5,645,944

4,594,938

1910

16,932,266

37,720,184

27,957,789

6,289,702

4,478,162

1911

22,408,444

45,520,758

29,591,237

8,433,736

4,503,492

1912

30,158,736

54,027,587

29,949,228

11,389,950

5,454,673

1913

32,480,470

55,517,795

31,637,108

11,794,667

5,390,288

1914

37,678,122

64,045,690

32,836,752

13,784,494

5,687,453

1915

42,372,812

72,844,946

34,520,411

14,049,685

7,931,876

1916

39,946,040

70,202,545

32,949,199

15,045,005

10,130,974

1917

47,350,217

78,174,900

33,980,590

17,034,535

11,682,319

1918

51,580,499

85,756,608

37,699,322

18,678,715

12,672,019

1919

60,208,770

100,078,267

52,683,511

20,972,810

14,530,543

1920

70,425,032

117,025,985

55,787,807

22,792,540

16,608,333

1921

100,936,861

162,375,405

65,137,600

31,490,225

19,807,129

1922

106,784,668

181,589,276

73,015,337

30,414,780

22,257,467

1923

81,848,051

168,442,413

66,378,566

30,261,848

20,517,106

1924

60,703,570

151,501,122

61,697,201

28,599,545

18,031,205

1925

49,520,110

139,745,195

57,665,696

27,988,810

1926

45,712,984

138,296,611

63,098,623

30,019,084

1927

51,165,246

136,327,928

66,179,147

33,141,375

1928

58,628,291

137,780,502

71,674,165

34,370,140

1929

60,949,585

141,487,287

75,062,057

38,317,115

1930

60,500,965

143,870,930

76,936,995

39,709,476

1931

58,437,040

143,516,745

76,512,340

34,992,860

1932

49,619,836

73,805,350

77,499,100

40,166,845

1933

26,074,543

70,859,736

64,447,000

19,207,440

1934

17,486,520

50,363,924

58,530,800

23,007,050

1935

51,004,636a

47,823,600

22,032,240

1936

52,397,656

46,563,600

23,476,215 27,400,639

1937

42,773,057

48,333,200

1938

51,049,479

61,209,000

34,658,165

1939

57,504,122

75,467,100

40,874,655

1940

58,383,937

104,952,900

35,359,539

289

| Appendix 3

The available data allow for a consistent estimation of value added in government services. From the budgets the expenditure on personnel is taken and this is augmented with 5 per cent depreciation. The expenditure on personnel was estimated to be, on average, 34.5 per cent of the budget for the period 1900-1940 and 39.3 per cent on average for the period 1950-2000. The results are summarised in appendix table A3.12.



Notes for table A3.12 (1) = (2) = (3) = (4) = (5) =

Routine expenditures (million fl/Rp) Personnel expenditure as % of total routine expenditures Value added in current prices = ((1) * (2)) + ((1) * (2) * 5 % depreciation) cpi (1993 = 100) (Van Leeuwen 2007) Value added in constant prices (million fl/Rp) = (3)/(5) * 100

Table A3.12 Value added by government services, 1900-2000 (1)

(2)

(3)

(4)

(5)

1900

117

42.4

0.010

436,546

1901

119

43.1

0.012

357,590

1902

125

45.4

0.011

406,094

1903

130

47.3

0.012

404,321

1904

132

47.9

0.010

457,888 463,543

1905

129

46.8

0.010

1906

130

47.0

0.011

439,358

1907

137

49.6

0.012

409,930

1908

148

53.5

0.013

419,481

1909

156

56.4

0.012

471,567

1910

170

61.7

0.012

515,270

34.5%

1911

197

71.5

0.013

542,730

1912

223

80.9

0.015

532,472

1913

235

85.3

0.014

614,154

1914

262

94.9

0.013

704,695

1915

286

103.6

0.013

786,183

1916

289

104.8

0.014

737,433

1917

318

115.3

0.015

759,128

1918

343

124.3

0.019

639,020

1919

399

144.6

0.019

742,019

1920

457

165.6

0.032

522,612

1921

597

216.3

0.027

813,390

1922

701

29.5%

253.9

0.023

1,097,183

1923

624

33.3%

226.0

0.021

1,091,209

1924

562

35.6%

203.5

0.019

1,066,925

1925

528

36.6%

191.1

0.018

1,051,135

290

| Accounting for Services

(1)

(2)

(3)

(4)

(5)

1926

546

37.1%

197.7

0.018

1,089,971

1927

579

36.3%

209.8

0.018

1,196,979

1928

593

35.1%

214.8

0.017

1,248,549

1929

642

36.3%

232.6

0.017

1,359,749

1930

679

36.4%

246.0

0.017

1,474,407

1931

659

37.1%

238.8

0.015

1,601,154

1932

475

172.1

0.012

1,378,752

1933

361

130.9

0.011

1,186,852

1934

399

144.4

0.010

1,423,283

1935

346

125.2

0.010

1,288,105

1936

291

105.4

0.009

1,121,859

1937

275

99.5

0.010

990,388

1938

350

126.9

0.010

1,233,720

1939

393

142.4

0.013

1,065,237

1940

452

163.9

0.011

1,524,593

1941

0.012

1942

0.017

1943

0.016

1944

0.024

1945

0.033

1946

0.058

1947

0.082

1948

0.106

1949

0.130

1950

8,726

3,601

0.152

1951

10,625

4,384

0.254

2,363,023 1,725,474

1952

15,025

6,200

0.268

2,312,447

1953

15,659

6,461

0.285

2,267,934

1954

13,391

5,526

0.303

1,825,086

1955

16,317

6,733

0.401

1,679,367

1956

20,015

8,259

0.459

1,798,912

1957

25,610

10,568

0.504

2,097,045

1958

35,313

14,572

0.734

1,985,966

1959

44,350

18,301

0.887

2,063,010

1960

60,544

24,983

1.09

2,286,415

1961

88,522

36,529

1.50

2,442,055

1962

122,078

50,375

4.16

1,210,882

1963

329,800

136,092

9.30

1,463,025

1964

681,330

281,151

19.73

1,425,277

1965

2,526,320

1,042,486

79.84

1,305,734

291

| Appendix 3

(1) 1966

(2)

29,433

(3)

(4)

(5)

12,146

0.93

1,299,148

1967

87,555

36,130

2.48

1,458,342

1968

185,283

76,457

5.56

1,374,494 1,275,981

1969

82,906

6.50

1970

216,540

48.0%

89,355

7.34

1,217,567

1971

288,170

45.6%

118,913

7.62

1,560,686

1972

349,090

46.8%

144,052

8.13

1,771,097

1973

438,100

45.7%

180,782

10.66

1,696,261

1974

713,300

37.7%

1,961,650

294,343

15.00

1975

420,394

17.86

2,354,321

1976

546,445

21.41

2,552,427

1977

1,629,700

39.1%

672,496

23.75

2,832,032

1978

2,148,900

41.6%

886,744

25.66

3,455,398

1979

2,743,700

36.5%

1,132,188

30.90

3,664,286

1980

4,061,800

35.0%

1,676,102

35.67

4,699,463 6,176,290

1981

5,800,000

34.9%

2,393,370

38.75

1982

6,977,600

32.6%

2,879,307

42.21

6,821,385

1983

6,996,300

34.6%

2,887,023

46.74

6,176,219

1984

8,411,800

32.8%

3,471,129

51.63

6,723,359

1985

9,433,900

32.3%

3,892,899

54.03

7,204,935 8,620,602

1986

11,951,500

52.4%

4,931,786

57.21

1987

13,559,000

49.6%

5,595,121

62.48

8,954,971

1988

17,482,000

41.2%

7,213,947

67.52

10,684,262

1989

20,739,000

37.5%

8,557,948

71.86

11,909,119

1990

24,331,000

39.2%

10,040,187

77.52

12,951,841

1991

29,998,000

36.7%

12,378,675

84.73

14,609,781

1992

30,227,000

41.8%

12,473,172

91.09

13,693,950

1993

33,605,000

43.3%

13,867,103

100

13,867,103

1994

40,290,000

44.0%

16,625,669

108.45

15,330,316

1995

43,179,000

45.9%

17,817,814

118.76

15,003,251

1996

50,435,000

41.3%

20,812,003

128.06

16,251,503

1997

62,561,000

37.3%

25,815,797

136.59

18,900,328

1998

89,610,000

31.0%

36,977,567

215.58

17,152,485

1999

147,717,000

25.7%

60,955,420

259.77

23,465,381

2000

166,881,000

31.2%

68,863,445

269.38

25,563,696

292

| Accounting for Services

Appendix 4

National Accounting for Housing

In the sna the contribution of house property to national income is taken as equivalent to the net rental income of dwellings. No distinction is made between owneroccupied houses and rented houses. The rental value of shops and other industrial buildings is not counted as housing, but as part of the product of the respective industries. Data on the number of houses can be obtained from the population censuses. These give us the average size of a household. Combining these with population estimates gives a time-series of the number of houses. Unfortunately, we only have fragmentary information on rents, which makes it impossible to construct timeseries. A source that provides some information on housing rents is a survey by the Centraal Kantoor van de Statistiek (cks) in 1928 on 314 urban households. The relevant results are presented in table A4.1.

Table A4.1 Monthly expenditure on rent, August 1925 Income class

Number of families

Average expenditure

On rent

A (2400) Total Source: cks (1928).

In 1939 cks published a study on 95 labourer households in Jakarta. This survey revealed that rents for these labourers, which can be classified as largely unskilled labourers, varied between 0.50 and 5.00 guilders (cks 1939: 12).

293

| Appendix 4

Ibrahim and Weinreb (1957) conducted a study on living expenditures in Jakarta in 1953. In a sample of 250 urban households they found an average rent for civil servants of Rp 16.00, for a labourer of Rp 9.70 and for a trader Rp 1.40 (see table A4.3). Moreover in a recent paper by Colombijn and Barwegen (2005) give some detailed information on rents in Indonesian cities between 1930 and 1960. Their findings can be found in table A4.2. They found that cheap houses without brick walls, sometimes referred to as ‘indigenous houses’, had rents up to 20-30 guilders. Very cheap houses in Medan, Bandung, Semarang, Malang and Surabaya brought in between 1.00 and 6.00 guilders. Dwellings of 1.00 and 2.00 guilders were usually meant for single coolies. Rents for middle-class residents were in the range of 20-80 guilders. Upper-class houses were 80 or more guilders. Table A4.2 Monthly rents, 1930-1960 Monthly rent Dataset

n

0-10

10-30

30-50

50-80 80-120

Batavia, housing agency niva, 1934

127

-

7.1

29.9

40.2

Surabaya, housing agency Van Vloten, 1935

20.5

>120 2.4

908

0.3

13.4

31.9

32.6

16.3

5.4

Surabaya, Soerabaiasch Handelsblad, 1930-1940

91

-

3.3

9.9

16.5

17.6

52.7

Makassar, Makasaarsche Courant, 1930-1940

27

-

11.1

33.3

29.6

25.9

-

Medan, Deli Courant, 1930-1940

31

-

9.7

25.8

35.5

29.0

Medan, municipal houses, 1948

525

71.4

20.2

4.2

3.0

0.8

0.4

Bandung, settlement permits, 1946-1949

102

35.3

32.4

15.7

5.9

9.8

0.7

Bandung, settlement permits, 1950-1960

136

35.3

12.5

36.8

8.1

5.9

1.5

Note: Figures give percentages. Monthly rent is given in Netherlands-Indies guilders and Indonesian rupiahs. Source: Colombijn & Barwegen (2005).

Table A4.3 Monthly expenditure per family in Jakarta, 1953 Civil servant

Labourer

Rp.

% of total

Rp.

Food

353.35

69.75%

- Rice

128.30

25.33%

Trader

% of total

Rp.

% of total

324.62

75.68%

393.17

78.08%

148.67

34.66%

145.1

28.82%

- Meat

18.57

3.67%

18.15

4.23%

36.09

7.17%

- Fish

22.78

4.50%

18.98

4.42%

28.58

5.68%

- Dried fish

13.68

2.70%

14.22

3.31%

10.63

2.11%

- Eggs

6.02

1.19%

1.85

0.43%

3.01

0.60%

- Cassava

5.04

0.99%

3.29

0.77%

2.15

0.43%

- Wheat

18.50

3.65%

14.39

3.35%

16.37

3.25%

- Vegetables

23.79

4.70%

22.13

5.16%

22.09

4.39%

- Fruit

10.92

2.16%

4.03

0.94%

4.60

0.91%

- Spices

21.49

4.24%

19.96

4.65%

22.92

4.55%

294

| Accounting for Services

Civil servant

Labourer

Trader

Rp.

% of total

Rp.

% of total

Rp.

- Oil

14.87

2.94%

12.18

2.84%

25.25

5.01%

- Beverages

33.81

6.67%

17.03

3.97%

30.42

6.04%

- Sweets

35.58

7.02%

29.74

6.93%

45.96

9.13%

Heating, light and water

43.49

8.59%

34.03

7.93%

38.93

7.73%

- For the kitchen

39.10

7.72%

31.05

7.24%

33.14

6.58%

- Light and water

4.39

0.87%

2.98

0.69%

5.79

1.15%

23.46

4.63%

16.05

3.74%

22.34

4.44%

- For male

4.84

0.96%

2.19

0.51%

0.74

0.15%

- For female

1.62

0.32%

1.80

0.42%

1.00

0.20%

- For children

0.81

0.16%

1.69

0.39%

5.56

1.10%

Drugstore products

16.19

3.20%

10.37

2.42%

15.04

2.99%

Housing and furniture

18.65

3.68%

11.53

2.69%

3.23

0.64%

- Rent

0.28%

Clothing and drugstore products

% of total

16.00

3.16%

9.70

2.26%

1.40

- Furniture

1.52

0.30%

1.18

0.28%

0.68

0.14%

- Kitchenware

1.13

0.22%

0.65

0.15%

1.15

0.23%

Other expenditures

65.88

13.01%

40.16

9.36%

45.88

9.11%

- Health

7.34

1.45%

4.82

1.12%

2.68

0.53%

- Education

2.46

0.49%

2.50

0.58%

0.61

0.12%

- Car

6.53

1.29%

2.85

0.66%

11.52

2.29%

- Recreation/sports

1.82

0.36%

0.47

0.11%

2.88

0.57% 5.40%

- Leisure

42.55

8.40%

26.77

6.24%

27.21

- Taxes

5.18

1.02%

2.75

0.64%

0.98

0.19%

Durable goods

1.74

0.34%

2.57

0.60%

0

0.00%

506.57

100 %

428.96

100 %

503.55

100 %

Total

Source: Ibrahim and Weinreb, 1957: 779.

Because the information on rents is limited I chose to estimate value added in the housing sector for a base year, namely 1930. For the years 1975, 1980, 1985, 1990, 1995 and 2000 I relied on estimates from the i-o tables. Gross value added in constant prices is obtained by using the number of housing units as extrapolator, while gross value added at current prices was estimated by inflating the gross value added at constant prics using the housing component of the cpi as an inflator.

295

| Appendix 4



Notes for table A4.4 (1) = (2) = (3) = (4) = (5) = (6) = (7) = (8) = (9) =

Value added in current prices. Bold indicates estimate is taken from i-o table. The years in between are interpolated based on (4) and inflated by (6) for period 1950-2000, by (5) for period 1925-1940 and by (9) for period 19001924. Population (x 1,000) from Maddison (2003) Average household size from Population censuses. Number of dwellings = (2)/(3) Price index of rents (1930=100) calculated from cks (1935) and cks (1938) Price index of rents (1993 = 100) calculated from (7) Inflation of housing prices from bps (1995) and Statistik Indonesia, various issues. Value added in constant prices = (1)/(6) * 100 cpi (Van Leeuwen 2007)

Table A4.4 Value added by housing, 1900-2000 (1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

1900

159.58

42,746

9,185

1,641,395

0.010

1901

200.41

43,275

9,298

1,661,708

0.012

1902

187.94

43,810

9,413

1,682,251

0.011

1903

199.03

44,352

9,530

1,703,063

0.012

1904

180.53

44,901

9,648

1,724,144

0.010

1905

176.24

45,457

9,767

1,745,494

0.010

1906

189.04

45,993

9,882

1,766,076

0.011

1907

216.35

46,535

9,999

1,786,888

0.012

1908

230.72

47,085

10,117

1,808,007

0.013

1909

218.93

47,642

10,237

1,829,395

0.012

1910

221.52

48,206

10,358

1,851,052

0.012

1911

246.90

48,778

10,481

1,873,016

0.013

1912

287.94

49,358

10,605

1,895,288

0.015

1913

266.19

49,934

10,729

1,917,405

0.014

1914

261.14

50,517

10,854

1,939,792

0.013

1915

258.69

51,108

10,981

1,962,486

0.013

1916

282.14

51,705

11,109

1,985,410

0.014

1917

303.83

52,083

11,191

1,999,924

0.015

1918

390.78

52,334

11,245

2,009,563

0.019

1919

396.89

53,027

11,394

2,036,173

0.019

1920

653.78

53,723

11,543

2,062,899

0.032

1921

555.25

54,367

11,681

2,087,627

0.027

1922

488.85

55,020

11,822

2,112,702

0.023

1923

442.77

55,683

11,964

2,138,160

0.021

1924

412.68

56,354

12,108

2,163,926

0.019

296

| Accounting for Services

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

1925

398.25

57,036

12,255

104.66

2,190,114

0.018

1926

423.84

57,727

12,403

110.05

2,336,920

0.018

1927

431.86

58,429

12,554

110.78

2,463,745

0.018

1928

421.64

59,140

12,707

106.86

2,451,073

0.017

1929

402.45

59,863

12,862

100.77

2,352,413

0.017

1930

404.28

60,596

13,020

100.00

2,422,671

0.017

1931

396.96

61,496

13,213

96.75

2,662,085

0.015

1932

369.57

62,400

13,407

88.77

2,961,090

0.012

1933

332.12

63,314

13,604

78.62

3,010,679

0.011

1934

284.05

64,246

13,804

66.27

2,800,446

0.010

1935

314.30

65,192

14,007

72.26

3,232,802

0.010

1936

325.67

66,154

14,214

73.79

3,466,090

0.009

1937

356.45

67,136

14,425

79.58

3,546,745

0.010

1938

364.55

68,131

14,639

80.20

3,545,111

0.010

1939

377.43

69,145

14,857

81.82

2,823,078

0.013

1940

387.37

70,175

15,078

82.74

3,603,115

0.011

1941

71,316

1942

72,475

1943

73,314

1944

73,565

1945

73,332

1946

74,132

1947

75,146

1948

76,289

1949

4.7

77,654

1950

2,341

79,043

17,039

0.0007

1951

3,517

80,525

17,358

0.0007

11.48

1,282,492

1,258,889

1952

4,693

82,052

17,688

0.0007

0.00

1,306,812

1953

5,870

83,611

18,024

0.0007

2.94

1,331,642

1954

7,046

85,196

18,365

0.0008

5.71

1,356,885

1955

8,222

86,807

18,713

0.0008

-1.35

1,382,543

1956

9,398

88,456

19,068

0.0008

2.74

1,408,806

1957

10,575

90,124

19,428

0.0009

13.33

1,435,372

1958

11,751

91,821

19,793

0.0012

35.29

1,462,399

1959

12,927

93,565

20,169

0.0014

18.26

1,490,175

1960

14,103

95,254

20,533

0.0017

20.59

1,517,075 1,546,237

1961

15,280

97,085

20,928

0.0033

90.24

1962

16,456

99,028

21,255

0.0071

112.82

1,577,182

1963

17,632

101,009

21,586

0.0113

59.19

1,608,733

1964

18,808

103,031

21,924

0.03

143.61

1,640,937

1965

19,985

105,093

22,267

0.13

367.34

1,673,777

297

| Appendix 4

4.6

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

1966

21,161

107,197

22,616

1.24

866.34

1,707,287

1967

53,498

109,343

22,971

3.09

148.91

1,734,086

1968

92,153

111,532

23,332

5.23

69.59

1,761,338

1969

105,088

113,765

23,699

5.87

12.27

1,789,052

1970

158,773

116,044

24,073

8.74

48.74

1,817,255

1971

162,842

118,368

24,453

8.82

0.97

1,845,925

1972

169,040

121,282

25,021

8.95

1.45

1,888,796

1973

198,761

124,271

25,603

10.28

14.91

1,932,717

1974

249,681

127,338

26,199

12.62

22.76

1,977,730

1975

338,289

130,485

26,810

16.72

32.40

2,023,863

1976

548,067

133,713

27,436

20.64

23.50

2,654,972

1977

757,845

137,026

28,078

23.34

13.08

3,246,541

1978

967,624

140,425

28,735

24.00

2.80

4,032,308

1979

1,177,402

143,912

29,409

28.09

17.04

4,192,157

1980

1,387,180

147,490

30,100

33.22

18.28

4,175,749

1981

1,778,886

150,657

30,999

35.79

7.74

4,970,186

1982

2,170,591

153,894

31,928

40.92

14.33

5,304,475

1983

2,562,297

157,204

32,888

46.20

12.91

5,545,765

1984

2,954,002

160,588

33,879

52.12

12.80

5,668,051

1985

3,345,708

164,047

34,904

55.78

7.03

5,997,985

1986

3,929,018

166,976

35,832

58.34

4.58

6,735,234

1987

4,512,327

169,959

36,788

61.83

5.99

7,298,009

1988

5,095,637

172,999

37,773

64.46

4.25

7,905,443

1989

5,678,946

176,094

38,787

68.41

6.13

8,301,515

1990

6,262,256

179,248

39,833

76.91

12.43

8,142,133

1991

9,626,136

182,223

41,041

82.82

7.68

11,623,164

1992

12,990,017

185,259

42,297

86.60

4.56

15,000,871

1993

16,353,897

188,359

43,602

100

15.48

16,353,897

1994

19,717,777

191,524

44,959

109

9.09

18,074,780

1995

23,081,658

194,755

46,370

115

5.67

20,023,055

1996

24,839,707

198,025

47,832

121

4.72

20,576,911

1997

26,597,757

201,350

49,350

128

6.08

20,770,417

1998

28,355,806 204,390

50,843

189

47.47

15,015,456

1999

30,113,856 207,429

52,381

199

5.23

15,153,862

2000

31,871,905

54,071

219

10.10

14,567,253

298

210,875

4.8

4.9

4.5

3.9

| Accounting for Services

(9)

Appendix 5

National Accounting for Financial Services

According to sna 93, output of financial intermediation companies in banking, insurance services and pension fund services cannot be directly measured since such companies do not normally charge their customers for their services except for some minor incidental services. Banks earn their main source of income by the difference between the interest earned by providing loans and the interest paid on deposits. Pension funds and insurance companies accept contributions and invest them in order to pay their customers. Their output has to be measured indirectly. This has also been done in Indonesia. Firstly value added was estimated for the colonial period. The procedure adopted is the following. For the ‘big four’, namely the Java Bank, nhm, niem and nihb, the financial report of the Java Bank is taken as starting point. Their annual reports are actually available, but they have a number of short-comings: 1) they are often less detailed, 2) it is often hard to sub-divide income in the Netherlands from income in the Netherlands-Indies, and/or 3) it is hard to sub-divide income from banking and income from trade activities. Therefore I chose to use annual reports by the Java Bank, which give a very detailed statement of income and expenditures. Value added of the Java Bank is then divided by the share of credit extension of the Java Bank in total credit extension of the ‘big four’. For the other financial institutions, i.e. the Saving Banks, the Government Pawnshop service and the Government Credit banks, detailed financial accounts are available, which make it possible to estimate value added in a direct way. The data and results are summarised in appendix table A5.1.

299

| Appendix 5

300

| Accounting for Services

123.57

114.76

121.85

136.90

1907

1908

1909

1910

77.88 108.75 114.01 157.14

226.02

315.23

330.46

455.48

613.22

734.44

621.73

1915

1916

1917

1918

1919

1920

1921

75.45

199.64

270.63

209.43

86.77

189.31

204.39

1914

73.66

68.92

63.37

53.97

49.61

47.24

42.72

35.64

1913

163.10

118.84

1906

178.07

94.54

1905

1912

85.85

1904

1911

33.31

74.40

1903 32.90

31.59

27.26

67.65

65.48

1902

31.59

(2)

Credit extension by Java Bank

1901

69.01

(1)

Total credit extension

32.1%

36.8%

34.2%

34.5%

34.5%

34.5%

34.5%

42.5%

39.9%

41.4%

42.3%

46.3%

44.3%

43.2%

38.2%

35.9%

37.7%

38.3%

44.8%

48.2%

40.3%

45.8%

(3)= (2)/(1)

27.00 26.72

8.58

21.35

16.78

11.60

11.33

10.31

8.40

8.24

7.12

6.35

5.80

4.72

4.35

6.56

5.80

3.54

3.20

2.83

2.57

2.74

2.54

(5)= (4)/(3)

9.95

7.29

5.79

4.00

3.91

3.55

3.57

3.28

2.95

2.68

2.68

2.09

1.88

2.51

2.09

1.34

1.23

1.27

1.24

1.11

1.16

(4)

Credit extension of Value added of Java Value added big Bank four Java Bank as percentage of total

Value added by the financial sector, 1900-1940 (in millions of guilders)

1900

Table A5.1

0.28

142.53

136.52

114.78

116.90

99.62

83.97

75.90

66.85

51.68

40.28

28.85

20.78

19.78

12.98

13.29

6.76

2.96

2.11

9.27

7.54

12.22

13.32

11.22

9.23

7.10

5.78

4.22

3.00

2.34

1.79

1.44

1.05

0.74

0.65

0.39

0.35

0.31

0.30

1.81 1.69 1.86

(7) 0.28

(6)

Value added of government pawnshop

1.67

Loans by government pawnshop

301

| Appendix 5 80.47 132.35

441.16

1940

82.76

76.66

78.10

92.08

209.30

1935

74.55

73.70

306.95

215.54

1934

270.02

247.08

1933

98.87 185.35

1939

291.75

1932

1938

330.26

1931

161.33 119.76

261.35

387.05

1930

278.76

563.86

1929

144.88

153.34

126.78

133.75

142.45

158.63

1937

571.90

1928

(2) 167.25

1936

542.75

582.97

465.02

1925

1927

487.00

1924

1926

481.54

1923

(1)

477.36

1922

30.0%

30.0%

29.8%

29.7%

29.3%

37.3%

34.6%

29.8%

63.5%

29.9%

30.9%

28.6%

25.3%

26.3%

23.4%

28.8%

29.3%

32.9%

35.0%

(3)= (2)/(1)

(4)

3.28

4.08

3.10

3.72

3.40

3.06

2.81

3.26

3.01

2.72

5.51

8.10

7.93

7.03

8.11

11.68

7.68

8.60

7.21

10.92

13.59

10.39

12.54

11.60

8.19

8.14

10.92

4.73

9.08

17.81

28.32

31.29

26.74

34.72

40.62

26.26

26.10

20.59

(5)= (4)/(3)

(6)

88.19

86.80

85.31

75.30

65.41

67.52

69.58

78.12

109.77

153.12

194.14

207.02

181.46

173.89

169.89

166.25

151.04

150.52

151.91

(7)

7.94

7.81

9.30

6.72

6.03

7.44

6.57

6.95

10.02

13.63

19.11

20.36

16.91

18.80

19.18

18.57

15.47

11.83

11.41

302

| Accounting for Services

7.21

7.23

1906

1907

19.86

1922

13.94

1919

19.25

13.45

1918

19.95

12.38

1917

1921

11.37

1916

1920

9.53

10.71

1913

1915

10.30

1912

1914

9.18

9.62

1911

8.47

6.71

1905

1910

6.03

1904

7.21

4.87

7.80

4.00

1902

1903

1909

3.46

1908

2.89

1901

(8)

Loans by Post Office Savings Banks

Continued

1900

Table A5.1

0.48

0.46

0.29

0.22

0.19

0.15

0.12

0.13

0.12

0.10

0.09

0.06

0.07

0.05

0.05

0.07

0.07

0.06

0.05

0.04

0.03

0.03

0.02

(9)

Value added of Post Office Savings Bank

0.44 0.47 0.58

6.70 7.27 8.92

46.06

47.54

39.36

30.12

28.95

20.80

27.77

21.68

18.84

15.68

11.98

4.67

3.84

2.64

2.47

2.31

2.35

1.80

1.50

1.24

0.96

0.78

0.57

0.66

10.09

8.85

0.35 0.58

5.45 8.92

0.32

(11)

Value added of Government credit system

4.92

(10)

Loans by Government credit system

37.14

40.29

37.47

36.26

32.59

25.32

22.48

19.05

15.55

13.52

10.99

9.32

8.24

6.69

5.89

8.03

7.09

4.35

3.92

3.18

2.88

3.07

2.84

(12)= 5)+(7)+(9)+(11)

Total value added of financial sector

685.89

825.04

902.51

773.69

596.43

446.61

429.60

324.08

285.22

254.89

228.08

201.20

173.40

149.31

141.98

147.63

137.43

108.13

97.50

80.09

70.75

72.21

55.01

(13)= (1)+(6)+(8)+(10)

Total credit extension

303

| Appendix 5

42.88

52.93

54.41

50.61

1936

1937

1938

1939

1940

0.35

0.47

0.39

0.56

0.66

0.63

0.51

0.55

0.56

0.49

0.50

0.52

0.48

0.48

0.48

0.48

0.50

0.50

(9)

30.00

30.90

26.67

21.68

19.39

17.40

22.66 24.96 22.20

2.58 3.00

21.86

20.19

18.51

17.83

20.68

18.96

28.24

42.93

54.82

54.07

51.22

59.36

64.27

46.73

42.68

(12)= 5)+(7)+(9)+(11)

3.09

2.04

1.91

2.25

2.25 2.60

17.45

3.64

5.04

5.51

5.63

5.39

5.19

4.99

4.61

4.51

4.25

(11)

17.43

24.83

50.72

72.40

74.87

68.30

63.29

56.31

52.38

46.87

43.24

(10)

612.37

476.08

414.86

402.68

383.97

331.07

342.92

403.91

496.99

599.43

689.18

842.12

834.77

835.65

784.27

687.10

703.49

696.55

(13)= (1)+(6)+(8)+(10)

Sources: Total credit extension: cei vi 1980: table 5; Credit extension and value added of Java Bank: annual reports, various issues; Government Pawnshops: Verslag van den gouvernements-pandhuisdienst; Post Office savings bank: Verslag omtrent den dienst der Postspaarbank in Nederlandsch Indie; Government credit system: Verslag van het Volkscredietwezen. Note: In bold: interpolated and extrapolated values. For the period since independence we have to rely on the i-o tables (table A5.2). The intermediary years are extrapolated by weighting total credit extension and inflating by the consumer price index. These results of this exercise are presented in appendix table A5.3.

35.71

36.83

1935

31.84

34.79

1934

29.60

1932

1933

24.31

27.29

22.71

1929

1931

21.93

1928

1930

19.50

20.68

1925

1926

18.97

1924

1927

19.10

18.66

1923

(8)



Table A5.2 Financial sector in Indonesia’s i-o tables, 1971-2000 (in million Rp) Banking & other financial institutions



304

Insurance

Total financial sector

1971

33,935

5,962

39,897

1975

200,273

30,548

230,821

1980

683,726

81,426

765,152

1985

2,177,482

199,330

2,376,812

1990

7,774,956

632,622

8,407,578

1995

22,398,417

1,492,002

23,890,419

2000

58,183,452

6,130,327

64,313,779

Table A5.3 Value added of financial sector, 1900-2000 (in millions of fl/Rp) Total value added in current prices

Total credit extension

cpi, 1993=100

Value added in constant (1993) prices

1900

2.84

55.01

0.010

29,234.65

1901

3.07

72.21

0.012

25,481.42

1902

2.88

70.75

0.011

25,817.19

1903

3.18

80.09

0.012

27,174.80

1904

3.92

97.50

0.010

37,449.38

1905

4.35

108.13

0.010

43,050.96

1906

7.09

137.43

0.011

66,271.18

1907

8.03

147.63

0.012

66,293.18

1908

5.89

141.98

0.013

46,133.36

1909

6.69

149.31

0.012

55,866.98

1910

8.24

173.40

0.012

68,884.40

1911

9.32

201.20

0.013

70,690.88

1912

10.99

228.08

0.015

72,330.10

1913

13.52

254.89

0.014

97,401.59

1914

15.55

285.22

0.013

115,480.63

1915

19.05

324.08

0.013

144,511.78

1916

22.48

429.60

0.014

158,173.28

1917

25.32

446.61

0.015

166,687.35

1918

32.59

596.43

0.019

167,611.65

1919

36.26

773.69

0.019

186,021.93

1920

37.47

902.51

0.032

118,217.22

1921

40.29

825.04

0.027

151,473.99

1922

37.14

685.89

0.023

160,528.18

1923

42.68

696.55

0.021

206,097.05

1924

46.73

703.49

0.019

245,018.23

1925

64.27

687.10

0.018

353,438.64

| Accounting for Services

Total value added in current prices

Total credit extension

59.36

784.27

0.018

327,288.63

1926

cpi, 1993=100

Value added in constant (1993) prices

1927

51.22

835.65

0.018

292,201.05

1928

54.07

834.77

0.017

314,310.89

1929

54.82

842.12

0.017

320,454.79

1930

42.93

689.18

0.017

257,266.72

1931

28.24

599.43

0.015

189,371.38

1932

18.96

496.99

0.012

151,881.08

1933

20.68

403.91

0.011

187,419.90

1934

17.83

342.92

0.010

175,740.51

1935

18.51

331.07

0.010

190,363.42

1936

20.19

383.97

0.009

214,899.25

1937

21.86

402.68

0.010

217,468.93

1938

22.66

414.86

0.010

220,366.01

1939

24.96

476.08

0.013

186,719.82

1940

22.20

612.37

0.011

206,534.85

1951

173

2.152

0,254

68.210,72

1941 1942 ..... 1949 1950

305

1952

197

2.445

0,268

73.444,54

1953

193

2,394

0.285

67,676.70

1954

228

2,826

0.303

75,185.32

1955

324

4,017

0.401

80,702.64

1956

390

4,842

0.459

84,940.34

1957

364

4,521

0.504

72,254.37

1958

533

6,620

0.734

72,665.79

1959

913

11,334

0.887

102,896.98

1960

1,224

15,203

1.09

112,062.27

1961

2,313

28,716

1.50

154,619.07

1962

3,540

43,956

4.16

85,097.58

1963

6,750

83,814

9.30

72,569.23

1964

17,998

223,467

19.73

91,241.00

1965

80,326

997,327

79.84

100,609.45

1966

511

6,342

0.93

54,636.78

1967

2,513

31,196

2.48

101,417.30

| Appendix 5

Total value added in current prices 1968

Total credit extension

cpi, 1993=100

Value added in constant (1993) prices

10,209

126,755

5.56

183,530.06

1969

19,767

245,434

6.50

304,234.85

1970

29,184

362,352

7.34

397,667.51

1971

39,897

495,363

7.62

523,630.66

1972

52,971

657,692

8.13

651,271.95

1973

80,911

1,004,590

10.66

759,177.03

1974

111,948

1,389,954

15.00

746,078.39

1975

230,821

2,750,000

17.86

1,292,660.11

1976

299,312

3,566,000

21.41

1,398,076.36

1977

330,452

3,937,000

23.75

1,391,607.39

1978

452,745

5,394,000

25.66

1,764,223.61

1979

526,104

6,268,000

30.90

1,702,717.32

1980

765,152

7,880,000

35.67

2,145,337.24

1981

986,444

10,159,000

38.75

2,545,600.95

1982

1,264,443

13,022,000

42.21

2,995,600.15

1983

1,485,541

15,299,000

46.74

3,178,022.28

1984

1,826,752

18,813,000

51.63

3,538,303.15

1985

2,376,812

22,157,000

54.03

4,398,977.71

1986

2,832,179

26,402,000

57.21

4,950,556.78

1987

3,524,079

32,852,000

62.48

5,640,276.02

1988

4,720,048

44,001,000

67.52

6,990,656.69

1989

6,823,103

63,606,000

71.86

9,494,933.63

1990

8,407,578

97,696,000

77.52

10,845,775.60

1991

9,776,942

113,608,000

84.73

11,539,117.15

1992

10,644,498

123,689,000

91.09

11,686,300.27

1993

12,932,107

150,271,000

100

12,932,107.29

1994

16,254,743

188,880,000

108.45

14,988,290.04

1995

23,890,419

234,611,000

118.76

20,116,605.95

1996

29,828,122

292,921,000

128.06

23,291,935.01

1997

38,505,354

378,134,000

136.59

28,190,639.55

1998

49,634,550

487,426,000

215.58

23,023,577.52

1999

22,925,275

225,133,000

259.77

8,825,307.28

2000

27,392,248

269,000,000

269.38

23,874,755.34

Notes: in bold: estimate of Input-Output table. Intermediary years interpolated based on total credit extension.

306

| Accounting for Services

Appendix 6

National Accounting for Other Services

The category ‘other services’ are those for which income is difficult to measure on an annual basis due to lack of useful data. Those services are the catering services, the so-called social and community services, such as medical services, education, and entertainment, and the other services, such as domestic servants. A very crude estimation procedure for this is assuming that the category ‘other services’ makes up 20 per cent of total value added in services. This is based on information from the i-o tables, which shows that on average this category indeed was roughly 20 per cent of total value added in services (see table A6.1). Table A6.1 Other services in the i-o tables

1971

va other services (1) 282,432

Total va (2) 4,270,399

Total service va (3) 1,713,109

(1)/(2)

(1)/(3)

6.6%

16.5%

1975

894,419

13,694,242

4,816,366

6.5%

18.6%

1980

3,436,021

48,330,072

16,199,908

7.1%

21.2%

1985

8,287,882

97,645,877

38,824,139

8.5%

21.3%

1990

18,521,224

207,801,303

84,383,984

8.9%

21.9%

1995

50,377,773

535,564,814

232,727,515

9.4%

21.6%

2000 99,748,684 Source: i-o tables

1,366,500,301

511,411,697

7.3%

19.5%

A different procedure can be followed as well. From the different population censuses information was taken on the number of people working in 1) hotels and restaurants, 2) community services, and 3) other services. It is assumed that those working in sub-category 1) and 3) hardly earn more than a labourer and this wage is taken from Van Leeuwen (2007: 240-242). In sub-category 2) most people are probably rather well-educated since surgeons, teachers, etc. are part of this. Therefore it is assumed that those earn the wage of a craftsman, also taken from Van Leeuwen (2007: 240-242). This gives the benchmark estimates presented in table A6.2. These benchmark estimates are interpolated based on both government and private expenditure on education taken from Van Leeuwen (2007: 240-242). Constant price estimates are obtained by deflation using the cpi from Van Leeuwen (2007). The results of this are presented in appendix table A6.3.

307

| Appenix 6

308

| Accounting for Services 99.54

Yearly income (in million fl/Rp)

21,829

42.02

9.70

1,878,199

1975

219,034

406.13

87.81

2,455,954

877,188

1,282,011

1980

1,340,042

847.78

642.26

3,581,832

1,200,927

1,353,099

1985

3,293,699

1,517.83

1,323.24

4,125,191

2,875,664

354,753

1990 2,929,112

468,193

6,949,871

4,299.49

1,954.31

363,549

4,200,799

Note: Assuming 320 working days a year. Wage for a labourer in 2000 extrapolated by growth in wage of craftsman

0.41 0.88

Craftsman

1,608,285

Labourer

Current daily wage

Unspecified

990,473

Other services

1,803,413

169,520 394,865

Social and community services

1971 938,491

Hotels and restaurants

1930

Table A6.2 Value added by other services for benchmark years, 1930-2000 1995

17,782,329

7,869.97

4,961.50

253,018

5,526,795

3,102,347

752,435

2000

46,929,120

19,597.58

12,354.99

155,105

4,761,291

3,059,388

2,255,866

309

| Appenix 6

73.33

67.37

69.56

77.55

1923

1924

1925

79.08

1921

1922

55.20

63.06

1920

37.49

1918

1919

34.10

32.96

1915

36.62

28.19

1914

1917

24.92

1913

1916

20.98

1912

14.49

1909

17.27

11.85

1908

19.74

11.14

1907

1911

9.94

1906

1910

9.41

10.13

1905

8.28

1903

1904

7.82

8.66

1902

8.33

1901

1900

Value added in current prices

0.018

0.019

0.021

0.023

0.027

0.032

0.019

0.019

0.015

0.014

0.013

0.013

0.014

0.015

0.013

0.012

0.012

0.013

0.012

0.011

0.010

0.010

0.012

0.011

0.012

0.010

cpi

Table A6.3 Value added by other services, 1900-2000

426,455.9

364,736.5

325,344.1

316,916.2

297,336.8

198,981.7

283,190.9

192,811.1

241,020.2

239,980.4

250,034.8

209,431.5

179,511.8

138,115.4

149,740.0

144,273.7

121,082.2

92,874.7

91,983.0

92,880.2

100,294.2

89,898.0

70,834.7

77,515.8

64,840.6

85,730.1

Value added in constant (1993) prices

40.2

36.8

35.9

39.1

42.5

37.5

30.7

19.5

17.9

16.0

14.9

13.1

11.8

10.5

9.6

8.5

7.7

6.7

6.3

5.2

5.2

4.9

4.7

4.5

4.2

4.2

Government expenditure on education

21.3

18.5

17.6

19.1

20.3

12.6

13.1

10.3

11.2

11.1

11.3

9.3

8.0

6.1

6.1

5.3

3.8

2.7

2.6

2.6

2.9

2.5

1.9

2.4

2.1

2.4

Private expenditure on education

61.6

55.2

53.5

58.2

62.8

50.1

43.8

29.8

29.1

27.1

26.2

22.4

19.8

16.7

15.7

13.7

11.5

9.4

8.8

7.9

8.0

7.5

6.6

6.9

6.2

6.6

Total expenditure on education

310

| Accounting for Services

96.83

0.033 0.058 0.082 0.106 0.130 0.152 0.254

1947

1948

1949

1950

1951

1944

1946

0.024

1943

1945

0.017 0.016

1942

0.012

0.011

0.013

0.010

0.010

0.009

0.010

0.010

0.011

0.012

0.015

0.017

1941

51.20

1940

44.92

1937

45.51

51.62

1936

58.36

56.72

1935

1939

72.76

1934

1938

87.13

96.79

1931

80.76

99.54

1930

1933

0.017

101.99

1929

1932

0.017

97.33

1928

0.018

91.77

0.018

84.84

1927

cpi

1926

Value added in current prices

38,107.2

476,253.3

436,489.5

442,583.4

446,990.8

549,342.1

583,428.7

717,336.9

732,125.3

698,106.2

649,113.3

596,516.9

596,173.2

565,802.4

523,518.6

467,765.9

492

28.7

29.7

24.0

22.3

27.7

30.9

41.6

47.4

51.7

56.6

55.7

54.4

47.6

46.2

44.2

Value added in Government expenditure constant (1993) prices on education

82

12.0

16.6

12.1

13.3

13.3

14.1

16.1

16.8

17.5

20.2

23.4

26.6

29.7

26.7

23.2

Private expenditure on education

573.3

40.7

46.3

36.1

35.7

41.0

45.0

57.8

64.1

69.2

76.9

79.1

81.0

77.3

72.9

67.4

Total expenditure on education

311

| Appenix 6 7.34 7.62

15.00 17.86

14,354.60

18,379.27

21,829.17

29,903.09

47,688.69

81,368.42

219,034.58

304,024.65

361,407.81

1969

1970

1971

1972

1973

1974

1975

1976

1977

23.75

21.41

10.66

8.13

6.50

5.56

2.48

3,432.14

0.93

8,727.66

1966

19.73 79.84

1968

1,217.56

1965

9.30

4.16

1.50

1.09

0.887

0.734

0.504

0.459

0.401

0.303

0.285

0.268

cpi

1967

22,303.62

82,509.28

1964

9,413.31

1963

911.66

1960

1,124.11

513.39

1959

3,660.01

351.86

1958

1962

256.36

1957

1961

155.13

207.93

1954

1956

149.79

1953

1955

157.67

148.27

1952

Value added in current prices

1,521,970.4

1,420,089.5

1,226,653.0

542,279.6

447,458.7

367,654.0

286,498.3

250,438.4

220,926.9

156,900.1

138,535.5

130,236.0

103,344.5

113,066.8

101,195.6

87,976.0

75,150.3

83,432.3

57,872.6

47,954.6

50,870.6

45,287.6

38,693.5

49,474.4

52,040.7

58,805.0

Value added in constant (1993) prices

806,943

690,466

511,693

370,684

218,197

137,996

102,139

85,822

62,722

34,724

12,799

4,306

288,482

76,345

29,641

10,377

2,965

2,418

1,952

1,617

1,308

1,057

905

795

796

847

Government expenditure on education

285,754

228,736

150,546

111,090

64,163

39,057

27,109

23,000

22,271

16,951

7,522

2,903

200,047

55,713

26,094

11,293

3,690

2,980

1,087

466

210

175

13

92

82

86

Private expenditure on education

1,092,696.6

919,201.8

662,239.0

481,774.1

282,359.8

177,053.2

129,248.3

108,821.8

84,992.1

51,675.6

20,321.3

7,209.0

488,529.0

132,057.4

55,735.2

21,670.5

6,655.7

5,397.8

3,039.8

2,083.4

1,517.9

1,231.1

918.5

886.9

877.9

933.6

Total expenditure on education

312

| Accounting for Services

25.66 30.90 35.67

449,086.92

633,947.68

1,340,041.82

1,626,902.11

1,734,532.27

1978

1979

1980

1981

1982

Note: Bold indicates estimate is taken from i-o table.

269.38

46,929,119.67

2000

215.58 259.77

42,885,171.58

46,135,210.65

1999

136.59

128.06

100

91.09

1998

26,011,105.96

1997

118.76

12,765,892.05

1994

17,782,328.79

10,577,230.17

1993

21,265,507.22

8,768,662.20

1992

1995

108.45

7,698,264.75

1991

1996

77.52 84.73

71.86

5,493,398.90

6,949,870.56

67.52

1990

4,764,795.26

1988

57.21 62.48

1989

3,518,859.31

4,205,392.50

1986

54.03

3,293,699.26

1985

1987

51.63

1984

46.74

2,147,214.77

2,510,307.48

1983

42.21

38.75

cpi

Value added in current prices

17,421,169.6

17,760,197.4

19,892,798.0

19,043,318.1

16,605,632.1

14,973,370.7

11,771,265.6

10,577,230.2

9,626,871.6

9,085,783.6

8,965,333.0

7,644,535.7

7,056,929.8

6,730,715.1

6,150,851.6

6,095,942.6

4,862,307.3

4,593,544.0

4,109,292.3

4,198,356.2

3,757,216.4

2,051,749.6

1,749,969.5

Value added in constant (1993) prices

40,403,550

40,403,550

23,983,014

18,462,585

14,846,084

14,011,160

12,878,625

10,901,046

9,743,961

9,267,557

7,159,726

6,182,745

5,506,876

4,593,088

4,398,050

4,000,473

3,431,713

2,690,478

2,608,353

2,195,746

1,513,545

993,156

Government expenditure on education

24,597,999

25,767,897

21,106,386

13,324,554

12,038,400

10,659,000

7,756,574

5,157,117

4,050,820

3,382,719

2,583,000

2,081,918

1,833,156

1,567,932

1,326,753

1,143,000

1,004,522

849,356

767,794

635,328

476,000

403,161

364,634

Private expenditure on education

66,171,446.5

61,509,935.6

37,307,567.9

30,500,985.1

25,505,083.9

21,767,733.7

18,035,741.5

14,951,865.7

13,126,679.8

11,850,557.0

9,241,644.0

8,015,901.0

7,074,807.6

5,919,840.5

5,541,049.6

5,004,995.3

4,281,069.1

3,458,271.9

3,243,681.3

2,671,745.6

1,916,705.9

1,357,789.6

Total expenditure on education

Appendix 7

Employment and Population

As discussed in chapters 2 and 3, for Indonesia there are a number of sources on labour force statistics. However, due to differences in concepts, procedures and seasonal timing, they lack consistency. Therefore I follow the method employed by Timmer and De Vries (2007) and rely solely on population censuses. Timmer and De Vries use these censuses as benchmarks to which they apply trends from the labour force surveys. These population censuses, which have been held in 1930, 1961, 1971, 1980 and 1990 and 2000, are considered of reasonable quality. The 1905 data are based on a population count in that year. These data have to be treated with caution, since they are believed to be of poor quality in absolute terms resulting in an under-estimation of the number of people in most sectors. For this a correction had to be made. Therefore it was assumed that the labour force participation rate was equal to that in 1930 and 1961, namely 34 per cent, and that the 1905 population count does give a reliable picture of the relative distribution of the labour force across sectors. Or in formula: Labour force participation rate (=34 per cent) x population in 1905 x relative sectoral share of employment in 1905 population count. The resulting time-series of the occupational structure are presented in table A7.1. The size of the population is also given in table A7.1 and is taken from Van der Eng (2002).

 An update of Van der Eng’s estimates is available from his website: http://ecocomm.anu. edu.au/people/info.asp?surname=van%20der%20Eng&Firstname=Pierre

313

| Appendix 7

Table A7.1 Number of people employed and population size (in thousands), 1905-2005 Sector:

  1905

Agriculture, Mining and Forestry, and Quarrying Fishing

Manufacturing

Public Utilities

Construction

Transport, Wholesale and Retail Storage, and CommuTrade, nication Hotels and Restaurants

1

2

3

4

5

6

7

10,510

(c)

850

(c)

(c)

788

139

14,274

90

2,209

(c)

(c)

1,293

316

1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940

314

| Accounting for Services

Finance, Insurance, and Real Estate

1905

Community, Social and Personal Services

Government Services

8

9

 

525

(d)

(d)

Activities not adequately defined

Sectoral Sum

 

 

2,643

15,455

1906

Population

45,457 45,993

1907

46,535

1908

47,085

1909

47,642

1910

48,206

1911

48,778

1912

49,358

1913

49,934

1914

50,517

1915

51,108

1916

51,705

1917

52,310

1918

52,334

1919

53,027

1920

53,723

1921

54,367

1922

55,020

1923

55,683

1924

56,354

1925

57,036

1926

57,727

1927

58,429

1928

59,140

1929

59,863

1930

685

(d)

(d)

2,003

20,870

60,596

1931

61,496

1932

62,400

1933

63,314

1934

64,246

1935

65,192

1936

66,154

1937

67,136

1938

68,131

1939

69,145

1940

70,175

315

| Appendix 7

Sector:

 

Agriculture, Mining and Forestry, and Quarrying Fishing

Transport, Wholesale and Retail Storage, and CommuTrade, nication Hotels and Restaurants

Manufacturing

Public Utilities

Construction

3

4

5

592

2,238

1

2

23,980

89

1,948

(c)

6

7

1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961

702

1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

25,820

92

3,078

30

759

4,304

945

1972

25,557

123

3,234

30

928

4,657

962

1973

27,230

166

3,401

34

1,032

4,926

1,007

1974

27,529

188

3,605

40

1,187

5,245

1,053

1975

26,833

198

3,695

42

1,275

5,392

1,032

1976

27,386

249

3,698

46

1,265

5,475

1,090

316

| Accounting for Services

Finance, Insurance, and Real Estate

Community, Social and Personal Services

Government Services

Activities not adequately defined

Sectoral Sum

8

9

 

 

 

Population

1941

71,316

1942

72,475

1943

73,314

1944

73,565

1945

73,332

1946

74,132

1947

75,146

1948

76,289

1949

77,654

1950

79,043

1951

80,525

1952

82,052

1953

83,611

1954

85,196

1955

86,807

1956

88,456

1957

90,124

1958

91,821

1959

93,565

1960

95,254

1961

3,140

(d)

(d)

32,689

97,085

1962

99,028

1963

101,009

1964

103,031

1965

105,093

1966

107,197

1967

109,343

1968

111,532

1969

113,765

1970

116,044

1971

114

4,068

(a)

39,210

118,368

1972

138

4,437

(a)

40,066

121,239

1973

154

4,424

(a)

42,375

124,183

1974

174

4,564

(a)

43,584

127,201

1975

193

5,234

(a)

43,894

130,297

1976

204

5,307

(a)

44,720

133,470

317

| Appendix 7

Sector:

 

Agriculture, Mining and Forestry, and Quarrying Fishing

Manufacturing

Public Utilities

Construction

Transport, Wholesale and Retail Storage, and CommuTrade, nication Hotels and Restaurants

1

2

3

4

5

6

7

27,032

305

3,838

47

1,438

5,670

1,270

1978

27,703

327

4,092

52

1,544

5,868

1,425

1979

28,042

357

4,217

61

1,548

6,269

1,447

1980

28,752

386

4,702

66

1,656

6,717

1,470

1981

29,623

422

4,988

76

1,855

7,277

1,627

1982

29,706

392

4,863

88

1,942

7,555

1,716

1983

30,568

422

4,786

93

2,050

7,702

1,796

1984

31,263

474

5,626

95

1,949

7,731

1,940

1985

31,995

453

6,025

105

1,988

7,977

1,952

1986

32,383

505

6,341

124

2,022

8,475

2,024

1987

32,480

536

6,755

141

2,096

8,919

2,134

1988

33,456

550

7,286

154

2,282

9,555

2,244

1989

34,461

621

7,809

173

2,570

10,422

2,476 2,612

1977

1990

35,375

731

8,191

187

2,895

10,591

1991

34,396

782

8,460

209

3,425

10,939

2,817

1992

35,771

824

8,355

240

3,322

10,623

2,838

1993

33,449

904

9,352

238

3,951

11,970

3,311

1994

31,601

1,026

11,541

253

5,001

13,366

3,815

1995

31,544

1,049

11,505

240

5,169

14,388

4,135

1996

31,486

1,072

11,469

227

5,336

15,410

4,454

1997

29,924

1,242

11,940

323

5,904

16,480

4,675

1998

32,901

934

10,576

205

4,950

16,091

4,693

1999

32,036

1,005

12,260

261

4,800

16,776

4,752

2000

33,954

961

12,394

257

4,916

17,694

5,145

2001

33,176

917

12,867

252

5,394

16,718

5,025 5,279

2002

33,918

875

12,893

247

6,008

17,030

2003

35,929

1,014

12,239

210

5,700

16,508

5,580

2004

33,897

1,433

11,786

316

6,382

18,297

6,192

2005

34,904

1,120

12,406

259

6,209

18,085

6,273

Source: see text. Notes: (a): included in community services; (b): included in manufacturing; (c): included in finance.

318

| Accounting for Services

Finance, Insurance, and Real Estate

Community, Social and Personal Services

Government Services

Activities not adequately defined

 

Sectoral Sum

Population

8

9

 

1977

245

5,716

(a)

45,561

  136,725 140,062

1978

267

6,022

(a)

47,300

1979

278

6,082

(a)

48,301

143,485

1980

302

7,142

(a)

51,193

146,995 150,134

1981

314

7,575

(a)

53,758

1982

324

7,634

(a)

54,221

153,343

1983

331

7,810

(a)

55,558

156,623

1984

351

7,970

(a)

57,399

159,975

1985

352

8,221

(a)

59,069

163,403

1986

372

8,459

(a)

60,704

166,312

1987

374

8,762

(a)

62,196

169,276

1988

369

9,114

(a)

65,011

172,294

1989

416

9,313

(a)

68,263

175,369

1990

502

9,524

(a)

70,608

178,500

1991

542

10,007

(a)

71,575

181,093

1992

590

10,472

(a)

73,034

183,724

1993

593

11,096

(a)

74,865

186,395

1994

655

11,293

(a)

78,552

189,107

1995

690

11,804

(a)

80,523

191,860

1996

724

12,315

(a)

82,494

194,655

1997

690

13,269

(a)

84,446

197,492

1998

649

13,014

(a)

84,012

200,372 203,296

1999

665

12,836

(a)

85,391

2000

927

10,053

(a)

86,301

206,265

2001

1,184

11,554

(a)

87,088

208,643 211,439

2002

1,041

10,878

(a)

88,169

2003

1,372

10,330

(a)

88,882

214,251

2004

1,181

11,042

(a)

90,525

217,077

2005

1,095

11,106

(a)

91,455

219,898

319

| Appendix 7

320

| Accounting for Services

References

Unpublished sources Algemeen Rijksarchief (ara), The Hague • Deli Spoorweg Maatschappij: ara, inv. 2.20.11 • Nederlandsch-Indische Spoorweg Maatschappij: ara, inv 2.20.10 • Koninklijke Paketvaart Maatschappij: º Uncoded items: ara, inv. 2.20.58.01 º Balances and annual reports: ara, inv. 2.20.59 • Koninklijke Nederlands-Indische Luchtvaart Maatschappij annual reports: º ara, Ministerie van Koloniën, 2.10.46.01, nr. 121-124

Series Bank Indonesia, Annual Report (1953-...). Bank Indonesia, Laporan Mingguan [Weekly Report] (1970-2001) continued as Statistik Ekonomi Moneter Indonesia [Economic and Monetary Statistics of Indonesia] (2001-...). bps, Pendapatan Nasional [National Accounts] (1970-...). bps, Statistical Pocketbook of Indonesia (1956-...). bps, Statistik Indonesia [Statistical Yearbook of Indonesia] (1976-...). bps, Seri Statistik Pengankutan Kereta Api [Railway Transport Statstics] (1961-1972). bps, Statistik Angkutan Kereta Api [Railway Transport Statistics] (1981-1990). bps, Statistik Perhubungan [Transportation and Communication Statistics] (1998-...) bps, Statistik Perhubungan Udara [Air Transport Statistics] (1964-1969). cks, Korte Berichten voor Landbouw, Nijverheid en Handel [Short Reports on Agriculture, Manufacturing and Trade] (1910-1932).

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