Decomposition analysis of the telecommunications sector in Indonesia: What does the cellular era shed some light on?

Other conference contribution, 2012

Indonesia is currently enjoying a rapid development in the telecommunications sector despite the economy havings been heavily dependent on the two largest sectors for almost four decades:s; manufacturing industry and trade. The telecommunications sector has undoubtedly shown that it has an important role in stimulating economic growth in Indonesia in since the last couple of years, with an annual growth rate higher than thatose of other sectors. This contribution is greatly supported to a great extent by thea rapid diffusion process of telephony, in particularly the cellular telephony, as the number of subscribers increased from just 2.1 million in 1999 to 170 million in 2011. This study aims toat measureing the contribution byof the telecommunications sector in driving economic output and to decomposeing the impact into several sources of growth:; the domestic final, export effect, import substitution effect and technology coefficient effect (Chenery, 1960; Skolka, 1989; Roy, Das & Chakraborty, 2002). The main methodology in this study is the Input-Output (IO) table. The table depicts the transaction flow across sectors, withere each sector producinges a certain output and, at the same time, consuminges the inputs from another sectors. The methodology captures theboth direct and indirect impacts of the sector due to the inter-relatedness between the industries (Yan, 1968; the United Nations, 1999; Miller & Blair, 2009). In addition, tThe time series of the investigation, also covers the period from 1980-2010, enablesallowing us to compare the impact analyseis during the pre- and post- cellular eras in Indonesia. The study found that the coefficient multiplier, which was approximatelyround 1.8 during the 1980’s, hads been decreased to only 1.3 by the end of 2008. Moreover, the cellular era that is started in the early 2000’s has brought about the trendency ofthat the changes inof output being has been predominantly generated byfrom domestic final demand rather than technological change effect. This finding indicates a lack of connection withof the telecommunications sector and, hence, the impact of the sector as a general- purpose of technology becomes has decreasedsmaller.