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Is South Sulawesi a Center of Growth in Eastern Indonesia? Japanese ODA Strategy Revisited

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  • Kazushi Takahashi

Abstract

Japanese ODA, especially that undertaken by JICA, has targeted South Sulawesi Province as a core area of development in eastern Indonesia, with hope that the economic growth of South Sulawesi will bring about spillover effects in other regions. This paper tests the validity of the strategy using a framework of Vector Autoregressive model. The results show that South Sulawesi’s economy Granger causes other regions in eastern Indonesia, but not vice versa, implying that South Sulawesi drives the development of other regions in eastern Indonesia. Further analysis shows that the development of the agricultural sector in South Sulawesi potentially has the highest spillover effects than other sectors and that the magnitude of spillover effect from South Sulawesi on eastern Indonesia is higher than other economically important regions, such as Eastern Java and Kalimantan.

Suggested Citation

  • Kazushi Takahashi, 2009. "Is South Sulawesi a Center of Growth in Eastern Indonesia? Japanese ODA Strategy Revisited," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 57, pages 203-218, August.
    • Handle: RePEc:lpe:efijnl:200910
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    Keywords

    spillover effect; vector autoregressive; regional disparity; Indonesia;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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