DECOMPOSITION ANALYSIS OF THE TELECOMMUNICATIONS SECTOR IN INDONESIA: WHAT DOES THE CELLULAR ERA SHED LIGHT ON?

摘要

Indonesia is currently enjoying rapid development in the telecommunications sector despite theeconomy having been heavily dependent for almost four decades on the two largest sectors: themanufacturing industry and trade. The telecommunications sector has played an important role instimulating economic growth in the country during the last few years, with an annual growth rate higherthan that of other sectors. This contribution is supported to a great extent by the rapid diffusion oftelephony, in particular cellular telephony, as the number of subscribers increased from just 2.1 millionin 1999 to 170 million in 2011. Previous studies investigating the impact of the telecommunicationssector on the economy aggregate the impact of the sectors on GDP without further scrutiny of whatsources of growth telecommunications has contributed. Hence, an interesting question arises as towhether the achievement of cellular diffusion is also followed by structural change in thetelecommunications sector. That said, this study aims to decompose the output of telecommunicationsinto several sources of growth: domestic final demand, export effect, import substitution effect andtechnology coefficient effect. A particular interest in this study is to compare the source of growthconcerning domestic final demand and the technological coefficient effect. The main tool for analysis inthis study is the Input-Output (IO) method, while the time series of the investigation covers the period1975-2008, allowing comparison of structural changes in the telecommunications sector between thepre- and post-cellular eras. The study found that the coefficient multiplier of the telecommunicationssector, which was approximately 1.8 during the 1980s, had decreased to only 1.3 by the end of 2008.Consequently, the final demand from the telecommunications sector contributed less to economicoutput in the late 2000s compared to the impact in the 1980. Moreover, the cellular era that started inthe early 2000s also brought about a trend of changes in telecommunications output. While finaldemand remains very dominant, the technological coefficient effect has diminished as the source oftelecommunications output. This finding indicates a lower ability of the telecommunications sector tobuild an inter-industry relationship with other sectors. A possible explanation for this result is the cellularuses which are much less related to business activities than that of fixed telephony dating back to the1970s in Indonesia.