Impact of Sei Mangkei SEZ in Perspective Rural-urban Linkages and

Sustainability Development in Simalungun Regency

Anggiat Sinurat

, Marlon Sihombing

, H. B.Tarmizi

, Chairul Muluk

Doctoral Program Student at Regional Planning Study Program, Graduate School, University of Sumatera Utara Jl. Prof.

Faculty (School) of Economic, University of Simalungun Pematangsiantar (USI) Jl. Sisingamangaraja Barat

Pematangsiantar Indonesia - Postal Code 21137

Faculty (School) of Social and Political Science, University of Sumatera Utara (USU) Jl. Dr.A. Sofian No. 1 Medan-

Indonesia – Postal Code 20155 (mrlnsihombing@gmail.com)

Faculty (School) of Economic and Business, University of Sumatera Utara (USU) Jl. Prof.TM Hanafiah SH No.12 Medan-

Indonesia – Postal Code 20155 (hb.tarmizi@yahoo.com)

Board of Trustee, University of Sumatera Utara (USU) Jl. Dr. Mansyur Medan-Indonesia-Postal Code 20155

(chairulm@gmail.com)

Keywords: Sei Mangkei SEZ, rural-urban linkage, sustainability development.

Abstract : This study aims to determine and analyze the impact of the development of the Special Economic Zone

(SEZ) of Sei Mangkei in the perspective of rural-urban linkages in increasing the income of the community

in Simalungun Regency-North Sumatra-Indonesia. The result of this research concludes that there are

positive and significant differences of income of society before and after development of Sei Mangkei SEZ

agroindustry in Simalungun District; This research recommends to the Government of Simalungun Regency

to be more proactive in taking policy in order to have the relevant of regional development policy related to

Sei Mangkei SEZ, because it will have an impact on improving people's prosperity seen from income

indicator, absorbing unemployment, and growth of business unit of the surrounding community due to the

increase of demand for agricultural inputs required in industrial operations in Sei Mangkei SEZ as well as

due to the broader multyplier effect of SEZ as growth-pole.

1 INTRODUCTION

1.1 Problem Statement

Some basic principles underlying the development

of the region are as growth center, as well as spread

effect that can be generated growth for the

surrounding area, even nationally. In Indonesia, the

Sei Mangkei SEZ agroindustry development policy

has the objectives of: national economic

development based on economic democracy with the

principles of togetherness, fair efficiency,

sustainability, environmental insight, independence,

and by maintaining the balance of progress and

national economic unity; maximize industrial

activities, exports, imports, and other economic

activities that have high economic value; accelerate

regional development; as a breakthrough model of

regional development for economic growth; and can

create jobs. The realization of the development

policy of oil palm agro industry in North Sumatera

Province is SEZ of Sei Mangkei Development as

expansion of Palm Oil industry in increasing the

value added of high quality products exported by

Perkebunan Nusantara III Co. Ltd. The project

requires space for an industrial site covering an area

of 2002.77 hectares. The investment that goes to Sei

Mangkei SEZ in 2013-2017 amounts to 5.10 trillion

IDR for infrastructure and factory development,

designed to accommodate more than 200 world-

class industrial units that are significant for the

realization of Indonesia's competitiveness into the

future. The development of the Special Sei Mangkei

Economic Zone is based on the advantages of

location factors which can give the optimum profit

position as close to primary input. The general

theory of Losch (1954) to show how economic

activity must be organized in a space. Sirojuzilam

(2011), in many industries, the question is: if the

peasants begin to produce a surplus of various

Sinurat, A., Sihombing, M., Tarmizi, H. and Muluk, C.

Impact of Sei Mangkei SEZ in Perspective Rural-urban Linkages and Sustainability Development in Simalungun Regency.

DOI: 10.5220/0009897200002480

In Proceedings of the International Conference on Natural Resources and Sustainable Development (ICNRSD 2018), pages 38-44

ISBN: 978-989-758-543-2

commodities, spatial economic patterns will

constitute a sense of balance. The project is

supported by investment allocation, granting of

fiscal and non-fiscal facilities by the Indonesian

government.

Production of small holder palm oil

plantations, increased compared to the previous

year. Statistical Central Bureau of Simalungun

Regency noted that in 2016, Palm oil production

increased to 10,749,068.32 tons in 2016, up from

2015 with a total production of 539,728.02 tons.

However, the land area in 2016 decreased to

29,142.90 hectares, from the year before 29,251.81

hectares.

1.2 Research Questions

What is the impact of Sei Mangkei SEZ

development in the perspective of rural-urban

interrelationship in increasing income, employment

and development of community business units in

Simalungun Regency?. This study aims to determine

and analyze the impacts before and after the

development of the SEZ of Sei Mangkei in the

perspective of rural-urban interrelationship in

increasing the income of the community. The results

of this study are expected to provide practical

benefits to the government and decision makers

where the direction of development programs that

will be planned to create an optimal agroindustry

linkages in the perspective of sustainable

development.

2 LITERATURE REVIEW

2.1 Sustainable Development

Sustainability can be interpreted as "keeping things

going", "the ability to survive and keep them from

degenerating". In the context of agriculture,

sustainability remains productive while maintaining

a resource base. Accommodating the meaning of

development to a value system is not something that

can be easily solved. Some illustrations, to explain

the shared dilemma of society, in relation to the

evolving value system, in interpreting development

through a measure of national income, are: Increased

income (total or per capita) other than indirectly

identical to a well-regarded distribution, nor

indirectly economic welfare, comfort, and

maintaining harmonious social relationships

according to the community value system.

Development in Indonesia in the past which

emphasizes on economic growth has negatively

impacted the sustainability of natural resources and

environment. To maintain the sustainability of future

development, reorientation of development

paradigm in terms of direction, strategy and policy

(Septana, 2007) is needed.

The World Bank's sustainable development

paradigm is translated into an environmentally

sustainable development triangle based on

economic, ecological and social sustainability.

Economically sustainable means that a development

activity must be capable of generating economic

growth, capital maintenance, efficient use of

resources, and investment. Serageldin (1996) in

Dahuri (1998), ecologically sustainable means that

the activity is capable of maintaining ecosystem

integrity, maintaining environmental carrying

capacity, and conserving natural resources including

biodiversity. Social sustainability means that

development can create equity of development

outcomes, social mobility, social cohesion,

community participation, community empowerment,

social identity, and institutional development. Putra

at all (2013), how efforts to align various aspects of

interest while maintaining environmental

sustainability are challenges in realizing sustainable

agricultural development. Furthermore,

Djojohadikusumo in Sri (2010), also says that

economic development in the sense of progress does

not merely mean increasing production and

increasing per capita productivity as the numbers are

flat. Development should mean the progress of

society entirely. So development must be able to

bring society from a static state to a dynamic

development that encompasses all spheres of life.

Mosher (1966) mention that agricultural

development is an integral part of economic

development and society in general. Many people

use broader definitions and assess development to be

sustainable if they include: ecologically sound,

sustainable economically, justly, humane, and

flexible.

2.2 Regional Concept and Regional

Development

Repubilic of Indonesia Law Number 26 of 2007,

provides a definition of region as a space that is a

geographical unity along with all related elements

whose limits and systems are determined on the

basis of administrative and / or functional aspects.

Rustiadi (2007) to acomadate the term region based

on the context of discussion, dad, emphasis and

Impact of Sei Mangkei SEZ in Perspective Rural-urban Linkages and Sustainability Development in Simalungun Regency



function. However, theoretically, there is no

nomenclature difference between the terms region,

region and region. In general all can be termed

territory. Budiharsono (2005) divides the area into 4

types, are homogeneous territory, nodal area,

administrative area, and planning area. Regional

development is sectoral development in a region

with the aim of not only spurring and growing the

region (rural), but also the surrounding area (urban).

Furthermore Riyadi (2002), said the development of

the region is an effort to spur socio-economic

development, reduce the gap between regions, and

maintain environmental sustainability in a region.

Hadjisaroso (1994). regional development is an act

of developing the territory or build areas or regions

in order to improve the welfare of the people.

Tarigan (2004), regional development can be

measured from several parameters, among others,

the increase of public income, increase of

employment, income distribution.

2.3 Rural - Urban Linkages

Hirshman (1958) was the first economist to operate

the concept of linkage that describes the relationship

between the linkage with economic development.

Investment plays a dominant role in economic

development as a capacity creator, income

stimulator, and foundation layers to increase

investment. True to that opinion, Simanjorang (2010,

167) said, in the framework of regional development,

investment is one variable that is very decisive and

can encourage economic growth of a region.

While Markusen in Kuncoro (2002, 24) states

that agglomeration is a "non-volatile" site due to

external savings. Agglomeration is a concentration

of spatial economic and population activity that

arises from the savings generated by adjacent

locations. The Polar Theory of Growth by Perroux

(1955) in Arsyad (1999) and became the basis of

regional industrial policy development strategies that

are widely applied in various countries today. The

essence of this theory is: In the process of

development will arise superior industry which is the

main driving industry in the development of an area.

Centralization of industry in an area will accelerate

economic growth. The economy is a combination of

a relatively active industrial system with a relatively

passive industry that is dependent on industry-

leading industries or growth centers. Furthermore,

Adisasmita (2005), the growth process is consistent

with the economic space theory, in which the driving

industry is considered a starting point and an

essential element for subsequent development.

The economic structure of a country shifts

from agriculture/mining to non-primary sectors,

especially industries. Chenery (1975), says that

when percapita income is still low, most of the

income comes from the agricultural sector (primary),

as income increases the contribution of the

agricultural sector decreases. This is indicated by the

declining agricultural curve in line with rising per

capita income. In contrast, the contribution of the

industrial (secondary) and tertiary (or tertiary)

sectors increased in line with the increase in per

capita income.

Sihaloho (2013), the establishment of SEZ in

some areas is expected to bring benefits in terms of

increased investment, employment, foreign

exchange earnings, competitive advantages of export

products, increasing the utilization of local

resources, services and capital for increasing

exports, and encouraging the improvement of the

quality of human resources through the transfer of

technology . These objectives, in line with the

government's vision to improve the economy and

equity nationally and create strong economic

fundamentals, both macro and micro, even

nationally and regionally.

2.4 Backward and Forward Linkages

Soekartawi (1995), agroindustry is part of

agribusiness activities, where agroindustry is the

processing activities of agricultural commodities. If

agriculture is defined as a business that produces

agricultural commodities at the primary level, then

its relation to industry can be backward linkage or

forward linkage. The integration of economic

development will be realized through the inter-

sectoral economic linkage. Syafrizal (2015), if the

inter-sectoral economic linkage is high enough, this

means that development linkages will also be good

enough. Therefore, to realize integrated

development, priority is given to sectors with high

inter-sectoral and vice versa. Any change in the final

demand of the sector will result in a change in the

output of that sector and will also result in changes

in demand and output in other sectors or to all

sectors in the economy. Backward circumference or

pull factor because it is attractive to the sectors in

the upstream to grow. Forward linkage is

encouraging the growth of downstream sectors due

to increased inputs provided by the upstream sector.

So its nature is upstream encouragement in the

future. This means changes in all downstream

sectors that make upstream a sector to flourish

(Tarigan, 2004: 103-107).

ICNRSD 2018 - International Conference on Natural Resources and Sustainable Development

2.5 Overview of Sei Mangkei SEZ

In Government Republic of Indonesia Regulation

Number 29 of 2012 on Special Economic Zones Sei

Mangkei write, in order to accelerate economic

development in the region of Simalungun, North

Sumatra Province and to support the acceleration

and expansion of national economic development, it

is deemed necessary to develop the Sei Mangkei

area as a special economic area. The Law of the

Republic of Indonesia Number 39 of 2009 regarding

SEZ concerning the consideration of SEZ

development mentioned that to accelerate economic

development in certain area which is strategic for

national economic development and to maintain

balance of progress of a region in national economic

unity, it is necessary to develop SEZ. In line with

that, the Government of Indonesia issued a policy

related to the development of SEZ, namely the

Economic Policy Package Volume VI to show the

seriousness of the government to reform the

economy, dated November 5, 2015 which also

regulates efforts to move the economy in the

periphery with the development of Special

Economic Zone (http://ksp.go.id/ini-paket-

kebijakan-ekonomi-jilid-6/).

It has been described in the previous section

that one of SEZ's development strategies is to attract

investment. The investment that goes to SEZ Sei

Mangkei is in the form of investment of Indonesian

government, State Owned Enterprise and Private

Investment. Total Realization of investments coming

into Sei Mangkei SEZ at year ended 2013 - 2017 of

Rp 5.10 trillion,-. The number of workers working in

Sei Mangkei SEZ and industries located in the

region in 2017 is 783 people. In addition, there are

workers who work not full time, as mechanical and

mantainance, janitor, and cafeteria officers who are

not recorded entirely

3 RESEARCH METHODOLOGY

The location of the research is the region Sei

Mangkei SEZ and 4 subdistricts of the area covering:

Bosar Maligas, Bandar, Hutabayu Raja and Ujung

Padang as describe in fegure 1. This research

includes quantitative research. This quantitative

approach departs from the data to then be processed

into useful information (Kuncoro, 2001). According

to the method, this research includes descriptive

research. Work model in this research use deductive

thinking pattern toward inductive.

Figure 1: The Map of Sei Mangkei SEZ Location in Bosar

Maligas of Simalungun Regency, 2017.

The data required in this study are primary and

secondary data. Data collection techniques used are

field research and library research. The population

of this research is all the people in the 4 sub-districts

mentioned above as many as 180,559 people, the

sample size is calculated by Taro Yamane formula

in Nasir (1998) so that the sample is 100 people

drawn purposively sampling. To analyze SEZ of Sei

Mangkei's impact on socio-economic aspect in the

area around Sei Mangkei SEZ was analyzed by

Linear Regression Equation and Pearson correlation.

Furthermore, to the problem of research solved, used

by Paired Sampel Test, because the independent

variables are 2 categorized, the statistical test used is

the t-test differentiation (the difference test is the

average of two samples) using the formula (Ghozali,

2013), as shown below:

(1)

Where: X

= average of income, employment, and growth

of business unit, ie condition of income, employment, and

growth of business unit of society after SEZ Sei Mangkei.

= average income, employment, and growth of business

unit, ie condition of income, employment, and growth of

community business unit, prior to SEZ Sei Mangkei. S

= first sample deviation standard; S

= second sample

deviation standard; n

, n

= first and second sample size.

Furthermore, t-count is compared with t-table value

at α = 0,05, with decision making criterion:

significant if t count> t table or if significance value

<α = 0.05. To answer the problem that is to know

the public response to the existence of Sei Mangkei

SEZ used Chi Square Test (X

), with the formula

(Priyatno, 2010) as shown below:

(2)



































2121

2nn

1)(nS1)(nS

Impact of Sei Mangkei SEZ in Perspective Rural-urban Linkages and Sustainability Development in Simalungun Regency



Where: fo = number of observations; fh = number of

expected observations. Testing using significance level



0.05.

4 RESEARCH RESULT AND

DISCUSSION

4.1 Research Result

Based on the result of statistical data processor, using

SPPS 21 application to conduct Rank Spearmen

Regression analysis and calculate by Chi Kwadrat

obtained the result as which is described in the

following section. The impact of Sei Mangkei SEZ

existence in Simalungun Regency to the surrounding

area is seen from the income of community.

Impact on Community Revenue in the study sites

was analyzed using the mean difference test. To

know the significance of difference of income is

then analyzed by using paired sample test (t-test).

From descriptive statistic calculation, it is known

that the average value of community response after

Sei Mangkei SEZ is 22.17 with a standard deviation

of 2,429. The average value of community response

before Sei Mangkei SEZ was 22.28, with a standard

deviation of 2,644. Furthermore, the hypothesis

testing is based on the results of test the data, as

shown in the table 1.

Table 1: t-Test of Differences Income.

Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients

t Sig.

B Std.

Error

Beta

(Constant)

12.696 2.076 6.115 .000

Community

Revenue Before

SEZ Sei Mangkei

.531 .076 .578 7.004 .000

a. Dependent Variable: Community Revenue After SEZ Sei Mangkei

Source: Results of Data Processing SPSS 21, 2018.

The result of data analysis shows t

count

value of

6,115 with significance value 0,000 (0,000 < 0,05).

Then H

is rejected. It means that there is a

difference of people's income before and after Sei

Mangkei SEZ is significant. From the calculation of

descriptive statistic known the average value of

community response after SEZ Sei Mangkei is 27.07

with standard deviation 2.57123. Written in the form

of simple linear regression equation model Y =

12.70 + 0,58X. The value of the Pearson correlation

ratio of 0.578, as shown in the table 2, suggests that

earnings after SEZ Sei Mangkei have a positive

correlation to earnings after Sei Mangkei SEZ with

earnings before the SEZ.

Table 2: Correlation Coefficient Value of Pearson

Revenue Society.

Correlations

Model Community

Revenue

After Sei

Mangkei SEZ

Community

Revenue

Before

Sei Mangkei

SEZ

R Square

Community

Revenue After

Sei Mangkei

SEZ

Pearson

Correlation

1 .578

.334

(

2-tailed

)

.000

N 100 100

Community

Revenue Before

Sei Mangkei

SEZ

Pearson

Correlation

.578

(

2-tailed

)

.000

N 100 100

**. Correlation is si

nificant at the 0.01 level

(

2-tailed

)

Source: Results of Data Processing SPSS 21, 2018.

The value of R

count of 0.33 means the

increase in the income of the community 33.00

percent due to the SEZ of Sei Mangkei, while 77.00

percent more caused by other factors not discussed in

this study. The results of data analysis indicate that

there is a difference that there are differences in

income before and after Sei Mangkei SEZ positively

and significantly. If it is written in the form of a

simple linear regression equation model Y = 12.70 +

0.58X.

The results of this study are supported by

statistical data, namely Gross Regional Domestic

Product (GRDP) of Simalungun Regency in 2016

amounted to 30.19 trillion rupiahs according to

current prices, driven by all sector economic

activities where the agricultural sector is the largest

contibution of growth that reaches 2.75%.

Contribution of GRDP of Simalungun Regency is

mostly from Agricultural Sector, 50.99%. Lingga D.

and Pratomo, W. (2013) also said that in society's

perception, Sei Mangkei will improve the living

standard of the people around Bosar Maligas Sub-

district in the form of increasing people's income,

also in terms of the availability of social and

economic facilities and infrastructure. The results of

Sinurat's (2018) study also stated that Sei Mangkei's

SEZ agroindustry policy will increase income in

Simalungun Regency. It can be concluded that the

existence of Sei Mangkei SEZ has a positive impact

on the sorrounding area viewed from the aspect of

community revenue. With the increase of people's

income will improve the welfare and poverty

reduction.

ICNRSD 2018 - International Conference on Natural Resources and Sustainable Development

4.2 The Impact of Sei Mangkei SEZ

Agroindustry Development the

Rural-Urban Linkages and

Sustainable Development of

Simalungun Regency

Long-term well-being of the community is an

indication of sustainable development can also be

measured by poor population based on data of

National Social Economic Survey of 2016 is 92,19

thousand or 10.81% has decreased compared to

2015 reached 92.89 thousand people with poverty

line in 2016 amounting to Rp. 315.947. But when

viewed from the index of severity of poverty and the

index of severity of poverty actually increased. The

poverty depth index from 1.22 to 1.60 in 2016 and

the Poverty Severity Index from 0.26 to 0.40 by

2016, as shown in the table 3.

Table 3: Poverty Line and Poor People in Simalungun

District, 2014-2016.

Year Line of Poverty

(people)

Poor People

(000 people)

2014 274.867 86,25 10,20

2015 283.234 92,89 10,96

2016 315.947 92,19 10,81

Source: Simalungun District of Statistical Central Bureau, 2017.

The result of the research indicates that from

the socio-economic aspect, there is a positive and

significant impact on the income of the community

after Sei Mangkei SEZ agroindustry in Simalungun

Regency. From the results of research it is clear that

the relationship between SEZ Sei Mangkei as an

urban with the surrounding area as rural is

characteristic of two areas that have a mutual

relationship need. Economic impacts through

increased income in the surrounding areas are

certainly bringing economic prosperity, meaning

there is interdependence between industrial areas

and agricultural areas according to demand-supply

law. The competitiveness of export products must go

through production while maintaining the quality of

natural resources and the environment and the use of

labor that complies with the workers' basic human

rights required for a "green product" in the global

market. Thus economic, ecological, and social

sustainability must be met.

5 CONCLUSIONS

From the result of data analysis and discussion

formulated Conclusion and research recommendation

that there are difference positively and significant of

income of local community before and after

development of Sei Mangkei SEZ agroindustry in

Simalungun Regency. It is recommended to the

Government of Simalungun Regency to be more

proactive in taking policy in order to have the

connectivity of regional development policy related

to Sei Mangkei SEZ including controlling the

conversion of agricultural land because it will affect

the improvement of people's welfare in terms of

increasing income due to the increasing demand the

required inputs of industry in Sei Mangkei SEZ

sequential and broader multiplier effect as urban

fungcion of growth-pole.

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ICNRSD 2018 - International Conference on Natural Resources and Sustainable Development