Regional Disparity in West Kalimantan

Nurul Bariyah, and Ricky Rinaldi Octavian

Department of Economics and Development Study, Universitas Tanjungpura Pontianak,

78124, Indonesia

Abstract. This study analyzes disparity between coastal region, inland region

and border region and disparity between districts as members of each region. To

assess the disparity phenomena the Theil index formula is used. GDP per capita

for this study is collected from Statistic Office Kalimantan Barat. Period of

study is 2008-2016 and the number of District is 9 (nine). The use of Theil

Index has some advantages: First, this index can calculate disparities within and

between regions simultaneously; and second, the results can provide important

policy implications. The Theil index value runs from 0 (zero) to 1. Where the

index is close to 0 (zero) the regional disparities is very low, in other words the

development is relatively even. However higher between-region disparities

compared to within regions disparities provide proof of relative inequality

between coastal region, inland region and border region. Less serious problem

of disparity occurs within each region. Region with high concentration of

economic activities tend to grow faster, while region with low concentration of

economic activities tend to have lower levels of development and economic

growth. As implication of the findings, development strategy should also

consider other factors such as concentration of economic activity in each region

in order to reduce disparity.

Keywords: Regional disparity ꞏ Theil index ꞏ Border region ꞏ Coastal region ꞏ

Inland region

1 Introduction

Administratively, West Kalimantan Province consists of 12 Districts and 2 Cities.

Four of those Districts are in the coastal region (bordering the sea), 3 in the Inland

region, 5 together in the border region, and the 2 Cities are located in the coastal

region. Districts included in the coastal region are Mempawah, Ketapang, Kayong

Utara, and Kubu Raya; Districts in the Inland region are Landak, Sekadau, and

Melawi; while Districts in the border region are Sanggau, Kapuas Hulu, Sambas,

Sintang, and Bengkayang; while Singkawang City and Pontianak City are two

coastal cities of West Kalimantan.

Each of these regions has different cultural characteristics, infrastructure needs,

natural resources, and special treatment from the central government. Because of its

more open geographical location which facilitates relations to the outside world, the

coastal region has relatively more access to development compared to areas located

in the Inland. Another advantage of the coastal region is mentioned in the Law of

the Republic of Indonesia Number 32 Year 2004 on Regional Government, Article

260

Bariyah, N. and Octavian, R.

Regional Disparity in West Kalimantan.

DOI: 10.5220/0009854800002900

In Proceedings of the 20th Malaysia Indonesia International Conference on Economics, Management and Accounting (MIICEMA 2019), pages 260-269

ISBN: 978-989-758-582-1; ISSN: 2655-9064

18 which states that "Regions that have sea areas are given the authority to manage

resources in the sea area." From the management of Natural Resources (SDA)

perspective, the coastal region receives profit sharing from the management of

natural resources under the bottom and / or on the seabed in accordance with laws

and regulations. This kind of opportunity is hardly available in Districts located in

the Inland region.

On the other hand, only 2 (two) of those 5 border Districts have official border

gates, namely Sanggau and Bengkayang. The other 3 border Districts namely

Sintang, Sambas, and Kapuas Hulu do not have such border gates, except Sintang

whose border gate is already under construction. Nevertheless, people along the

border line have been using informal border doors to transport people and goods

following ethnic and kinship ties established between people on both sides of the

border.

In 2002, Akita and Alisjahbana conducted a study on disparities in Indonesia

using the Theil index as a measure of development disparity between regions. Based

on this study, in the period 1993-1998, the highest inter-provincial index on the

island of Kalimantan was the province of West Kalimantan. West Kalimantan

province has Theil index totals ranging from 0.103 to 0.110, while Central

Kalimantan, South Kalimantan and East Kalimantan Provinces in the same period

had total Theil index below 0.069. With reference to the indicators set by the World

Bank in Inscription (2006), the level of equality in the Province of West Kalimantan

has not shown a level of poor evenness, although it cannot be said to be too bad.

As explained earlier, regional disparity arises because of lack of equity in

economic development caused by a number of interrelated factors. Alisjahbana

(2005) suggested that one of the prominent disparity problems in Indonesia is the

concentration of economic activities in Java and Bali. The development of new

provinces since 2001 and decentralization is thought to have pushed disparities

between regions wider. At the provincial level, there are still significant disparities

in the interval between the 1990s and 2000.

2 Literature Review

2.1 Regional Economic Development and Economic Growth

Regional economic development is a process whereby the regional government and

its people manage existing resources and form partnership with the private sector to

create new job opportunity and stimulate development of economic activities

(economic growth) in the region (Arsyad, 2010). Economic growth is influenced by

four factors, namely population, number of capital goods, land area and natural wealth

and the technology used.

According to Adam Smith in Suryana (2000) economic development is a process

of integration between population growth and technological progress. Meier (in

Adisasmita, 2005) defines economic development as a process of increasing real

income per capita in a long period of time. The process leads to changes that occur

continuously through a series of combinations of processes in order to achieve

Regional Disparity in West Kalimantan

261

something better, namely an increase in per capita income that continues over the

long term.

Economic development cannot be separated from economic growth; economic

development encourages economic growth, and vice versa, economic growth

accelerates the process of economic development. Economic growth refers to an

increase in the value of everything produced in the economy, while economic

development is defined as an increase in the economic wealth of a region, for the

welfare of its population.

Regional economic growth that varies in intensity will cause economic disparities

in income and disparities between regions. Myrdal (1968) and Friedman (1976) state

that regional growth or development will lead to divergence. Therefore, equitable

development that is more oriented towards equitable economic growth, becomes a

very important strategic issue in determining the direction of economic development

in West Kalimantan going forward. The Solow growth model attempts to explain

long-run economic growth by looking at accumulation of capital, population growth,

and productivity increases.

Mankiw NG, Romer and Weil (1992) augmented the

model to include human as well as phisical capital and find that by holding population

growth and capital accumulation constant, countries converge at about the rate the

augmented Solow model predicts.

About the relationship between regional economic productivity and allocation of

central government spending Lee and Roger said that “economic productivity across

subnational regions as a factor explaining the level and allocation of central

government expenditure. As regional productivity becomes more dispersed, the

preferences influencing national decision making should diverge, thus impeding

agreement to expand the central state.“ So, regional government will expand

productivity potential as central government do not feel the need to target local

community.

2.2 Development Disparity

Development disparities come in different disguises, social, economic, political, and

cultural development. Yifan Ding wrote that “… large economic and social disparities

may lead to social instability, thus damaging economic development”. Therefore in

order to safeguard government sponsored regional development such disparity needs

to be remedied.

Information about development disparities in the European Union comes from

Postoiu and Busega who write that Solow (1956) posted a neoclassical paradigm that

“disparities tend to decrease as result of faster economic growth recorded by the

poorer countries”. On the other hand, Romer’s (1986) and Lucas's (1988) argue that

“inequalities are more likely to grow (endogenous growth theories)”. Krugman's

(1991) new geographical economics, or Myrdal's theory (1957), however suggests

that “economic growth is leveraged by a cumulative causation effect.” Quah's

analysis (1996) argues that “economic disparities arise because poor countries do not

have the same ability to implement new technologies as developed countries. That

will lead to more development gaps, dividing countries into "convergence clubs".

A study was conducted by Karimi, Yusof, and Hook (2010) to find out gap and

rank of regional disparities among major states during the Seventh and Eights

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262

Malaysian development Plan. They attempted to assess whether balanced regional

development which is one of the key objectives of Malaysian regional development

can be established. They used new methodology they called TOPSIS and Shannon

enthropy to do the ranking, and the analysis only showed small result in reducing

development gaps, where Wilayah Persekutuan Kuala Lumpur stays at the top and

Sabah stays at the bottom in term of achieved development.

Andhiani, Erfit, and Bhakti (2018) analyze regional economic growth and

inequality of development in the provinces of Sumatra using panel data and

regression analysis. The result shows that economic growth in the region of Sumatra

tend to decrease, whereas development inequality ranges from IW (Williamson Index)

0.406-0.446. The highest level of inequality occured in 2012 in South Sumatra

Province of 0.876 and the lowest occured in 2014 in Lampung Province in 0.103.

Based on the result of panel data regression, it is known that simultaneously

investment, government expenditure, agglomeration, and labor influence to economic

growth. Likewise, simultaneously investment, government spending, agglomeration,

and labor also have an effect on development inequality

The determinants of regional income disparity in Indonesia for the period of 1993-

2002 was investigated by Resosudarmo and Vidyattama (2006). Their findings

suggest that there is a conditional regional income per capita growth convergence, and

such growth is mainly determined by saving of physical capital, trade openness and

the contribution of the gas and oil sectors.

A study conducted by Siswanto et al. (2014) attempted to find out whether shifting

development toward the outskirt of urban area will affect economic and social disparity

of urban, peri-urban, and rural areas involved. The result shows that “urban and peri-

urban areas have medium and high level of social and economic disparity compare

with rural areas which have low levels of disparity”.

The effect of economic growth toward regional disparity was analyzed by

Kurniasih (2013) to prove whether the Kuznet hypothesis on inverted U curve is

applicable to West Kalimantan for the period of 2001 – 2010. She uses the Klasen

typology for classifying the regions. Her analysis finds that economic growth

influences disparity significantly but negatively. Higher economic growth is followed

by lower disparity. In other words Kuznet hypothesis about high economic growth is

followed by high disparity does not apply for West Kalimantan.

In seeing disparities between regions within a country or region is not easy. There

are times when people think that the inequality of an area is quite high after seeing

many poor groups in the area concerned or the presence of a handful of groups in the

midst of a generally poor community. In contrast to income distribution that looks at

inequality between community groups, development inequality between regions sees

differences between regions so that the issue is not between rich and poor groups but

the difference between developed and underdeveloped regions (Sjafrizal, 2008).

2.3 The Theil Index

Theil Index is an index that is widely used in calculating and analyzing regional

income distribution. The main character of this index is its ability to see the gap

between regional groups (between inequality) and inequalities within a regional group

(within inequality), according to Kuncoro (2001).

Regional Disparity in West Kalimantan

263

Theil Index uses the Gross Regional Domestic Product (GRDP) per capita as a

baseline. The reason is clear, because what is being compared is the level of

development between regions and not the level of prosperity between groups. The

values range from zero to one, where zero states that the distribution of GRDP by

constant prices is perfectly evenly distributed between groups of regions, whereas if it

is close to one it means that the distribution of GRDP by constant prices is not evenly

distributed between groups of regions. Theil entropy index which is getting bigger

indicates that inequality is getting bigger too, and vice versa, if the index gets smaller,

the inequality will get lower/smaller or in other words more evenly distributed.

The use of Theil Index as a measure of disparity or economic inequality between

regions has certain advantages, including:

1. Its nature is not sensitive to the scale of the area and is not affected by extreme

values.

2. Independent of the number of regions so that it can be used as a comparison of

different regional systems.

3. Can be decomposed into an index of inequality between groups and intra-

group regions simultaneously.

Theil Index is a static analysis used to measure income disparity by using a

measure of entropy from inequality. Theil's coefficient can be interpreted as the

logarithm of the weighted geometry average of regional per capita income which is

deflated by Etharina's national average per capita income (2005).

In addition to those mentioned earlier, Theil's index also has several other

advantages when compared to other disparity indices. These advantages are: (1) can

calculate inequality within regions and between regions simultaneously, so that the

scope of analysis is broader. In the case of Indonesia, using this method can be

calculated inequality within provinces and districts / cities and between provinces,

districts and cities, (2) can calculate the contribution (in percentages) of each region

to the imbalance of overall regional development so as to have policy implications

which is quite important (Sjafrizal; 2008).

3 Research Methodology

Judging from the purpose of this study which is pure research background theory

(theory gap) and empirical, namely research conducted to evaluate or develop a

theory or findings that already exist. Viewed from the relationship between variables,

it is an associative research on causality, which is research that aims to determine the

relationship or influence between two or more variables (Suliyanto, 2006). The data

used is a combination of quantitative and qualitative data. Qualitative data is used to

sharpen the discussion.

Development policies are usually based on the specificity of the region concerned

(endogenous development) by using the potential of human resources, institutions,

and physical resources locally (regional). Each region basically has a style of

economic growth that is different from one region to another. The difference in

growth was due to differences in the economic, social and physical character of the

region itself, including its interactions with other regions.

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The implementation of regional development in West Kalimantan Province, aimed

at the realization of economic growth and welfare of the community in accordance

with the third mission of the development of the Province of Kalimantan as set out in

the 2013-2018 West Kalimantan Regional Medium-Term Development Plan

(RPJMD), namely "Carry out equitable and balanced development in a sustainable

manner to reduce disparities between regions while taking into account ecological

aspects in the use of natural resources ".

Based on the theoretical foundation and empirical study, the following hypothesis

is formulated:

1. There has been a disparity in development between and within groups of

Districts in West Kalimantan Province, namely groups of Districts in the

coastal region, group of Districts in the inland region, and group of Districts in

the border region in West Kalimantan Province.

2. Inland district group have the highest disparity compared to coastal and border

district groups.

The data used in this study are secondary data obtained from the Central Statistics

Agency (BPS). This study uses panel data, which is a combination of times-series and

cross-sections. The number of individuals used is 9 Districts in the province of West

Kalimantan and within a period of 7 years (2010-2016).

Descriptive Analysis is an analysis conducted to assess the characteristics of a data

in this study. Descriptive analysis is a form of simple analysis that aims to describe

and facilitate the interpretation carried out by providing exposure in the form of

tables, graphs, and diagrams. This analysis provides a current overview of the

socioeconomic conditions of the districts in West Kalimantan Province.

The analysis technique used to measure development disparities between regions

in this study is the Theil index. The use of Theil index as a measure of disparity has

certain advantages. First, this index can calculate disparities within regions and

between regions simultaneously, so the scope of analysis is broader. Secondly, using

this index we can also calculate the contribution (in percentage) of each region to the

overall regional development disparity so that it can provide significant policy

implications (Sjafrizal, 2008).

This study uses the Theil index formula which is applied based on per capita

GRDP and population to analyze the level of economic disparity (GRDP per capita)

in Districts located in coastal region, Districts in inland region, and Districts in border

region in the province of West Kalimantan.

Theil index formulation (Td) as follows:

𝑇𝑑  











𝑦



/ 𝑌 𝑙𝑜𝑔 𝑙𝑜𝑔 𝑦



/ 𝑌/𝑛



/ 𝑁 

where:

Td = Theil Index

yij = GRDP per capita district i in the province j

Y = GRDP per capita province j

ij = total population of district i in the province j

N = total population of province j

Regional Disparity in West Kalimantan

265

Theil index coefficient (level of disparity) lies between 0 to 1, getting closer to

zero means that income disparity between districts / cities in West Kalimantan

Province is getting lower or in other words the GDP per capita is evenly distributed,

but if the Theil index coefficient is close to 1 (one) then the disparity in income

between districts / cities in West Kalimantan Province is higher and indicates the

unequal distribution of GDP per capita (Sjafrizal, 2008).

Calculation of Theil index in this study is the sum of Theil index between groups

and within groups with the following formula:

ITheil = I(between) + I (within)

where:

I(between) = level of disparity between groups in West Kalimantan Province

I(within) = level of disparity within groups in the Province of West

Kalimantan

Theil index within region in West Kalimantan Province can be searched by the

following formula:

𝐼









𝑦



/ 𝑌 𝑙𝑜𝑔 𝑙𝑜𝑔 𝑦



/ 𝑌/𝑛



/ 𝑁 

where:

I(within) = level of disparity within groups in the Province of West

Kalimantan

yij = GRDP per capita district i in the Province of West Kalimantan

Y = GRDP per capita of the Province of West Kalimantan

nij = total population of district i in the Province of West Kalimantan

N = total population of the Province of West Kalimantan

Theil index between region in West Kalimantan Province can be searched by the

following formula:

𝐼









𝑦



/ 𝑌 𝑙𝑜𝑔 𝑙𝑜𝑔 𝑦



/ 𝑌/𝑛



/ 𝑁 

where:

I(between) = level of disparity between groups in West Kalimantan Province

yij = GRDP per capita district i in the Province of West Kalimantan

Y = GRDP per capita of the Province of West Kalimantan

nij = total population of district i in the Province of West Kalimantan

N = total population of the Province of West Kalimantan

4 Result and Discussion

Analysis of the level of development disparity that occurs between Districts in the

three research areas in West Kalimantan Province was carried out using the Theil

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Entropy Index method. The disparity or inequality analyzed is in the form of

economic development disparity, which is reflected in the value of District GRDP in

the three regions studied, namely coastal region, inland region, and border region in

West Kalimantan Province. Theil Entropy Index Analysis is conducted to see

disparities that occur between regions (coastal, inland, and border regions) and

disparities within each of the three regions (between districts in each region).

In the period between 2008 and 2016, within region disparities in West

Kalimantan expressed in Theil Index fluctuated from year to year, ranging from

0.00118 to 0.00281, while disparities between groups ranges from 0.00623 to

0.01029. Disparity fluctuations expressed in the index are illustrated in Table 2.1 and

Graph 2.1 on the next page.

Tabel

Decomposition of Disparities in West Kalimantan Province.

Year 2008 -2016

WITHIN GROUP BETWEEN GROUP

TOTAL

THEIL

INDEX

CONTRIBUTION

(%)

THEIL

INDEX

CONTRIBUTION

(%)

2008 0.00155 19.536 0.00640 80.464 0.00795

2009 0.00150 18.407 0.00665 81.593 0.00815

2010 0.00118 15.882 0.00623 84.118 0.00740

2011 0.00271 20.877 0.01029 79.123 0.01300

2012 0.00276 21.712 0.00997 78.288 0.01273

2013 0.00281 22.164 0.00986 77.836 0.01267

2014 0.00260 20.529 0.01006 79.471 0.01266

2015 0.00219 18.258 0.00982 81.742 0.01201

2016 0.00193 16.369 0.00988 83.631 0.01181

AVERAGE 0.00214 19.304 0.00880 80.696 0.01093

Source: processed data

Viewed from the perspective of the Theil Index decomposition perspective, the

contribution between regions to disparity in the province of West Kalimantan in the

2008-2016 period was quite high, ranging from 77.836% - 84.118% with an average

contribution of 80.669%, while the contribution within group of the total regional

disparity in West Kalimantan Province in the period 2008 - 2016 only ranges from

15.882% to 22.164% with an average contribution of 19.304%.

In general, the Theil index value for within group, between group and total index

approaching 0 indicates that regional disparity in West Kalimantan Province is very

low, in other words its development is relatively evenly distributed. Disparity between

groups (between groups) is higher compared to disparities within groups (within

groups) due to differences in several factors. The main cause is the factors of

economic development which are quite different from one region to another. High

concentrations of economic activity in certain regions tend to grow faster, whereas

regions with a low level of concentration of economic activity will tend to have lower

levels of development and economic growth.

Regional Disparity in West Kalimantan

267

Fig.

Decomposition of Disparities in West Kalimantan Province. Year 2008 -2016

5 Conclusion & Recomendation

5.1 Conclusion

1. Between 2008 and 2016, there has been a disparity in development between

regions (coastal, inland, and border regions) and disparity within each of the

region (between districts falling under each region) in West Kalimantan.

2. In general, the Theil index value for within regions, between regions, and total

indexes that are close to 0 indicates that regional disparity in West Kalimantan

Province is very low, in other words its development is relatively evenly

distributed.

3. Disparities expressed in the Theil Index in regions (within regionss) fluctuate from

year to year, and the magnitude is relatively low compared to disparities between

regions. In other words the contribution of disparity between regions is greater

towards the disparity of the Province.

4. Although the difference is not significant, compared to districts in the other two

regions, districts in the interior have relatively higher disparities. Geographical

factors where their location is more isolated to economic access than the other two

regions affect this condition.

5. Even if seen from Theil's low index, it can be seen that development in coastal

districts, inland districts, and border districts in West Kalimantan Province is

relatively evenly distributed, but if seen from the development components, for

example the Index Human Development and its components, the numbers are still

quite alarming, especially those related to educational issues

5.2 Recomendation

1. Although the level of disparity in West Kalimantan Province is relatively good,

local governments need to pay attention to the problem of disparity through a

spatial or regional approach.

0,005

0,01

0,015

0,02

0,025

0,03

2008 2009 2010 2011 2012 2013 2014 2015 2016

BETWEEN

WITHIN

TOTAL

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268

2. Related to improving the quality of life, local governments need to improve

policies aimed at improving human development such as the quality of education

and health for the community.

3. Development Programs that aim to improve existing human resources, especially in

the fields of education, health and economic improvement of the community, such

as functional literacy programs, Special Assistance for Poor Students (BKSM),

Jamkesda, service improvement at puskesmas and posyandu, and business

improvement in the agriculture and SME sectors, needs to be further improved.

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