#1NATURAM PRIMUM COGNOSCERE RERUM Development in Papua after Special Autonomy MalkovaPORT Australian National UNIVERSITAS University CENDERAWASIH Budy P. Resosudarmo Julius Ary Mollet Hans Kaiwai Umbu Reku Raya#2Tambrauw Raja Ampat, Sorong City Manokwari Manokwari Sorong Maybra Kapeso Air Field Papua and West Papua Wondama Biak Numfor Supiori 2001: Special autonomy 2003: provincial Jayawijaya South Sorong Teluk Bintuni West Teluk Kepulauan Yapen Central Mamberamo split Mamberamo Raya Sarm Jayapura City Papua Waropen Jayapura Puncak Jaya Fak-fak Kaimana Nabire Nabira Keerom Intan Jaya Mulia Tolikara Pania Puncak Yalimo Dogiyal Delyal Lanny Jaya Wamena Pegunungan Mimika Timika Nduga Bintang Yahukimo Maluku Asmat Grasberg Mine Banda Sea Boven Digul Mappi Papua PAPUA NEW GUINEA Source Notional Statistic Office ( 0 200 km Credit: Cartography Australian National University Merauke Merauke#3In general: - Summary development in the island of Papua is progressing However: - (1) Papua's economy after the provincial split has been stagnant, (2) poverty in rural areas is still high, (3) other welfare indicators also show that development challenges are still immense Possible explanations: Issue 1: Heavy reliance on NR → other sectors grew slowly (Manning & Rumbiak, 1989) When NR drops, the economy is affected Issues 2 & 3: besides the initial condition High population growth in rural areas Fundamental: low level of education and infrastructure and health facilities (Mollet, 2007) Fiscal effectiveness (Resosudarmo et al., 2009) Urban bias development (Manning & Rumbiak, 1989) Effective targeting EYE#4Long-term look at the economy 450 . . . . 400 350 300 250 200 150 100 50 Both Papua Both Papua no mining, oil-gas mnf -Indonesia ....Indonesia no mining, oil-gas mnf Special autonomy Provincial split GDP and GDP w/o mining and oil-gas industries grew at least by a similar amount to Indonesia GDP grew a bit slower after regional autonomy, but still at least equal to that of Indonesia → The economy of the island seems to be growing relatively well 0 1993 1995 1997 1999 2001 2003 2005 GDP and GDP w/o mining and oil-gas industries are indexed at 100 in 1993 2007 2009 2011#5% Special autonomy Poverty -Papua West Papua Indonesia Proportion of poor people declined both in Papua and West Papua It declined faster than the national level But still more than twice the national figure 60 60 50 50 40 40 30 30 20 20 10 10 1999 2000 2001 2002 2003 Provincial split 2004 2005 2006 2007 2008 2009 2010 2011 2012 0#6Budget Regional government (planned/actual) expenditure per capita in both Papua and West Papua has been relatively high compared with other regions →Size of government budget seems to be comparatively fine → Need to be higher than other regions: could be due to difficult geographical conditions Papua West Papua Maluku Sulawesi Kalimantan Nusa Tenggara Java-Bali w/o Jakarta Sumatra Rp million 02468 10 12 14 2007 (Planned) 2007 (Actual) 2011 (Planned) 2011 (Actual)#7350 300 250 200 150 100 50 0 Issue 1: After the split Papua-GDP Papua-GDP per capita West Papua-GDP ....W Papua-GDP per capita While West Papua's GDP showed rapid growth, Papua's GDP did not GDP per capita grew slower than GDP; in Papua, it grew negatively → Economic growth is dominated by the growth of West Papua → Population grew faster than the economy 2003 2004 2005 2006 2007 2008 2009 2010 2011 GDP and GDP per capita are indexed at 100 in 2003 2012#8Issue 2: Rural poverty The poverty rate in urban areas has been much lower than the national average Though declining, the poverty rate in rural areas is still much higher than 60 50 50 50 40 40 % 2006 2008 2012 I 2010 the national average 30 30 Indonesia-Rural (2012) Reducing the poverty rate in rural areas is the main challenge of the poverty alleviation program in Papua and West Papua 20 20 10 0 Indonesia-Urban (2012) WPapua-Urban Papua-Urban WPapua-Rural Papua-Rural#9Issue 3: Health indicators Rates of TB and Malaria 250 Papua and West Papua, TB cases per 100,000 persons (2010) though falling, are still the highest in the country persons (2010) 200 Rate of cumulative AIDS increased 150 I Malaria cases per 1,000 I Cumulative AIDS per 100,000 persons (2011) I Child mortality per 1,000 children (2010) But this is not the case 100 regarding child mortality rates* → Other welfare indicators show that development challenges in Papua are still immense, but there is progress 50 Sumatra Java-Bali Nusa Tenggara Kalimantan Sulawesi Maluku West Papua Papua#10Structure of the economy The economies of both Papua and West Papua are both dominated by natural resource extraction industries: - Mining (Freeport) ⇒ 47% of Papua's economy (2012) Natural gas (BP) ⇒ 54% of West Papua's economy (2012) Several issues with natural resource extractive industries: - - When revenue from these industries decline, the economy is heavily affected Limited leakage to general public Less incentive to develop other industries In both provinces, agriculture (food crop) has been the second most important sector (+/- 12.5%) Followed by construction and government services#1100 8 7 6 5 4 3 2 1 $ billion Freeport sales 2005 2006 2007 2008 2009 2010 2011 2012 Copper Gold Silver Total Freeport sales are still relatively high but have declined in the last few years This is the main reason for the decline in Papua's exports in the last few years#12Expenditure growth Private and government consumption as well as Papua capital formation grew West Papua positively 1993-2001 2003-2012 2003-2012 Decline in mineral exports Private Consumption 8.7 9.4 7.7 is the main reason for Government economic stagnation in 11.6 14.5 11.6 Consumption Papua province Fixed Capital Formation 9.1 12.7 6.1 Change in Stocks 13.0 35.7 18.8 Exports 12.8 -9.7 15.2 Imports 12.1 5.9 7.5#13• Rural population Population grew by as much as 4.9% annually (Papua and West Papua: 2000-2010) This is 3 times the national figure Migrant population grew more than non-migrant (6.7% vs 4.5%) - Migrant population is approx. 22% of the population (2010) Rural population grew by as much as 5%, while urban population by 4.6% → fast growing rural population#14Education facilities In general, non-migrants are less well educated than migrants Non Recent Lifetime migrant migrant migrant Among those Approximately 50% of 100% 15+ year old non-migrants in Papua and West Papua either 80% have not completed elementary school or only 60% finished elementary school 40% Diploma and above Senior Secondary Junior Secondary Primary I Less than primary Note non-migrant is still the majority in Papua and West Papua 20% → Indicating low level of education facilities; → in particular in rural areas 0% W Papua W Papua W Papua Papua Papua Papua#15Infrastructure: Electricity 700 kWh/person 600 500 400 300 200 100 Electricity use per person 2004 in Papua and West Papua has been relatively low 2010 Sumatra Kalimantan-Sulawesi Java w/o Jakarta-Tangerang Bali-Nusa Tenggara-Maluku Papua and West Papua compared with other islands Its growth is lower than other islands Infrastructure for economic development is relatively limited in Papua and West Papua → Particularly in rural areas 0#16Government expenditure Proportion of spending on general services is relatively higher than the national average (53% vs 33% in 2010) Education budget is relatively lower than the national average - 13% for Papua and 10% for West Papua vs 30% at the national average (2010) Health budget Is quite comparable with the national average, but low - 5% for W Papua and 8% for Papua (2010) Though the social protection budget is already higher than that of the national average, it needs to be higher - Approx. 2 % in both Papua and West Papua (2010) KANTUR REVUR PROWSI PAPLA#17Urban agglomeration In Papua, economic growth has mostly been in Jayapura and surrounding areas Growth of GDP Growth of GDP per HH GDP per capita capita 2003-2011 2003-2011 2011 Expenditure per capita 2011 (Rp (% annually) (% annually) 000/year) (Rp 000/year) West Papua On a per capita basis, Sorong Greater 4.6 2.0 36,209 8,450 rural Papua grew Area* Manokwari district 8.7 5.3 18,049 8,128 negatively Teluk Bintuni district 39.5 33.6 298,731 11,555 Welfare in Jayapura, Other districts 8.7 5.2 22,880 6,634 Sorong, Manokwari and Papua Merauke (all having a Jayapura Greater 12.0 8.3 31,050 9,960 large urban area) is better Area* Mimika district -7.1 -12.0 239,083 10,354 than in other districts without rich natural Merauke district 6.9 4.8 21,234 7,135 resources Other districts 5.8 -4.5 7,035 5,315 Greater area = kabupaten + kota#18% Distributional growth of expenditure 12 Poor 10 8 6 4 2 2008-2012 Rich Average annual growth per capita household expenditure for each percentile from 2008 to 2012 shows that the richer the household the greater the increase in household expenditure → Worsening income. distribution → Indication of the need for better targeting 0 1 15 29 43 57 71 85 99 -Poly. (Indonesia) •Poly. (Papua & West Papua)#19Born in Papua/West Papua Average annual per capita household expenditure for each percentile from 2011 to 2012 shows that those not born in Papua/ W Papua experience higher expenditure growth But very poor people not born in Papua/W Papua experience the lowest expenditure growth → The need to target Papuans → and the very poor non- Papuan 30 Poor 25 20 10 15 5 Х 2011-2012 0 1 15 29 43 57 71 85 85 -Poly. (Born in Papua/W Papua) Poly. (Born outside Papua/W Papua) Rich 99#20Final remarks Issue 1: Reducing reliance on NR by promoting development in other sectors, particularly the agricultural sector, should be considered Issues 2 & 3: Population growth control is needed, particularly in rural areas Human quality needs to be vastly improved; in particular attention to improving education and health facilities for local Papuans in rural areas is important Continue to improve infrastructure including ensuring good connectivity within the province and with other provinces Fiscal effectiveness to target development in rural areas; might need greater budget spending in rural areas targeted to the poor Might need to ensure participation of local Papuans in economic activities; however, any affirmative action that might create a disincentive among Papuans to be more competitive should be avoided