"Infrastructure plays an important role in improving economic growth and higher economic growth in areas with more adequate infrastructure" World Bank, 1994
Economic stretch of a region is strongly influenced by the infrastructure and quality of human resources owned. The availability of physical capital is closely related to the availability of capital formation funds. In the 1994 World Bank publication, infrastructure plays an important role in boosting economic growth and higher economic growth in areas with more adequate infrastructure availability. Research in various countries concludes that in general infrastructure development programs are targeted at increasing basic needs and human connectivity such as water, electricity, energy and buildings.
Solow Model
In general, researchers often use the solow model in determining the influence between economic growth with physical capital and human resources. The greater the value of physical capital, the greater the value of economic growth to be achieved by the region by assuming the value of the work in the area is constant.
The recent phenomenon, the performance of economic growth in Central Sulawesi is above the national average. Stronger improvements in economic fundamentals along with improved macroeconomic and macroeconomic performance boosted the economic growth rate of Central Sulawesi to above the national average.
In 2012-2016, the value of economic growth in Central Sulawesi are 9.53%, 9.59%, 5.07%, 15.56% and 9.98% respectively. The growth value is far above the national economic average which ranges from 4-6 percent. Conducive situation has encouraged various parties to invest capital goods that are useful for the manufacture of economic goods in Central Sulawesi. This is seen from the growth value of PMTB Central Sulawesi which is always above 14 percent in 2011-2015. Formation of fixed capital formed in line with the level of economic growth that occurred in Central Sulawesi.
Given the structure of the economic growth rate of Central Sulawesi in 2016, the construction and manufacturing sectors play a significant role in the formation of Central Sulawesi GRDP with contribution of 24.74 percent. Both sectors are closely related to the formation of fixed capital both buildings and non-buildings. The manufacturing sector needs machinery in the production process. In terms of Gross Domestic Product (GDRP), the Gross Fixed Capital Formation (PMTB) sector is dominant with contribution value above one third of GDP of Central Sulawesi Province. This reinforces the importance of the PMTB sector in the Central Sulawesi economy.
ICOR 2017
The vital sector of PMTB in the structure of the Central Sulawesi economy becomes a matter of concern in decision making. The ups and downs of the performance of the PMTB sector have a significant effect on maintaining the economic growth rate of Central Sulawesi.
In the 2016 DPRD parliamentary meeting, Central Sulawesi Governor Longki Djanggola explained that based on problems and funding capabilities and challenges in 2017, it is projected that the growth of Central Sulawesi GRDP is estimated to reach 10 percent to 12 percent. Given these projections, it becomes a common question, what strategic steps should be needed to meet the Central Sulawesi macroeconomic target.
There are several prediction simulations that explain the steps to achieve economic growth. One of them is Instrumental Capital Output Ratio (ICOR). The ICOR value explains the amount of investment required if it wants to increase output by 1 unit of monetary.
Based on ICOR calculation simulation in 2017, to reach the level of growth rate of 10 percent, it takes 57.33 trillion rupiah by considering the inflation factor. The value can be obtained from capital goods in the form of buildings or construction, machinery dal equipment, transportation equipment, and other capital goods such as seeds. The challenge of achieving the value of capital goods is needed to achieve the economic growth target of Central Sulawesi in 2017.
Dimas Indra Purwanto, SST
The author is a staff of Nerwilis BPS Kota Palu
