indonesia country presentation

7/30/2019 Indonesia Country Presentation

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Measuring the Informal Sector:

Indonesian Experience

by

BPS-Statistics Indonesia

Presented inWorkshop on Measuring the Informal Sector

20-23 May 2008

ADB Headquarters, Manila, Philippines


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INTRODUCTION (1)

Indonesia is the fourth most populous country in theworld, after China, India, and the USA. The

estimation Indonesian Population in 2008 was 228.4million with population growth 1.34 % per year

The number of labor force in 2007 (Feb) were 108.1million, with increase of labor force 2 million peopleper year

The number of open unemployment was still high,10.5 million (9.8%) in 2007 (Feb).

On the other hand, the per capita GDP of Indonesiawas still quite low, only US$ 1,666.7 in 2006


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INTRODUCTION (2)

Excessive labor supply and low productivity of labor have longtime been the major problem in Indonesia. In 2007, 16.6 %(37.2 million) of people were still live below poverty line. Thispercentage did not change much from the condition before

1997 economic crisis, 17,5 % (34 million people) in 1996

The existence of large employment in informal sector isanother problem of Indonesias economy . In 2007, 63.1 % of

employment were in informal sector

Informal sector were basically small enterprises, accountedfor 98,77 % of enterprises in Indonesia; however, theircontribution to total GDP in 2006 was only 37,67 %

With the potential role of informal sector in absorbing theincrease in labor force, it is necessary to better measuring theinformal sector for policies in improving the productivity ofinformal sector.


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Measuring Informal Employment (1):

The National Labor Force Survey (Sakernas)

The Indonesias Labor Force Survey (in Indonesianacronym called Sakernas) was a household survey

conducted annually by BPS:- 1986-1993: Quarterly (Feb, May, Aug, Nov)

- 1994-2001: Yearly in August

- 2002-2004: Quarterly (Feb, May, Aug, Nov) and

Yearly in August

- Since 2005: Conducted in Semester with sample2005 and 2006 Feb and August: 68,000 hhs

2007 Feb: 68,000 hhs and August: 285,000 hhs2008 Feb: 68,000 hhs and August: 285,000 hhs


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The National Labor Force Survey (Sakernas)

Respondents: Population aged 10 years andpublished at 15 years over (minimum working age)

Labor Concept: Referred to ILO Recommendation

Objective: to provide an absolute and rate data onlabor force at national and provincial level

Coverage: all rovinces in Indonesia

Since 2007, the sample in every August Round wasinceased to provide estimation at district/regency

level.


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Concept & Definition used in Sakernas

Workng Aged Population: Population 15 years oldand over

Working: An economic activity done by a person whoworked for pay or assisted others in obtaining pay orprofit for the duration at least one hour during the

survey week Unemployment: population who are not working at

the moment, however looking for job; included:

established a new business/firm, hopeless of job andhave a job in future start

Underemployment: Population worked under normal

working hours (< 35 hours a week) Informal Sector: Concept of Informal sector.doc
http://c/Documents%20and%20Settings/user/My%20Documents/Cocept%20of%20Informal%20sector.dochttp://c/Documents%20and%20Settings/user/My%20Documents/Cocept%20of%20Informal%20sector.doc


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Sampling Methodology of Sakernas: 2001-2007

Sampling frame used was the master samplingframe of census blocks and the sampling frame of allhouseholds in the selected census block.

The master sampling frame for census blocks wasbased on the result of the 2000 Population Census.

Census Blocks is an enumeration area consisted ofaround 80-120 households with clear boundaries

Sampling design: two stage probability proportional

to size (pps) sampling, both for urban and ruralareas. In the first stage, sample of n units of censusblocks were selected with pps from N units, both for

urban and rural areas. In the second syage, fromeach selected census block, 16 hhs were selectedusing linesr systematic sampling.


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Method of Estimation in Sakernas: 2001-2007

Estimation of Total Characteristics

Variance estimation of total characteristics

hh

A

k

hijk

n

i j hijh

hh yPy

AnPY

hijh

~116

~

11

16

1== == =

( )

2

11)( = =hn

i

hyhyi

h

h

h zzn

n

Yv


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Sampling Design:

The 2008-2010 Sakernas use two stage pps

sampling, applying a panel survey and rotationsystem, so that the same household will beenumerated in the next period until 2010

Sampling FrameSampling Frame:: the selected census blocks of the 2007the selected census blocks of the 2007 SakernasSakernas ..

the name of the household head resulting from listingthe name of the household head resulting from listing

in August 2007.in August 2007.Divided into 2:Divided into 2:

for province level estimation (Feb)for province level estimation (Feb) complementary census blockscomplementary census blocks

+ province CB for+ province CB forkabupatenkabupaten estimationestimation


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Forming the Census Blocks Sample Packages

For province level estimationFor province level estimation

consists of 4 sample packages (1, 2, 3, 4)consists of 4 sample packages (1, 2, 3, 4) 1.091 census blocks each1.091 census blocks each

Complementary Census BlocksComplementary Census Blocks consists of 2 packages (5 and 6)consists of 2 packages (5 and 6) 6.977 census blocks each6.977 census blocks each

The forming of census blocks sample packages:The forming of census blocks sample packages:

independently done in urban & rural areasindependently done in urban & rural areas


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Household Updating and household listing

Updating for every the selected CB of the 2007 Sakernas

Listing

for all additional census blocksUpdating of Household Frame andHousehold Listing in the first stage :" in the middle of J anuary 2008 for Census Block

Sample Packages numbered 1, 2, 3, dan 4


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Sample groups based on the results ofSample groups based on the results of

updating and listing in stage I:updating and listing in stage I:Package 1: 3 household sample clusters$ A, E, and I.

Package 2: 2 household sample clusters$ B and F.Package 3: 2 household sample clusters$ C and G.

Package 4: 2 household sample clusters$ D and H

Updating of household frame and listing ofhousehold in Stage II:

in the middle of J uly 2008 for census blocks samplepackage numbered 1, 2, 3, 4, 5, and 6


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Listing of household for the additional

census blocks is only done in packages 5and 6

Updating and Listing Results (packages5,6)

For sampling frame of household sample selection

For forming the household groups

The resulted sample packages:

Package 5: 2 clusters$J and L

Packa e 6: 2 clusters$ Kand M


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Result of updating on packages 1,2,3, and 4

For anticipating an household sample addition


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Estimation of Total Characteristics by age group ineach district

i= age group; h=urban, rural

i. 15-19 year vi. 40-44 year

ii. 20-24 year vii. 45-49 yeariii. 25-29 year viii. 50-54 year

iv. 30-34 year ix. 55-59 year

v. 35-39 year x. 60+ year

hihi

a

lhijkl

n

j k hijhi

hihi yPy

an

PY

hijkhi ~1

16

~

11

16

1

== == =

M i I f l E l t (7)


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Variance estimation of the difference between twoperiod (Feb Aug)

Applying replication method

Variance estimation:where:= estimate offull sample,

= estimate of the g-th replication,G = number of replication,c = constanta.

+

=

yxyx n

y

n

xCov

n

yVar

n

xVardVar ,2)(

( ) ( )( )

2

1 = =

G

g

gcv

( )g



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Trend of Labor Force, Open-Unemployment, and

Informal Employment in Indonesia: 2001-2007

The total number of labor force in Indonesia

increased by average of 2 million people per year,and become 108.131 million in February 2007,indicating that Indonesian economy is a laborsurplus economy.

The open unemployment rate in Indonesia wasquite high, around 8.1 % - 11.2 % during 2001-2007, indicating that a large portion of labor could

not be absorbed in the economy



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Trend of Labor Force, Open-Unemployment, and

Informal Employment in Indonesia: 2001-2007 The employment in informal sector were quite

dominant Indonesias economy since 2001, around63 % since 2004. About two third of them worked inagriculture sector, indicating that agriculture sector

provide a safety valve for employment in Indonesia. However, according the result of National Socio

Economic Survey in 2007, 53 % of the poorhouseholds in Indonesia worker in agriculturesector, indicating that informal sector , particularly in

agriculture sector was not able to solve the problemof poverty in Indonesia.

Measuring GDP for SMEs (1):


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Concept of SMEs

Law and regulation

Law no. 9/1995 on Small Enterprise

Presidential decree no. 10/1999 on Medium Ent.

SMEs criterion are based on annual sales

Small Enterprise is an economic activity whichperformed by own-account worker, household, or otherquasi-corporation producing goods & services with an

annual sales of Rp. 1 billion or less. Medium Enterprise is an economic activity performed

by own-account worker, household, or other quasi-

corporation producing goods & services with an annualsales ranging between Rp. 1 billion to Rp. 50 billion.

M i GDP f SME (2)


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Statistical Unit

Micro/Small Medium/Largesales = Rp 1 M

Registered

businessNon-

registered

business

Cutt-off

Based on Law No. 9/95 & Pres.decree No. 10/99, only

annual sales (omzet) are used to classify scale of

enterprises


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Measuring GDP for SMEs (3) :

Data Sources

Economic census (1996, 2006) Agriculture census (1993, 2003)

Other annual special SME-surveys



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Data Treatments 2006 Economic Census employed field

enumeration based on establishmentapproach

While SMEs use enterprise approach;therefore, enterprise with businessaffiliations (such as branch office,

ancillary unit, factory, etc) are treated asone entity


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Economic Classification of Indonesias SME

Industry Description

1. Agriculture Agriculture, estate crops, livestock, hunting & forestry, fishery

2. Mining & quarrying Metallic & non metallic minerals, quarrying

3. Manufacturing Mfg. of food, beverages, tobacco. textile, leather, footwear, wood, paper, etc.

4. Utilities Non-PLN2 electricity, water supply company owned by local govt.5. Construction Residential & non residential construction (non-AKI)

6. Trade, Hotel &

Restaurant

Wholesale & retail trade, hotels, restaurants

7. Transportation &

communication

Transport, storage, & communication

8. Financial

Intermediaries

grameen banks, leasing, services allied to finance, business services

9. ServicesEducation services, amusement & recreational services,

health, community, social & personal services



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Methodology1. Production approach

GDP is measured as total value added ofall economic activities

Used in agriculture, mining & quarrying,

manufacturing, utilities, services2. Commodity flow approach

GDP is measured as total value of goods& services produced/used/sold byeconomic activities

Used in construction, trade, hotel,restaurant


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Macro indicators of Indonesias SMEs in 2006

Economic growth of Indonesia was 5.5%:

SMEs grew 5.4% Large enterprises grew 5.6%.

The size of the economy was Rp. 3,338.2 trillion:

SMEs contribution was Rp. 1,778.7 trillion or 53.3% of total GDP Indonesia.

SMEs engines of growth:

construction (8.2%), services (8.1%), and

mining & quarrying (7.9%).

The lowest growth was in agriculture (3.1%).



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gGDP at Current Market Prices & Contribution by

typical enterprise unit, 2000-2006

Figures in italics are GDP contribution (%)

During 2000-2006, the average contribution of

SME is 55 % to total GDP of IndonesiaGDP at current market prices (in trillion rupiahs) & contribution

2000 2001 2002 2003 2004 2005 2006

Small 541,19 642,24 742,57 815,16 900,47 1.053,34 1.257,65

38,94 39,01 40,76 40,48 39,22 37,82 37,67

Medium 218,90 260,19 294,49 328,82 371,01 437,72 521,09

15,75 15,80 16,16 16,33 16,16 15,72 15,61

SME 760,09 902,43 1.037,06 1.143,98 1.271,48 1.491,06 1.778,7554,69 54,81 56,92 56,81 55,38 53,54 53,28

Large 629,68 743,89 784,77 869,70 1.024,35 1.293,90 1.559,45

45,31 45,19 43,08 43,19 44,62 46,46 46,72

Total 1.389,77 1.646,32 1.821,83 2.013,67 2.295,83 2.784,96 3.338,20100,00 100,00 100,00 100,00 100,00 100,00 100,00


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Measuring GDP for SMEs (9)

(bil lion Rp)

2003

UK40,48%

UB43,19%

UM

16,33%

small

medium

large

2006UK

37,67%

UM15,61%

UB

46,72%

small

Medium

large

2003 2006UK 815,156 1,257,655

40.48 37.67

UM 328,822 521,091

16.33 15.61

UKM 1,143,978 1,778,746

56.81 53.28

UB 869,697 1,559,450

43.19 46.72

JUMLAH 2,013,675 3,338,196

100.00 100.00

small

medium

SME

large

total

Figures in italics are GDP contribution (%)

Measuring GDP for SMEs (10): Contribution of typical


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g ypenterprise unit by economic activities, 2005-2006

Small Medium Large Total Small Medium Large Total

1. Agriculture, Livestock, 318 31 15 364 374 38 18 430

Forestry, and Fishery 87,26 8,63 4,11 100,00 86,84 8,88 4,29 100,00

2. Mining and 22 9 277 308 29 12 314 355

Quarrying 7,01 3,02 89,97 100,00 8,15 3,24 88,60 100,00

3. Manufacturing 98 89 585 772 117 106 714 936

12,66 11,56 75,78 100,00 12,45 11,27 76,28 100,00

4. Electricity, Gas, and Water Supply 0,1 2,0 24,5 26,7 0,2 2,3 27,9 30,40,53 7,62 91,86 100,00 0,53 7,56 91,91 100,00

5. Construction 87 43 66 196 110 54 85 249

44,31 21,77 33,92 100,00 44,20 21,78 34,02 100,00

6. Trade, Hotel, and Restaurant 326 89 16 430 378 101 18 496

75,68 20,65 3,67 100,00 76,08 20,33 3,59 100,00

7. Transportation and Communication 52 43 85 181 69 54 108 231

28,75 24,01 47,24 100,00 29,84 23,47 46,68 100,00

8. Financial Intermediary, Leasing, & Bus. Servic 39 108 83 231 45 127 99 272

16,97 46,98 36,05 100,00 16,71 46,86 36,43 100,00

9. Services 113 23 141 277 136 27 175 338

40,78 8,15 51,07 100,00 40,22 7,96 51,82 100,00

Gross Domestic Product 1.053 438 1.294 2.785 1.258 521 1.559 3.338

37,82 15,72 46,46 100,00 37,67 15,61 46,72 100,00

GDP without Oil & Gas 1.053 435 980 2.468 1.258 518 1.201 2.977

42,68 17,62 39,70 100,00 42,25 17,40 40,35 100,00

Sector2005* 2006**

Fi ures in italics are structure %

Activities in Agriculture, trade, hotel & restaurant, & servicessectors are mostly dominated by SME

Small enterprise mostly engage in trade, hotel & restaurant and

agriculture, while Medium ent. Mostly engage in financialintermediaries and manufacturing sector


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Measuring GDP for SMEs (12):Source of Growth 2003-2006

1.88 1.972.24 2.16

0.78 0.83

0.94 0.91

2.122.22

2.50 2.42

0.00

2.00

4.00

6.00

2003 2004 2005 2006

P

ercent

UK UM UB

SME

2,66

SME

2,80SME

3,18

SME

3,07

Small Med Lrg

4.78

5.685.03 5.48

M i GDP f SME (13)


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Improvement in the future Optimizing 2006 Economic Census

Improving nominal level of SMEs Benchmarking for updating the coverage of GDP

Classification update from ISIC rev.2 to ISIC

rev.4 Spatial data: computing for GDP-SMEs by

regional (in level of provinces, municipalities,regencies)


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Concluding Remarks (1)

Informal sector plays an important role in absorbingthe excessive labor supply in Indonesia, wherearound 63 % of the labor worked in informal sectorsince 2004

The conribution of small enterprises to GDP in2006 was 37,7 %, and combining with medium

enterprises, SMEs contribution to total GDP in2006 was 53,3%.


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Concluding Remarks (2)

Sakernas is a good source of data in Indonesia toprovide data on informal employment; whileenterprises surveys ( such as SUSI) and censuses(agriculture and economic census) were good

sources of data in measuring GDP of SMEs. To develop better policies in optimzing the role of

informal sector in Indonesia, it is necessary todevelop a method that linked informal employmentand informal sector and poverty.


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