CEDS UNPAD

The Financing Of Regional Development And Economic Growth In West Java Province

In the context of recent decentralization of regional development in Indonesia, the local authorities and communities need to understand by how potential sources for financing regional development effect the economic growth. There is three sources of financing such as government, private investor and local communities. The purpose of this paper is to explain the role of financing resources of the economic sectors in regional economic growth. Using panel data generated from economic sectors among 20 kabupaten/kota (municipalities) in Jawa Barat Province during 1991-2000 I examine the effect in economic growth of different financing sources. The pattern of development financing was varied among regions. The financing concentration was occurred in some regions where have good available infrastructures and characterised with industry-based development. The results from empirical analysis suggest that the impact of both government and private financing on economic growth is significant in industry-based regions. In the period analysis, communities financing through bank loans supported the regional development significantly in both industry-based and agro-based regions. The implication based on this study is that the local authority should encourage the private financing sources to promote local economic growth.

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Center for Economics and Development Studies is a research center under the Department of Economics, Padjadjaran University, Indonesia. A leading research institute in Indonesia in the area of economics and development studies.
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