One of the biggest challenges in Indonesian economic development is to maintain rapid economic growth and at the same time reducing inter-regional economic disparity.

The process by which government allocate resources, create policies, regulations, and incentives is crucial to ensure that economic progress is shared equally among regions. Development planning become one of the key process and its ability to deliver optimum resource allocation depend, to a large extent, on the quality of the scientific tools that help shape the process.

Economic modeling has been used by policy makers around the world to work out best development scenarios. Given the challenge that Indonesian face in the future, having access to the best available models will be a big advantage. This has been the motivation of the three institutions, Center of Policy Studies, Monash University, Center for Economics and Development Studies (CEDS), Universitas Padjadjaran, and BAPPENAS (Indonesian National Development Planning Agency) to develop an economic model that can help work out best scenarios for national development. A research proposal was jointly written by the three institutions and submitted to a highly-competitive Public Sector Linkage Program (PLSP) funded by the Australian Government. The proposal has been approved and the project will start soon this year.

This is not the first time that Monash University work together with CEDS. Back in 2006, Center of Policy Studies (CoPS), Monash University, jointly with CEDS competed for an Australian Government funding, under the same scheme, Public Sector Linkage Program (PLSP), to improve the capacity of CEDS in economic modeling. The proposal was approved and the activity funded by the program became the seeds of the development of CEDS expertise in economic modeling. The first version of IndoTERM, an inter-regional CGE model of the Indonesian economy was a product of this joint work. Since then, CEDS has progressed to become one of the leading centers of excellence in economic modeling in Indonesia.

The Public Sector Linkages Program (PSLP) is a competitive grant scheme funded by Australian Government with the objective to achieve nationally determined development outcomes in selected countries through improving governance and management in their public sectors. Only Australian institutions, partnering with other countries’ institutions are eligible to compete for this grant.

In this project CEDS will work together with Center of Policy Studies (CoPS), Monash University and BAPPENAS to develop a inter-regional economic model that can help policy makers to improve medium-term development planning. The Centre of Policy Studies (CoPS) is an independent research unit within the Faculty of Business and Economics, Monash University. CoPS undertakes economic-modelling research in many parts of the world and is the creator of Australia’s best known economic models such as ORANI and TERM. Versions of these models have been developed for over 25 countries. CoPS’ economic-modelling software, GEMPACK, is licensed to users in around 70 countries. A close partnership between CoPS, CEDS, and BAPPENAS will no doubt contribute to the improvement of national development strategies and policies for the benefit of Indonesian society now and in the future.

The project addresses regional economic development with a particular focus on food security and natural resource management. One of the challenges in setting development policy for Indonesia is to improve domestic connectivity with the high degree of regional diversity – manufacturing and service industries are concentrated in Java, while outer islands are rich in natural resources. Many in the Eastern provinces are poor small-scale rural dwellers, experiencing a high degree of food insecurity.

During the course of the project researchers and modelers from Monash University, CEDS, and BAPPENAS will work together developing the model, training, and writing research and policy papers in the context of Indonesian economic development.

(Photo Credit: The Australian)