Investment Models and Approaches to Selecting Key Sectors Related to Economic Diversification

This study examines various economic diversification policy scenarios with a focus on the selection of priority sectors that need to be supported to create sustainable development. Economic diversification can be directed to several options, such as downstreaming, upstream sector development, or completely new sectors that are not related to the current leading sectors. In order to evaluate the feasibility of investment, a cost benefit analysis (CBA) is used to assess the costs, potentials, and risks associated with each option. Cost aspects that need to be considered include direct investment and environmental externality costs, while diversification benefits are calculated based on their contribution to GRDP, employment absorption, and social development.

This report was prepared by Article 33 Indonesia to provide insights on how best to select sectors that suit local economic conditions in various regions, based on data obtained from various sources, such as the Input-Output Table, SNSE, SAKERNAS, and SUSENAS. This study aims to provide policy recommendations that can be used by policymakers to maximize the potential for economic diversification at the regional level.

This report goes into more depth on policy directions that can maximize diversification outcomes in Indonesia. For more information on the research findings and proposed policy recommendations, please visit the following link.

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