Press conferenceEconomic Development

Workshop on Economic Diversification of Regions Rich in Natural Resources by Article 33 Indonesia

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3 minutes

On 27 and 28 February 2024, Article 33 Indonesia, supported by the Ministry of Home Affairs and the FORD Foundation, held a workshop on economic diversification in areas rich in Natural Resources (SDA) in Indonesia. This activity was attended offline and online by 90 participants on the first day, and as many as 47 participants on the second day. Participants come from various institutions such as the central government, regional governments, and national scale NGOs and local NGOs in natural resource rich areas in Indonesia. 

On the first day (27/02/2024), the activity included two discussion sessions detailing various aspects and challenges in developing economic diversity at the regional level. 

Keynote Speaker, Plt. Deputy for Regional Development, Mrs. Tri Dewi Virgiyanti:

If you look at the current growth in state income which is still at point 5%, Indonesia will only become a developed country in 2041 at point 6% for projections threshold high income. This can be done if Indonesia can get out of the middle income trap. So, economic transformation is needed with encouragement from various sectors. In preparing the RPJMN, Bappenas takes into account the potential of each region, several examples of encouragement have been made for economic diversification in the regions of Bali, Papua, South Sumatra, and others. During the COVID-19 pandemic, for example, the province of Bali experienced a very large economic decline due to GRDP which was supported by the tourism sector. From this, it is important to diversify the economy based on natural resources and local wisdom so that economic growth can be maintained and resilience.

Article 33 Indonesia Research Results: 

Research conducted by Article 33 Indonesia highlights the urgency of economic diversification as a critical step to maintain economic stability in the face of shocks, increase investment opportunities, and reduce dependence on one particular sector. Although initially carried out in natural resource-rich areas, now many other areas need to diversify to reduce the risk of dependency. In a global context, Indonesia has good opportunities for diversification, although it is still faced with significant challenges. On the other hand, regulations at the central level have begun to provide encouragement, but their implementation has not been optimal at the regional level.

Discussion Session 1: 

In the first session, the discussion focused on the direction of diversification, especially in the context of the green economy. However, differences in understanding regarding diversification were found, as well as the need to regulate and encourage overall economic diversification so that it does not stagnate. A concrete example from South Sumatra shows efforts to encourage diversification even though it is still in the primary sector. Local communities and Indigenous Peoples and Local Communities (IPLC) understands the benefits, but the derivative mechanisms still need to be clarified. Discussions also highlighted the lack of relevant non-fiscal incentives.

Discussion Session 2: 

The second session highlighted the green economy road map that almost all regions already have, although it still needs optimization. High dependence on certain sectors is a major challenge, with some regions having up to 70% jobs focused on one sector. Downstreaming efforts as a product diversification step, although positive, still have vulnerabilities. The main challenges that arise are Human Resources (HR) capacity that is not aligned with new sectors, as well as mitigating economic fluctuations when sectors change.

On the second day (28/02/2024), discussion activities were held more intensively by discussing the main issues and recommendations for strengthening economic diversification, as well as the role of various parties in supporting the strengthening of economic diversification.

In this discussion, the important role of NGOs and civil society as catalysts and facilitators in encouraging economic diversification in the regions is in the main spotlight because they are considered to have the ability to mobilize resources, connect various stakeholders, and provide the technical assistance needed to accelerate the diversification process. Additionally, this discussion highlights the importance of understanding will timings the right way to start diversifying the economy, especially after knowing the trend of decreasing income from the oil and gas sector. Although decline oil and gas is a sure thing, choosing the right time to start diversification is the key to success.

Apart from that, collaboration between regions is also an important focus of discussion. Piloting economic diversification that is successful in one region can be applied in other regions through joint action and collective action. In this context, the role of NGOs as initiators and facilitators of collaboration is appreciated as an important step to strengthen economic diversification in various regions. The discussion also highlighted the importance of understanding the capabilities and potential of the local economy and the need for accurate data to guide strategic decisions in implementing economic diversification. Thus, cross-sector collaboration and an integrated approach are key in formulating steps towards inclusive and sustainable economic development in various regions.

From this workshop activity, it can be concluded that economic diversification requires cross-sector collaboration and an integrated approach from various parties, including local governments, NGOs, the private sector, civil society and other stakeholders. The need to adapt strategies to local economic conditions and potential as well as sustainable resource management is the key to success in economic diversification efforts to achieve inclusive and sustainable economic development.