Contribution Sector of Agriculture, Mining, Manufacturing,

Construction, Retail Trade and Professional/Technical to the

Formation of Indonesia's Gross Domestic Product

Iskandar Muda and Abikusno Dharsuky

Accounting Departement, Economic & Bussiness Faculty, Universitas Sumatera Utara, Medan, Indonesia

Keywords: Agriculture, Forestry and Fishing, Mining and Quarrying, Construction.

Abstract: The purpose of this research aims to know the contribution of sector of Agriculture, Mining, Manufacturing,

Construction, Retail Trade and Professional/Technical to the Formation of Indonesia's Gross Domestic

Product. The type of this research is quantitative methods with secondary data from Economic of Indonesia

Period 2000 until 2017 from Asia Development Bank. The statistical tool of this research useTime Series

analysis with WarpPLS 6.0 software. The results show that Agriculture influence to the formation of

Indonesia's Gross Domestic Product. The Mining, Manufacturing, Construction, Retail Trade and

Professional/Technical are not influence.

1 INTRODUCTION

An economy experiences economic growth if the

amount of production of goods and services.

Economic growth is an increase in community

economic activity that causes an increase in the

production of goods and services or an increase of

national income. Economic growth can be

interpreted as a process of changing a country's

economic conditions on an ongoing basis towards

better conditions for a certain period (Pheng and

Hou, 2019, Polyakova et al., 2019and Van et al.

2019). Economic growth can indicate the success of

economic development in people's lives, so it is

important to do the calculation on economic growth.

The Gross Domestic Product Period in 2000-2017

show in the Table 1.

Table 1. Gross Domestic Product by Industrial

Sources : Asia Development Bank (2019).

Based on Table 1 show that the sectoral industry

contributed byagriculture, forest, and fishing.

Indonesia is an agrarian country, so most of the

people of Indonesia search as farmers and ranchers.

The contribution of the agriculture and livestock

sector to economic growth and development in

Indonesia This sector includes the sub-sector of

plants, foodstuffs, estate crops, livestock, forestry

and food. Agriculture and animal husbandry play an

important role in human life, especially Indonesians

whose food needs are dominated by agriculture and

animal husbandry such as rice, vegetables, fruit,

meat, milk, skin and so on. Agriculture also acts as a

supplier of raw materials which will later be

processed by the manufacturing industry (Ahmed

and Sallam, 2018, Stupnikova and Sukhadolets,

2019). With agriculture and animal husbandry a free

market system can be formed in which a variety of

exchanges of basic needs for money occur. In this

condition the Government also participates in setting

prices in the free market.

Agriculture and animal husbandry are able to

provide foreign exchange to the country if

agriculture and animal husbandry are able to

increase production capacity and increase the

competitiveness of agricultural or livestock products

(Muradi and Boz, 2018). This must be done so that

Indonesian farmers and ranchers are able to increase

exports and reduce imports. In this process of

change, the government must participate in helping

392

Muda, I. and Dharsuky, A.

Contribution Sector of Agriculture, Mining, Manufacturing, Construction, Retail Trade and Professional/Technical to the Formation of Indonesia’s Gross Domestic Product.

DOI: 10.5220/0009205803920395

In Proceedings of the 2nd Economics and Business International Conference (EBIC 2019) - Economics and Business in Industrial Revolution 4.0, pages 392-395

ISBN: 978-989-758-498-5

farmers by providing land that farmers use,

providing basic training, subsidizing superior

machinery and seeds, and encouraging people to use

domestic agricultural and livestock products. This is

useful to reduce imports and increase exports.

Indonesia has abundant natural resources.

Indonesia can become a developed country if it has

superior human resources in dealing with natural

resource issues. Many mines in Indonesia are owned

by foreign companies so it is not helpful to increase

the country's foreign exchange income. The role of

the mining industry is increasingly important for the

economies of countries in the world including in

Indonesia. There are 40 countries that depend on

non-oil exports more than 25% of the country's

goods exports. Three quarters of the 40 countries are

middle and low income countries. Many of these 40

countries have low Human Development Indexes.

Ericsson and Löf (2019) stated in many countries

with the mining sector such as Chile, Ghana and

Brazil, mining has played a large role in poverty

alleviation and social development performance

compared to countries without the mining sector.

The industrial sector that developed until now

turned out to be still dominated by labor-intensive

industries, which usually have relatively short links,

so the creation of added value is also relatively small

(Casni et al., 2019). However, due to the large

population of business units, the contribution to the

economy remains large. At present every region in

Indonesia hotel and restaurant developments affect

the economy in Indonesia. This is a trading activity

so that the level of consumption in Indonesia is also

quite large. n addition, the development of services

is quite high such as insurance companies, travel,

public accountants, teachers, and others.

2 METHOD

This study usesSecondary data.Data source from

Asia Development Bank in 2000-2017 period. The

hypothesis was tested by using

WarpPLSsoftware6.0. The data analysis technique in

this research with Linier Regression. The

equationisformed as follows:

Y = α + b1X1 + b2X2 + b3X3+ b4X4 +

b5X5+b6Z+e

X1 = Agriculture

X2 = Mining

X3 = Manufacturing

X4 = Construction

X5 = Retail and Trade

X6 = Professional/Technical

Y = Formation of Indonesia's Gross

Domestic Product

b1,…b5 = Coefficient

α = Constant

e = Error

3 RESULT AND DISCUSSION

3.1 Result

The descriptive statistics of this research are as

follows:

Table 2. Descriptive Statistics

Sources :WarpPLS 6.0 (2019).

3.1.1 Hypothesis Testing

Based on the results of testing the hypothesis found

in Figure 1 below:

Sources :WarpPLS 6.0 (2019).

Figure 3. WarpPLS Testing Results 6.0

Based on Figure 1, only the Agriculture variable

influences the formation of Indonesia's Gross

Domestic Product while the other variables have no

effect. This is indicated by the significance value

smaller than 0.001 (Ho is rejected, Ha is accepted).

The significance value (p value) of each variable is

as follows:

P values

--------

AFF(X1) MQ(X2) Mnf(X3) Cons(X4)

WRT(X5) PSTA(X6)

GDP_In_0.009 0.489 0.224 0.203 0.292

0.381

From the description above, the multiple

regression equation is derived from the path

coefficient as follows:

Contribution Sector of Agriculture, Mining, Manufacturing, Construction, Retail Trade and Professional/Technical to the Formation of

Indonesia’s Gross Domestic Product

393

Y = 0.459 X1+0.007 X2+0.165 X3+0,179X4-

0,121X5+0.069 X6+e

3.1.2 Determination Coefficient Test Results

(R2)

The coefficient of determination is used to test the

goodness-fit of the regression model which can be

seen from the R Square value. R square only exists

for endogenous constructs. The magnitude of the

coefficient of determination is as follows:

********************************

* Latent variable coefficients *

********************************

R-squared coefficients

----------------------

AFF(X1) MQ(X2) Mnf(X3) Cons(X4)

WRT(X5) PSTA(X6)GDP_In_

0.757

Source: WarpPLS Output 6.0. (2019).

3.2 Discussion

Income arising from the production activities

constitutes domestic income. All goods and services

as a result of economic activities operating in the

domestic territory, regardless of whether the

production factors originate from or are owned by

the inhabitants of the area, are the domestic products

of the region concerned. The fact shows that some of

the factors of production used in production

activities in an area originate from other regions or

from abroad, and vice versa the factors of production

owned by residents of the area participate in the

production process in other regions or abroad

(Chung and Tseng, 2019 and Hasan et al., 2019).

This causes the value of domestic products that arise

in an area is not the same as the income received by

residents of the area. Gawrycka and

Szymczak(2019) states that the flow of income that

flows between these which is generally in the form

of wages/salaries, interest, dividends and profits,

there is a difference between domestic products and

regional products.

Value added calculation is the value of

production minus the intermediate costs. Gross value

added here includes components of income factors

(wages and salaries, interest, land rent and profits),

depreciation and net indirect taxes. So by adding up

the gross added value of each sector and adding up

the gross added value of all these sectors, a Gross

Regional Domestic Product will be obtained at the

market price (Mardones and Rio, 2019). Net

Regional Domestic Product based on the cost of the

factor is the amount of compensation for the factors

of production participating in the production process

in a region. Net Regional Domestic Product based

on factor costs, is the amount of income in the form

of wages and salaries, interest, land rent and profits

incurred or is income derived from the area (Miller,

2019). However, the income generated earlier is not

entirely the income of residents of the area, because

there is a portion of the income received by residents

of other regions, for example a company whose

capital is owned by outsiders, but a company

operating in the area, then by itself the profits of the

company some will belong to outsiders, that is, those

who have the capital (Olufayo, 2019 and Pescee et

al., 2019). Conversely, if there are residents of this

area who add capital outside the area, then some of

the company's profits will flow into the area, and

become income from the owners of capital.

For this reason the need to increase the volume

of production in the agricultural sector, especially

the added value. The manufacturing sector needs to

be improved if there is a continuous supply of

electricity and gas in an area. If the Regional Net

Regional Product is based on a factor cost reduced

by income flowing out and added to income flowing

in, then the result will be the Regional Net Product

that is the amount of income actually received by all

who live in the area concerned. This Regional Net

Product is Regional Revenue.

4 CONCLUSIONS

The results show that Agriculture sector influence to

the formation of Indonesia's Gross Domestic

Product.The Mining, Manufacturing, Construction,

Retail Trade and Professional/Technical are not

influence to the sectoralGDP.

EBIC 2019 - Economics and Business International Conference 2019

394

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Contribution Sector of Agriculture, Mining, Manufacturing, Construction, Retail Trade and Professional/Technical to the Formation of

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