MIDTERM INDONESIAN ECONOMIC

1. What is structural transformation? Please elaborate the concept and relate it the current condition of Indonesia.

Economic growth occurs continuously can cause changes in the structure of the regional economy. Structural transformation means a process of structural change in the economy from agriculture to industry and services sectors, where each sector will undergo a transformation process that is different.

FACTORS CAUSE STRUCTURAL TRANSFORMATION.
As for some of the factors contributing to the transformation of the economy, namely, the first caused by human nature in their consumption activities. In accordance with the Law of Engels that the higher the income of the people, then the less the proportion of income used to buy agricultural materials, otherwise the proportion of income that is used to purchase goods industrial production becomes larger. Thus the role of the industrial sector will be greater than the agricultural sector. Second, changes in the economic structure caused also by technological changes that take place continuously. Structural transformation process will run faster if there was a shift towards domestic demand pattern of manufacturing industry output amplified by similar changes in the composition of foreign trade or export.

OCCURRENCE OF STRUCTURAL TRANSFORMATION.
Sukirno (2006 ) explains that , based on the undertaking of the economic sectors in the Indonesian economy is divided into three main groups :

1. The primary sector , comprising agriculture , livestock , forestry , fisheries , mining and quarrying .
2. Secondary sector, comprising manufacturing, electricity, gas and water, building.
3. Tertiary sector , comprising trade , hotels , restaurants , transport and communications , finance , leasing and business services , other services ( including government ) .

In general, the transformation that occurs in developing countries is the transformation of the agricultural sector to the industrial sector, or the transformation of the primary sector to the primary sector (secondary and tertiary. As seen in the figure below, which is based on the results of the study Chenery and Syrquin that changes sectoral contribution to the formation of regional GDP in the long run will show the following pattern:

Economic Structural Changes in the Process of Economic Development

Source: Tulus Tambunan (2001)

Seen in the Figure that the output of the primary sector contributes to the formation of the Gross Domestic Product (GDP) has narrowed while the share of Gross Domestic Product (GDP) of the secondary and tertiary sectors have increased along with the increase in national income per capita. Thus, economic transformation showed a shift of economic activity from the traditional economy into a modern interconnected economy.

Examples of Structural Transformation
From the beginning we see most of the people who live in rural areas to work as a farmer, but now many who make the shift from rural to urban areas and worked in various manufacturing and service companies.

In economic transformation, there are several stages or economic processes, namely:

• The process of accumulation
  Process of resource utilization in order to increase production capacity in line with the increase of income percapita of a country

Two main indicator is the increase in expenditure per GDP Education and School enrollment ratio increased both enrollment rate of primary, secondary and tertiary.

• The process of allocation 
• the process of distribution
• 
  

2. The ultimate goal of ASEAN is to achieve ASEAN Economic Community in 2015. In relation with labor market, how do you think Indonesia’s labor force will face this challenge? Please give your opinion.

I think Indonesia is not yet ready for labor or labor Indonesia will face problems in dealing with ASEAN COMMUNITY 2015.
Labor issues in the country faces three major problems, namely

• Limited employment opportunities. This is because economic growth has not been able to absorb the labor force into the labor market and the number of unemployed who have been there. 
• Low quality of the labor force. Based on BPS data in August 2013, the low quality of the labor force as indicated by the estimated composition of the labor force, which is mostly down to the elementary school education, which still reached 52 million people, or 46.95 percent. 
• Persistently high levels of unemployment. Based on BPS data, the open unemployment rate in Indonesia in August 2013 reached 6.25 percent in February 2013, an increase of 5.92 per cent recorded in August 2012 and that by 6.14 percent.

3. Please elaborate, how urbanization impact on structural transformation? What is the most important factor of production in this process? (max. 500 words)

Urbanization is the movement of people from rural to urban. Urbanization due to the increasing needs of rural consumption, but the resources in the village itself is not able to meet the needs of the community. Therefore, much rural society who go to the city. People who had been a farmer in the city they work in the industry, either as workers or others. This process will automatically change the structural transformation in Indonesia. Where the supply of the economy of the agricultural sector declined while of manufacturing sector increased by leaps and bounds. Since most of the farmers in the village have gone to town. And the city they work in sectors manufacture.

People who do the urbanization of the city to be indirect labor inputs for manufacture. So the industry demand for labor can be met. The more labor will increase the production industry. And an increase in auto production workers will get a bigger income as well. So the economic standard of the people could be increasing.



4. Why low and middle income economy usually have bigger gap in income distribution? Please explain

Low and middle income economy usually have bigger gap in income distribution because too many expenses incurred rather than on income is not sufficient to be distributed evenly across the area, causing the distribution of income distribution. The main cause is the lack of proper economic development targets and structural development at the expense of other sectors. The gap also caused by : The middle income have more strong production factor than low income class. And the differentiation of knowledge and information between middle and low income make more significant of GAP.

ECONOMY, EFFICIENCY, EFFECTIVENESS AND ITS RELATIONSHIP WITH AUDIT MANAGEMENT

Economy

Utilization of something of value such as cost, time, energy, or other valuable. Economic concept ensures that the cost of the inputs used in the operation of the organization can be minimized.

Efficiency

Efficiency relates to how the company conducts its operations, so that the achieved optimization of available resources. Efficiency relates to the working methods (operations). In conjunction with the concept of input-process-output, efficiency is the ratio between output and input. How big is the output produced by using a certain number of inputs owned by the company? Good working method will be able to guide the process of running operations by optimizing the use of resources of the company. Thus, efficiency is a measure of a process that connects between the input and output of the company's operations.

Effectiveness

Effectiveness is the end product of an activity (operation) which has reached its destination, both in terms of quality of work, quantity of work and deadline targets

In brief definition of effectiveness can be understood as the level of success of a company to achieve its objectives. Is the implementation of a program / ​​activity has achieved its objectives? Effectiveness is a measure of output.

input-process-output

Audit management aims to identify activities, programs, and activities that still require improvement, so that the recommendations given will be achieved improvements over the management of the various programs and activities of the company. The emphasis of the management audit is directed primarily at the various objects audits that if it can be improved in the future will come, as well as prevent the occurrence of many losses.

The management audit sees that efficiency is used as a standard assertion that the standards can be implemented to reduce the risk. Effectiveness and efficiency in a company should also look at the safety of the workers, how companies that also pay attention to their employees in order to improve effectiveness and efficiency. The decline in corporate performance is demonstrated by the achievement of corporate profits, high customer complaints, high employee turnover, and so on, an indication that the company's management needs to be improved. These issues must be resolved. Audit management through the stages of the audit, to assess accurately the process (management) that have occurred, identify weaknesses and recommend improvements for the shortage.

INFLATION RATE IN INDONESIA

In simple terms, inflation is understood as a persistent, ongoing rise across a broad spectrum of prices. An increase in prices for one or two goods alone can’t be described as inflation unless that increase spreads to (or leads to escalating prices for) other goods. The reverse of inflation is deflation.

The indicator commonly used to measure the level of inflation is the Consumer Price Index (CPI). Changes in the CPI over time are indicative of price movements for packages of goods and services consumed by the public. Since July 2008, the packages of goods and services in the CPI basket have been based on the 2007 Cost of Living Survey conducted by the Statistics Indonesia (BPS). Following this, BPS monitors price movements for these goods and services in selected cities and towns each month, using information from traditional markets and modern retail outlets on specific categories of goods and services in each location.

Other inflation indicators used in international best practice include:

1. Wholesale Price Index. The wholesale price for a commodity is the price of transactions taking place between the first wholesaler and the next largest trader for large quantities on the first market for a commodity. [More detailed explanations of the Wholesale Price Index can be found at the Statistics Indonesia (BPS) website: http://dds.bps.go.id/eng/]
2. The Gross Domestic Product (GDP) Deflator illustrates the measurement of price levels for the final goods and services produced within an economy. The GDP Deflator is derived by dividing GDP based on nominal prices by GDP based on constant prices.

The inflation rate in Indonesia was recorded at 7.75 percent in February of 2014. Inflation Rate in Indonesia is reported by the Statistics Indonesia. Inflation Rate in Indonesia averaged 11.61 Percent from 1997 until 2014, reaching an all time high of 82.40 Percent in September of 1998 and a record low of -1.17 Percent in March of 2000. In Indonesia, the consumer price index is based on a survey conducted in 66 cities. The indicator consists of 774 commodities classified into 7 major groups. Housing, water, electricity, gas and fuel constitute 25.5 percent of total weight; Food stuff - 19.5 percent and Transportation, communication and financial services - 19 percent. Prepared food, beverage, cigarette and tobacco accounts for 16.5 percent of total weight; Education, recreation and sports accounts for 8 percent; Clothing for 7 percent and Medical care for the remaining 4.5 percent. This page provides - Indonesia Inflation Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news

indonesia inflation rate

Tables and CPI Inflation in Indonesia in 2011 - 2014 by Month

BULAN	TAHUN 2011		TAHUN 2012		TAHUN 2013		TAHUN 2014
	IHK	INFLASI	IHK	INFLASI	IHK	INFLASI	IHK	INFLASI
Jan	126.29	0.89	130.9	0.76	136.88	1.03	110.99	1.07
Feb	126.46	0.13	130.96	0.05	137.91	0.75	111.28	0.26
Mar	126.05	-0.32	131.05	0.07	138.78	0.63	N.A	N.A
Apr	125.66	-0.31	131.32	0.21	138.64	-0.1	N.A	N.A
Mei	125.81	0.12	131.41	0.07	138.6	-0.03	N.A	N.A
Jun	126.5	0.55	132.23	0.62	140.03	1.03	N.A	N.A
Jul	127.35	0.67	133.16	0.7	144.63	3.29	N.A	N.A
Agt	128.54	0.93	134.43	0.95	146.25	1.12	N.A	N.A
Sep	128.89	0.27	134.45	0.01	145.74	-0.35	N.A	N.A
Okt	128.74	-0.12	134.67	0.16	145.87	0.09	N.A	N.A
Nov	129.18	0.34	134.76	0.07	146.04	0.12	N.A	N.A
Des	129.91	0.57	135.49	0.54	146.84	0.55	N.A	N.A
Tahunan		3.79		4.3		8.38

 Indonesia Core inflation Rate

Core Inflation Rate in Indonesia increased 4.57 percent in February of 2014 over the same month in the previous year. Core Inflation Rate in Indonesia is reported by the Statistics Indonesia. Core Inflation Rate in Indonesia averaged 4.66 Percent from 2008 until 2014, reaching an all time high of 8.29 Percent in December of 2008 and a record low of 3.56 Percent in March of 2010. In Indonesia, the core inflation rate tracks changes in prices that consumers pay for a basket of goods which excludes some volatile price items. This page provides - Indonesia Core Inflation Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

indonesia core inflation rate

In Indonesia, CPI inflation is disaggregated into:

1. Core Inflation, i.e. the persistent component within inflation movement, influenced by fundamentals such as

• Supply-demand interaction
• External environment: exchange rate, international commodity prices, trading partner inflation
• Trader and consumer expectations of inflation.

2. Non-Core Inflation, i.e. the inflation component marked by volatility due to the influence of non-fundamentals. The non-core components of inflation are:

1. Volatile Foods:
   Inflation predominantly influenced by shocks in the food stuffs category, such as harvests,​ Disruptions from natural events or movements in domestic food commodity prices and in