Regional Inequality In Indonesia's Land Border Areas:

How to Increase Economic Performance?

Abstract

In order to attain developmental objectives, the government allocates transfer funds, including profit-sharing funds (PSF), general allocation funds (GAF), non-physical special allocation funds (SAF-NP), physical special allocation funds (SAF-P), and village funds (VF). This study seeks to assess the impact of these transfer funds on economic performance in land-border areas and formulate development strategies. Utilising secondary data from 2017 to 2022, the analysis employs Panel Data Regression and the Analytical Network Process (ANP). The chosen locations are provinces in Indonesia that share land borders with neighbouring countries, specifically the Kalimantan corridor and the East Nusa Tenggara-Papua corridor. The findings indicate that in the Kalimantan corridor, some of the transfer funds significantly contribute to the economic performance, but not to regional inequality. In the East Nusa Tenggara-Papua corridor, all transfer funds, except SAF-P, significantly influence economic performance. In terms of strategy, the East Nusa Tenggara-Papua corridor takes precedence for development, followed by the Kalimantan corridor. The overarching developmental goals include improving welfare, enhancing productivity, and reducing inequality. In the allocation of development funding through transfer funds, the priority is PSF, VF, SAF-NP, GAF, and SAF-P, with SAF-P being the last.