Investigating Fiscal Independence across Regencies and Cities in Aceh Province: A Sectoral Competitiveness Analysis

Fachrizal Fachrizal; M. Shabri A. Majid; Suriani Suriani

doi:10.56225/finbe.v3i1.310

Authors

Fachrizal Fachrizal Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia
M. Shabri A. Majid Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia
Suriani Suriani Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, 23111 Darussalam, Banda Aceh, Indonesia

DOI:

https://doi.org/10.56225/finbe.v3i1.310

Keywords:

Sectoral competitiveness, Fiscal independence, Shift-share, Economic policy

Abstract

Fiscal independence is an essential aspect of assessing the economic stability of a region. Also, sectoral competitiveness is a vital benchmark in evaluating the superiority of a sector in the economy. The fiscal independence level of districts and cities in Aceh Province indicates that the budget management of all districts and cities in Aceh Province still depends on central government funds to finance regional development. Thus, through a sectoral competitiveness analysis, this study examines fiscal independence across regencies and cities in Aceh province. Using 23 districts and cities in Aceh Province during the 2014-2020 (quarterly data) of Gross Regional Domestic Product (GRDP), this study applies shift-share analysis. The results show significant variations in the competitiveness of certain economic sectors in different regions. Nagan Raya Regency leads the agriculture sector, while West Aceh Regency dominates the mining and quarrying sector. Aceh Tamiang district stands out in the manufacturing sector, while Aceh Besar district is the centre of competitiveness in the construction sector. Bireun district showed the best performance in the wholesale and retail trade and repair of cars and motorcycles, while Aceh Utara achieved excellence in the transportation sector. The city of Banda Aceh consistently performs best in the accommodation and food supply sector, the real estate sector, and the other services/tourism sector. In addition, the findings of this study also show that from the perspective of the dominance of the highest sectoral competitiveness value per region, there are 6 (six) dominating sectors out of a total of 9 (nine) sectors observed, namely the industrial sector, wholesale, and retail, trade sector repair of cars and motorcycles, mining and quarrying sector, construction sector and agricultural sector. However, this study's findings also show significant potential for economic diversification, which could significantly improve the region's fiscal independence.

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