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Measuring the Informal Sector:
Indonesian Experience
by
BPS-Statistics Indonesia
Presented inWorkshop on Measuring the Informal Sector
20-23 May 2008
ADB Headquarters, Manila, Philippines
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INTRODUCTION (1)
Indonesia is the fourth most populous country in theworld, after China, India, and the USA. The
estimation Indonesian Population in 2008 was 228.4million with population growth 1.34 % per year
The number of labor force in 2007 (Feb) were 108.1million, with increase of labor force 2 million peopleper year
The number of open unemployment was still high,10.5 million (9.8%) in 2007 (Feb).
On the other hand, the per capita GDP of Indonesiawas still quite low, only US$ 1,666.7 in 2006
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INTRODUCTION (2)
Excessive labor supply and low productivity of labor have longtime been the major problem in Indonesia. In 2007, 16.6 %(37.2 million) of people were still live below poverty line. Thispercentage did not change much from the condition before
1997 economic crisis, 17,5 % (34 million people) in 1996
The existence of large employment in informal sector isanother problem of Indonesias economy . In 2007, 63.1 % of
employment were in informal sector
Informal sector were basically small enterprises, accountedfor 98,77 % of enterprises in Indonesia; however, theircontribution to total GDP in 2006 was only 37,67 %
With the potential role of informal sector in absorbing theincrease in labor force, it is necessary to better measuring theinformal sector for policies in improving the productivity ofinformal sector.
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Measuring Informal Employment (1):
The National Labor Force Survey (Sakernas)
The Indonesias Labor Force Survey (in Indonesianacronym called Sakernas) was a household survey
conducted annually by BPS:- 1986-1993: Quarterly (Feb, May, Aug, Nov)
- 1994-2001: Yearly in August
- 2002-2004: Quarterly (Feb, May, Aug, Nov) and
Yearly in August
- Since 2005: Conducted in Semester with sample2005 and 2006 Feb and August: 68,000 hhs
2007 Feb: 68,000 hhs and August: 285,000 hhs2008 Feb: 68,000 hhs and August: 285,000 hhs
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Measuring Informal Employment (2):
The National Labor Force Survey (Sakernas)
Respondents: Population aged 10 years andpublished at 15 years over (minimum working age)
Labor Concept: Referred to ILO Recommendation
Objective: to provide an absolute and rate data onlabor force at national and provincial level
Coverage: all rovinces in Indonesia
Since 2007, the sample in every August Round wasinceased to provide estimation at district/regency
level.
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Measuring Informal Employment (3):
Concept & Definition used in Sakernas
Workng Aged Population: Population 15 years oldand over
Working: An economic activity done by a person whoworked for pay or assisted others in obtaining pay orprofit for the duration at least one hour during the
survey week Unemployment: population who are not working at
the moment, however looking for job; included:
established a new business/firm, hopeless of job andhave a job in future start
Underemployment: Population worked under normal
working hours (< 35 hours a week) Informal Sector: Concept of Informal sector.doc
http://c/Documents%20and%20Settings/user/My%20Documents/Cocept%20of%20Informal%20sector.dochttp://c/Documents%20and%20Settings/user/My%20Documents/Cocept%20of%20Informal%20sector.doc7/30/2019 Indonesia Country Presentation
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Measuring Informal Employment (4):
Sampling Methodology of Sakernas: 2001-2007
Sampling frame used was the master samplingframe of census blocks and the sampling frame of allhouseholds in the selected census block.
The master sampling frame for census blocks wasbased on the result of the 2000 Population Census.
Census Blocks is an enumeration area consisted ofaround 80-120 households with clear boundaries
Sampling design: two stage probability proportional
to size (pps) sampling, both for urban and ruralareas. In the first stage, sample of n units of censusblocks were selected with pps from N units, both for
urban and rural areas. In the second syage, fromeach selected census block, 16 hhs were selectedusing linesr systematic sampling.
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Measuring Informal Employment (5):
Method of Estimation in Sakernas: 2001-2007
Estimation of Total Characteristics
Variance estimation of total characteristics
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Measuring Informal Employment (6):
Sampling Methodology of Sakernas: 2008-2010
Sampling Design:
The 2008-2010 Sakernas use two stage pps
sampling, applying a panel survey and rotationsystem, so that the same household will beenumerated in the next period until 2010
Sampling FrameSampling Frame:: the selected census blocks of the 2007the selected census blocks of the 2007 SakernasSakernas ..
the name of the household head resulting from listingthe name of the household head resulting from listing
in August 2007.in August 2007.Divided into 2:Divided into 2:
for province level estimation (Feb)for province level estimation (Feb) complementary census blockscomplementary census blocks
+ province CB for+ province CB forkabupatenkabupaten estimationestimation
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Measuring Informal Employment (6):
Sampling Methodology of Sakernas: 2008-2010
Forming the Census Blocks Sample Packages
For province level estimationFor province level estimation
consists of 4 sample packages (1, 2, 3, 4)consists of 4 sample packages (1, 2, 3, 4) 1.091 census blocks each1.091 census blocks each
Complementary Census BlocksComplementary Census Blocks consists of 2 packages (5 and 6)consists of 2 packages (5 and 6) 6.977 census blocks each6.977 census blocks each
The forming of census blocks sample packages:The forming of census blocks sample packages:
independently done in urban & rural areasindependently done in urban & rural areas
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Measuring Informal Employment (6):
Sampling Methodology of Sakernas: 2008-2010
Household Updating and household listing
Updating for every the selected CB of the 2007 Sakernas
Listing
for all additional census blocksUpdating of Household Frame andHousehold Listing in the first stage :" in the middle of J anuary 2008 for Census Block
Sample Packages numbered 1, 2, 3, dan 4
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Measuring Informal Employment (6):
Sampling Methodology of Sakernas: 2008-2010
Household Updating and household listing
Sample groups based on the results ofSample groups based on the results of
updating and listing in stage I:updating and listing in stage I:Package 1: 3 household sample clusters$ A, E, and I.
Package 2: 2 household sample clusters$ B and F.Package 3: 2 household sample clusters$ C and G.
Package 4: 2 household sample clusters$ D and H
Updating of household frame and listing ofhousehold in Stage II:
in the middle of J uly 2008 for census blocks samplepackage numbered 1, 2, 3, 4, 5, and 6
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Measuring Informal Employment (6):
Sampling Methodology of Sakernas: 2008-2010
Household Updating and household listing
Listing of household for the additional
census blocks is only done in packages 5and 6
Updating and Listing Results (packages5,6)
For sampling frame of household sample selection
For forming the household groups
The resulted sample packages:
Package 5: 2 clusters$J and L
Packa e 6: 2 clusters$ Kand M
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Measuring Informal Employment (6):
Sampling Methodology of Sakernas: 2008-2010
Household Updating and household listing
Result of updating on packages 1,2,3, and 4
For anticipating an household sample addition
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Measuring Informal Employment (7):
Method of Estimation in Sakernas: 2008-2010
Estimation of Total Characteristics by age group ineach district
i= age group; h=urban, rural
i. 15-19 year vi. 40-44 year
ii. 20-24 year vii. 45-49 yeariii. 25-29 year viii. 50-54 year
iv. 30-34 year ix. 55-59 year
v. 35-39 year x. 60+ year
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M i I f l E l t (7)
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Measuring Informal Employment (7):
Method of Estimation in Sakernas: 2008-2010
Variance estimation of the difference between twoperiod (Feb Aug)
Applying replication method
Variance estimation:where:= estimate offull sample,
= estimate of the g-th replication,G = number of replication,c = constanta.
+
=
yxyx n
y
n
xCov
n
yVar
n
xVardVar ,2)(
( ) ( )( )
2
1 = =
G
g
gcv
( )g
Measuring Informal Employment (9):
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Measuring Informal Employment (9):
Trend of Labor Force, Open-Unemployment, and
Informal Employment in Indonesia: 2001-2007
The total number of labor force in Indonesia
increased by average of 2 million people per year,and become 108.131 million in February 2007,indicating that Indonesian economy is a laborsurplus economy.
The open unemployment rate in Indonesia wasquite high, around 8.1 % - 11.2 % during 2001-2007, indicating that a large portion of labor could
not be absorbed in the economy
Measuring Informal Employment (8):
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Measuring Informal Employment (8):
Trend of Labor Force, Open-Unemployment, and
Informal Employment in Indonesia: 2001-2007 The employment in informal sector were quite
dominant Indonesias economy since 2001, around63 % since 2004. About two third of them worked inagriculture sector, indicating that agriculture sector
provide a safety valve for employment in Indonesia. However, according the result of National Socio
Economic Survey in 2007, 53 % of the poorhouseholds in Indonesia worker in agriculturesector, indicating that informal sector , particularly in
agriculture sector was not able to solve the problemof poverty in Indonesia.
Measuring GDP for SMEs (1):
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Measuring GDP for SMEs (1):
Concept of SMEs
Law and regulation
Law no. 9/1995 on Small Enterprise
Presidential decree no. 10/1999 on Medium Ent.
SMEs criterion are based on annual sales
Small Enterprise is an economic activity whichperformed by own-account worker, household, or otherquasi-corporation producing goods & services with an
annual sales of Rp. 1 billion or less. Medium Enterprise is an economic activity performed
by own-account worker, household, or other quasi-
corporation producing goods & services with an annualsales ranging between Rp. 1 billion to Rp. 50 billion.
M i GDP f SME (2)
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Measuring GDP for SMEs (2):
Statistical Unit
Micro/Small Medium/Largesales = Rp 1 M
Registered
businessNon-
registered
business
Cutt-off
Based on Law No. 9/95 & Pres.decree No. 10/99, only
annual sales (omzet) are used to classify scale of
enterprises
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Measuring GDP for SMEs (3) :
Data Sources
Economic census (1996, 2006) Agriculture census (1993, 2003)
Other annual special SME-surveys
Measuring GDP for SMEs (4):
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Measuring GDP for SMEs (4):
Data Treatments 2006 Economic Census employed field
enumeration based on establishmentapproach
While SMEs use enterprise approach;therefore, enterprise with businessaffiliations (such as branch office,
ancillary unit, factory, etc) are treated asone entity
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Measuring GDP for SMEs (5):
Economic Classification of Indonesias SME
Industry Description
1. Agriculture Agriculture, estate crops, livestock, hunting & forestry, fishery
2. Mining & quarrying Metallic & non metallic minerals, quarrying
3. Manufacturing Mfg. of food, beverages, tobacco. textile, leather, footwear, wood, paper, etc.
4. Utilities Non-PLN2 electricity, water supply company owned by local govt.5. Construction Residential & non residential construction (non-AKI)
6. Trade, Hotel &
Restaurant
Wholesale & retail trade, hotels, restaurants
7. Transportation &
communication
Transport, storage, & communication
8. Financial
Intermediaries
grameen banks, leasing, services allied to finance, business services
9. ServicesEducation services, amusement & recreational services,
health, community, social & personal services
Measuring GDP for SMEs (6):
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Measuring GDP for SMEs (6):
Methodology1. Production approach
GDP is measured as total value added ofall economic activities
Used in agriculture, mining & quarrying,
manufacturing, utilities, services2. Commodity flow approach
GDP is measured as total value of goods& services produced/used/sold byeconomic activities
Used in construction, trade, hotel,restaurant
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Measuring GDP for SMEs (7):
Macro indicators of Indonesias SMEs in 2006
Economic growth of Indonesia was 5.5%:
SMEs grew 5.4% Large enterprises grew 5.6%.
The size of the economy was Rp. 3,338.2 trillion:
SMEs contribution was Rp. 1,778.7 trillion or 53.3% of total GDP Indonesia.
SMEs engines of growth:
construction (8.2%), services (8.1%), and
mining & quarrying (7.9%).
The lowest growth was in agriculture (3.1%).
Measuring GDP for SMEs (8):
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gGDP at Current Market Prices & Contribution by
typical enterprise unit, 2000-2006
Figures in italics are GDP contribution (%)
During 2000-2006, the average contribution of
SME is 55 % to total GDP of IndonesiaGDP at current market prices (in trillion rupiahs) & contribution
2000 2001 2002 2003 2004 2005 2006
Small 541,19 642,24 742,57 815,16 900,47 1.053,34 1.257,65
38,94 39,01 40,76 40,48 39,22 37,82 37,67
Medium 218,90 260,19 294,49 328,82 371,01 437,72 521,09
15,75 15,80 16,16 16,33 16,16 15,72 15,61
SME 760,09 902,43 1.037,06 1.143,98 1.271,48 1.491,06 1.778,7554,69 54,81 56,92 56,81 55,38 53,54 53,28
Large 629,68 743,89 784,77 869,70 1.024,35 1.293,90 1.559,45
45,31 45,19 43,08 43,19 44,62 46,46 46,72
Total 1.389,77 1.646,32 1.821,83 2.013,67 2.295,83 2.784,96 3.338,20100,00 100,00 100,00 100,00 100,00 100,00 100,00
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Measuring GDP for SMEs (9)
(bil lion Rp)
2003
UK40,48%
UB43,19%
UM
16,33%
small
medium
large
2006UK
37,67%
UM15,61%
UB
46,72%
small
Medium
large
2003 2006UK 815,156 1,257,655
40.48 37.67
UM 328,822 521,091
16.33 15.61
UKM 1,143,978 1,778,746
56.81 53.28
UB 869,697 1,559,450
43.19 46.72
JUMLAH 2,013,675 3,338,196
100.00 100.00
small
medium
SME
large
total
Figures in italics are GDP contribution (%)
Measuring GDP for SMEs (10): Contribution of typical
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g ypenterprise unit by economic activities, 2005-2006
Small Medium Large Total Small Medium Large Total
1. Agriculture, Livestock, 318 31 15 364 374 38 18 430
Forestry, and Fishery 87,26 8,63 4,11 100,00 86,84 8,88 4,29 100,00
2. Mining and 22 9 277 308 29 12 314 355
Quarrying 7,01 3,02 89,97 100,00 8,15 3,24 88,60 100,00
3. Manufacturing 98 89 585 772 117 106 714 936
12,66 11,56 75,78 100,00 12,45 11,27 76,28 100,00
4. Electricity, Gas, and Water Supply 0,1 2,0 24,5 26,7 0,2 2,3 27,9 30,40,53 7,62 91,86 100,00 0,53 7,56 91,91 100,00
5. Construction 87 43 66 196 110 54 85 249
44,31 21,77 33,92 100,00 44,20 21,78 34,02 100,00
6. Trade, Hotel, and Restaurant 326 89 16 430 378 101 18 496
75,68 20,65 3,67 100,00 76,08 20,33 3,59 100,00
7. Transportation and Communication 52 43 85 181 69 54 108 231
28,75 24,01 47,24 100,00 29,84 23,47 46,68 100,00
8. Financial Intermediary, Leasing, & Bus. Servic 39 108 83 231 45 127 99 272
16,97 46,98 36,05 100,00 16,71 46,86 36,43 100,00
9. Services 113 23 141 277 136 27 175 338
40,78 8,15 51,07 100,00 40,22 7,96 51,82 100,00
Gross Domestic Product 1.053 438 1.294 2.785 1.258 521 1.559 3.338
37,82 15,72 46,46 100,00 37,67 15,61 46,72 100,00
GDP without Oil & Gas 1.053 435 980 2.468 1.258 518 1.201 2.977
42,68 17,62 39,70 100,00 42,25 17,40 40,35 100,00
Sector2005* 2006**
Fi ures in italics are structure %
Activities in Agriculture, trade, hotel & restaurant, & servicessectors are mostly dominated by SME
Small enterprise mostly engage in trade, hotel & restaurant and
agriculture, while Medium ent. Mostly engage in financialintermediaries and manufacturing sector
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Measuring GDP for SMEs (12):Source of Growth 2003-2006
1.88 1.972.24 2.16
0.78 0.83
0.94 0.91
2.122.22
2.50 2.42
0.00
2.00
4.00
6.00
2003 2004 2005 2006
P
ercent
UK UM UB
SME
2,66
SME
2,80SME
3,18
SME
3,07
Small Med Lrg
4.78
5.685.03 5.48
M i GDP f SME (13)
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Measuring GDP for SMEs (13):
Improvement in the future Optimizing 2006 Economic Census
Improving nominal level of SMEs Benchmarking for updating the coverage of GDP
Classification update from ISIC rev.2 to ISIC
rev.4 Spatial data: computing for GDP-SMEs by
regional (in level of provinces, municipalities,regencies)
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Concluding Remarks (1)
Informal sector plays an important role in absorbingthe excessive labor supply in Indonesia, wherearound 63 % of the labor worked in informal sectorsince 2004
The conribution of small enterprises to GDP in2006 was 37,7 %, and combining with medium
enterprises, SMEs contribution to total GDP in2006 was 53,3%.
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Concluding Remarks (2)
Sakernas is a good source of data in Indonesia toprovide data on informal employment; whileenterprises surveys ( such as SUSI) and censuses(agriculture and economic census) were good
sources of data in measuring GDP of SMEs. To develop better policies in optimzing the role of
informal sector in Indonesia, it is necessary todevelop a method that linked informal employmentand informal sector and poverty.
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