Analysis Of Incremental Capital-Output Ratio (Icor) And Projection Of Investment Needs In Maluku Province

Abstract

This study aims to analyze the relationship between investment and economic growth and to project investment needs in Maluku Province using the Incremental Capital-Output Ratio (ICOR) by economic sector and district/city.

Standard method, accumulation method, and time lag (lag 1) were applied to obtain ICOR. While the projection of investment needs uses the ICOR values obtained, the economic growth target set by the Maluku Provincial Government and the implicit index as a proxy for price changes. The results obtained quite high ICOR values, namely an average of 5.91 for the standard method, 5.89 for the accumulation method, and 5.58 for the time lag approach (lag 1), where sectorally the highest investment efficiency is in 1)Construction Sector; 2)Trade and Retail, Car and Motorcycle Repair Sector; and 3)Public Administration, Defense and Compulsory Social Security Sector. While th the lowest efficiency is 1)Electricity and Gas Procurement Sector; 2)Real Estate Sector; and 3)the Mining and Quarrying Sector. At the district/city, the most efficient investment is Ambon City, followed by Central Maluku Regency, and Aru Regency. While the least efficient is East Seram Regency (SBT), followed by Southwest Maluku Regency (MBD), and Tanimbar Islands Regency (KKT). The investment needs in the future will increase in line with the increase in economic growth targets set and changes in inflation.