V. RESULTS AND DISCUSSIONS
5.1 The Role of Pulp and Paper Industry in The Economy of Riau Province 5.1.1 Output Structure
Input-Output Table calculations showed that the total economic output in Riau Province reached 593,158,146.59 million rupiah. From Table 5.1, can be
seen that mining and quarrying sector contributes the largest output with the contribution of 142,070,032 million rupiah or 23.95 percent of the total output in
Riau Province, followed by industry of food products, beverages and tobacco products, and agriculture sector with the amount of each of 113,345,578.25
million rupiah and 69,975,061.18 million rupiah on the second and third. The output of pulp industry reached 35,525,159 million rupiah or 5.99
percent of the total output in Riau Province, while for paper industry the output reached 4,233,851 million rupiah or 0.71 percent. These values put pulp industry
in the seventh positions and paper industry in the fourteenth position in the economy of Riau Province. Pulp industry has higher value of output than paper
industry, which indicates the higher contribution to the output in Riau Province. Even though this value was not the biggest output in Riau Province, pulp and
paper industry still contributes a lot of amount to the economy of Riau Province.
Table 5.1 Output Structure of Riau Province in 2010
Sector Output
Total million rupiah
Agriculture 69,975,061.18
11.80 Wood
22,907,049.10 3.86
Other forest products 5,213,202.00
0.88 Mining and Quarrying
142,070,032.01 23.95
Industry of Food Products, Beverages and Tobacco Products 113,545,578.25
19.14 Industry of Textiles and Wearing Apparel
157,328.00 0.03
Industry of Wood and Furniture 2,530,448.01
0.43
Pulp Industry 35,525,159.00
5.99 Paper Industry
4,233,851.00 0.71
Industry of Paper Products 615,651.00
0.10 Mining Industry
17,401,862.99 2.93
Industry of Fertilizer and Chemical Products 2,492,672.00
0.42 Industry of non-metallic Products
6,384,224.00 1.08
Industry of Fabricated Metal Products 173,129.00
0.03 Other Industries
495,329.00 0.08
Electricity, Gas, and Water Supply 1,878,743.00
0.32 Construction
53,864,219.00 9.08
Trade, Hotels and Restaurants 50,197,063.03
8.46 Transport and Communications
15,863,447.00 2.67
Financial Institutions, Leasing and Corporate Services 12,094,103.00
2.04 Services
35,539,995.00 5.99
Others 0.00
0.00
Total 593,158,146.59
100
Source: Riau Province Input- Output Table, 2010 calculated
5.1.2 Demand Structure
In 2010, the total demand for domestic goods and services produced by Riau Province reached 593,158,146 million rupiah. Total demand is the sum of
the intermediate demand and total final demand. Mining and quarrying gives the biggest contribution for 23.95 percent of total demand, followed by Industry of
food products, beverages and tobacco products, which contributed 19.14 percent of all.
The intermediate demand of Riau Province in 2010 amounted to 223,234,665 million rupiah and the final demand amounted 369,923,481 million
rupiah. From these values, the final demand is greater than the intermediate demand in Riau Province, which suggests that the use of output in Riau Province
tend to meet direct consumption of the society. Based on Table 5.2, viewed from the intermediate demand, it appears that mining and quarrying sector provides the
strongest output by 48,814,819 million rupiah or 21.87 percent, which followed by the agriculture sector with a value of 42,610,515 million rupiah or 19.09
percent. As for the paper industry, the intermediate demand is 2,446,353 million rupiah or 1.10 percent of all the intermediate demand in Riau Province.
From the final demand in Table 5.2, mining and quarrying also took the first place by 93,255,222 million rupiah or 25.2 percent of all, followed by Industry of
food products, beverages and tobacco products for 74,879,523 million rupiah or 20.2 percent. As for the paper industry, it has contributed 1,787,498 million
rupiah or 0.5 percent of all final demand, which makes it ranks fourteenth than other sectors in Riau Province. The intermediate demand for paper industry is
higher than the final demand for paper industry, which means that overall people use the output of paper industry for indirect consumption or as input rather than
for direct consumption to the other sectors. This indicates that paper industry has a strong connection with its downstream industries. On the other hand, pulp
industry has contributed 16,51,780 million rupiah or 7.43 percent for the intermediate demand, and 18,933,379 million rupiah or 5.1 percent for the final
demand in the economy of Riau Province. Pulp industry has the higher value of
final demand than intermediate demand, which indicates that the output of pulp industry is use to direct consumption or to be used by paper industry.
Table 5.2 Demand Structure of Riau Province in 2010
Sector Intermediate
Demand Final
Demand Total
Demand Total
million rupiah
Total million
rupiah Total
million rupiah
Agriculture 42,610,515
19.0 27,364,546
7.4 69,975,061
11.8 Wood
18,565,758 8.3
4,341,291 1.2
22,907,049 3.8
Other forest products 2,541,933
1.1 2,671,269
0.7 5,213,202
0.8 Mining and Quarrying
48,814,810 21.8
93,255,222 25
142,070,032 23.9
Industry of Food Products, Beverages
and Tobacco Products 38,666,055
17.3 74,879,523
20 113,545,578
19.1 Industry of Textiles
and Wearing Apparel 21,762
0.01 135,566
0.0 157,328
0.03 Industry of Wood and
Furniture 884,960
0.4 1,645,488
0.4 2,530,448
0.43
Pulp Industry 16,591,780
7.43 18,933,379
5.1 35,525,159
5.99 Paper Industry
2,446,353 1.1
1,787,498 0.5
4,233,851 0.71
Paper Products Industry
296,714 0.13
318,937 0.1
615,651 0.10
Mining Industry 8,825,825
3.95 8,576,038
2.3 17,401,863
2.93 Industry of Fertilizer
and Chemical Products 1,611,510
0.72 881,162
0.2 2,492,672
0.42 Industry of non-
metallic Products 1,032,852
0.46 5,351,372
1.4 6,384,224
1.08 Industry of Fabricated
Metal Products 134,508
0.06 38,621
0.0 173,129
0.03 Other Industries
167,885 0.08
327,444 0.1
495,329 0.08
Electricity, Gas, and Water Supply
1,168,226 0.5
710,517 0.2
1,878,743 0.32
Construction 4,189,399
1.8 49,674,820
13 53,864,219
9.08 Trade, Hotels and
Restaurants 18,532,684
8.3 31,664,379
8.6 50,197,063
8.46 Transport and
Communications 6,197,602
2.7 9,665,845
2.6 15,863,447
2.67 Financial Institutions,
Leasing and Corporate Services
6,583,767 2.9
5,510,336 1.5
12,094,103 2.04
Services 3,349,767
1.5 32,190,228
8.7 35,539,995
5.99 Others
Total 223,234,665
369,923,481 593,158,146
Source: Riau Province Input- Output Table, 2010 calculated
The intermediate demand of pulp industry needs to be process further to be consumed directly. The high value of intermediate demand in pulp industry also
shows that pulp industry has a strong connection with its upstream industries.
Pulp industry has higher value of demand than paper industry in the economy of Riau Province. Both also have strong connection whether with its downstream
sectors or with its upstream sectors. Pulp industry has a high value of final demand, which indicates the high demand for direct consumption, while paper
industry has a high value of intermediate demand, which indicates the high demand for indirect consumption. Direct consumption used by society,
government, and export, while indirect consumption used by other industries.
5.1.3 Gross Value Added
Gross value added or primary input, is the remuneration of production factors that created due to the production activities. From Table 5.3, the total for
gross value added is 342,691,446 million rupiah, with 89,108,115 million rupiah 26 percent derived from wages and salaries, 228,797,776 million rupiah 65
percent from business surplus, 21,349,678 million rupiah 6 percent from depreciation, 8,053,247 million rupiah 2 percent of indirect tax, and 4,617,370
million rupiah 1 percent of subsidies. Wages and salaries is the remuneration paid to employees, either goods or money, including all benefits provided.
Business surplus included all gross profits, before the distribution to shareholders in the form of dividends and before income taxes. Depreciation is the allowance
for corporate profits to the accumulation of capital goods replacement wears out The government provides subsidies and charges indirect taxes on every sale made
by companies such as value-added tax. Tax is an amount that a company should pay for the government in term of the production. Therefore, gross value added is
the sum total of the wage, surplus, depreciation and minus the subsidies. Mining
and quarrying sector gives the biggest value of gross value added in Province Riau by 123,077,422 million rupiah or 35.91 percent of all, which comes from
wages and salaries by 13,282,583 million rupiah 10.79 percent, business surplus by 101,913,666 million rupiah 82 percent, depreciation by 4,168,288 million
rupiah 3.3 percent and indirect tax by 3,713,615 million rupiah 3 percent. Pulp Industry contributes 18,211,169 million rupiah to the gross value
added of Riau Province, which comes from 5,893,632 million rupiah of wages and salaries, 9,193,395 million rupiah of business surplus, 2,788,363 million
rupiah of depreciation and 335,779 million rupiah of indirect tax. On the other hand, paper industry contributes 2,323,999 million rupiah to gross value added of
Riau Province, which comes from 641,376 million rupiah 27.5 percent of wages and salaries, 1,354,358 million rupiah 58.2 percent of business surplus, 277,118
million rupiah 11.9 percent of depreciation and 51,147 million rupiah 2.2 percent of indirect tax.
The sectors that have large value of output not necessarily have a high cost in production costs including the cost of wages and salaries. Based on the ratio of
wages and salaries to the business surplus in Table 5.3, the pulp industry ratio is 0.64 and paper industry ratio is 0.47. The ratio can be categorized in good things
when approaching equilibrium value that close to 1, which means that the proportion of wage and salary receipts balanced with the surplus business
received by the companies. Pulp industry and paper industry ratio values are less than one 0.64 and 0.47, which means that pulp and paper industry have more
business surplus than wages and salaries. There are only two sectors that give more than one in the ratio, Industry of non-metallic products sector and transport
and communications sector, with the value of each of 1.26 and 1.65. This shows that in Riau Province, most of the sectors still have higher business surplus than
wages. Table 5.3 Gross Value Added Structure of Riau Province in 2010
Sector Wages
Salaries million
rupiah Business
Surplus s million
rupiah Ratio
of ws
Depreci- ation
million rupiah
Indirect Tax
million rupiah
Subsidies million
rupiah Gross Value
added million
rupiah Agriculture
14,841,059 28,589,317
0.5 2,149,996
644,259 -2,740
46,221,891 Wood
4,093,576 12,426,935
0.3 891,643
591,065 18,003,219
Other forest products
1,112,235 3,454,431
0.3 135,573
97,726 4,799,965
Mining and Quarrying
13,281,853 101,913,666
0.1 4,168,288
3,713,61 5
123,077,422 Industry of Food
Products, Beverages and
Tobacco Products
12,497,546 20,643,797
0.6 1,558,149
808,785 35,508,277
Industry of Textiles and
Wearing Apparel 20,749
42,403 0.4
6,497 1,331
70,980 Industry of Wood
and Furniture 204,577
462,193 0.4
82,048 15,566
764,384
Pulp Industry 5,893,632
9,193,395 0.6
2,788,363 335,779
18,211,169 Paper Industry
641,376 1,354,358
0.4 277,118
51,147 2,323,999
Industry of Paper Products
125,039 152,646
0.8 12,036
5,051 294,772
Mining Industry 2,731,347
10,169,571 0.2
1,153,122 66,087
-3,987,781 10,132,346
Industry of Fertilizer and
Chemical Products
615,095 753,371
0.8 109,814
15,909 -403,493
1,090,696 Industry of non-
metallic Products 800,182
634,293 1.2
124,067 54,191
1,612,733 Industry of
Fabricated Metal Products
31,553 32,021
0.9 12,097
4,081 79,752
Other Industries 80,045
112,267 0.7
21,241 6,640
220,193 Electricity, Gas,
and Water Supply
228,063 286,406
0.8 219,895
26,088 -175,906
584,546 Construction
7,528,308 9,663,357
0.7 1,568,663
502,578 19,262,906
Trade, Hotels and Restaurants
9,811,578 19,365,878
0.5 2,214,740
884,159 32,276,355
Transport and Communications
2,829,878 1,711,069
1.6 2,119,568
99,357 -40,081
6,719,791 Financial
Institutions, Leasing and
Corporate Services
1,783,467 6,113,774
0.2 475,623
80,510 8,453,374
Services 9,956,957
1,722,628 5.7
1,261,137 49,323
-7,369 12,982,676
Others
Total 89,108,115
228,797,776 21,349,678 8,053,247
-4,617,370 342,691,446
Source: Riau Province Input- Output Table, 2010 calculated
5.1.4 Investment
Riau Province total investment in 2010 amounted 78,670,186.12 million rupiah, which comes from the total of fixed capital formation and stock changes.
Fixed capital formation includes all the expenditures for the procurement, manufacture and purchase of capital goods. From Table 5.4, can be seen that the
sector that has the highest investment is the construction sector for 49,674,820.24 million rupiah or 63 percent of all. In the order hand, the negative value of
investment states that a decline in total demand for final demand in the sector compared with the previous year.
Paper industry has total investment amounted to 228,476.99 million rupiah, which comes entirely from the value of stock changes due to the value of fixed
capital formation is zero. Therefore, paper industry is included in the sector that does not contribute to gross fixed capital formation.
On the other hand, pulp industry has a total investment of 647,874 million rupiah, which comes from 2,576,559 million rupiah of fixed capital formation and
negative value of stock changes by 1,928,685 million rupiah. The Negative values indicate that there is a change in inventories of goods or raw materials production
sector, which has been used by the manufacturer or most of the manufactured output is exported abroad.
Table 5.4 Investment in Riau Province, 2010
Sector Fixed Capital
Formation million rupiah
Stock Changes million rupiah
Investment million rupiah
Agriculture 7,023,419.60
2,746,041.84 9,769,461.44
Wood 364,467.96
364,467.96 Other forest products
139,590 139,590
Mining and Quarrying 10,996,493.92
4,770,746.96 15,767,240.88
Industry of Food Products, Beverages and Tobacco Products
1 -2,621,489.91
-2,621,488.91 Industry of Textiles and Wearing
Apparel 14
7,964 7,978
Industry of Wood and Furniture 173,626.97
61,757.99 235,384.96
Pulp Industry 2,576,559
-1,928,685 647,874
Paper Industry 228,476.99
228,476.99
Paper Products Industry 2,441
2,441 Mining Industry
362,259.06 362,259.06
Industry of Fertilizer and Chemical Products
29 84,959.99
84,988.99 Industry of non-metallic Products
582,570.36 278,338.17
860,908.53 Industry of Fabricated Metal Products
2,857 -4,959.99
-2,102.99 Other Industries
79,743.94 14,166.99
93,910.93 Electricity, Gas, and Water Supply
Construction 46,012,087.22
3,662,733.02 49,674,820.24
Trade, Hotels and Restaurants 1,758,644.02
435,051 2,193,695.02
Transport and Communications 487,565.02
109,766 597,331.02
Financial Institutions, Leasing and Corporate Services
10,099 10,099
Services 252,850
252,850 Others
Total 69,956,560.
8,713,626.07 78,670,186.12
Source: Riau Province Input- Output Table, 2010 calculated
5.15 Export and Import
In 2010, Riau Province export reached 178,084,866.95 million rupiah and for the import reached 27,232,031.09 million rupiah. Mining and quarrying was in
the first position with the amount of exports of 77,365,017.42 million rupiah or 43.44 percent, and imports of 6,337,723.18 million rupiah or about 23.27 percent
of all imports, followed by industry of food, beverages and tobacco products with the difference between export and import by 46,708,140.26 million rupiah.
From the Table 5.5, can be seen the difference between export and import indicates that almost all sectors in Riau Province showed a positive value except
for financial institutions, leasing and corporate services sector, construction sector and electricity, gas, and water supply sector. This value represents the ability of
every sector to fulfill domestic needs in Riau Province. Positive value from the difference between export and import shown the ability of sectors to produce all
the domestic needs and have no dependence on imports. The negative value of the difference between export and import may occur due to a lack of experts in the
field in Riau. Pulp industry has the value of export of 18,285,504.99 million rupiah or
10.2 percent, and the value of import of 790,790 million rupiah. The net value of export and import for pulp industry is 17,494,714.99 million rupiah and put pulp
industry in the third position in the economy of Riau Province. Paper industry export value reached 1,318,738.97 million rupiah in 2010, and the import value
reached 666,256 million rupiah, which put paper industry in the twelfth position of export in Riau Province. The small number of export happened due to the
persistence of huge domestic needs of paper that cannot be met by the paper companies in Riau Province. The higher value of export than import shows that
domestic paper consumption can be met without reliance on imports. Business surplus obtained through the difference in export and import, which amounted to
652,482.97 million rupiah in paper industry and 17,494,714.99 million rupiah in pulp industry.
Table 5.5 Export and Import in Riau Province, 2010
Sector Export
Import X-M
Total million rupiah
Total million
rupiah Agriculture
3,021,934.83 1.70
1,824,872.23 6.70 1,197,062.60
Wood 2,002,789.78
1.12 517,865.01 1.90
1,484,924.77 Other forest products
856,320 0.48
25,245.01 0.09 831,074.99
Mining and Quarrying 77,365,017.42
43.4 6,337,723.18 23.2
71,027,294.24 Industry of Food Products,
Beverages and Tobacco Products
47,408,825.34 26.6
700,685.08 2.57 46,708,140.26
Industry of Textiles and Wearing Apparel
67,925 0.04
15,368.02 0.06 52,556.98
Industry of Wood and Furniture
1,340,701.75 0.75
188,089.16 0.69 1,152,612.59
Pulp Industry 18,285,504.99
10.2 790,790
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