Forestry Sector Impact on the Economy of Central Java , Indonesia

In 2016, the forestry sector produced a Gross Regional Domestic Product (GRDP) of Rp. 3.8 trillion or around 0.45% of the total GRDP of the province of Central Java, Indonesia (BPS Central Java, 2017). The Forestry Sector growth has increased, but the role of the sector shows a downward trend in GRDP. By employing the Input-Output analysis, this study intends to identify the structure of the Central Java forestry sector, through backward and forward linkages and mapping the path of the impact of the forestry sector's economic activities through simulations, toward the economy and sectoral income levels in Central Java. This study finds that the forestry sector is intermediate ouput that is used by other sectors to become their production inputs, so this sector has a good multiplier for the economy.


INTRODUCTION
Central Java Province, Indonesia has a lot of natural resources in the form of wood and other forest products. The area of governmentowned forest is ± 651,020 hectares and ± 635,000 hectares of community forest are used for various purposes, including timber production, non-timber forest products including pine sap, resin, eucalyptus, honey, and so on. The performance of the forestry sector in 2016, based on the figure of Gross Regional Domestic Product (GRDP), is Rp. 3.8 trillion or around 0.45% of the total provincial GRDP (Badan Pusat Statistik Jawa Tengah, 2017). In total, as the agricultural sector, the forestry subsector with the agriculture and fisheries subsector, ranks second in the economic structure of Central Java. In the second quarter 2017 period, The Agriculture, Forestry and Fisheries sectors accounted for 14.36% of Central Java's economic growth or in the second position after the Manufacturing Industry which contributed 34.97% of economic growth. The Forestry sector growth has increased, but the role of the forestry subsector of the Central Java's GRDP shows a downward trend. The contribution of the Forestry sector from GRDP recorded continued to decline, which amounted to 0.56% in 2013, then dropped to 0.50% in 2015 and lastly 0.45% at the end of 2016 (Badan Pusat Statistik Jawa Tengah, 2017).
In analyzing the economy of a region, the economic impact and economic contribution is something different. However, the two terms are often used interchangeably, confusing practitioners (Watson et al. 2015, Henderson et al. 2017a). According to Cheney (2018), contribution analysis illustrates changes in the dominance of the structure of the economy, while impact analysis shows the effects of new indicators or indicators that disappear in business activities or economic activities in a sector. Watson et al. (2015) states that the contribution analysis is about looking at how the current sector conditions in supporting the economy, but this contribution has not yet reflected the impact of the indicators, both directly and indirectly on an economic sector. Schminke (1995) argues that the sustainable forest development can only be achieved if all stakeholders work together seriously due to the rapidly changing of world meanwhile the natural resources including forests are under pressure. So that the development of related human resources and technology also must be done immediately and sustainability.
Information regarding the contribution of the Forestry Sector GRDP is believed to not reflect the actual contribution of the Forestry sector. The contribution of the Forestry sector through multipliers is estimated to be quite large for the economy of Central Java, while the contribution of the forestry sector seen in the GRDP data is very small. This is because the linkages and support of the forestry sector in other sectors have not been taken into account, because the GRDP only calculates the final output of a sector or only shows the direct role of the sector. Whereas in the economy, each sector including the Forestry sector has an indirect role in addition to a direct role in the output of the economy. The indirect role is the influence of the Forestry sector on Other Economic sectors in shaping the output of the economy. For the illustration, the estimation of the GRDP from the Forestry sector only calculates roundwood production, while in the downstream sector, the processing of advanced Forest products such as furniture no longer includes output (added value) calculated from the Forestry sector. Likewise in the production of Non-Timber Forest products such as honey, food crops grown under stands, and non-extractive products such as recreation and forest tourism This study identifies the map of the forestry sector structure in Central Java, through backward and forward linkages, by employing the Input-Output Analysis. This study also maps the path of the impact of Forestry sector economic activities through simulations of Central Java and sectoral economies, and the level of sectoral income in Central Java. Input-Output analysis is an analysis that can reflect the contribution of the forestry sector in Central Java Province in terms of its linkages to other sectors. This study is important to provide an analysis of the economic impacts of the Forestry sector and forest products, especially in order to communicate greater economic benefits from industry to policy makers (Henderson and Munn 2013, McConnell 2013, Henderson and Evans 2017, Joshi et al. 2017).

RESEARCH METHODS
The data used in this study are collected from the Central Statistics Agency (BPS), Central Java Provincial Government, which includes the 2013 Central Java Province Input-Output (I-O)  Table  are total transactions based on consumer prices (million rupiah); total transactions based on producer prices and domestic transactions based on producer prices.
The total transaction table is a table that covers transactions in goods and services sector transactions, both from local production (in the Central Java region itself) and imports (from outside the Central Java region). The table of domestic transactions is a table that covers the transaction value of goods and services between economic sectors that only come from production in the scope of Central Java region. The transaction table which is based on the buyer's price is a transaction table that includes the value of trading margins and transportation costs (which are incorporated in the input value for sectors that buy it) on goods and services transactions between sectors. The table of transaction which is based on the producer prices is a transaction table that includes the value of transactions between goods and servicesbetween sectors that do not contain elements of margin of trade and transportation (it hase been separated as inputs purchased from the trade and transportation sector).   (2015) IO Table Scheme and  In the Table 3, an example of an I-O table is illustrated. Each quadrant is expressed in the form of a matrix. As shown in the table, for example in an economy there are 3 sectors, namely sector 1, sector 2, and sector 3. Suppose that in the economy, all goods in the domestic market come from domestic output from domestic production sectors (X). Furthermore, the interpretation of each number in each cell is double. This means that it can be read both in column and row. Each number when viewed horizontally shows the distribution of output, while vertically is the input of a sector obtained from other sectors.
Input Coefficient and Leontief Inverse Matrix, by knowing the input between a sector (xij) and the total input of the sector (Xj), the input coefficient can be calculated as: The technology coefficient aij, can be written as: By shifting all elements to the left, except Yi, then grouped by X, the equation is obtained: If the relationship between data is written into matrix notation, the equation in the column becomes: Where I is an identity matrix of the size of nx while A, X and Y are respectively the technology coefficient matrix with order n x n, column vectors output n x 1 and the final demand column vector n x 1. If there is a change in the final demand in the economy, there will be a change in national output and written as: The matrix of (I -A) -1 is known as the Leontief inverse matrix. It is clear that the level of output depends on the value. Furthermore, how the calculation and interpretation of each of these matrix elements will be discussed in a separate section.
Because the form of the equation is linear, equation (3.11) can also be written as: Where Y is a vector of changes in the final demand and X is a vector of the changes of output. Multiplier: Output and Income, one of the main purposes of I-O analysis, is to find out the impact of changes in the elements of exogenous variables in the I-O model of the economy. For the example is a change in the element of final demand (such as government spending) in the case above. The general form of measuring the impact is X = (I -A) -1 Y. The results of these impacts, namely X will depend on (I -A) -1 and Y.
The main concern for the formula is the Leontief inverse matrix, which is determined by the matrix A and the transaction intermediate matrix Z. Changes in Y vector are formed from projections on certain final request elements. Furthermore, accuracy in determining the value of these elements will determine the accuracy of the results of the calculation of the impact. The output multiplier of a sector j is the total value of the output produced by the economy to meet (or as a result) a change in one unit of money of the sector's fineal demand. The output multiplier is the number of columns of the Leontief inverse matrix element. By notation, it formulated as: Where O j is the number of output multiplier of j and ij is the element of the Leontief inverse matrix, (I-A) -1 . The change in the amount of income received by the household that created due to the addition of one unit of money to the final demand of a sector. The path of influence of the change in final demand on increasing household income can be explained by, for example, the case of an increase in final demand. An increase in sectoral final demand will increase sectoral and total economic output. This can be measured through output multiplier numbers as explained previously.
An increase in output will increase demand for labor, this will increase remuneration for households that have these workers. The relationship of the total output of each sector with the labor income is indicated by the row (n + 1) of the matrix (which is the component of wages and salaries in the primary input matrix), referred as the coefficient of wages and salaries, which is the ratio between the value of wages and salaries to the total value of input, H R . So the impact of the final demand on household income is measured by the multiplier of output and the coefficient of household income, which is called the household income multiplier, H j , Household income multiplier matrix: ..........................................(9) Where H R is the row vector n+1, because it is considered a transaction matrix and the input coefficient matrix has order n x n.
Where xn+1,j in the formula is same with the row v (primary input) on the table 3. The Simulation of the Impact of Forestry Sector Activities and Development of Shock Scenarios, by developing a shock injection scenario with a certain magnitude, this study simulates the activity impacts on the economy toward total/sectoral output and income. To estimate changes in shock to changes in sectoral output, is calculated by: Where Y is a vector of changes in final (including consumption expenditures) and X is a vector of output changes. A is the technology coefficient matrix and (I-A) -1 is the Leontief inverse matrix (Firmansyah, 2006). To estimate the changes in sectoral of household income, is calculated by the formula: Where H is a vector of output changes. H R is the adalah matriks of household income coefficient. (Firmansyah, 2006).

RESULTS AND DISCUSSION
The Development of the Forestry Sector of Central Java , Central Java's economic growth shows a positive trend in the period 2011-2017. This is indicated by the constant rate of economic growth in the range of 5.1-5.5%. In 2017, Central Java's economic growth is 5.3% (yoy), slowing down compared to 2015 (5.5%), which was caused, among others, by slow down in the forest and logging sub sectors. Based on the sectoral composition of the business sector, Central Java's economic growth is driven by the secondary sector and the primary sector.Based on the 2009-2029 Central Java Regional Spatial Planning (RTRW), the land use with the spatial pattern is consists of cultivation areas and protected areas. Allotment of cultivation areas includes production forests, community forests, agriculture, plantations, mining, industry, livestock and settlements covering an area of 2,693,008 hectares and land for allotment of protected areas includes protected forests, border areas, nature reserves, and nature conservation, karst protected areas 561,404 Ha.
The development of production forest designation areas in Central Java Province with an area of 546,290 Ha is divided into 20 Forest Management Units (KPH), with the function of a limited production forest by ± 362,360 Ha and permanent production forests covering ± 183,930 Ha. Limited production forest areas are in 28 districts (all districts except Sukoharjo Regency) and one city, Semarang City, while production forest areas remain in 28 districts (districts except Karanganyar Regency). Since 2009-2015, the state forest area and the area of Perhutani forest have experienced an increase or expansion. 0.71% for Perhutani land and 0.54% for state forest. However, the conservation forest has decreased / narrowed by 5.88% in the past 6 years as presented in Table 4.The development of community forest areas in 2015 was 640,393.90 in 35 districts/cities in Central Java. Cilacap Regency has the widest community forest area in Central Java, reaching 8.97%. The growth of the area of community forests in Central Java tends to fluctuate with the increasing trend. This is due to public awareness to plant trees on land owned with the hope of obtaining a large return in the future.
Source: Pemerintah Provinsi Jawa Tengah (2018a), processed That is, the order of this sector is better if imports and distributions are separated, in other words this sector is the support sector of the local economy, with low import dependence. In addition, the Manufacture of Wood and Wood Material Construction (50), which is a sector that receives input support from the Forestry sector, ranks 5th.
The value added (VA) shown in I-O represents the percentage of VA of a sector against the sector's corresponding output. The sector that has the largest added value compared to its output (relative to other sectors in the economy) is the Other Mining (30) sector which reached 89.67%. The sector that has a high ranking is the most efficient sector compared to other sectors in the economy. Other forestry products sector (25) has a high composition of VA which ranks 7th, while the Wood Sector (24) is in the order of 11 out of 88 IO Central Java classification sectors. If VA is large compared to other sectors, then sectors that have the biggest VA is the sector that has the best multiplier for the economy. Compared to other sectors, the composition of VA toward the formation of the total VA of Central Java's economy contributed by the Wood (24) and Other Forestry Products (25) sectors was not too high, at 0.39% and 0.12%. Although the VA of forestry sector production (sectors 24 and 25) is not too high compared to other sectors in the Central Java economy, these two forestry sectors are one of the sectors that are attractive to investors. It can be seen in Table  5.4 that the magnitude of the business surplus of the two sectors is 69% and 72% (the average of the two sectors is 70.5%). This means that 70.5% of profits are enjoyed by investors.
According to the 2013 Central Java I-O Table classification, the forestry sector consists two sectors, namely The Wood sector (24) and The Other Forestry products sector (25). The two sectors also have links with other sectors both from input and output side. Other sectors that buy the output of wood and other forestry products, use as inputs in their production process. In terms of input, the activity of the wood and other forestry products sectors drive the demand for their input which are bought from other sectors. In terms of output, the activity of the wood and other forestry products sectors drive the demand of their outputs that used by other sectors as inputs in the production process. So, the activity of the two forestry sectors boosts other sectors through their input and output channels. In addition, the output value of forestry which can be calculated as GRDP, this sector also plays a role to supports other sectors (which have linkage with forestry sector) in forming the GRDP. As the studies of the impact forestry sector in several regions of the world by Henderson, Standiford, and Evans (2016), Atyi (1998), Lebedys andLi (2014), Nurrochmat et.al. (2015) and Thanger (2014).  (2014), processed Which state the sector forestry will have an impact on the economy because it has relevance to other sectors, both as input and output. The Impact of Forestry Sector on Central Java Economy,. From the results of the data processing, it is known which sectors use the most inputs from the two sectors.    (51) uses its inputs derived from Other Forestry Products sector by 10.97% (2nd place) and from the Wood sector by 5.98% (4th place). The largest use of inputs (1st place), which reached 51.48% by Sector 51, come from Sector 50 (Manufacture of Wood and Wood Material Construction). It shows that Sector 51 is the largest user of inputs in the form of materials from other wood processing industries wich is from Sector 50, not logs. However, it also can be seen that the Manufacture of Wood and Wood Material Construction also buys Wood sector output reach 19.21% of the total input used. This means that the Wood sector contributes to the Sector 51 production process in two ways namely directly and indirectly through the production of Sector 50. The same explanation for Other Forestry Products Sectors.  Table 9 shows that the input of Other Construction sector (70) originating from the Wood sector is only 5.9% (the 7th order in the use of sector 70 inputs) and which comes from the Other Forestry Products sector is almost zero.
However, the main input provider of Sector 70 is Sector 50 -which also buys inputs from Wood sector. So the Wood and Other Forestry Products sectors contribute directly and indirectly to the production of Sector 70. Wood and Other Forestry Products sectors contribute to the Sector 50 production process directly or indirectly. The use of output of Wood and Other Forestry Products sector is 2.03% and 0.004 % respectively, not too significant in supporting Sector 69 (Residential and Non Residential Construction Sector) (Table 11). However, the second support of the Forestry sector was also carried out indirectly in addition to directly. The description of the analysis of the forestry sector in Central Java is in line with the research of Henderson, Standiford and Evans (2016), which states that the economic contribution of the forest products industry is very different in each region for two reasons. That is, the total value of the effect or contribution reflects the value of the direct effect (eg the size of the forest product industry) and the value of the multiplier (eg how the economy responds to expenditure). Forestry provides many economic benefits for the local economy (eg sales, employment, income), and the ability to practice forestry depends on access to publicly managed infrastructure (eg roads and bridges) to transport forest products that are harvested and produced. However, the economic benefits resulting from forestry-related harvesting and manufacturing are not always fully understood or valued. An analysis of the impact of the forestry sector on the economy of Central Java is explained as follows. Impact analysis of the forestry sector on the economy of central java, analysis of direct, indirect, and total impact of the forestry sector on the Economy of Java, in this impact analysis, the Central Java I-O Table used is aggregated to 87 sectors from 88 sectors so that the output multiplier matrix (Leontief inverse matrix) can be calculated. Sector 88 is aggregated with Sector 87 become Sector 87. The influence of a sector through input purchase is called the backward linkage of a sector, while the influence of a sector through the supply of output to other sectors is called forward linkages. The effect of a sector is triggered by changes in the final demand (in the Input-Output analysis known as the final demand approach). In summary, to understand the impact of the movement of a sector, for example the impact that occurs activities the final change in demand, namely changes in investment or consumption. For example, an increase in final demand (eg investment) in Sector A will increase the output created in the sector and in other sectors directly related to sector A, both as input providers and output buyers. Other sectors that are directly related also increase their output. If the impact comes from the additional output of Sector A created coupled with an increase in the output of other sectors which are providers of sector A inputs, then it is called the direct backward impact of Sector A. If the impact comes from the output of Sector A created plus output of other sectors which are buyers of sector A output, hence the direct impact of Sector A.
Indirect impacts are the impact of the next round. For example, the indirect backward impact is the output of sectors that provide input to the sector of direct input sector A. This impact continues backward in terms of the linkages. For total impact, is the sum of direct and indirect impacts. Similar explanations for future impacts are indirect. Sectors 24 and 25 have a direct, indirect and total backward impact that is smaller than the sectoral average. This means that if the sector moves fthe impact through its input channels is not as large as the other sectors on average in the direct, indirect and overall economic output (Table 13).From Table 14 it can be seen that Sectors 24 and 25 have a direct, indirect and total impact that is smaller than the sectoral average. This means that if the sector moves for example by making additional investments, the impact through its output path is not as large as the other sectors on average at the economic output both directly and indirectly and overall. In fact, the sectors in the economy do not move individually, but together simultaneously, so that the support of the Forestry sector can also be done through the movement of other related sectors, as explained in the following section. Analysis of the Impact of Changes in Sectoral Activities on Sectoral Outputs and the Total Economy of Central Java 2018-2023.
This section is analyzed based on the case that the Forestry sector (Sector 24 and 25) get a shock or injection at the final demand, and the impact is calculated on the creation of economic output. In addition, if several other sectors that use inputs derived from the Forestry sector output also get an injection at their final demand, it can be seen that the creation of output the sectors (where the Forestry sector plays a role), and also known how the Wood and Other Forestry sectors role in the formation of the outputs.
The magnitude of injection in this study is assumed to be an investment of 1 trillion rupiahs in each sector. Table 15 shows changes in economic output that occur if the final demand (in this case investment) is the Wood (24) and Other Forestr Products sector (25), is increased by 1 brillion rupiahs (simulations are carried out alternately, when Sector 24 received a shock of 1 trillion, Sector 25 and other sectors did not get investment or zero investment value).  Source: BPS (2014), processed In addition, it is also simulated if 5 selected sectors (Sectors 51,70,50,69 and 49) that have a backward linkage with Sector 24 and 25 are given alternately (such as the simulation above) shock investment of 1 trillion rupiahs, is known how the economic output occurs due to the shock, and what part of the contribution from Sectors 24 and 25 in the formation of the output. Table 16 to 20 are the simulation results from an increase in investment of 1 trillion rupiahs in each of these sectors. The choice of the 5 sectors are based on 5 sectors that use the Wood and Other Forestry Products sectors as inputs.  Table 16 shows that if in the industrial furniture sector of wood households (51) is invested 1 trillion rupiahs (other sectors have not changed), the economic increases by 2.236 trillion rupiahs. In other words, the economy will grow 2,236 times investment in sector 51. From these results, the Wood and Other Forestry Products sectors including the 6 biggest contributors to the economic output. Sector 24 contributed 4.30%, and Sector 25 contributed 3.27% from the increase in economic output due to investment increase in Sector 51.  Construction Sector (69) (other sectors have not changed), the economic output increases by 2,250 trillion rupiahs. In other words, the economy grows 2,250 times investment in Sector 69. Based on these results, the Wood and Other Forestry Products Sectors contribute 1.09% and 0.01% of the increase in economic output due to the investment increase in Sector 69.  Table 20, it is known that if in the Manufacture of Leather and Footwear Sector (49) an investment of 1 trillion rupiahs is invested (other sectors have not change), then the economic output will increase by 2.462 trillion rupiahs. In other words, the economy grows by 2,462 times investment in Sector 49. From these results, the Wood and Other Forestry Products Sector contribute 0.15% and 0.22% from the increase in economic output respectively due to the investment increase in Sector 49.  (2014), processed Impact of Changes in Sectoral Activities towards Sectoral and Total Income in Central Java. Table 21 shows a simulation result of the investment increase by 1 million rupiahs in each sector (while other sectors have not changed) towards sectoral and total income in Central Java. With an increase by 1 million rupiahs of investment in the Wood Sector (while other sectors have not changed) will increase the income of the entire sector by 0.258 million rupiahs, and an increase of 1 million rupiahs in Other Forestry Sector (while other sectors have not changed) increases the all sector income by 0.206 million rupiahs

CONCLUSION
From the component of the forming value added of the Wood and Other Forestry Products Sector, it shows that two sectors of forestry are attractive sectors for investors because they have a portion of the business surplus of 69% and 72% of all value added.
The Wood and Other Forestry Products sector product is mostly the intermediate output, which is above 97% and 88% of its products are used by other sectors as the production inputs, so these sectors have a high multiplier for the economy.
In terms of exports, the products of the Wood Sector and Other Forestry Products Sectors export only 6.6% and 36.14% of their products, respectively. The Wood Sector exports of its products to other provinces, while the Other Forestry Products Sector exports 82.52% to other provinces and 17.48% to other countries. Based on this data, the Central Java Forestry Sector also acts as a source of foreign exchange income for the country. The Wood and Other Forestry Products Sector drives the economy directly and indirectly. The impact of the activities of the forestry sector can be traced through a linkage scheme between sectors both through the input purchase path (backward linkages) and the sale of output (forward linkages) to other sectors.