THE CONTRIBUTION OF THE CONSTRUCTION INDUSTRY TO THE ECONOMY OF INDONESIA: A SYSTEMIC APPROACH

Construction industry contributes significantly in terms of scale and share in the development process for both developed and developing countries. The construction products provides the necessary public infrastructure and private physical structures for many productive activities such as services, commerce, utilities and other industries. The industry is not only important for its finished product, but it also employs a large number of people (directly and indirectly) and therefore has an effect on the economy of a country/region during the actual construction process. This research examines work done to determine the detailed effects of investing in construction. The effects considered are those on the micro and macro economy of the people directly or indirectly employed by the construction industry The work is based on surveys, which were carried out in Indonesia to investigate how the money invested in construction flows through the economy. It also examines at which point in the construction process income is received, and at which point it is spent. The results of these surveys were analysed using statistical methods and combined with results from economic input-output modelling. The results were then used to build a system model. A system model is developed to examine its use to compare labour intensive and equipment based construction methods. It was found that the construction sector provides a very important contribution to the national and local economy through its job generating ability for local people as multiplier effects. A system model developed is able to predict the effects of changes in policy on expenditure in the micro scale. Key words: construction industry, labour intensive construction, micro and macro econom