Has the National Capital Relocation Reshaped Regional Economic Structure? Evidence from East Kalimantan

Abstract

This study aims to describe changes in the economic structure of East Kalimantan around the enactment of Law Number 3 of 2022 concerning the National Capital (IKN), and to identify the leading sectors in the province. Unlike previous studies on capital relocation in Indonesia, which focus on spatial planning, fiscal impacts, and macroeconomic projections, this study combines the Location Quotient (LQ), the Dynamic Location Quotient (DLQ), and Shift-Share analysis at the 52-subsector level, and complements them with a comparison of sectoral growth before and after the enactment of the law. The analysis uses East Kalimantan's Gross Regional Domestic Product (GRDP) at constant prices, with the national economy as the reference region. The results show that the provincial economy remains dominated by resource-based sectors, with coal and lignite mining recording an average LQ of 14.42 during 2018–2022. Sea transport, other mining and quarrying, and the chemical, pharmaceutical, and traditional medicine industries are identified as leading sectors by the LQ, the DLQ, and the Net Shift criteria simultaneously. In 2023, growth accelerated most strongly in the electricity and gas supply sector (12.21 percentage points) and the construction sector (8.05 percentage points) relative to the previous year. Because the methods are descriptive and the post-enactment period is short, these patterns are consistent with, but do not prove, an effect of the IKN development on the regional economic structure.