This article was published in *Garda Indonesia* under the title: "Economic Sector Appears ‘Underrated’ Despite Being a Standout in NTT" – Read more at: https://gardaindonesia.id/sektor-ekonomi-terlihat-underrated-padahal-unggul-di-ntt/
By: Diah Mekita Sari, S.Tr.Stat., Junior Statistician at BPS (Statistics Indonesia) of NTT Province
When discussing a region's leading sectors, we often immediately picture the sectors that contribute the most to the economy.
Take NTT Province, for example. Agriculture, forestry, and fisheries are easily identified as key sectors due to their significant roles in the regional economic structure.
However, is the sector with the largest contribution always the most outstanding one?
Not necessarily.
There are sectors that—while perhaps not yet matching the economic value of other major sectors—hold a relatively stronger position in NTT compared to the national economic structure. These are the sectors worth watching, as they harbor potential for future development.
One approach to examining this is the Location Quotient (LQ).
LQ is essentially a simple tool to answer one question: how strong is a sector's position in NTT compared to the position of the same sector at the national level? This analysis is used to identify sectors that possess a comparative advantage or a higher level of relative specialization compared to other regions.
Understanding LQ is actually quite straightforward.
Suppose we want to look at the LQ for the information and communication sector. First, we calculate the sector's contribution to NTT's total economy. Then, we calculate the contribution of that same sector to Indonesia's total economy.
Next, the two figures are compared.
If the result is greater than 1, it means the sector accounts for a larger share of NTT's economy than the same sector does within the national economy.
In this analysis, such a sector is categorized as a leading sector in NTT. If the value is less than 1, it indicates that the level of specialization in NTT remains below the national structure. Thus, the Location Quotient (LQ) does not simply ask, "Which sector generates the most revenue?" Rather, it is more appropriately used to determine, "Which sector excels in NTT compared to Indonesia as a whole?"
This perspective is crucial because the magnitude of economic value and the strength of relative advantage are two distinct concepts.
Based on data for NTT Province’s Gross Regional Domestic Product (GRDP)—totaling IDR 148 trillion in 2025—and Indonesia’s Gross Domestic Product (GDP) of IDR 23,636 trillion, the LQ analysis reveals a compelling picture. The calculations for NTT Province identify six sectors with an LQ value exceeding 1: Agriculture, Forestry, and Fisheries; Information and Communication; Financial and Insurance Services; Public Administration, Defense, and Compulsory Social Security; Education Services; and Human Health and Social Work Activities.
Interestingly, not all of these sectors have traditionally been perceived by the public as NTT’s "leading sectors"; some tend to be "underrated"—possessing high quality yet receiving insufficient attention.
Agriculture, forestry, and fisheries is perhaps the sector most easily recognized as a leading one. In 2025, this sector contributed approximately IDR 42 trillion to NTT’s GRDP, with an LQ value of 2.20. This figure indicates that the proportion of the agriculture, forestry, and fisheries sector within NTT’s economy is significantly larger than the proportion of the same sector within the Indonesian economy.
On the other hand, there are several sectors worth noting that may not have previously taken center stage in discussions regarding NTT’s economic strengths.
One such sector is Information and Communication, which has an LQ of 1.44. This value indicates that the information and communication sector holds a relatively stronger position in NTT compared to the same sector at the national level.
By 2025, its contribution to NTT’s Gross Regional Domestic Product (GRDP) is projected to reach approximately IDR 9.8 trillion.
While this figure does not yet make information and communication the largest sector in NTT’s economy, this is precisely where the Location Quotient (LQ) offers a different perspective. A sector need not be the largest contributor to possess a relative advantage.
Amidst an increasingly digital economic landscape, this position warrants attention. Factors such as digital infrastructure, expanded connectivity, the demand for technology-based services, the growth of the digital economy, and data utilization can create significant opportunities for this sector. In other words, a sector that may not appear dominant today could become a crucial component of NTT’s future economic transformation.
If a sector exhibits high relative concentration, it implies the existence of an economic base that can be further developed. The analysis reveals that NTT’s strengths extend beyond the sectors traditionally recognized for their importance; there are also strengths in service sectors that may not always feature prominently in everyday discussions about the regional economy.
The next question is: what steps should be taken once these leading sectors have been identified?
This is where LQ analysis must go beyond mere tables and figures. Location Quotient (LQ) should serve as a starting point for shaping policy direction. Sectors with high LQ values warrant further analysis to understand the drivers of their advantage, productivity trends, key players, and existing barriers, as well as their potential to generate multiplier effects for other sectors.
Agriculture, forestry, and fisheries, for instance, should not be viewed merely as sources of raw materials. The challenge lies in advancing downstream processing, boosting value-added output, strengthening supply chains, expanding market access, and enhancing productivity.
Meanwhile, the information and communication sector may require a different type of ecosystem—one defined by human capital quality, digital infrastructure, internet access, innovation, and strong linkages with the business community.
The financial services sector requires expanded financial inclusion and access to financing. Education and healthcare demand improvements in service quality alongside the strengthening of human resources. The public administration sector, meanwhile, should be viewed not just as an economic activity, but as the foundation for public service delivery that supports economic activities across other sectors.
Ultimately, data is not an end in itself; it is a tool for identifying opportunities that may not yet be apparent.
Sectors currently considered "underrated" may actually possess stronger foundations than we realize. What is needed next is the courage to interpret the figures, test that potential through in-depth analysis, and translate the findings into policy.
After all, the future of NTT’s economy will be shaped not only by sectors that are currently large but also by our ability to identify sectors with the potential to become major drivers of growth in the future.(*)
