The Role of Economic Growth in Increasing PAD

Oct 13, 2025 by talynt.org 105 views

Analysis of the Effect of Economic Growth on Regional Original Revenue (PAD) of North Sumatra Province

Introduction

The success of regional development is largely determined by the availability of funds. As a unitary state, the region is an inseparable part of the Unitary State of the Republic of Indonesia. In order to achieve sustainable development, it is essential to explore and utilize various sources of regional financing. Regional Original Revenue (PAD) is one of the existing financial resources, which is a source of income for North Sumatra Province. The problem faced is how PAD can run and increase efficiently and effectively. This study focuses on the influence of economic growth on PAD in North Sumatra Province. Economic growth is an independent variable (independent), while PAD is the dependent variable (dependent).

The Role of Economic Growth in Increasing PAD

Strong economic growth is an important foundation for increasing PAD. Along with economic growth, economic activity in an area will be increasingly dynamic. This has a positive impact on regional income through various sources, such as:

*** Local Tax: ** Increased business and trade activities will encourage an increase in local tax revenue, such as Land and Building Tax (PBB), hotel taxes, and restaurant taxes. The growth of local businesses and industries will lead to an increase in tax revenue, which will contribute to the PAD. For instance, the growth of the tourism industry in North Sumatra Province has led to an increase in hotel taxes and other related taxes, which have contributed to the PAD.

*** Regional levies: ** Increasing activities in the fields of tourism, licensing, and public services will increase the acceptance of regional levies. The growth of the tourism industry has also led to an increase in regional levies, such as licensing fees and other related fees. This has contributed to the PAD and has helped to increase the revenue of the region.

*** Other income: ** Investment and development triggered by economic growth will encourage the revenue of other income, such as the results of regional asset management and profit sharing. The growth of the economy has also led to an increase in investment and development, which has contributed to the PAD. For instance, the growth of the agriculture sector in North Sumatra Province has led to an increase in the revenue of regional asset management and profit sharing.

Challenges and Strategies in Improving PAD

Although economic growth has a positive potential for PAD, there are a number of challenges that need to be overcome, such as:

*** Poverty Level: ** Economic inequality and high levels of poverty can hamper economic growth and reduce the potential of PAD. Poverty is a major challenge in North Sumatra Province, and it has a negative impact on economic growth and PAD. To overcome this challenge, it is essential to implement policies and programs that aim to reduce poverty and improve the welfare of the community.

*** Dependence on PAD: ** The regional dependence on the minimal PAD, causing the region to depend on the General Allocation Fund (DAU) and the Special Allocation Fund (DAK) from the center, so that it lacks initiative in increasing PAD. The dependence on PAD is a major challenge in North Sumatra Province, and it has a negative impact on the region's ability to increase PAD. To overcome this challenge, it is essential to implement policies and programs that aim to increase PAD and reduce the dependence on DAU and DAK.

*** The inability of the region in managing PAD: ** The weak capacity and professionalism of the regional apparatus in managing PAD, causing low efficiency and effectiveness of PAD. The inability of the region to manage PAD is a major challenge in North Sumatra Province, and it has a negative impact on the region's ability to increase PAD. To overcome this challenge, it is essential to implement policies and programs that aim to improve the capacity and professionalism of the regional apparatus in managing PAD.

To increase PAD effectively, a directed and comprehensive strategy is needed, including:

** Investment Investment Climate: ** Creating a conducive investment climate to attract investors both domestic and foreign, thereby increasing economic activity and PAD. A conducive investment climate is essential to attract investors and increase economic activity, which will contribute to the PAD. For instance, the government of North Sumatra Province has implemented policies and programs that aim to create a conducive investment climate, such as the establishment of a one-stop service for investors.

*** Improving the quality of human resources: ** Building competent and professional human resources in various fields, including in the field of regional financial management. The quality of human resources is essential to improve the capacity and professionalism of the regional apparatus in managing PAD. To improve the quality of human resources, it is essential to implement policies and programs that aim to build competent and professional human resources, such as training and development programs.

*** Utilization of Technology: ** Applying Information and Communication Technology (ICT) in the process of planning, budgeting, and monitoring PAD to increase transparency and accountability. The utilization of technology is essential to improve the efficiency and effectiveness of PAD. To utilize technology, it is essential to implement policies and programs that aim to apply ICT in the process of planning, budgeting, and monitoring PAD, such as the establishment of a digital platform for PAD management.

Conclusion

Economic growth has a significant influence on PAD in North Sumatra Province. Strengthening economic growth, improving the quality of human resources, and utilizing technology is the key to maximizing PAD. With a strong PAD, the region will have a greater financial ability to run development programs and improve the welfare of the community. The government of North Sumatra Province should implement policies and programs that aim to strengthen economic growth, improve the quality of human resources, and utilize technology to maximize PAD.

Recommendations

Based on the findings of this study, the following recommendations are made:

The government of North Sumatra Province should implement policies and programs that aim to strengthen economic growth, such as creating a conducive investment climate and improving the quality of human resources.
The government of North Sumatra Province should implement policies and programs that aim to improve the quality of human resources, such as training and development programs.
The government of North Sumatra Province should implement policies and programs that aim to utilize technology, such as the establishment of a digital platform for PAD management.
The government of North Sumatra Province should increase the transparency and accountability of PAD management by applying ICT in the process of planning, budgeting, and monitoring PAD.

By implementing these recommendations, the government of North Sumatra Province can maximize PAD and improve the welfare of the community.
Frequently Asked Questions (FAQs) about the Analysis of the Effect of Economic Growth on Regional Original Revenue (PAD) of North Sumatra Province

Q: What is Regional Original Revenue (PAD)?

A: PAD is a source of income for North Sumatra Province, which is generated from various sources, such as local tax, regional levies, and other income.

Q: What is the role of economic growth in increasing PAD?

A: Economic growth is an important foundation for increasing PAD. Along with economic growth, economic activity in an area will be increasingly dynamic, leading to an increase in regional income through various sources, such as local tax, regional levies, and other income.

Q: What are the challenges in improving PAD?

A: There are several challenges in improving PAD, including poverty level, dependence on PAD, and the inability of the region to manage PAD.

Q: How can the government of North Sumatra Province overcome the challenges in improving PAD?

A: The government of North Sumatra Province can overcome the challenges in improving PAD by implementing policies and programs that aim to strengthen economic growth, improve the quality of human resources, and utilize technology.

Q: What are the benefits of maximizing PAD?

A: Maximizing PAD will provide the region with a greater financial ability to run development programs and improve the welfare of the community.

Q: How can the government of North Sumatra Province maximize PAD?

A: The government of North Sumatra Province can maximize PAD by implementing policies and programs that aim to strengthen economic growth, improve the quality of human resources, and utilize technology.

Q: What is the importance of transparency and accountability in PAD management?

A: Transparency and accountability are essential in PAD management to ensure that the funds are used effectively and efficiently.

Q: How can the government of North Sumatra Province increase transparency and accountability in PAD management?

A: The government of North Sumatra Province can increase transparency and accountability in PAD management by applying Information and Communication Technology (ICT) in the process of planning, budgeting, and monitoring PAD.

Q: What are the recommendations for the government of North Sumatra Province to maximize PAD?

A: The recommendations for the government of North Sumatra Province to maximize PAD include:

Implementing policies and programs that aim to strengthen economic growth, such as creating a conducive investment climate and improving the quality of human resources.
Implementing policies and programs that aim to improve the quality of human resources, such as training and development programs.
Implementing policies and programs that aim to utilize technology, such as the establishment of a digital platform for PAD management.
Increasing transparency and accountability in PAD management by applying ICT in the process of planning, budgeting, and monitoring PAD.

Q: What is the future of PAD in North Sumatra Province?

A: The future of PAD in North Sumatra Province is promising, as the government of North Sumatra Province has implemented policies and programs that aim to strengthen economic growth, improve the quality of human resources, and utilize technology.

Q: How can the community of North Sumatra Province contribute to the maximization of PAD?

A: The community of North Sumatra Province can contribute to the maximization of PAD by supporting the government's policies and programs, such as creating a conducive investment climate and improving the quality of human resources.

Q: What are the potential risks and challenges in maximizing PAD?

A: The potential risks and challenges in maximizing PAD include the risk of corruption, the risk of mismanagement, and the risk of dependence on external funding.

Q: How can the government of North Sumatra Province mitigate the risks and challenges in maximizing PAD?

A: The government of North Sumatra Province can mitigate the risks and challenges in maximizing PAD by implementing policies and programs that aim to prevent corruption, improve the quality of human resources, and increase transparency and accountability in PAD management.