Types of Economic Actors and Their Important Role in the Indonesian Economy

Economic Actors – Economic actors are all parties who carry out economic activities (production, distribution, and consumption) both individuals and organizations (government or private) or society in general.

Definition of Economic Actors

Every economic agent has their respective roles. According to the Cambridge Dictionary , an economic actor is a person, company or organization that has influence over economic motives by producing, buying or selling.

Meanwhile, according to the Longman Business Dictionary , the definition of an economic actor is a person, company, and others who have an impact on a country’s economy, for example by buying, selling, or investing. See a more complete explanation of the types of economic actors and their roles below:

Types of Economic Actors and Their Roles

Examples of the activities of economic actors themselves start from a housewife who buys food ingredients, such as rice, vegetables, fruits, eggs, meat, milk, and others.

Fertilizer producers produce fertilizer that is needed in agricultural activities, up to the collection of taxes by the government and the distribution of imported products by the government. The following is a more complete explanation of the following division of economic actors:

1. Family Household

The household as the smallest scope which then contributes to building the wider community. The household as an economic agent consisting of father, mother, children and other family members.

As economic actors, in this case consumer households have 2 roles, namely as actors of production and actors of consumption. The role of households as actors of production can be seen from the utilization of their labor for companies or government agencies.

In addition, businesses that can be run within the scope of the household are called UMKM, which Sinaumed’s can learn about various important aspects in the book UMKM Is Key below.

Meanwhile, from the consumption side, the role of the household can be seen from the use of products, both goods and services to meet all their needs. To earn income, family households utilize a factor of production, namely labor, to be sold to corporate households. The following are some of the main household activities, including:

  • Obtain income from companies or producers in the form of wages or salaries (a reward for sacrificing their energy to do work or carry out production), interest (various rewards to households from a company for lending capital to the company concerned), profit (all forms of payment or rewards from the results of the sacrifice of thoughts, energy and expertise in managing the company so that the company is able to obtain profits or profits), rent (some payments to consumers for renting land or buildings to companies that carry out the production of goods or services) and sales proceeds (any wages or compensation received by households from selling raw materials to producing companies).
  • Spending income in the goods market.
  • Save part of the income in state financial institutions.
  • Paying some taxes to the government.
  • Make purchases on the money market because you need cash to shop for your daily needs.

2. Manufacturers

Producer households have an important role in society. Producer households are economic actors who provide goods or services to consumer households. Producing households in Indonesia can be divided into several groups, namely State-Owned Enterprises (BUMN), Privately-Owned Enterprises (BUMS), and Cooperatives.

Based on the field of business, companies can be divided into three, namely: Primary Industry, namely companies that process natural resources and utilize the factors of production provided by nature.

For example, agricultural activities, mining, fisheries, forestry, animal husbandry, and others. Secondary Industry, namely companies that produce goods in the sense of industry or companies that process semi-finished goods into finished goods into finished goods that are ready for public consumption.

Examples are clothing companies, shoe companies, car companies, and others. Tertiary Industry, namely companies that produce services, such as transportation services (transportation), savings and loans, building leases, and others. The roles of producer households include:

  • As Producers of Goods or Services: Producing households or companies are tasked with producing goods or services in accordance with their respective fields. Goods or services that have been produced are then distributed to consumers, so that consumers can easily buy or consume these goods or services.
  • Utilizing various factors of production in consumption households to carry out the production process.
  • Apply for working capital loans to financial institutions to build or expand their business.
  • Determine purchases of various capital goods and other stock items.
  • Producer households provide remuneration in the form of rent, interest and so on.
  • Producer household development agents play a role in development in Indonesia. The government feels helped by the existence of producer households in the development sector to provide welfare for the community. Development agencies also absorb a lot of manpower, provide salaries to workers, and ensure work safety for workers.
  • As a distributor of goods or services (distributor) Not only making goods, but there are producer households that directly distribute their goods or services to consumers directly.
  • Increasing state income through taxes, producer households are obliged to pay taxes to the government for production activities carried out, so producer households have helped the government to increase state revenues through taxes.
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3. Company

The company is a business organization formed to produce goods and services needed by consumers. The role of companies as economic actors is broader, because they can act as producers, distributors and consumers.

The role as a producer is the main role of a company because it has become the place where production takes place. Meanwhile, there are companies that try to make a product that is produced reach the hands of consumers. Retail companies are in charge of marketing and selling products from the company.

In this case, the company acts as a distributor. While the role as a consumer can be seen when a company has to meet the needs of raw materials (inventory) for production. Some of the activities of the group of companies or producers are as follows:

  • Producing products, both goods and services, as well as acting as a supplier in the market for goods or services.
  • Utilizing various factors of production in consumption households to carry out the production process.
  • Apply for working capital loans to financial institutions to build or expand their business.
  • Determine purchases of various capital goods and other stock items.
  • Pays taxes to the government on the sale of goods it produces.

In a company in running its business there are rules that must be followed, the book Business Ethics for Business People by Agus Arijanto will explain various factors as well as practical examples of ethics in doing business.

4. Government

Apart from households and companies, the government plays a very important role in the economy. The economy that takes place in Indonesia must be controlled with various policies that are beneficial, both for producers, consumers, and distributors.

The main role of the government as an economic actor is to control the economy with various economic policies to prosper its citizens. Some of the government’s economic activities include:

  • Making Fiscal Policy, namely one of the policies made by the government and related to state income and expenditure.
  • Making Monetary Policy is a policy made by the government and related to the regulation of the money supply to control the rate of inflation.
  • Making International Financial Regulations are all policies that exist in the financial sector and are closely related to the international world, for example international trade, economic cooperation with other countries and many more.
  • The government can also act as a producer and consumer. As a consumer, it means that in carrying out its duties, the government needs goods and services. Consumption activities carried out by the government can be in the form of purchasing office equipment, medical equipment, educational support equipment, using family households in carrying out their duties, and so on.
  • As a producer, it means that the government participates in producing goods and services needed in order to realize the people’s prosperity as much as possible. In terms of household producers, the government produces electricity, water and energy sources for the community.
  • Policies in managing the economy by maintaining price stability for goods and services, providing basic needs, providing public facilities and infrastructure, preparing short, medium and long term economic plans, granting business licenses, determining the amount of taxes, and providing subsidies.
  • From distributors it can be seen in the activities of distributing Raskin, channeling BOS funds or School Operational Assistance to assist operational activities in schools, for example through the provision of textbooks, and others.
  • The state is also tasked with creating public investment, for example providing roads and bridges. Assigned to establish a state company that will be used as a stabilizer of economic activity.
  • Play a role in the collection of direct and indirect taxes. In charge of spending state revenues that are used to buy goods needed by the government.
  • Make loans from abroad to help finance domestic development.
  • Hire skilled workers to help with various government tasks and work as well as carry out monetary policy.
  • Providing the currency needs of the community.

5. Overseas Households

It cannot be denied that other countries also play a role in the economy in Indonesia, because a country cannot meet its own needs, so it requires other countries to meet its needs. The roles of foreign households for the domestic economy are as consumers, producers, investors, labor exchanges, foreign lenders.

As consumers, this can be seen from the import activities carried out by foreign households on domestic products. As producers, overseas households help to meet the needs of a country that cannot produce goods and services. This can be seen with export activities.

Investment development carried out in a country requires large funds to improve people’s welfare. To cover the shortage of funds, the state will invite foreign investors to invest in the country, where the investment provided can be in the form of loan funds.

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Some of the economic activities carried out by foreign communities are as follows:

  • Providing the needs of certain goods to be imported by other countries. Carry out export and import activities with other countries to mutually meet the needs of each country.
  • Make investments by providing credit to finance development activities carried out by the government and the private sector in the country.
  • Enter the Indonesian money market as money distributors from abroad, credit applicants, and rupiah currency for the needs of all their company branches in the country.
  • To be a media liaison between the domestic money market and the foreign money market
  • Labor exchange differences in population have an effect on available jobs. Generally, a country with a large population will experience an excess of human labor and a lack of jobs, whereas a country with a small population will experience a shortage of labor and an excess of jobs.
  • Foreign loan lenders have the goal of helping the economy of a country that is in need of loan funds. These loans can be made through world financial institutions or bilateral cooperation such as the World Bank.

6. Financial Institutions

  • Collecting funds from various parties, both household consumers and companies.
  • Providing business capital loans for companies or producers to be able to improve their production performance.
  • Provide demand deposits for financial transaction activities so that they can help the payment mechanism for business people. Demand deposits themselves are funds kept at commercial banks which can be used at any time to make payments through checks, demand deposits, banknotes, share certificates and so on. Demand deposits are issued by commercial banks and are intangible money because they are only in the form of bank bill balances.
  • Overcoming inflation by increasing the central bank’s cash reserves so that the circulation of money increases.

To better understand the scope of financial institutions, both banks and other financial institutions, Sinaumed’s can read the books Banks and Other Financial Institutions below.

Economic Book Recommendations

1. Globalization, Constitutional Economics, and the Economics Nobel

2. Monetary Economy: Case Study of Indonesia

3. Indonesian Economic Politics

Types of Economic Actors

Various types of economic actors, including:

1. Cooperative

Cooperatives are business entities that are carried out jointly to achieve common goals as well. In Law no. 12 of 1967, Indonesian Cooperatives are defined as people’s economic organizations with a social character, consisting of people or cooperative legal entities which constitute an economic arrangement as a joint venture based on the principle of kinship.

Within cooperatives there are various principles, theories that are related to other disciplines of knowledge that you can learn about in the book Cooperatives: Principles, Theory, and Practice, the 2014 Revised Edition.

2. BUMN (State Owned Enterprises)

BUMN is a business entity whose capital ownership is partially or wholly owned by the state. SOEs can also be non-profit whose purpose is to provide goods and services to the community. The form of BUMN can be divided into three, namely:

  • Liability Company (Limited Liability Company) , namely a BUMN in the form of a limited liability company, whose capital is divided into shares of which all or at least 51% of the shares are owned by the state, and aim to make a profit.
  • Public Limited Liability Company (Limited Public Company) , namely BUMN whose capital and number of shareholders are determined based on certain criteria or in other words, companies conducting public offerings in accordance with statutory regulations in the capital market sector.
  • Public Company (Perum) , namely BUMN whose capital is all owned by the state and is not divided into shares. The purpose of a public housing company is to benefit the public in the form of providing high quality goods and services while at the same time seeking profit based on the principles of corporate management.

In Indonesia itself, existing SOEs are regulated in existing law. Sinaumed’s can understand this in the book Deconstruction and Legal Reformulation of SOEs in Indonesia below.

3. Perjan (Services Company)

Perjan is a state-owned enterprise whose capital is wholly owned by the government. Perjan is always oriented towards community service, so he is always at a loss. Therefore, now there is no longer a perjan model. An example of Perjan is PJKA (Railroad Bureau Company), which is now PT KAI.

4. Company

The company can be defined as the place where production activities occur and all factors of production gather. In Indonesia itself, there are several forms of companies, namely private companies, state-owned companies (BUMN), regional companies, firms, CV (commander partnership).

Read more on other economic materials:

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  • Basic Concepts of Economics
  • Definition of Goods Market
  • Definition of Request and Offer
  • Definition of Money
  • Definition of Inflation
  • Definition of Banks
  • Economic Principles
  • Definition of Scarcity
  • Definition of Macroeconomics
  • Microeconomics
  • Economic Recession
  • Economic Globalization
  • People’s Economy
  • Economic agents
  • Economic Problems in Indonesia
  • Economics
  • Types of Economic Systems
  • People’s Economy