Measuring the Indonesian provinces competitiveness by using PCA technique

Abstract

Indonesia is a country which has vast teritoty. It has 34 provinces. Building local competitiveness is critical to enhance the long-term national competitiveness especially for a country as diverse as Indonesia. A competitive local government can attract and maintain successful firms and increase living standards for its inhabitants, because investment and skilled workers gravitate from uncompetitive regions to more competitive ones. Altough there are other methods to measuring competitiveness, but here we have demonstrated a simple method using principal component analysis (PCA). It can directly be applied to correlated, multivariate data. The analysis on Indonesian provinces provides 3 clusters based on the competitiveness measurement and the clusters are Bad, Good and Best perform provinces.