ECONOMIC ACTIVITIES

Economic activities are consisting of production, distribution, and consumption. Typically, in any of the activities, there are certain economic actors. In developed countries’ economy, economic actors are not only consisting of households, firms, and government, but also involve people outside the country.

The presence of foreign communities in the economy in a country as one of economic actors nowadays is increasingly important because of the globalization of the economy. The boundaries of a country in the economy are not only less and less clear, and every country needs another country in order to support the economic development.

ECONOMIC ACTORS

1. Household

Household is one of economic actors that play a quite important role. Household is a source of factor of production such as labor and expertise. In addition, the family household is a group of economic actors who consume the products that produced by other economic actors.

Consumption activities in a given household or individuals are concerning all things to satisfy every need of families or individuals in order to maintain viability. By doing the consumption activities, either for the primary, secondary, and tertiary needs, thus survival can be ensured.

The role of family households could not be separated from the inherent characteristics of family households in the form of individuals or groups who are not able to produce all kinds of life needs. Therefore, the presence of labor supply and the expertise of family households will generate income in the form of wages, salaries, rent and the other things which would then be paid back through the act of consumption. However, the role of households as a user of goods or services is not the only role. Often found that households are able to produce certain goods or services. Generally, households are able to produce these so-called as domestic industries. Examples of products that produced by households are such as crafts, foods, shelters and rental services.

2. Company

The second economic actor is company, in which company is defined as the venue for the production process to generate goods or services. From the definition above, it can be seen that the role of the company is to produce goods and / or services because other economic actors do not play a role in that field.

It needs to known about the process of production, in which the company requires production factors. Production factors could be in the forms of labor, capital and expertise. Inside the company, production factors are combined to produce efficient and high valuable products or services.

With the advancement of science and technology, the company carried out the production process becomes faster and with low cost. In addition, goods or services that produced by the company no longer intended to meet the market in the country, but rather is intended to meet the overseas market and international market by exporting goods and services and to conduct international trade.

3. Government

The government is also obliged in economic activities. Government is obligated to secure and manage the branches of production which is important not to be dominated by individuals who later only will be used for personal or group interests.

Government participation in economic activity implies that the utilization of natural resources should be managed by the government and the results are really for the welfare and prosperity of the people. So in this case the government should give priority to the interests of the people. In order to increase public welfare, the government should not implement a wide range of politics and policy, both in economics and other fields.

In general, the role of government can be grouped into three main things.

a. Efficiency

The economy cannot always go well. Often there is competition in the economy with unfair and unhealthy. Sometimes manufacturers do not know the techniques of the most expensive production so that production costs do not reach the minimum. The role of government in this case is to provide a solution to enable the efficient production processes, creating a healthy and fair competition and remove barriers that lead to high economic costs, thus society are not disadvantaged and economic efficiency can be created.

The government should be able to optimize its role in correcting the market's inability to remove all barriers that interfere with market mechanisms through regulatory, public services, subsidies and incentives which are carried out transparently and regulated by law.

b. Fairness

The second role of government is to create fairness in the economy, both on the distribution of income and opportunity in the attempt. Besides that, the government role is raising the living standard of people a lot through the process of economic growth and welfare programs that raise the minimum living standard, thus there is no gap between the rich and the poor.

This creates the role of fairness that can be done in ways as follows.

1) Develop an economic system that relies on popular market mechanisms with fair by the principle of fair competition and attention to economic growth, the values of justice, social interest, quality of life, insightful environmentally and sustainable development, thus that can guarantee the equal opportunities in business and work, protection of the consumers rights and fair treatment for all people.

2) Develop a healthy and fair competition and avoid a monopolistic market structure and adverse market structure that distorting various society.

3) Seeking a decent life that based on the humanity with fair to the community, especially the poor and abandoned children in developing social security system and through government programs and to develop the business and creative community that its distribution is done by an effective bureaucracy and established by law.

c. Stability

Through a policy issued by the government such as fiscal and monetary policy, the government can bring stability, especially in the economy. Stability is necessary because in the absence of stability, the economy is not run well. The stability is also necessary in order to create investor interest and confidence to be willing to invest in a particular country. Investors, especially foreign investors really need the assurance that the capital they invested not in vain. In order to create stability, especially in the economic field, the government can do these things.

1) Manage the macro and micro-economic policies in a coordinated and synergistic to determine a reasonable interest rate, inflation rate, stable rate and realistic exchange rate, to provide basic needs, especially housing and foods for the people, provide adequate and reasonably priced public facilities and the licensing is transparent, easy, cheap and fast.

2) Develop a fiscal policy with regard to the principle of transparency, discipline, fairness, efficiency and effectiveness to increase revenues and reduce dependence on funds from abroad.

3) Develop a healthy capital market, transparent, efficient, and improve the implementation of regulations in accordance with international standards and overseen by an independent agency.

4) Optimizing the use of foreign government loans for productive activities that are conducted in a transparent, effective, and efficient.

Furthermore, J.E. Meade argued about the power of government in the economy, as quoted by Suherman Rosyidi in his book titled as The Introduction of Economic Theory.

• Banking System

The banking system is usually called as the monetary authority. In this case the government has institutions that served to define and control the amount of money circulating in the community.

-  Fiscal Authority

Fiscal Authority is a form of governmental authority that relating to tax matters.

- Commercial Authority

Commercial Authority is a form of government power to regulate commerce traffic for example to set the export, import, type of merchandise, and others.

- Exchange Control

Exchange Control is the power of government to responsible for managing the institution and functioning of government control or control over payments made by an area.

4. Foreign Communities

The role of foreign communities in the implementation of economic activities is also very important because people overseas are part of the perpetrators of economic activity. In the era of free trade and the era of economic globalization, the role of foreign society is enormous in a country's economic growth because there is no country is able to meet all their needs themselves. Therefore, it is required the cooperation between countries, whether in the form of bilateral, multilateral and regional or international.

Role of foreign people in a country's economy can be seen from three aspects.

a. Foreign Communities as the Consumer

As consumers, people overseas will buy the products of other countries. If a country is able to export domestically produced goods to foreign countries, then people will buy the foreign goods which are exported.

Therefore, the production of the country will bring in foreign exchange. Of course the exported goods must be goods that can compete with the production of other countries, or both of the quality and price. Foreign exchange earned on exports of goods, giving the opportunity for these countries to spend more abroad by buying other items that are needed in order to expedite the development process or kept as tools of payment at any time if needed.

b. Foreign Communities as Manufacturer

As has been stated above that no one country is able to meet all of their needs. Therefore, the presence of foreign communities as producers of goods that have not been able to produce its own is essential in meeting the needs of the community. Goods produced abroad may be obtained by importing it from countries that produce these goods.

c. Foreign Communities as Investors

Developing countries are generally still having problems in implementing economic development. Such barriers include lack of capital. To overcome these obstacles one of the effort is to open to the foreign public who have capital to invest in the country. This investment can be done by way of cooperation between countries in the form of joint ventures, production sharing or pure foreign investment. Joint venture is a form of cooperation between countries together to invest and manage with results is shared in accordance with the agreements / rules that have been agreed. Production sharing is a form of capital investment with the contract system. Owners of foreign capital to plan, establish, and manage the business as agreed in a predetermined time period, say 20 or 30 years. Once the contract is end in accordance with the agreement of business proficiency level is left entirely to the state governments concerned. Pure Foreign Investment means foreign community as owners of capital with are fully given permission to invest in a business, and the total capital is owned by the respective overseas communities.

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