Sunday, April 1, 2007

The Dominance of Jakarta in Indonesia's Economy

In previous post, it is clear that Jakarta's dominance in Indonesia's urban system particularly in the distribution of urban population is very high. The domination of Jakarta over other Indonesian cities has been increasing since the 1950s. Does such dominance correspond with the concentration of Indonesia's economy? Does Jakarta also dominate Indonesia's economy? This post attempts to answer the questions by comparing Jakarta's gross domestic regional product (GDRP) with Indonesia's gross domestic product (GDP). I use data of Jakarta's GDRP and Indonesia's GDP in 2000 and 2005 to also identify the change of Jakarta's contribution to Indonesia's GDP over five year period.

Jakarta's contribution to Indonesia's GDP in 2005 was 16.9% and it was an increase of 2.0% from that in 2000. The staggering Jakarta's contribution to Indonesia's economy was primarily caused by the dominance of Jakarta in the financial and business sector. Indonesia's GDP of the financial and business sector in 2005 was 146.3 trillion rupiahs and Jakarta's GDRP of this sector accounted for 62.1%. Some other sectors of Jakarta's economy also highly contributed to Indonesia's economy in 2005 including construction (26.2%), trade, hotel and restaurant (23.1%), transportation and communication (20.1%) and services (19.3%). On the contrary, agriculture and mining sectors of Jakarta only contributed as low as 0.1% to Indonesia's economy in 2005. These figures indicate that Jakarta strongly dominates urban sectors in Indonesia's economy.

It is also important to note that there were three sectors (electricity, gas and water, trade, hotel and restaurant, and services) of Jakarta's economy that increased their contributions to Indonesia's economy during period 2000-2005. In contrast, sectors of manufacturing and construction of Jakarta decreased their contributions to Indonesia's economy. These facts indicate that Jakarta has shifted from industry city to services city. A number of manufacturing plants in Jakarta have been relocated but most of them were just relocated to Jakarta's peripheral areas. Such relocation did not change much Indonesia's highly concentrated manufacturing sector. The manufacturing sector in Jakarta and its peripheral areas (Bogor, Depok, Bekasi and Tangerang) accounted for 23.5% of Indonesia's economy in 2005.

The staggering Jakarta's contribution to Indonesia's economy as demonstrated by comparing Jakarta's GRDP with Indonesia's GDP strongly indicates the dominance of Jakarta in Indonesia's economy. The increasing Jakarta's contribution to Indonesia's economy will create more regional imbalance in Indonesia. Jakarta's dominance should be reduced and other urban centers in Indonesia should be supported to compete with the dominance of Jakarta.


AdhiRock said...

I am the first? yes! hahahahaha

I am totally agree that Jakarta dominance should be reduced and government should be able to spread the business into some district outside Jakarta.

It’s quite dangerous when Jakarta become one of big contribution to the Indonesia’s economics. In this case when Jakarta is going to “chaos” (for example: flood) it will affect to the other city and the whole Indonesia economic itself.

And it’s time the government and business practice recognize that they should relocate the business to develop cities.

iman said...

I support to Adhirock and totally agree both for Deden and Adhi. If you realize, that actually central government has been doing decentralization many things to regional government. Anyway this policy does not working properly, i think. So, what are the solutions??

Anonymous said...

historically jakarta have been developed by colonial power to centrelize the administration. sadly, this policy is continued by the current "independent" administrator. There is no chance for real decentralization since political elites are enjoying this centrelize city structure to easily secure their power over the vast resource of the big indonesia. the possible (but hard) option is to become federal state where the relation between center and periphery is clearly defined. or, indonesian have to wait until all islands become jakarta..:-))

salam kenal,
umar (

gerhana said...

Until all of Java becomes Jakarta, other islands may have the chance to be developed. :))

bagindo said...

A crazy idea, but not impossible, move capital city of Indonesia out of Java:)