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Until the mid-1970s, the significance of Jakarta in the national economy seemed to have grown rather rapidly, with both population and per capita GDP growing much faster than the national average. In the years between 1975 and 1983, population growth fell, although it was still above the national average, while per capita GDP growth exceeded the national average (table 11.10). During the period 19831985, a sharp drop took place in Jakarta's GDP per capita growth whereas the national growth experienced only a moderate decline. To some extent this might be related to the economic recession experienced by the whole country during the period following the devaluation in 1983. In the period 1985-1989, the recovery of Jakarta's economy put the province back to a higher level in terms of GDP per capita growth compared with the national level.

The Jakarta economy has unique characteristics, which partly explain its economic dominance and to some extent indicate its international role compared with other regions. The first characteristic is Jakarta's role in international and domestic trade in comparison with other parts of the country, because the city was founded as a trading centre. Its role in international trade is illustrated by the fact that in 1989 the value of Jakarta's exports accounted for one-fifth of total national exports (including oil/gas), while if oil and gas are excluded then the share would become one-third - the largest share in the country. These shares have tended to increase since 1986.

On the import side, Jakarta also has a significant role as the main entrance for import goods. The most striking feature in imports is that the total value of Jakarta's imports was more than 50 per cent of the total national value of imports (c.i.f.) in 1989. In addition, the total value of Jakarta's imports has always surpassed the total value of its exports (f.o.b.). Of the export commodities shipped from Jakarta, it has been noted that a large proportion was produced outside Jakarta, particularly oil/petroleum commodities. Only recently has Jakarta produced significant amounts of consumption goods, notably textiles, garments, and paper goods.

Though the above figures explain the city's role in the international trade of the country, according to the 1986 Economic Census the key role of Jakarta was further exhibited by the fact that around one-twelfth of all national wholesale trade enterprises were concentrated in Jakarta, while one-fifth of the national employment in this subsector was also located in Jakarta.

Jakarta's second unique economic characteristic is the magnitude and structure of its domestic and foreign direct investment. In fact Jakarta comprises around 4.6 per cent of the total national population, but it received between one-fifth and one-third of total domestic and foreign investment projects, respectively, in 1967-1991 (tables 11.11 and 11.12).

These shares would become twice as big if the Botabek region were included because a substantial portion of West Java's total investment was located in the region, practically as an extension of the Jakarta economy. The Botabek region accounted for more than half of domestic investment and almost 50 per cent of foreign investment cumulatively from 1967 to the early 1991. Most investment in Botabek is engaged in the manufacturing sector whereas in Jakarta it has shifted towards and is now dominated by the construction and service sectors.

Table 11.11 Cumulative domestic investment, 1968-1anuary 1991 (preliminary figures)


No. of projects

Share of projects (%)

Investment value (Rp. million)

Share of value (%)


Share of employment (%)




DKI Jakarta 1,043 18.6 9,159,929.5 17.4 221,918 2,589 224,507 12.4
West Java 1,457 26.0 15,260,217.4 29.0 372,022 2,374 374,396 20.7
Indonesia 5,599 100.0 52,589,958.8 100.0 1,800,454 9,381 1,809,835 100.0

Source: BKPM, January 1991.
Note: Cumulative figures include the value of new projects, expansion, alterations, mergers, changes of status, as well as revocations.

Table 11.12 Cumulative foreign investment, 1967-January 1991 (preliminary figures)


No. of projects

Share of projects (%)

Investment value (Rp. million)

Share of value (%)


Share of employment (%)




DKI Jakarta 350 32.2 2,903,727.4 17.2 77,402 1,999 79,401 25.2
West Java 318 29.3 4,646,711.4 27.6 84,754 1,370 86,124 27.4
Indonesia 1,087 100.0 16,833,514.9 100.0 309,025 5,631 314,656 100.0

Source: BKPM, January 1991.
Note: Cumulative figures include the value of new projects, expansion, alterations, mergers, changes of status, as well as revocations.

Both domestic and foreign investments are dominated by industry and service projects. More than a quarter of all foreign investment that took place in Jakarta up to 1989 was from Japan. Hong Kong and South Korea are the two other large Asian investors in Jakarta. So far only US investment leads Hong Kong investment in Jakarta. The same pattern of foreign investment can be identified in the Botabek area.

The investment boom in Jakarta as well as in Botabek is in turn followed by the creation of abundant new employment and generates a multiplier effect in other related sectors. A rough estimate shows that more than half of the total new employment created by both types of investment was generated in Jakarta and Botabek. It is thus understandable that Jakarta and the Botabek area have attracted a lot more people (labour) from outside the regions.

The role of the manufacturing sector in Jakarta has been clearly shown in the earlier discussion. Until now, the attraction of Jakarta had remained high, despite some limitations. To some extent, these restrictions in turn have caused new manufacturing investors to move out to the surrounding areas. The expansion of industrial activities from Jakarta to the Botabek region has also been confirmed by the evidence that Jabotabek region has become the major industrial region in the country in terms of industrial output and manufacturing value-added (MVA). In 1989, Jabotabek produced nearly 26 per cent of Indonesia's MVA (including oil/gas) of large and medium manufacturing establishments. The large and medium MVA in DKI Jakarta grew more than the national average (table 11.13) during the period 1975-1985, but it declined in the period 1985-1989.

The decline of MVA growth over the period 1985-1989 is related to the drift of (new) industrial location(s) to the peripheries. The movement of industrial activities from the core area to its peripheries (the Botabek region) has several causes: high urban land prices, difficulties in acquiring urban land, restrictions on industries with high water consumption locating in DKI Jakarta, etc. This tendency has been accelerated by the provision of transportation and road systems, which has made the Jabotabek area an integrated region linked with other regions within the country and with international markets as well.

Table 11.13 Growth and share of large and medium MVA in Indonesia and the Jabotabek area, 1975-1989 (%)


Average annual growth of large& medium MVA

Share of large & medium MVA








DKI Jakarta 16.7 13.4 10.9 11.9 20.2 19.8 19.2
Botabek n.a. n.a. 10.2 n.a. n.a. 7.4 6.6
Jabotabek n.a. n.a. 10.7 n.a. n.a. 27.2 25.8
Indonesia 11.9 13.1 12.8 - - - -

Sources: BPS, Provincial Income in Indonesia, various issues; Bappeda & KSP Jawa Barat, PDRB Propinsi Jawa Barat 1985-89.

The share of large and medium MVA in DKI Jakarta compared with the national MVA seems to have increased steadily from 12 per cent in 1975 to nearly 20 per cent in 1985, but decreased slightly in 1989. The same happened to the Botabek region between 1985 and 1989, as is shown in table 11.13. However, these declines do not mean that the role of Jakarta vis--vis the Jabotabek region also declined, since the absolute MVA of both regions still grew rapidly.

Jabotabek's size and rapid growth have helped to provide employment opportunities for surplus rural labour and have expanded the production base for Indonesia's industrial sector.

Environmental conditions

Another area that needs attention is the region's environmental condition. Rapid urban growth and associated industrialization in the Jabotabek area are placing increasing stress on the natural resources of the region, with domestic and industrial waste causing severe degradation of ground, surface, and coastal waters, air pollution, and contamination of soils. This adversely affects its residents' health and quality of life and the economy of the region. Around 40 per cent of the population still depend on groundwater, and the quality of this source is already poor in many areas and is threatened in others. As the region expands, and in the absence of pollution control, safe water must be brought from more distant sources, and the costs of transmission and treatment are high.

Although the coverage of the solid waste collection service in Jakarta is reportedly very high (85 per cent), 15 per cent is randomly dumped and only about 50 per cent of what is collected is disposed of in a controllable manner in suitable landfills. As a consequence of shortcomings in the secondary collection and transportation system, solid waste is disposed of in informal dumps, drains, and canals, causing pollution of waterways (Jakarta's raw water source), pollution of groundwater, and flooding owing to clogging of the primary and secondary drainage systems.

Aquaculture and coastal fishing - important employment and food sources -are threatened, especially by industrial pollution. The incidence of infant mortality and of gastro-enteric, pulmonary, and viral diseases caused, in part, by polluted and congested conditions is high, especially among the poor and those living in the northern, flood-prone areas of the city. In addition to problems relating to health and quality of life, the environmental situation imposes higher infrastructure and maintenance costs.


A survey in 1985 revealed that, on an average weekday, 14 million person trips were made to, from, or within DKI Jakarta. Of these, only 608,000 (4.3 per cent) were between Botabek and Jakarta; 91.2 per cent of all trips were within Jakarta itself. Journey-to-work trips from Botabek to Jakarta accounted for only 76,000 trips on a typical weekday. About 64 per cent of trips between Botabek and Jakarta were by public transport: 56 per cent by bus and 7.7 per cent by rail. Overall, however, the rail system carried only 1.7 per cent of all motorized trips, i.e. about 55,000 passengers per day.

In Jakarta, the recent rapid growth in the level of motorization (total registered vehicles grew by an average 12.6 per cent per annum between 1981 and 1985) has outstripped the rate of growth of road capacity. The consequent traffic congestion has been exacerbated by a poorly developed hierarchical road structure and insufficient capacity on the secondary roads serving the main arterial network. For many roads, particularly in the secondary and local network, traffic capacity is reduced by inefficient use of kerb space, poor parking controls, unregulated bus stopping, mixed vehicle types, and undisciplined driver behaviour.

Jabotabek's main road system is dominated by the influence of Jakarta. The national and provincial networks serving Bogor, Tangerang, and Bekasi are primarily oriented towards Jakarta and carry substantial volumes of traffic.

Toll roads have helped to relieve urban traffic congestion in these cities, but internal traffic circulation is still in need of improvement: a poorly developed sub-arterial network, interference from roadside activities, and mixed traffic remain causes of delay and reduced capacity.

Secondary centres in the Botabek kabupatens are relatively well served by roads directly linked with Jakarta or by the national or provincial networks.

The Jabotabek region is also served by a suburban railway network, which comprises: (a) three north-south lines in the central area of Jakarta (the Western, Central, and Eastern lines), (b) a spur line to Tanjung Priok, and (c) radial lines to Tangerang, Merak, Bogor, and Bekasi. Of these, only the Bogor line operates a reasonably frequent commuter service. The rail network's layout is not ideally suited to commuter operations. It functions as a suburban system serving Botabek centres. That is why most commuting trips require transfers to bus/minibus services and often involve significant travel-time penalties over alternative private and public modes of transport (such as express buses).

The main characteristics of and concerns about the existing transport system can be summarized as follow:

(1) Internal travel within Jakarta dominates the pattern of trips; trips between Botabek and Jakarta account for a very small proportion of the total.

(2) Trips are strongly focused on the central area of Jakarta, with consequent problems of congestion on access roads.

(3) Non-motorized trips are still important, particularly for low-income groups and short-distance journeys, but the bus system is the predominant non-private motorized mode. Travel by passenger car is increasing; the rail system caters for only a very small proportion of travel needs.

(4) The public transport system is a severe drain on public funds, with the two state-owned operators, PJKA and PPD, losing more than Rp. 30 billion per year on their operations.

(5) Both Jakarta and the kotamadya/kabupaten capitals of Botabek suffer from urban traffic congestion, the result of poorly structured networks, insufficient control over adjacent development and parking, mixed traffic, and ineffective methods of traffic control.

The transport sector is of special importance to any strategy for the development of Jabotabek. But there are still major variations in the priorities and strategies of the key agencies concerned. There is no single integrated, mutually agreed plan for transportation development in Jabotabek, covering the overall development framework for the region. The core of the problem lies in the institutional division of responsibilities regarding transport development.

Planning and development management

The government spent almost US$1 billion to develop the Jabotabek region in the national development plan Repelita IV. The budget has increased considerably since then. With more limited resources, the government is forced to seek new ways to finance Jabotabek's development. Urban managers in Jabotabek are now being asked to rely on local resources and not to expect huge subsidies from the central government.

Planning responsibilities among the three tiers of government (central, provincial, and local/kabupaten) in Jabotabek are still not clearly defined. The involvement of two different provinces with their (still) different regional perspectives, the role played by national agencies, the diverse range and scope of development programmes, and the limitations of the existing programming and budgeting procedures all hamper the planning and implementation of concerted development efforts.

There is a clear need for improved channels of communication, for more clearly stated development policies, principles, and criteria, and for an overall, coordinating perspective on the region's development planning. A single agency is needed that is capable of (a) providing a forum for the joint preparation of programmes by the national, provincial, and local agencies involved, (b) undertaking independent and objective evaluations of alternative development options, and (c) maintaining and translating an overall development strategy into basic guiding policies, principles, and criteria for sector development.

That agency should be charged with the coordination of all infrastructure development planning in Jabotabek as a whole and empowered to make choices between alternative sectors. One key to improving the coordination and integration of plans and efforts in Jabotabek lies mainly in strengthening institutional arrangements for planning and programming.

Supporting programmes

Jakarta and the Botabek region are the most densely populated areas in Indonesia. Population growth and industrialization have given rise to an escalating demand for space. As a result, environmental problems have emerged. There are clear indications that environmental degradation is increasing, particularly in the rivers and aquifers. Such rapid urban growth has been a big challenge to the Jakarta and West Java administrations because there are limited resources to invest in all necessary infrastructure sectors.

Efforts at managing and coping with the growth and development of the Jabotabek region include the preparation of spatial plans that would be used as a reference in guiding development and investment location in the area. A strategy for the settlement development pattern is a necessary part of the spatial plan.

Another major effort in response to the region's growth is the development of infrastructure, which consists of water supply, urban roads and transportation, solid waste management, drainage and sanitation, flood control, and kampung improvement.

Several other sectors also need to be developed, such as power, telephone, land management, and housing development. Some are included in the existing infrastructure development projects, while others are separately developed. At present, not enough information is available to be included in this chapter. A review of the spatial plan for the region and the infrastructure development projects follow.

Spatial plans

The original Jabotabek regional planning study was undertaken by Cipta Karya in 1974. Subsequently, with the issuance of a Presidential Instruction in 1976, the Jabotabek Planning Team (JPT) was established. The main output of the JPT is the Jabotabek Metropolitan Development Plan (JMDP), which presented an integrated plan for the period until the year 2005. It was revised by Cipta Karya in 1983 (Jabotabek Structure Plan 1985-2005). It is the most comprehensive plan for a metropolitan area ever made in Indonesia. However, it has no official recognition because a Presidential Decree that was intended to provide the legal basis for the plan has never been issued.

The JMDP used the concept of "marketing geography," where the dominant pattern of links between consumers and resources within the region determined a hierarchy of growth centres whose order depended on their economic significance. The most important centres surrounding DKI are Bekasi, Tangerang, and Bogor, followed by Karawang and Serang. Regions outside these centres are expected to grow as agricultural areas to service Jabotabek.

Other proposals of the JMDP include: (i) an east-west development axis to take into account environmental considerations for selecting zones of development priority, and (ii) improved social facilities, environment, and health for low-income groups.

Based on these two plans (the JMDP of 1980 and the Draft Jabotabek Structure Plan of 1983), the DKI Jakarta Structure Plan 2005 (1985-2005) was prepared and was approved through Local Government Regulation in 1984. The objectives of the DKI Plan are as follows:

• to implement population policies to reduce Jakarta's population growth to a total of not more than 12 million in 2005;

• to implement land management policies to accommodate the current growth of population;

• to determine a policy that would limit the use of private cars in the city, especially in the city centre, and improve public transport ser vices; and

• to implement environmental protection and preservation policies, with special emphasis on river water quality control.

The general spatial policies are as follows:

• main urban development is directed towards the east and west;
• development towards the north-west and north-east is to be limited; and
• development is to be strictly controlled in the southern area.

The main policies in the Botabek region include:

• urban development areas in the west and east will be encouraged by improving urban infrastructure;

• there is to be very limited growth in the north-east and north-west, because groundwater and soil structure conditions would impose high development costs.

Complementary to the DKI spatial plan, the West Java Province government has prepared a spatial policy for its Botabek region. Botabek is to be a buffer zone to accommodate any overspill from Jakarta. It is considered an environmentally sensitive area as a result of pollution produced by urban areas and industries.

Other indicated functions of Botabek are intensive agricultural development for Jakarta's consumption. Botabek is also seen as the location for large- and medium-scale industry in small towns in the kabupaten of Bogor, Tangerang, and Bekasi surrounding DKI Jakarta.

The Botabek Plan contains a strategy of concentric growth for commuter zones around Jakarta, in which:

- the inner circle is expected to accommodate 75 per cent of commuters to DKI Jakarta. The settlement centres are directly adjacent to the Jakarta administrative boundary. The distance to the city centre is approximately 15-20 km.

- the outer circle is expected to accommodate 25 per cent of commuters. The settlement centres are a little further away, about 3040 km from the DKI Jakarta city centre (fig. 11.2).

However, recent developments in the Jabotabek region indicate a slightly different pattern from that planned. The population growth of the surrounding towns has exceeded the projected numbers and is growing at a rate faster than expected. A new kabupaten capital has been developed, which is not included in the plan, and this has created a need to change, among other things, the road network. Rapid development is taking place on the fringes of DKI Jakarta, which is expected to be redirected in the plan, specifically to the east-west development axis. All these new physical developments are clearly induced by government policy to deregulate the economy and to promote industrial estates as a necessary step to attract foreign firms.

Infrastructure development

Infrastructure development in Jakarta, as in other urban areas in Indonesia, is implemented through the integrated urban infrastructure development programme (IUIDP) approach. The IUIDP approach tries to integrate the development of some components of urban infrastructure. At the moment these components include: water supply, solid waste management, drainage, sanitation, urban roads and transportation, flood control, and kampung improvement. This infrastructure development programme covers a period of five years and is adapted to the availability of local government resources, including its potential for obtaining loans from the central government and donor countries. Some of the main issues in infrastructure development in Jakarta and Botabek region are as follows.

With regard to water supply, the biggest problem is that the upstream catchment areas are increasingly cleared for development because of land pressures. This increases erosion, flooding, and siltation of downstream waterways. Groundwater is depleting rapidly in the northern part of Jakarta owing to overpumping. As a result, salt water is intruding from the Java Sea into the coastal aquifers. Wells can no longer be used as a water source in this region. In the southern part of the city, wells have to be dug much deeper to produce potable water. The quality of raw water is poor in general. Demand to extend the piped system is growing at a fast rate, as population densities and environmental pollution increase. The service areas do not extend far enough to serve all possible users.

Fig. 11.2 Growth centres and population of Jabotabek in 2005 (Source: Rencana Umum Tata Ruang [General Spatial Plan], Wilayah, Jabotabek, Badan Kerja Sama Pembangunan [Development Cooperation Board], Jabotabek)

With regard to human waste and sanitation, the main problem is that the majority of the population of Jakarta and Botabek use septic tanks and pit latrine facilities. A large proportion of the urban poor dispose of their excrete directly into the canals, drains, and rivers. An integrated flood control and drainage plan for Jabotabek is lacking and the rapid urbanization of the region has resulted in increased flooding downstream, especially in the low-lying areas of north Jakarta.

KIP (Kampung Improvement Programme) is part of a major attempt to improve the welfare of the urban poor by upgrading their living environment and basic infrastructure. The programme has improved the condition of large slum areas, but a new pattern of behaviour has emerged. As housing conditions are improved, the value of the houses rises; low-income families are displaced by higher-income groups and move on to other poorer locations, creating new slums.

The largest investment of the Jabotabek Urban Development Programme II/III1 is in water supply (62 per cent) and KIP (11 per cent). Both are in Jakarta, with the rest of the funds used for other infrastructure components and projects in Jakarta as well as in the Botabek region. Additional components have been added to provide more coverage for Botabek. Water supplies receive high priority because of their high political profile, their role in maintaining public health, their convenience to users, their cost recovery potential, and their capital intensity. In contrast, the other components involve relatively small-scale investments, are labour intensive, and require mostly recurrent expenditure by local government.

From the above discussion, it is clear that the support system for the growth and development of DKI Jakarta and the Jabotabek region is still faced with many problems, but numerous efforts have been planned or are being implemented. The inadequacy of infrastructure, shelter, services, etc., needs to be continuously addressed. The government is aware of this and is doing its best.

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