Growth, crisis and spatial change- a study of haphazard urbanisation in Jakarta, Indonesia

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Growth, crisis and spatial change: a study of haphazard urbanisation in Jakarta, Indonesia

Charles Goldblum ! , Tai-Chee Wong ", *

!Institut Francais d'Urbanisme, University of Paris VIII, 4 rue Nobel, Cite Descartes, 77420 Champs Sur Marne, France

"Division of Geography, Nanyang Technological University, 469 Bukit Timah Road, Singapore 259756, Singapore

Abstract

The 1997 economic crisis in Indonesia has a close relationship with the e!ects of globalisation as characterised by in#ows of industrial and"nancial capital, originating from the global shift since the 1980s. In Jakarta especially, metropolitan expansion has witnessed substantial in#ow of international capital into property-development activities. The crisis in Jakarta is characterised by a typical suburbanisation sprawl along development corridors extending beyond the scope of its Master Plan. Both the public and private sectors have been associated in the development programmes whereby a large number of new towns and industrial estates have been constructed. Adverse e!ects are obvious as a result of ine!ective urban management and a lack in infrastructure and commitment to the planning principles. Jakarta's CBD expansion has also initiated the move of industries and low-income groups towards the peripheral zones. Consequently, the traditional urban villages face demolition, replaced by more lucrative and intensive land use. Thekampungrestructuring policy, once a symbol of social welfare, has virtually stopped to function under the impact of the globalisation and international capital. The high vulnerability of the speculative property market and its inherent urban problems question the sustainability of the Indonesian economic growth model. Educational upgrading, however, is seen as one of the fundamentals for supporting this model. ( 2000 Elsevier Science Ltd. All rights reserved.

Keywords: Globalisation; Centre-periphery; Urbanisation; Crisis; Land-use; Speculation; Spatial e!ects

Introduction

Before the outbreak of the Southeast Asian crisis in July 1997, the economic prospect of Indonesia appeared to many to be quite promising despite the well-acknow- ledged ine$ciency of its public services and widespread urban poverty. Optimistic views that Indonesia was about to join the newly industrialising nations were not rare (for example, see Yeung and Lo, 1996). The 1997 crisis hit Indonesia really hard and for more than two years from the downfall of Suharto to the election of a new president Abdurrahman Wahid in November 1999, there have been persistent riots, ethnic and relig- ious violence, and the re-emergence of regional claims of greater autonomy or even independence. Economic recovery is far from being obvious. Almost all these disturbances have an urban origin.

*Corresponding author. Tel.:#65-460-5168; fax:#65-469-2427.

E-mail address:[email protected] (T.-C. Wong)

This paper examines a speci"c issue of haphazard urbanisation and spatial change in Jakarta and its adjoining districts where the impact of the crisis is most signi"cant. In the analysis, the hypothesis whether peri- pheralisation or marginalisation of the globalisation process is directly associated with Jakarta's urban development is used as the theoretical framework. The framework assumes that with a dominating economic and

"nancial status and a population of 10 million, Jakarta's metropolising sphere is responsible for a great scope of in#uence nation-wide, but the capital city itself is in-

#uenced by its integration in a supra-national urban network of East Asia (Goldblum, 1996a).

Jakarta and its network extension have required us to consider the emergence of a new centre-periphery system, as well as con#icts arising between this system, which imposes stringent demands, and those in charge of In- donesia's politics and administration in Jakarta. This two-dimensional problem is centred around the urban

&territoriality'issue characterised by economic#ows, and

a property investment process which seemingly ignores the limitations of politics over territorial development.

PII: S 0 2 6 4 - 8 3 7 7 ( 9 9 ) 0 0 0 4 3 - 5

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For understanding this issue, the globalisation impact which has led to a dynamic physical land-use change including a rapid residential and industrial suburbanisation is"rst investigated.

Marginalised urbanisation and urban dynamics in the globalisation process

Since globalisation began to accelerate in the 1980s, its e!ects have been widely analysed (see Henderson, 1989).

Hessler (1993) has demonstrated that going global has advantages, given that a world-wide strategy is conducive to working out an organised plan for products, mar- keting, logistics and research and development, selection of strategic alliances, reducing the negative e!ects of time and distance, enjoying the sensitivity of the local cus- tomer needs and greater opportunities for new applica- tions and services. Dramatic restructuring has taken place by multinational corporations (MNCs) in accom- modating new requirements in the production systems which are persistently changing nature (Thrift, 1996; Cof- fey, 1996; Daniels, 1996; Sassen, 1995). In competitive globalised markets, many MNCs from developed countries have to rely increasingly on international customers to derive the bulk of their revenues.

Daniels (1996) asserts that there are four driving forces in the globalisation of production, namely the search for market, cost reduction, competition enhancement through sub-contracting in overseas locations specialis- ing in producing components of quality, and "nally favourable government policies to foreign direct investments (FDI). Obviously globalisation requires MNCs to establish strategic alliances in which co-operation from business partners is a crucial factor of success or failure.

Nonetheless, strategic alliances in peripheral countries may merely involve sales and management partners, whose local investment interests may still be focused on the lucrative property development with fast returns.

Here, there is conversion process in turning revenues acquired from business links with MNCs to property development where market is predominantly local.

Global links and their ewects on peripheral metropolitan centres

As mentioned above, economic globalisation is an extended stage of world capitalism. Its processes which in#uence changes in FDI recipient territories have orig- inated in developed countries. Global links o!er growth opportunities but could create setbacks. A good example is demonstrated by the burst of the economic bubble in Thailand in July 1997 as a result of excessive capital surplus and low interest rates, ignited by collapse of the housing market due to falling demand mainly in Bangkok and its surrounding provinces (Goldblum, 1998).

In retrospect, economic globalisation accelerated in the aftermath of the 1974 oil crisis, leading to widespread recession in developed countries, which saw internationalisation of"rms as an outlet from domestic impasse (Drakakis-Smith, 1996). What followed were rising international "nancial #ows from the developed core to selected peripheral countries as overseas ventures ex- panded. Bene"ting from the crisis as a key regional oil producer, Indonesia became more exposed to external capital penetration and manufacturing investments.

Huge oil gains accumulated throughout the 1970s and 1980s also encouraged Indonesia to import greater volumes of capital goods and allocate more resources for infrastructure and support agricultural activities. More signi"cantly, there was a resultant expansion of state- owned and private"nancial institutions which were later found to be heavily involved in the rampant government}private land speculative activities until the outbreak of the crisis in 1997.

In assessing the impact of economic globalisation, Sassen (1995, pp. 38}56) observes that the"nancial sector which can generate more pro"t than manufacturing as a whole has the potential to impose through international transactions`a new valorisation dynamic, often with de- vastating e!ects on large sectors of the urban economya. Two spatial e!ects that may arise are those of centrality and marginality in the international shift of manufacturing

and"nancial transactions. In the developed core, on one

hand, it could result in a rising concentration of economic power in global cities against a decline of its old manufacturing centres being marginalised. On the other hand, major urban centres in selected developing or peripheral zones receiving manufacturing investment from the dein- dustrialising core would witness the transfer of this marginality from core to periphery. In Southeast Asia, foreign manufacturing capital has been most concentrated in capital cities with high indexes of primacy which have seen a rapid rise in their position in the national economic power (Wong, 1999).

Nonetheless, in the recipient peripheral countries such as Indonesia, the generally low-skilled and labour-intensive manufacturing plants generate relatively low levels of pro"t. This is also true of the limited scope of producer services (legal,"nancial, consulting, advertising, market- ing, production technology, design etc) which fail to operate e!ectively due to the lack of strong middle classes and domestic industrial entrepreneurs. Consequently, major cities such as Jakarta which have deregulated their

"nancial system for international transactions have in- evitably seen a considerable level of real-estate speculation facilitated by easy access to bank loans.

Financial capital from East Asia to Indonesia

From the 1980s, the property market mechanism in Jakarta has been considerably a!ected by in#ow of

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capital from Japan and the four &newly industrialising economies' (South Korea, Taiwan, Hong Kong and Singapore). By Wallerstein's classi"cation, these are semi-peripheral economies lying between the core and periphery and they have an expansive nature of capital accumulation like the core (Hout, 1993, pp. 113}114).

This nature is characteristically re#ected by their property"rms'activities whose&insecure position'as late comers encourages them to compete to survive in a core- dominating global market. Speculative activities in the property market are part and parcel of their production processes.

The spatial dynamics as a result of global "nancial movements are therefore dictated by outcome of investment evaluation, land availability in selected urban sites and the assessed gain in the land and property market. It is a complex mechanism involving, for instance, physical planning decision-making processes * urban dispersal or decentralisation, ease of tra$c#ows along potentially congested growth corridors, need for residential zones to accommodate workers in the formal and informal sectors who will participate actively in the economic diversi"cation strategy in favour of industrialisation as a response to manufacturing shift of the multinational corporations from core to periphery. Within Jakarta and its adjoining rapidly urbanising and industrialising districts, a new core-periphery relationship has similarly appeared, marked by di!erent social forces including the urban poor, government authority and the private developers.

This global/local dialectic relationship (Dear and Flusty, 1998) is now discussed in the context of Jakarta.

Jakarta:a high-risk property development centre Being the capital of a vast insular and multicultural state, Jakarta has been known for a long time for its particularity among the Southeast Asian capital cities, which links its large population size with its particular feature earning it a name as a`conglomerate of villagesa. This has been so in terms of economic#ows and in its relation to the territory under its sphere of in#uence.

With a long tradition as a Javanese centre of trade, Jakarta became a major seaport during the Batavia times and also a strategic place in the expansion of the Dutch colonial rule. Located in the middle of a large group of islands which were to form the world's largest archipelago-state (Charras, 1995), the future capital city of Indonesia was then exposed to the speci"c di$culties encountered in unifying lands dispersed and culturally diverse, as well as in organising their economic space in accordance with the Dutch protectionism. After In- donesia's independence, the country's con#icts with its neighbours (notably during the &confrontation' against the formation of Malaysia in 1963), and domestic political tensions have reinforced Jakarta's representative role

in national unity. Incorporation of the national ideology, placed under &unity in diversity', as a place "lled with symbols of sovereignty and prestige, Jakarta is distinct from the other large Indonesian cities in this aspect. It also enjoys an administrative status accorded by a 1974 decree, as a special territory covering"ve municipalities in an &autonomous' region of 650 square kilometres managed by a governor.

As the capital city, Jakarta bene"ts from its special position and is earmarked as a special city region deserv- ing protection and safeguarding from outside intrusion, similar to any national territory. This feature corres- ponds with the&closed city'concept which Jakarta's governor, Ali Sadikin, tried to put into practice in 1970 within the &new order' (Orde baru) framework whilst undertaking an open and economically liberal policy.

Indeed, the kampung restructuring policy, a symbol of social welfare, represents supposedly a pribumi image of the city administration and "gures as a counterpart to social control. Nevertheless, the policy currently falls within the&regional' #ows and international investments including those in the internationalised and sensitive property market, a strong indication of the capital city's extensive spatial development distinct from other parts of the country. It appears like a re-emergence of pre-colonial port cities in the archipelago, where local people and foreign traders were ruled by a distinct power system.

Under present circumstances marked by a heavy multinational in#uence upon local centralised politics, how would this trend a!ect the function of the capital city as a symbol of national unity?

Jakarta and its three adjoining districts

The present Jakarta and its extended surrounding zone (known as Jabotabek comprising Jakarta, Bogor, Tangerang and Bekasi) cover a total of 7500 km2. This extended metropolitan area is exposed to both economic and urban crises as a result of the accelerated sprawl and suburbanisation, the great magnitude of construction activities and a discontinuity between physical development and social conditions.

Hardly 20 years ago, private housing development in Indonesian cities was still weak, characterised by insu$cient support in the sector such as limited capabi- lity of developers, lack in demand and a complex land market system. The oil sector, which was then dominating the national economy but was poorly redistributive, made local capitalists hesitant to move into the property market (Goldblum, 1987). Up to the present, supported by economic growth in the last 20 years, a diversi"ed economy adopted as an&anti-oil shock'measure in 1982 as well as an expansion of middle-income groups, property development takes a dominating role, ignoring all risks of oversupply (Bouteiller and Fouquier, 1995).

From then on, pioneer players active in sales of

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Fig. 1. Jakarta Special Region (DKI) and the Three Adjoining Districts.

subdivided land parcels have given way to large development companies strongly linked to"nancial conglomerates which are a business circle of the Chinese diaspora in favour of an open policy and economic deregulation (Bouteiller, 1997; Trolliet, 1994). Their scope of development varies, ranging from sale of hundreds of hectares of residential plots to thousand-hectare new town developments. Development has extended beyond the administrative boundary of the Jakarta Special Region, transforming the adjoining districts (Botabek: Bogor, Tangerang and Bekasi) into its privileged development area.

Hence, between 1991 and mid-1992, Bekasi District alone recorded 235 private housing development projects

*a total of 500,000 housing units were constructed in an area of over 8000 ha. The development trend becomes clear when the land area used for some 30 new town projects is considered. For instance, to the west of Jakarta in the Tangerang District, Serpong has taken up 6000 ha, and Tigaraksa 3100 ha. To the east of Jakarta in the Bekasi District, Cikarang Baru adjoining Cikarang stretches over 5400 ha, and Bekasi 2000 an area of 2000 ha (see Fig. 1). The middle and higher-income groups are key targets of these housing projects. New towns are often built adjacent to industrial estates. Ser- vice-oriented facilities such as hotels and o$ces in Lippo Cikarang are welcomed in new towns, and even exclusive leisure facilities like the golf course in Cikarang Baru are no exception (Djoko, 1996).

An urban development between regulation and deregulation

This economic and spatial dynamic is not just a conse- quence of private property developments. The dynamic is fundamentally facilitated by government policies involving the public sector to provide large infrastructure projects. Such large projects are the follow-up actions of the urban development programme adopted by the Fourth National Development Plan (Repelita IV, 1984}1989).

To an extent, their development falls within the jurisdic- tion of the Jabotabek Metropolitan Development Plan of 1981, from which the Master Plan of Jakarta DKI 1985}2005 is derived. Fig. 1 shows the hierarchical growth centres proposed by this Master Plan for the Jabotabek Metropolitan Region which comprises the Jakarta Special Region and the three adjoining districts.

One of the major tasks as de"ned by this planning document aims to release load along the Jakarta}Bogor north-south axis, Jakarta's growth corridor, a projected heavily used route leading towards the capital and con- tributing to environmental degradation (water pollution, erosion, subsidence). To this end, the planning intention is to impose a balance on the east}west axis by strength- ening its focus on the Bekasi District to the east, and on the Tangerang District in the west of the capital city. This strategic action involves the government authorities directly in road infrastructure provision, notably toll high- ways linking key axes of development, as well as to an

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integrated new town to be built in an area of 1300 ha in Bekasi.

Apparently this form of suburban development is a typical feature in the Southeast Asian countries on their way in joining the newly industrialising nations&club'. It is also the symbol in integrating urban development with the diversi"cation strategy of the big conglomerates (e.g.

Salim Group, Lippo Group), indeed a diversi"cation whereby new towns and industrial zones are physically integrated at a high level.

The basic feature, however, is that in this economic diversi"cation process, all initiatives come from the government authorities. Since the 1980s, policy has aimed to free Indonesia from its overwhelming dependence on oil revenues by promoting manufactured exports such as textiles, electric and electronic goods, metal and chemical products. As a result of the policy, the State welcomes industrial investments in the fringe of Jakarta along Botabek and beyond for manufacturing activities pre- viously concentrated in the capital or for selected new ones.

In three years following the adoption of the Presiden- tial Decree of 1989 (Keppres 53/1989), 119 foreign"rms were set up, among them 76 in West Java Province in an area of some 20,000 hectares. They all were given propri- etary rights to industrial land, and the management authority to run them. Later, under pressure for more industrial land, the West Java provincial government released an additional 18,000 ha of land, concentrated in the key sites of Botabek and Bandung.

Industrial concentration in the West Java Province, albeit serving in part to decentralise the capital city, tends to put additional load to its development. Between 1967 and 1991, West Java received two-thirds of the approved foreign invested projects. Since the early 1990s, it has won 45% of the approved projects, and nearly half of the private investments from both foreign and national sour- ces. However, industrial expansion has now entered into a phase in need of the support of large infrastructure works and new- town programmes to meet the pressing demand for workforce growth and the incessant in#ux of migrants to the extended metropolitan region of Jabotabek.

Urban sprawl and the core issues

The development dynamism discussed above and initiated by the government authorities has involved complex forces at stake. As far as planning is concerned, a large number of private projects fall within the jurisdic- tion of the Bogor District (e.g. Bogor Lakeside, Sentul, Rancamaya) where the local governments are hardly equipped to handle any adverse e!ects of urban development. Without proper administrative institutions, the areas sandwiched between development zones are exposed to negative impacts of industrial developments.

Though the Jabotabek Master Plan was meant for less intensive land use, the peopling of the new urban areas outside Jakarta has grown swiftly. Consequently, the annual growth rate of the Jakarta population has dra- matically dropped in the last two decades, falling from an annual average of 4.1% in 1971}1980 to 2.4% in 1981}1990. Conversely, in the last 10 years, the Districts of Bekasi and Tangerang have seen an annual growth of 6.3% and 6.1% respectively. As to Bogor, despite an in-principle safeguarded development plan, it recorded an annual average growth rate of 4.1% during the same period.

This migratory movement is a combination of population out#ow from the capital city * higher income groups in search of better living quality and those evicted

from&urban villages'(kampung) and exodus of migrants

from Java itself. The latter groups have been attracted by the improved infrastructure and facilities in Jakarta's peripheral areas in the development process. The migra-

tory #ows have largely #ooded the adjacent districts

around Jakarta. In Tangerang and Bekasi, it has again become possible to restart or simply create labour-intensive industries as well as earn a living in the informal sector in situ (e.g. trishaw). Only 10% of the Botabek population is estimated to work in Jakarta.

Rapid growth along the Jakarta-Bogor-Bandung axis which stretches over 200 kilometres in an unprecedented rhythm gives rise to a metropolitan region characterised by uncertainty and heterogeneity; with an enormous sub- urb where urban functions reinforce each other. The metropolitan region is indeed becoming a major pole in the urbanisation process of Java.

Origins of the urban expansion

If metropolitan urbanisation is propagating in an ever-growing expanse, where the residential development mentioned above might appear as an arti"cial but increasingly visible and exclusive facet (Labrousse, 1988), its real matrix is still the capital city. More importantly, the capital's downtown core, focal point of high-level services and image of a Central Business District, shares common features and trends with other great Southeast Asian capital cities which enjoy the bene"ts of a central place and a centre of political and economic power. In fact, it is above all in the perspective of specialisation and internationalisation of key functions that the Jakarta Special Region has set out for a planned urban expansion. It is out of the concern to protect itself against an in#ux of migrants, tra$c congestion, and to expand the city core area that eviction procedures to clear densely populated zones have been introduced. It is a result of rising land values in the city core in the context of global tertiarisation marked by in#ow of large volumes of global funds that industries and people move towards the peripheral zones. Yet, little analysis has been done

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regarding these key determinants associated with Jakarta's suburbanisation process.

It is estimated that in the mid-1980s, three-quarters of the jobs in Jakarta came from the service sector.

From then on, the &formalisation' and internationalisation of the service jobs have developed in parallel and have begun to be incorporated in the typical high-level service sector as adopted in Singapore since the 1970s*o$ce blocks, shopping complexes and international hotels and condominium blocks. Physical transformation of Jakarta's central area, like other Southeast Asian metropolises, is both an expression and a factor of this pattern of spatial change. The transformation has also provided opportunities for intensive speculative activities: in the early 1990s, it was admitted that about 40% of the lands in the central area were controlled by speculators who jacked up land prices and constructed large numbers of high-rise o$ce buildings. Since then, however, property prices in the central area have been largely"xed by international capital. The withdrawal of

the &most favoured nation' status granted to the four

dragons (South Korea, Hong Kong, Singapore and Taiwan) by the United States of America has induced industrial investments to relocate to Indonesia (in a broader sense an &Asian refocus' by moving towards Southeast Asia and China), as well as urban-based investments including those related residential and services developments.

The new &golden triangle'

Situated close to prime business lands around the Jalan Thamrin corridor, Jakarta's new core which has spread to Kuningan where substantial land use change has taken place, symbolises in particular certain mecha- nisms*special functions which emerge as a result of this long-standing change, a gradual shift of the core towards the south of the capital, and the game of speculation (Mohammad Saefudin, 1992). In fact, as a result of the advantages granted to property investments there, land prices have surged considerably, reaching in early 1990s US$3,000/m2. Thus, land use in this area has shifted rapidly to accommodate internationally invested high- rise mega-blocks, such as Indonesia Plaza, The Paci"c, Chase, BCA or Darmala Group Buildings (banks and o$ces).

This selected transformation has targeted particularly

the&urban villages'which cover almost 50% of the total

Kuningan area, and part of which had bene"ted from the start of the restructuring program in 1969 known as KampungImprovement Program (KIP). Even though the KIP is seen as a model of restructuring in situ and the upgrading of living quarters has been integrated in the new urban planning principles in the early 1990s, most of thekampungparcels situated along the expansion path of this centre of commerce and international busi-

ness have been submerged and disappeared in the large scale redevelopment process. Residential development, mainly in the form of luxurious apartments, takes up over 400 ha of land in accordance with the plan brought forward by the regional planning o$ce (Bappeda). All land in the central area has yet to face a rising demand for o$ce, shopping, hotels in the capital city, totaling hundreds of thousands of square metres

in #oor area. The demand for higher-level services

is obviously met at the expense of its inhabitants, and it re#ects a great city's way of land reconversion as a result of competition in the regional network of capital cities.

A test of selection:end of kampung in the central area?

The fate of the Kebun Kacang&urban village', being exposed to Jakarta central area's new development axis has openly experienced this change of development on a large scale, as Jellinek (1991) wrote about its fortunes and misfortunes in the 1980s. Located at the extreme south of Jalan Thamrin, Kebun Kacang, apart from the pressure it faced in the past, has bene"ted from development of this large avenue since the 1960s at least in terms of informal activities, rental collection and job opportunities in construction works. Nonetheless, the urban village has at the same time disquali"ed its own existence, though involuntarily. Having participated in the Kam- pung Improvement Program, and having an increased population due to its locational advantages, Kebun Kacang "nally had to face demolition, despite some protest. Only one-"fth or 160 households accepted the relocation o!er. The great majority left for the peripheral zones.

Hence, the transformation of the central area is no longer for improving the low-income residential form in conformity with the new image of Jakarta's new centre under construction. It is rather the need to accommodate the international service sector expansion towards the south, and where the area in question happens to be located at the heart of the new CBD's extension. Under these circumstances, it is understandable why the Na- tional Housing Bank (BTN) is hardly concerned with promoting home ownership by providing mortgage loans to low-income groups in this new prime location.

This does not mean, however, that the residential function in the central area is removed, as almost 50,000 housing units were planned in the early 1990s for the Kuningan&golden triangle'. But the target groups of this housing programme, of which three-quarters were desig- nated for condominiums, are those associated with the high-level service sector and the internationalisation of the economy: land appreciation results from high-rise construction and price or rental levels also conform with the service development standards. In the peripheral areas, where population relocation has occurred, land

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prices have also surged following the development of infrastructure and facilities there.

The globalisation headway

Population relocation arising from great projects in Jakarta is certainly nothing new* the development of the Senayan Sports Complex in 1962 for the Asian Games had forced some 47,000 people to evacuate. In situ resettlement schemes have been common when low-

cost #ats are proposed; a typical example is the

Kemayoran scheme, located at the north-east of the capital city on the old airport site, which has been used to house 5,200 households to be relocated from an adjacent kampung.

During the 1960s and 1970s, whenkampunginhabitants were forced to leave, it was then relatively easy to "nd a replacement site nearby, thus avoiding major disloca- tions in their social network and daily activities. Further- more, the government authorities were able to take advantage with their actions to beautify and broaden arterial roads in the capital as a source of legitimacy; they even took interest in improving the living standards of

the &indigenous' population under Mohammad Husni

Thamrin's (MHT)kampungrestructuring programme.

However, since the 1980s, the Jakarta Administration has opted for globalisation, especially under the mandate of Governor Wiyogo (1987}1992). Consequently, urban redevelopment is no longer determined by local factors, but above all by the regional dynamics of metropolitan development. Placing itself in parallel with Kuala Lumpur, Bangkok or Singapore within the

&golden triangle', Jakarta "nds itself interwoven in a

market mechanism set for quick investment returns, extending beyond the basis of the Master Plan, more signi"cantly when Jakarta's physical planning and land systems o!er little resistance to such massive development activities. As to the government's interventions, they are hindered by ine!ective land-management administration, shortage of infrastructure and facilities, and land and "nancial fuzziness whereby land transactions take place as well as by alliances between business and politicians (or even some military interest groups). There- fore, it is little surprising that The Jakarta Plan of 2005 links international capital (believed to have "nanced more than one-third of the investments in Jakarta), as well as transfer of construction and urban-based technology within the central area development in accordance with new metropolitan functions, and with Jakarta's integration in the great regional metropolitan network. In this connection, the Jakarta city government, on the basis of the Decree 540 of 1990, has legally adopted procedures allowing release of land for development of the central area and sanctioned co-operation between the public and private sectors, notably those from the real-estate Indonesia (REI).

The question of extra-territoriality:Jakarta's challenges

One of the primary issues might be called the question of extra-territoriality; a question stemming from the

&Growth Triangle-SIJORI'involving Singapore, Malaysia

and Indonesia in Riau-Batam (Lee, 1991; Nur, 1997) which brings the trade network to a political front. In fact, who would have imagined 30 years ago at the climax of the confrontation that Singapore would extend its industrial growth on Indonesian soil in the form of trans- border regions (Goldblum, 1996b)?

Certainly, Indonesia is far from being the only case in East Asia to"nd itself in such a situation. The rise of Taiwanese investments in Shanghai, in particular in developing the Pudong business centre in competition with Hong Kong, raises even more inquiry. It is clear that Batam makes up an important proportion of the industrial and tourism investments outside Jakarta.

Nonetheless, the functional links established in the

&growth polygons'o!ering free trade and export-process-

ing zones, and&golden triangles' in the heartland of the large metropolis have called for a reconsideration as to how the urban space of these metropolises has developed, and has led us to think about the extension of Jakarta.

Indeed, Jakarta has grown rapidly in the context of an extended metropolitan region (McGee, 1995; Yeung and Lo, 1996; Budhy Soegijoko, 1996).

In the heart and the peripheral zones of this growing metropolis, old foothold spots have ensured if not a simple symbiosis, at least some form of solidarity between the capital city and its peripheral zones. They used to be represented respectively bykampungsin the central area and rice-growing villages: both are now exposed to a process of exclusion in favour of a new core-periphery relationship, as a result of an unequal confrontation between a village-based system and the dispersal forces originating in the core of Jakarta. It matters little if these forces arise from a planning strategy or that of a speculative land market. They have lost their role as an economic and independent landholder.

Kampungeradication from the central zones to provide room for international investments, like the well-justi"ed provision of large-scale infrastructure, does not settle the problem by a simple transfer of population and activity to the periphery. Indeed, in the periphery, large industrial and housing projects are being developed by converting rapidly agricultural lands there (Nas, 1996). To the east of Jakarta, the development of the Bekasi integrated new town and an industrial estate adjacent to it has led to the removal of 16,500 inhabitants and 12,000 farmers, respectively. Construction of large branches of shopping complexes close to new residential centres such as Hero Supermarket at Ciledung, Tangerang and Bekasi has required land conversion of this nature. The threat imposed on small retail business and its often closely

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associated informal sector is something additional to examine. So new urban settlements have been formed and planned to accommodate some hundreds of thousands of dwellers linked to the capital city by large tollways but isolated from their immediate surrounding environment like satellites. They have emerged as a result of mainly private property developments but are de- prived of any institutional right to have their population locally represented as such.

Policy implications and re6ections

Based on the above analysis with regards to the haphazard growth of the Jabotabek region, some policy implications are portrayed as follows:

(a) Economic globalisation originating from the developed core is a double-edged sword. It may bring higher growth to peripheral countries but may also stir up turmoil if the entrepreneurs in recipient socie- ties plunge themselves into short-term speculative pursuits by creating 'arti"cial'demand in the property market. The role of the private sector should be directed towards more productive areas of urban development.

(b) Rapid urban development in the Jabotabek region has revealed the lack of competent planning and management sta!to ensure smooth implementation of Master Plans. Stepping up of personnel training and retraining has become a priority task for more e$cient future implementation of plans and infrastructure development. Moreover, power devolution from Jakarta to the three adjoining districts of Bogor, Tangerang and Bekasi is conducive to planning and implementation co-ordination. This will act as an incentive and a means to remove the current bureau- cratic barriers.

(c) Until educational budget, school facilities, teacher quality and living standards of the poor households are substantially improved, it is unlikely that Jabotabek will be ready to attract high-technology and knowledge-intensive foreign direct investments.

Educational upgrading is hence fundamental for general socio-economic improvement in Indonesia.

(d) With a potentially high population density and an expanding metropolitan region, the Jabotabek region will have to resort to higher density residential housing for the urban poor, who now mostly live in single-storey kampung houses. A higher density has the advantage of freeing more land for infrastructure development and provision for greenery in an increasingly polluted urban environment.

(e) Given current trends, further expansion of the extended metropolitan region of Jabotabek is inevi- table. The region is a catalytic zone for economic growth, and with agglomeration economies gener-

ated, its further expansion should not be discouraged (McGee, 1995).

Concluding remarks

Economic globalisation since the 1980s has had tre- mendous impacts on urban space in the Third World, including Indonesia. Typically, the two most signi"cant consequences are spatial and"nancial. In the"rst aspect, urban development in the extended metropolitan region of Jabotabek has followed largely an identical pattern in the West. Industrial dispersal has induced a shift from the city core to the new towns in the suburban districts. In Jakarta itself, prime lands with high business potential have been transformed into o$ce blocks, retail and shopping complexes. The characteristic single-storey &urban village houses' (kampungs) housing the lowly educated urban poor relying predominantly on informal sector have become&formalised'as many now serve suburban industries as low and semi-skilled workers. With poor management co-ordination and ine!ective implementation of plans, the quality of physical planning is far from being satisfactory.

The"nancial impact is characterised by large in#ows

of FDI in industries in general and in property market in particular. The latter, being more lucrative than the for- mer at times of high growth and accessible domestic and international loans, has turned itself into a speculative playing"eld, ignoring the e!ective demand. Besides these

"nancial weaknesses, the high vulnerability to economic

#uctuations inherent in this kind of property development system (risk of overproduction exacerbated by the economic crisis or relocation of property investments in favour of other urban markets), raises the question of the stability of the implicit alliance between the Indonesian oligarchy and the business circle, a powerful network and motor behind the urbanisation process. The stability is doubted especially at a time where disturbances may lead to a political shift (Far Eastern Economic Review, 10 July 1997, 28 August 1997). It is still questionable whether the fall of Suharto in May 1998 would lead to a quicker economic recovery and the elimination of the collusion between business and politics. The present unstable political situation has yet to provide clear signals of demo- cratic and economic reforms, and non-interference from the powerful military in the newly elected civilian government. Indeed, a warning has been issued by the Defence Minister Juwono Sudarsono that a military takeover from the civilian coalition government led by Wahid is possible if he proves incapable of maintaining order and keeping separatist movements under control (Straits Times, 24 November 1999).

In other words, if the on-going"nancial crisis is a con- junctural event, it questions the sustainability of the economic growth model, hitherto a successful one based

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on an export-led mechanism and foreign investments, which has contributed to property-market turmoil. This growth model is further threatened by the generally low educational level of the Jabotabek population, the majority of whom have only a primary education (Bambang and Imron, 1996, p. 332). There is little opportunity in the near future to upgrade the present labour-intensive and low-skilled workforce to attract high-value added and knowledge-intensive international investments. This means local entrepreneurs are still inclined to resort to the more lucrative but speculative property market.

Thus, the origins of such turmoil are more complex than the e!ects of globalisation, which act merely as exogenous factors.

Note

This paper is partly based on Goldblum (1998).

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