Investment, Infrastructure, ICT in Jakarta: Emergence from Covid-19 and Development Outlook

Jakarta’s massive infrastructure development and growing digital sector kept the economic slump at bay during the covid-19 pandemic. A recent study by ACI tracks Jakarta’s emergence from the pandemic and its socioeconomic progress vis-à-vis the province’s medium-term development plan (RPJMD). It finds that the province’s digital sector showed resilience amidst the economic contraction induced by the global pandemic and it consistently achieved most of the RPJMD’s targets.

Special Capital Region Jakarta or DKI Jakarta is Indonesia’s capital city located on the island of Java. The current Jakarta Provincial Government has five main economic priorities – human development, infrastructure, governance, sustainable city, and cultural heritage and equitable development. Concentrated efforts have been made to achieve these targets. For example, leveraging support from the National Government, Jakarta has targeted to increase the mode-share of public transport by 60% in 2030 for all modes of mobility in the Greater Jakarta Area. Despite these efforts, the economic slowdown of 2020 stagnated businesses in many sectors such as logistics and trade. On the other hand, the digital sector registered growth. The mobility restrictions accelerated the growth of the Information and Communication Technologies (ICT) sector by 11%. Digital investments in Indonesia doubled in 2020 as compared to 2019. As Indonesia rides the digital wave, Jakarta, which is home to 5 out of 12 tech unicorns, has a critical role in this growth. Given “the capital centrality to the national economy and the intention of 93% of customers in Indonesia to continue using digital service after the pandemic”, Jakarta’s socioeconomic development is of grave importance to support Indonesia’s digital and overall economic development.

As covid-19 ravaged the world, an economic slump was inevitable. Indonesia experienced an economic contraction of 2.4% in 2020. Needless to say, its capital city too faced the heat with a sharp economic downturn in 2020 (Figure 1) – intensifying the gap between actual and targeted growth rates as specified in the RPJMD. But even before 2020, Jakarta’s GRDP growth couldn’t achieve its targets. Inflation, on the other hand, remained below the targets from 2013 to 2020. On the labor market front, Jakarta’s unemployment rates have consistently performed well from 2013 to 2017 but failed to achieve the targets from 2018 to 2020 (Figure 2) probably due to target revision by the government in 2018. The unemployment shoot-up in 2020 is attributable to the demand and supply disruptions caused by the pandemic. With environment and sustainability increasingly occupying the center stage, dedicated efforts towards the two might help attract the talent and investment needed to become a digital hub of Indonesia. On this front, Jakarta’s Environmental Quality Index (EQI) has met its targets since 2018. The Provincial government has plans to further improve the EQI through a regulation that mandates setting aside 30% of Jakarta’s land as green spaces. Social welfare and human development are essential to achieving holistic progress. Jakarta’s GINI index which is a measure of equitable income distribution has been under control since 2018. Two governmental programs have made this possible – subsidization of basic needs such as education and healthcare for low-income households, and the introduction of vocational education programs to upskill and reskill the low-income workforce. Further, Jakarta has been faring well in terms of good governance. Public complaints of corruption have been falling since 2012 even as the government’s revenue and expenditure soared.

Jakarta’s capital centrality, resulting concentration of economic and trade activities, growing digital economy, and sizeable online consumer base have endowed the city with great potential to become Indonesia’s digital hub. Jakarta, however, must perform well on other measures of socioeconomic well-being to fully realize this goal. A comparison of the city’s performance and the RPJMD targets reveals an encouraging picture. Its unemployment rate has dropped considerably over the years, and social development has witnessed good progress too with some indicators surpassing the targets. Even as Jakarta’s fiscal size expanded over the years, it consistently recorded a lower number of public complaints of corruption. The evaluations made in this study hold important lessons for policymakers on various levels of the government and others with a stake in the city’s, the province’s, and ultimately the country’s development.

By Shubhangi GUPTA

Researchers: LIEW Wan Yin, Doris, Xuyao ZHANG

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