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Work piles up as Jakarta prepares to lose capital status
As efforts to realize the plan to move the capital city to East Kalimantan intensify with the formation of a steering committee, which includes world-renowned leaders, questions linger about what will become of Jakarta after it loses the status of capital
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span>As efforts to realize the plan to move the capital city to East Kalimantan intensify with the formation of a steering committee, which includes world-renowned leaders, questions linger about what will become of Jakarta after it loses the status of capital.
The congestion-riddled, flood-prone city is expected to remain a business and economic center on a national, regional and global scale. Currently, it is the largest contributor to the country's gross domestic product (GDP) among all regions.
In response to the plan, Jakarta Governor Anies Baswedan said the authorities needed to prepare suitable rules and regulations first.
Jakarta deputy governor for civil registry and settlements, Suharti, who was also acting head of the city development planning board, said the city administration and relevant ministries were drafting a new bill for Jakarta to replace the 2007 law on Jakarta’s special status as capital city.
The deliberations are being carried out in line with the bill on the new capital city prepared by the central government and the House of Representatives. Both have agreed to include the new bill among the 50 prioritized bills of the 2020 National Legislation Program.
“The bill stipulates how Jakarta will keep contributing to the national economy, even more than the current 17 percent of the country’s GDP,” Suharti told The Jakarta Post recently.
According to Statistics Indonesia (BPS), Jakarta contributed 17.34 percent of GDP in 2018, the highest among all provinces, followed by East Java and West Java at 14 and 13 percent, respectively.
“The city administration requires special needs for its new status as a special region for the economy: not only the [physical] infrastructure but also other supporting systems, such as human resources, financial systems and public services,” Suharti said.
She added that the administration was likely to propose autonomy at a provincial level, just as it has today, while focusing on boosting sectors like trade, services and financial and creative industries, among others.
As deliberations over the draft bill are still ongoing, Suharti said the administration could not elaborate on the issue.
Institute for Development of Economics and Finance executive director Tauhid Ahmad projected Jakarta would experience a decline in economic activities from a drop in government expenditures, which include spending for business events and meetings.
The situation might last for the first five years should the relocation of the capital city be gradually carried out, he said.
BPS recorded government expenditures in Jakarta of 16.4 percent in 2018, higher than household expenditures of 6 percent and non-profit institutions serving households of 8.3 percent.
The central bank has estimated government expenditures in Jakarta of between 12.3 and 12.7 percent in 2019 and 6.5 and 7.8 percent this year, a higher projection compared to other expenditures.
“There should be a road map developed to fill in the economic gap when the government starts relocating the capital,” Tauhid said.
He suggested the administration boost local entertainment and leisure destinations as an attempt to attract business visitors to hold events and meetings in Jakarta. Otherwise, they would choose other places like Yogyakarta or Bali.
On the other hand, Jakarta Property Institute executive director Wendy Haryanto said relocating the capital would increase investor confidence, as the number of demonstrations considered a "hindrance" to business growth was likely to fall.
Despite aiming high to play a significant role on a global scale, Turro S. Wongkaren from the Demographic Institute of the University of Indonesia stressed that the administration should pay attention to human resources given that more than 25 percent of Jakartans work in informal sectors.
“Small and medium enterprises should be improved to avoid increasing inequality,” he said.
When the plan to relocate the capital city was announced in August last year, Anies immediately expressed a wish to have some of the central government's properties transformed into green spaces.
Wendy further said balancing asset management, in addition to serving business purposes, could become a chance to address urban issues lingering in the city, namely the lack of green spaces and a housing backlog.
“I'm not saying we cannot achieve that. The problem is a lack of willingness, a reluctance [to cooperate among relevant stake holders] and a long bureaucracy,” she said.
It was later decided the central government would attempt to utilize its assets in Jakarta to fund the capital city relocation instead, according to Jakarta Spatial Planning Agency head Heru Hermawanto.
“The central government’s assets are valued at about Rp 1.4 quadrillion [US$106.66 billion], including offices and non-offices like green spaces. Total revenue expected from asset management is Rp 90 trillion,” he said, citing data from the Finance Ministry's State Assets Directorate General.
Heru said the administration would cooperate with ministries and relevant stakeholders to improve connectivity to support the business and economic center status, which includes but is not limited to improving mobility and data integration.
Wendy stressed that connectivity should put quality on top.
"The word 'convenience' comes at a price, but that is what makes people want to be in a city, right?” she said.
