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Reducing Java's dominance in national procurement
Government data show that Java still dominates both procurement and spending, indicating a high need to initiate both central and regional programs that focus on building the capacity, competitiveness and quality of local suppliers toward more equitable, inclusive and sustainable economic growth.
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Metalsmith Muchlis (left) shows some of his products to his business mentors from Dharma Bhakti Astra Foundation (YDBA) on July 27, 2023 at his small-scale metalworking workshop in Banyumas, Central Java. (Courtesy of/ YDBA)
I
ndonesia’s economy has demonstrated resilience over the past few years, even amid significant challenges like the global pandemic. In 2020, Indonesia's economy contracted 2.07 percent but gradually recovered to achieve stable annual growth of around 5 percent by 2022-2023.
One of the key drivers of this recovery was efficient management of the state budget (APBN), with government spending continuing to grow despite economic slowdowns.
However, while national economic recovery has been achieved, the distribution of government spending remains highly concentrated on the island of Java, which accounts for 58.75 percent of GDP, underscoring its dominant role in the national economy.
This trend is mirrored in government procurement data, which show that most transactions, in terms of both amount and value, occur on Java, particularly in Jakarta. Such concentration poses a challenge to achieving more balanced and inclusive economic growth across all regions.
According to data from the State Treasury and Budget System (SPAN), government procurement transactions are heavily dominated by suppliers based on Java. Mapping suppliers based on their tax identification numbers (NPWP) revealed that 74 percent of the total value of procurement transactions was concentrated in Jakarta.
These findings highlight the strong dominance of Java-based suppliers, including across various spending categories such as goods, capital expenditure and social assistance.
One of the consequences of this concentration is the limited involvement of small and medium enterprises (SMEs) in government procurement. SMEs represent only 25 percent of total suppliers and receive just 1 percent of the transaction value. This stark imbalance suggests a gap in access to government contracts among suppliers outside of Java and highlights a need to improve the competitiveness of local suppliers and SMEs.
