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Indonesia’s Urban Development Towards Inclusive and Sustainable Economic Growth
1Peter D. EllisSenior Economist
Robust Economic GrowthRobust Economic Growth
Recent patterns of economic growth are expected to continueece t patte s o eco o c g o t a e e pected to co t ue
• Real GDP growth 6.0% for 2010
• Driven by strong domestic consumption and investment
P dil d li i• Poverty rates are steadily declining
• Increased local government authority
2009 2010 2011Gross domestic product (Annual per cent change) 4.5 6.0 6.2
Consumer price index (Annual per cent change) 4.8 5.1 6.4
Budget balance* (Per cent of GDP) -1.6 -1.5 -1.7
Major trading partner growth (Annual per cent change) 0 8 6 5 4 3Major trading partner growth (Annual per cent change) -0.8 6.5 4.3
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Urbanization Growth RatesUrbanization Growth RatesCompound Annual Growth Rates of Urban Population,
1970‐2010
4.5% 3.8% 4.2%
3.0%
3.5%
4.0%
3.1%3.4%
2.8% 3.1%
1 0%
1.5%
2.0%
2.5%
0.0%
0.5%
1.0%
China India Indonesia Philippines Thailand Vietnam
• Source: United Nations World Urbanization Prospects, 2009
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Indonesia is Rapidly UrbanizingIndonesia is Rapidly Urbanizing
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Source: Indonesia Statistical Bureau (BPS) Proyeksi Penduduk, 2005
High Economic Density in Java Economic activity and
population are concentrated in majorconcentrated in major urban areas and in non‐oil Provinces.
Major metropolitanMajor metropolitan areas, such as Jakarta and Surabaya, experience economic growth of 6% p.a.
Urban population in West Java (including Jakarta) is expected to increase from currently 60% to 80% bycurrently 60% to 80% by 2025.
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Java‐BaliJava Bali
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SulawesiSulawesi
7
Geographical Distance between Major Citiesin Indonesia and Singaporein Indonesia and Singapore
8
Economic Distance within IndonesiaB d t t tBased on sea transport costs
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Urban Population is De‐ConcentratingUrban Population is De Concentrating
City 1990 1995 2000 2005 2010
Jakarta 15.1% 12.2% 9.7% 9.3% 8.9%
Surabaya 4.5% 3.7% 3.0% 2.8% 2.4%
B d 3 8% 3 1% 2 5% 2 4% 2 3%Bandung 3.8% 3.1% 2.5% 2.4% 2.3%
Medan 3.2% 2.7% 2.2% 2.1% 2.0%
Semarang 2.3% 2.0% 1.7% 1.4% 1.3%
Makassar 1.5% 1.3% 1.2% 1.2% 1.2%
Palembang 2.1% 1.9% 1.7% 1.4% 1.2%
Other Urban 67.6% 73.1% 78.0% 79.3% 80.6%Other Urban 67.6% 73.1% 78.0% 79.3% 80.6%
Total Urban 100.0% 100.0% 100.0% 100.0% 100.0%
Source: World Urbanization Prospects: The 2009 Revision.
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Economic Development is Expanding in ll bSmaller Urban Areas
M dGRDP non oil & gas (2008)
Medan3%
Jakarta 28%RuralRural43%
Bandung2%
Semarang 2%
Surabaya 7%
Makassar 1%Oth bOther urban
14%
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Compound Annual Growth Rate of population f diff i i 1996 2007for different city sizes 1996 ‐ 2007
14.00%
11.61%
10.00%
12.00%
6.96%
4.65%
6.00%
8.00%
3.00%3.40%
2.00%
4.00%
2 93%
‐2.00%
0.00%
> 10 million 5 ‐ 10 million 1‐5 million 0.5 ‐ 1 million < 0.5 million TOTAL URBAN
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‐2.93%‐4.00%
% CAGR
Indonesia’s Largest Metropolitan AreasIndonesia s Largest Metropolitan Areas
Jakarta Metropolitan Area (Jabotabek) Surabaya Metropolitan Area (Gerbangkertosusila)
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Jakarta Metropolitan Area (Jabotabek) Surabaya Metropolitan Area (Gerbangkertosusila)
Population of 8 Metro AreasPopulation of 8 Metro AreasMetro name
2005 CAGR 1995 ‐ 2005
Core Periphery Metro Core Periphery Metrop y p y
Jakarta 8,820,603 12,799,559 21,620,162 0.44% 2.47% 1.56%
Surabaya 2,611,506 5,974,090 8,585,596 0.33% 1.46% 1.10%y , , , , , ,
Bandung 2,270,969 5,079,430 7,350,399 0.66% 3.13% 2.26%
Semarang 1,446,533 4,335,017 5,781,550 0.97% 1.15% 1.10%
Medan 2,029,797 1,812,196 3,841,993 1.07% 0.10% 0.59%
Palembang 1,369,239 1,122,731 2,491,970 1.20% ‐2.67% ‐0.85%
Makassar 1,194,583 1,106,362 2,300,945 1.58% 1.58% 1.58%
Denpasar 574,610 1,208,004 1,782,614 3.97% 1.07% 1.87%
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Source: Indonesia Bureau of Statistics (BPS)
Opportunities and Challenges
• Cities accommodate half of Indonesia’s population and are responsible for a major share of national GDP
– Urbanization rate to support economic growth
– Rising middle class and demand
– Rapid motorization
• Substantial public investment is required to address infrastructure demand
Increasing investment needs Infrastructure Spending as a share of GDP– Increasing investment needs
– Greater demand for basic services
– Local government coordination
Mass transit 6
7
8Private
SOE
Sub-national government
Percent of GDP
Infrastructure Spending as a share of GDP
Mass transit
Flood and other disaster control
2
3
4
5
6 Sub-national government
Central government
150
1
2
1994-1997 1998-2000 2001-2008
Thank YouThank You
16