The Faults of Indonesia’s Urbanization

At risk of sounding grandiose, urbanization has driven progress since the dawn of man. People being in closer proximity to each other allows for specialization, and with specialization comes greater productivity. It allows for greater efficiency of communication, and often creates rapid intellectual blooms, formations of archives and universities, and the documentation of all of our research and knowledge. Without hyperbole, it can be said that humanity’s greatest achievements happen in our cities. But what happens when it just doesn’t quite work out?

jakarta slums

Indonesia, a large and rapidly growing nation composed of thousands of islands in southeast Asia, has seen some pretty remarkable growth in the past half century. In terms of population and growth, it remains in a similar range as Malaysia and the Philippines. Where it differs from these countries is in its massive increase in urban population.

indonesia rural v urban

As this table illustrates, The ratio of urban to rural citizens became 1:1 in 2010 and is expected to reach 1:2 by 2050. At a cursory glance, that looks great for Indonesia. China is undergoing a very similar process, in fact, the amount of land being urbanized in Indonesia is second only to China. With more urbanization comes GDP growth: for China, 10% GDP growth per 1% urbanization. For Indonesia, however, this is not the case.


Indonesia’s GDP has struggled to climb meaningfully, some sources say as little as 4% GDP per 1% urbanization. So what does this lackluster growth lead to? An increase in population without an increase of product to match leads to, at best, a stagnation of poverty and at worse, worsening quality of life.

poverty in indonesia


While the Gini coefficient has risen, given the rate of urbanization, it’s rather unremarkably so. What’s more, the access to important services has actually regressed. While a decade ago, 50% of households had access to safe water, that number has since fallen to 48%. Sewage covers only 11 of the nation’s 98 cities and less than 2% of city residents have access to it.

Jakarta Urban Breakdown


We can see in this figure that with the urbanization the outer suburbs and core city of Jakarta, Indonesia’s largest urban center, have actually not increased. Instead, we see the creation of a new classification all together. 


jakarta slums 2


These areas tend to be very poor and lacking basic necessities. If these people are so close to the city then, why is it they are not only left poor but also in need of basics?

First and foremost, Indonesia really has not done much to improve their infrastructure. In the mid to late 2000’s, while China was spending around 10% of its GDP on infrastructure, Indonesia spent a measly 3%. Furthermore, this rapid expansion puts strain on already existing infrastructure, worsening its condition and efficiency.

While it would certainly behoove Indonesia to invest in its infrastructure, creating temporary low skill jobs and improving quality of life, what it really needs to focus on to see the rapid growth of its cohorts is industrialization.


GDP breakdown


We can see that Indonesia’s former sources of income, mining and agriculture have fallen off, and manufacturing as seen some increase. We know that urbanization with industrialization means success in the modern world. However, we can see with Indonesia as a shining example, that urbanization without adequate industrialization leads to the creation of slums, and decreased quality of life for many of its citizens.

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