Indonesia: Second City Engagement

British Embassy Jakarta

November 2013

Summary

Our engagement with Indonesia in the coming years will increasingly take us beyond Jakarta and Java, to exploit the potential of its fast-growing outlying provinces. Surabaya (population three million plus, and growing faster than the national average) is one such city. A large and acquisitive middle class, ambitious plans for infrastructure development and an administration committed to good governance and a conducive foreign investment climate make it just the sort of place where we will need to expand our effort.

Detail

 

The adage that Jakarta is not Indonesia is increasingly true both in political and economic terms, as fast-growing second cities drive national growth and nurture the next generation of political leaders. The majority of Indonesia’s consuming class, which by 2030 will number in excess of 80 million, will live outside the capital.

 

Indonesia has 11 cities with a population of over one million, and this is set to increase rapidly with the accelerating population drift to the cities. Of those, the fastest growing are the second cities of more than two million inhabitants, including Surabaya, Medan and Bandung. They consistently record growth exceeding that of Jakarta and benefit from the significant autonomy afforded by decentralisation. The next stage will be to identify a small number of cities which have commercial needs which map onto UK capabilities and progressive administrations with which we can work.

 

The province of East Java is one such and was the subject of a recent embassy scoping visit. It ranks second in per capita GDP at $2,234, despite almost two thirds of the land being agricultural. The provincial capital, Surabaya, has the economic weight (average growth of 7%) and population (nine million when the surrounding areas are included) to generate a substantial middle class with money to invest in UK education, products and tourism. The economy is diverse (and not over-reliant on commodities) with the main trading port and retail driving growth. There are opportunities in infrastructure design, town planning, green cities and education. The port is home to a major naval base, where the three frigates recently purchased from Britain will soon be re-fitted.

 

Surabaya is also notable for its progressive government. The policies of the mayor have transformed the city; the streets are clean, education is prioritised and transparency improving. The mayor has already collected an award in Bangkok for good governance and there is real enthusiasm for working with us in education, healthcare and sustainable infrastructure. The recently re-elected governor of the province highlighted a similar commitment to improved governance and accountability and the development of an investor friendly environment. He intends to tackle the wealth divide and to transform Surabaya into a gateway to the east. His administration has struck a ground-breaking agreement with the national Corruption Eradication Commission, which gives the agency oversight over the provincial budget process, and is also using e-applications to cut delays in issuing key investment and other permissions.

 

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Countries: Indonesia
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