Does Indonesia still have a Java-Centric Economy?

The island of Java has long been the undisputed economic center of Indonesia. From education to health, the island is the most developed nationwide in many metrics, resulting in many to come in search of better opportunities. This is even more apparent in its capital city, Jakarta, which is also the country’s financial and political hub. Since his inauguration in 2014, one of President Jokowi’s main policies has been on infrastructure spending outside Java to promote more equitable growth from other regions, but has the expected benefits materialized? Using data on the gross regional product (GRP) from Statistics Indonesia, we can get a clearer picture on how this Java-centric dynamic has changed, if at all.

Gross regional product per capita

Let’s first take a look at the GRP per capita figures of each province. While not a perfect measure in itself, such data allows us to have a general idea of the average living standards in each province and make some comparisons.

Interestingly, all Javanese provinces seem to be spread out evenly within the visualization. Jakarta predictably appears on top, but the same cannot be said for the other Javanese provinces. Instead, high up on the list are provinces rich in resources, such as Riau and East Kalimantan. They are known to produce the country’s supply of commodities, from coal, gold, rubber to palm oil among other things.

Of course, one could argue that GRP alone does not illustrate the complete picture of Indonesia’s economic situation. Indeed, with resource-rich provinces appearing so high up, it calls into question how much of the provinces’ earnings are actually received by local residents given that the large industries that operate there may have taken up a larger share of the income. Several news publications have cited the Institute for Development of Economics and Finance (Indef) Economist Bhima Yudhistira Adhinegara’s estimate that around 70% of the total money in circulation nationwide occurs within Jakarta alone.

Distribution of Indonesia’s GDP

We can use an alternative method to assess Javanese dominance in Indonesia, and that is by looking at how GDP is distributed throughout the country.

At first glance, the data of the distribution shows that Java’s regional dominance still persists even with the government’s decentralization policies. Over the past two decades, Java comprises 57-58% of Indonesia’s GDP. This is a significant proportion when remembering that the island makes up just 7% of the country’s total land area. Nevertheless, an important question still needs to be asked — how has this distribution evolved among the country’s various provinces?

 

Jakarta has consistently occupied the top spot, with East Java, West Java and Central Java trailing the capital closely behind. Again they are then followed by resource rich provinces Riau, North Sumatra and East Kalimantan. Interestingly, Yogyakarta is an outlier compared to the rest of Java’s provinces.

Conclusion

In any case, on a macro level, the key takeaway is clear. The short answer is yes, the Indonesian economy is still Java-centric. Throughout the past two decades, when looking at the distribution, not much has changed regarding Java’s economic dominance with the exception of some resource-rich provinces. However, whether this would change as the gains from infrastructure spending arise still remains to be seen. This opens up the need to further explore another important consideration in the future, namely inequality within each region.