Jakarta’s boom­ing econ­omy

Business Traveller (India) - - CONTENTS -

J et-lagged in Jakarta, I open the cur­tains and look out on the sleep­ing me­trop­o­lis. The roads, chock-full of crawl­ing traf­fic dur­ing the day, are empty at this time. And even through the double-glazed win­dows of the 56th floor of the Westin (the tallest ho­tel in the coun­try), I can hear the 4am call to prayer ris­ing up among the dark­ened tower blocks.

In­done­sia has the world’s big­gest Mus­lim pop­u­la­tion (87 per cent of 252 mil­lion peo­ple), and there are hun­dreds of mosques all over the cap­i­tal where devo­tees go to pray up to five times a day. The Na­tional Mosque is the largest in South­east Asia, with space for 2,00,000 peo­ple. Jakarta has also been ex­per­i­ment­ing with “mosque-mo­biles” to make wor­ship dur­ing busy times, such as Ra­madan, eas­ier.

For many, at­tend­ing mosques is as much a part of life as vis­it­ing the city’s 250 or so glitzy marble shop­ping malls. Th­ese are the new Mec­cas of con­sumerism built for the bur­geon­ing mid­dle class. There are now around 88 mil­lion In­done­sians that fit into this de­mo­graphic – that’s a lot of spend­ing power.

Chris Wren, chief ex­ec­u­tive of­fi­cer of the Bri­tish Cham­ber of Com­merce says,“Twenty years ago, there were only a few In­done­sians that could af­ford to have a glass of wine in an in­ter­na­tional restau­rant. Now the

mid­dle classes are win­ing and din­ing. The wealth is fil­ter­ing down.”The pres­ence of many fa­mil­iar in­ter­na­tional brands – from M&S, Tesco, Deben­hams, H&M and the Body Shop to Ar­mani, Bose, Ralph Lau­ren, Nike and TAG Heuer – at­test to in­vestor con­fi­dence in con­sumer de­mand.

Joel Der­byshire, di­rec­tor of trade and in­vest­ment for the UK Depart­ment for In­ter­na­tional Trade (UKDIT) in Jakarta, says, “There are more malls in Jakarta than any other city in the world. Peo­ple love shop­ping. Whereas in the UK we might go to parks, the mind­set here is that you go to a mall – they are air-con­di­tioned and have all kinds of things in them – I went to one with a huge water park, and some have cin­e­mas with beds in them and huge karaoke cen­tres.”

I take an Uber to the Cen­tral Park mall in West Jakarta, 11km north of my ho­tel. It’s a slow crawl through rush hour, which my driver tells me lasts from 7am to 9am, and from 4pm to as late as 9pm. One of the largest shop­ping com­plexes, not only does it have a glow­ing, el­e­vated tun­nel link­ing it to the Neo Soho mall across the road, but it also has a Pull­man ho­tel, and an ur­ban gar­den with water foun­tains, lawns and trees lit up in pink and pur­ple fairy lights. I sit on the ter­race of a restau­rant and watch as a vi­o­lent rain­storm forces ev­ery­one inside.


In­done­sia’s econ­omy re­lies heav­ily on do­mes­tic con­sump­tion (60 per cent). The de­mand for ex­ports such as coal and palm oil has slumped, trig­ger­ing a fall in the value of its cur­rency, the ru­piah, and higher prices.

Richard van der Schaar, owner and di­rec­tor of con­sul­tancy In­done­sia In­vest­ments says, “There has been a big prop­erty boom but we are a lit­tle wor­ried as it has re­ally slowed down now. I live in a new apart­ment com­plex and it’s al­most empty. They built too much a few years ago, so there is ex­cess sup­ply.”

The same goes for com­mer­cial build­ings. Arun Ku­mar, gen­eral man­ager of the Westin, says, “There is a lot of va­cant Grade A of­fice space. Peo­ple are mov­ing to new of­fices and the old ones are left va­cant. They are ac­tu­ally giv­ing it away much cheaper.”

Si­t­u­ated on the top 20 floors of the 69-storey mixed-use Gama Tower, the 272-room ho­tel opened last Au­gust.You only have to spend a lit­tle time in the panoramic lobby or deca­dent Sea­sonal Tastes restau­rant, which has seven live cook­ing sta­tions, to see how pop­u­lar it is among lo­cals.

How­ever, overnight oc­cu­pancy is only 40 per cent.“It is grow­ing but not as fast as I would like be­cause ev­ery­one is fish­ing from the same pond,”Ku­mar says. “The five-star seg­ment is very tough.”Do a quick Ex­pe­dia search and you will see al­most ev­ery in­ter­na­tional ho­tel brand rep­re­sented – Kempin­ski, Fair­mont, Shangri-La, Raf­fles, In­ter­Con­ti­nen­tal, Grand Hy­att, JW Mar­riott, Ritz-Carl­ton, Man­darin Ori­en­tal...the list goes on.

And there are still more com­ing (al­though de­lays are ex­pected) from Park Hy­att, Langham, Wal­dorf As­to­ria, St Regis and W. Which one will get your busi­ness, though, given the traf­fic, should be the one clos­est to your meet­ings. Wren says,:“It’s a fool­ish trav­eller who books a ho­tel in Jakarta in the wrong area to save £15/`1,241 a night.”

Why keep open­ing lux­ury hotels if there aren’t enough peo­ple to fill them? First, be­cause there is po­ten­tial – there are cur­rently ten mil­lion vis­i­tors to In­done­sia a year, but the govern­ment aims to double this to 20 mil­lion by 2020. Sec­ond, it’s about sta­tus. Ku­mar says: “In­done­sians pride them­selves on the brands they as­so­ci­ate them­selves with – it’s not pri­mar­ily about mak­ing money.”While this doesn’t seem like savvy busi­ness think­ing, there has been such a wave of op­ti­mism and en­ergy rip­pling through the coun­try that you can hardly cast blame.

In 2014, Joko “Jokowi”Wi­dodo was elected the sev­enth pres­i­dent

of In­done­sia af­ter promis­ing to boost GDP growth to 7 per cent. While he hasn’t yet achieved the eco­nomic growth hoped, he has in­tro­duced re­forms to make for­eign in­vest­ment eas­ier. Last year, the coun­try’s GDP grew by just over five per cent, com­pared with the UK’s two per cent.

In­done­sia has the 16th-largest econ­omy in the world, but by 2030 it is pre­dicted to be the sev­enth­largest. More im­pres­sive still, a re­port from PwC claims that it will be the fourth most pow­er­ful econ­omy on the planet by 2050, be­hind China in first place, the US in sec­ond and In­dia in third.


Fly­ing in over the sea to­wards the north-west shores of Java, it’s clear from the huge con­tainer ships lit­ter­ing the bay that Jakarta’s Tan­jung Priok Port plays a vi­tal role in its trad­ing ca­pa­bil­i­ties. A vast new ter­mi­nal (Kal­ibaru) was un­veiled last au­tumn to al­low for the faster turn­around of ever­big­ger ves­sels, with ad­di­tional ex­pan­sion to be com­plete by 2024.

Lo­gis­tics costs equate to 26 per cent of In­done­sia’s US$861 bil­lion GDP, so im­prov­ing in­fra­struc­ture across the cap­i­tal is a pri­or­ity. By 2020, the coun­try hopes to have re­duced this over­head to 19 per cent. To take pres­sure off the city’s congested roads, a US$1.7 bil­lion mass rapid tran­sit sys­tem is be­ing built. The first in the coun­try (part over­ground, part un­der­ground), it is hoped that it will be ready in time for the 2018 Asian Games, which are tak­ing place in Jakarta.

Air­lift is also crit­i­cal – last sum­mer, the new US$560 mil­lion Ter­mi­nal 3 opened at Jakarta Soekarno-Hatta air­port. It is ini­tially be­ing used for do­mes­tic flights, but later, in­ter­na­tional ser­vices will move over. Ku­mar says,“Not a lot of leisure travel comes into the city. It has lit­tle to of­fer – at the week­ends lo­cals are in Sin­ga­pore. On Fri­day evenings, flights are full.”

An ex­press rail link to down­town is com­ing this year and a third run­way is be­ing de­vel­oped. By next year, the hub will be able to han­dle 62 mil­lion pas­sen­gers an­nu­ally.

With a pop­u­la­tion of 12 mil­lion peo­ple, Jakarta is a sprawl­ing mega city with no dis­cernible bound­ary, and lit­tle in the way of pedestrian-friendly zones. There is Chi­na­town, with its dank al­ley­ways, mar­ket stalls sell­ing nets of live frogs and crabs, and the charred, smoky Dharma Bhakti Tem­ple (it caught fire last year but still has a for­est of man-height can­dles burn­ing inside). And there are car-free Sun­days on Sudirman and Tham­rin roads.

The old Dutch Colo­nial area of Kota Tua, once the heart of Batavia, was the cap­i­tal city of the Dutch East Indies. Up un­til 1942, when the Ja­panese took con­trol, it formed a key trad­ing cen­tre with Asia, which saw spices, to­bacco, sugar, opium, cof­fee and tea flow in and out with the help of a net­work of canals.

To­day, the fo­cus is on the (SCBD) Sudirman Cen­tral Busi­ness Dis­trict, and new planned satel­lites such as Bumi Ser­pong Da­mai (BSD) Smart City in Tangerang. A pri­vate de­vel­op­ment from Si­nar Mas Land, the blos­som­ing ur­ban strong­hold has been de­signed as a self-sus­tained tech in­no­va­tion hub, with hous­ing, restau­rants, of­fices, shops, a cut­ting-edge ex­hi­bi­tion cen­tre, and a co-work­ing space called EV Hive. Unilever recently opened its new coun­try HQ here.

In­done­sia has fiercely em­braced dig­i­tal – smart­phone pen­e­tra­tion is around 50 per cent and, by 2019 it is es­ti­mated that 92 mil­lion peo­ple will have one. So­cial me­dia has ex­ploded, too. In­done­sia is the fourth-big­gest Face­book mar­ket

on the planet, while Jakarta has been dubbed the Earth’s “Twit­ter cap­i­tal”. With 60 per cent of the pop­u­la­tion un­der the age of 30, you can un­der­stand why. At lux­ury hotels such as the Westin and Four Sea­sons, groups of women in colour-co­or­di­nated hi­jabs can be spot­ted pos­ing for In­sta­gram shots with their own pro­fes­sional pho­tog­ra­phers.

E-com­merce is also tak­ing off. “Five years ago, In­done­sians would have been scared to buy things on­line,”Wren says. That has all changed. In Jakarta there are bik­ers wear­ing green GoJek crash hel­mets ev­ery­where. In 2015, the com­pany launched a ride-hail­ing app for mo­tor­cy­cle taxis, which can weave in and around cars, mak­ing them the fastest way to get about. Since then, it has branched out into ev­ery­thing from food de­liv­er­ies to on-de­mand mas­sages. If you want to get ahead in a city like Jakarta, you have to be nim­ble. Even Uber is do­ing two-wheel­ers.


How easy is it for a for­eigner to do busi­ness here? The UKDIT’s Der­byshire says:“We tell Bri­tish com­pa­nies look­ing at In­done­sia that to suc­ceed you need pa­tience, per­se­ver­ance and persistence. This re­quires an in­vest­ment in re­la­tion­ships, which takes time – it is not a trans­ac­tional mar­ket. If you want to get off a plane and sign a deal, you can’t.”

Wren says:“Vis­i­tors look at the head­line stats and get re­ally ex­cited but then they see the le­gal un­cer­tainty, awk­ward reg­u­la­tory en­vi­ron­ment, bribery and cor­rup­tion, and ask: ‘How can we get at the op­por­tu­ni­ties?’ We give them the street­wise ver­sion of what they need to know. The Bri­tish Cham­ber of Com­merce helps them to ap­pre­ci­ate that the risks can be man­aged.”n

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