The Effectiveness of Stimulating New Economic Centers Outside of Java

JAKARTA – Along with the myriad of challenges of Java's environmental carrying capacity, the government is continually looking for ways to spread industrial activity beyond Indonesia's most populous and densely-packed island and create new economic centers across the archipelago in order to properly distribute growth.

However, this plan still has its own range of challenges, such as the limited availability of connectivity infrastructure and human resources (HR) and the lack of support for urban services to ensure quality of life in certain regional areas. 

This is the theme of a recent online survey held by the Ministry of National Development Planning/Bappenas through the Indonesia Development Forum (IDF) event, of which 285 respondents took part during the Inspiring Session Road to IDF webinar on Tuesday (29/6). The survey participants mainly consisted of those in the 25-50 age bracket across all provinces, and are typically employed as government workers, public sector workers, academics, university students, entrepreneurs and housewives. The topic of the survey is in line with one of 5 IDF subthemes, namely Subtheme 5: Designing Industrial Activities to Help Foster New Economic Growth Centres.

This survey was conducted to encourage the facilitation and development of industrial activities and to also collect input for policy development efforts in the future.

Regarding the effectiveness of efforts to foster new economic growth centers outside of Java, around 35.8% of respondents consider improving business and investment certainty to be the key factor in inviting industrial activity in regional areas. Only 12.3% said that the provision of human resources outside of Java is the best way of encouraging industrial growth in those areas.

Furthermore, the suitability of industrial site planning with a region's spatial planning and environmental carrying capacity is considered by around 35.8% of respondents to be the main issue hindering growth of new industrial centers outside of Java.

This finding is in line with the current conditions where strategic area planning efforts are still not in line with spatial and regional planning (RTRW) documents in the targeted region and has also not taken into account the disaster risk index when choosing the location.

As many as 26% of respondents say that the main issue hindering the stimulation of industrial activity in other regions is the feasibility of industrial activities which might not necessarily fit with the local market needs. Up to 17.5% think that the limited availability of skilled workers is still an issue that hinders the development of new economic centers.

Therefore, addressing this issue requires support from the government in the form of supportive policies which prioritize vocational education and training, as well as employment, in addition to infrastructure development, innovation and research & development, land and spatial planning, empowerment of small-to-medium-scale industries (IKM), ease of investment, and easy access to flexible funding.

The availability of environmentally friendly technologies is believed by 32.3% of respondents as the most important factor in encouraging the growth and development of green economy-based growth centers. With the current state of the Covid-19 pandemic, which has affected the fabric of people's lives and weakened economies worldwide, efforts to engineer industrial activities through stimulating new economic centers outside of Java, are expected to stimulate investment and also encourage the creation of new jobs and boost economic recovery efforts.