Urbanization within the Indonesian economy: a policy dilemma

Urbanization within the Indonesian economy : a policy dilemma

William B. Wood

Most Third World countries have serious problems relating to rapid urban growth but attempts to solve urban problems have generally failed . This paper looks at the urban issues of one country, Indonesia, and the attempts by the Indonesian government to control rural to urban migration . Contradictions between macroeconomic and urban policies, however, have undermined government programmes . The author is a graduate of the Department of Geography, University of Hawaii at Manoa, Honolulu, HI, USA .

'The author would like to thank Mike Douglass for his comments on an earlier draft of this paper. 2Biro Pusat Statistik, Proyeksi Penduduk Indonesia 1980 .2000, Jakarta, Indonesia, 1983, Table 3 .3 . 3Gavin Jones, 'Indonesia: the transmigration programme and development planning', in Robin Pryor, ad, Migration and Development in Southeast Asia - A Demographic Perspective, Oxford University Press, Kuala Lumpur, Malaysia, 1979. °Clifford Geertz, Agricultural Involution The Process of Ecological Change in Indonesia, University of California Press, Berkeley, CA, USA, 1963 .

0264-2751/86/030219.09$03.00 Cc; 1986

Although Indonesia is predominantly a rural country, an increasing percentage of its population resides in urban areas . This paper reviews the parameters of Indonesia's urbanization process and some of the urban problems of the capital city, Jakarta . The principal argument here focuses on the inherent conflicts between macroeconomic goals and urban development . An analysis of Indonesia's urban issues, however, first requires a brief overview of the country's geography, history and economy . 1 The Republic of Indonesia is an archipelagic country of 13 000 islands that stretch out for 2 500 miles across the equator . By far the largest country in Southeast Asia, Indonesia covers about two million square kilometres of land . Almost 85% of this land area, however, is made up by just four islands : Kalimantan, Sumatra, Sulawesi and Java . During the 1970s the country's average population growth rate was 2 .3%, giving it a doubling time of 30 years .'- Indonesia's 1985 population was about 165 million, the fifth largest in the world . One of Indonesia's most striking characteristics is the wide disparity in population densities between the inner islands of Java and Bali and the outer islands of Sumatra, Kalimantan, Sulawesi, Maluku and Irian Jaya . Java, for example, has an average density of over 730 persons per square kilometre while Kalimantan has about 13 . For over 70 years successive government administrations have attempted to ease the problems generated by Indonesia's highly concentrated population distribution by encouraging landless Javanese and Balinese peasants to transmigrate to the outer islands . So far, despite optimistic government projections, these efforts have failed to greatly influence the population distribution pattern in the archipelago . 3 Over 60% of Indonesia's population is engaged in some type of agricultural activity . The most important agricultural system is sawah or wet rice cultivation, in which small paddy fields are intensively cultivated . The elastic labour demands of sawah cultivation have led to very high population densities and have had a profound influence on the culture and economic development of Java and Bali . ; In contrast to the sawah farmers of the inner islands, shifting cultivators in the outer islands have based their agro-ecosystems on the regenerative capacity of their forests . Traditionally, the outer islands have been the resource

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Urbanization within the Indonesian economy frontier of Indonesia . During the last century of Dutch colonialism, the outer islands contributed the lion's share of revenue with their cash crop plantations, oil fields and mines .' After independence in 1949, the Jakarta-based government continued its dependence upon the national revenue earnings of the outer islands . Little of this revenue . however, was returned to the regions that generated it . The unequal relationship between the inner and outer islands created resentment among the people of the outer islands which manifested itself in frequent regional rebellions .' Indonesia's unbalanced pattern of natural resource availability and population distribution continues to have a major effect on economic development . The Indonesian Government's principal source of national revenue is its oil exports from the outer islands . Since the mid-1960s, oil exports have increased by over 20 times in real purchasing power and since 1973 have contributed over 66% of the value of total exports .' Oil exports played a major role in almost doubling the average annual growth rate of Indonesia's Gross Domestic Product (GDP) from 3 .9% , in the 1960s to 7 .7'% between 1970 and 1982 . 8 Oil revenues accounted for 64 .2% of Indonesia's total domestic revenues in the 1983/84 fiscal year ." An indication of the economic importance of Indonesia's oil export earnings becomes evident when the country's per capita Gross Domestic Product with oil revenues taken into account, US$430 . is compared to its per capita Gross Domestic Product without oil revenues, US$300 . Although the national government owns all natural resources in Indonesia, most resource extraction activities are very dependent upon the skills, capital and technology of large multinational corporations . The increased demand for Indonesia's resources, especially from the newly industralizing countries, and the high price of petroleum and timber on the world market coincided with the opening up of the Indonesian economy by the Soeharto administration . The Foreign Investment Laws of 1967 and 1970 . for example . paved the way for large-scale multinational involvement in resource extraction activities in the outer islands . In return, the national government received substantial resource-generated revenues, primarily through its state owned corporations, the most important being Pertamina, the national oil company . Oil exports during the 1970s and early 1980s have subsidized a wide range of government-funded economic development projects and stimulated domestic production and consumption .

5J .H . Boeke, The Evolution of the Netherlands Indies Economy, Netherlands and Netherlands Indies Council, Institute of Pacific Relations, NY, USA, 1946 . Christine Drake, 'National integration and public policies in Indonesia', Studies in Comparative International Development, Vol XV, No 4, 1980, pp 59-84 . Urbanization in Indonesia 'Ross Garnaut, 'General repercussions of the resources boom in the segmented Indonesia's indigenous urban tradition predates European influence by Indonesian economy', in Ross Garnaut several centuries . Most towns were centred around the kraton (royal and Peter McCawley, eds, Indonesia : Dualism, Growth and Poverty, Research court) of local aristocrats . Feudal rulers located along the coasts and School of Pacific Studies, Australian major rivers regulated much of the archipelagic trade in spices, textiles National University, Canberra, Australia, and foodstuffs : , radual1v their courts became surrounded by market1980, p 415 . iii "World Bank, World Development Report places and small settlements of foreigners . 1984, Oxford University Press, New York, The Dutch colonization of Indonesia initially had little effect on 984, Table 2 . indigenous towns and cities as it was focused on the coastal spice trade . 1 American r. n Indonesia's Petrota leum Sector. Annual nual RepoReport,J akarta , In- After 1850, however, Dutch interest shifted away from coastal trading and towards agricultural production in hinterland areas . As a result . donesia, 1984, p 8 . 10 Justus M . van der Kroet, 'The Indone- many towns in Java and Sumatra became colonial administrative sian city and its political evolution', Far centres . Dutch colonial policy deliberately restricted manufacturing in Eastern Economic Review, Vol 20, 21 June 1956, p 774port cities, concentrating instead on the processing and export of

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Urbanization within the Indonesian economy

"D .G .E. Hall, A History of South-East Asia, Macmillan, London, 1961, p 501 . 'William Withington, 'Medan : primary regional metropolis of Sumatra', The Journal of Geography, Vol LXI, 1962, pp 59-62. "James L- Cobban, 'Geographic notes on the first two centuries of Jakarta', in Y .M . Yeung and C .P . Lo, ads, Changing Southeast Asian Cities: Readings on urbanization, Oxford University Press, Singapore, 1976 .

14 1f the metropolitan regions around the two largest cities of Jakarta and Surabaya are included, the percentage of Indonesia's urban population rises to 30% . 15 Graeme J . Hugo et al, Comparative Study on Migration, Urbanization and Development in the ESCAP Region. Country Reports, lit. Migration, Urbanization and Development in Indonesia, Report pre-

pared for the Economic and Social Commission for Asia and the Pacific, Bangkok, Thailand, United Nations, NY, USA, 1981,

plantation crops, including tea, coffee, sugar and tobacco . Between 1870 and 1900 colonial reliance upon port cities increased as export trade doubled and import trade quadrupled in value .'' In addition, the establishment of plantations in the outer islands created new regional trading centres, such as Medan in northern Sumatra ." These rapidly growing cities contained heterogeneous populations of European bureaucrats and businessmen, Indonesian aristocrats and civil servants, and Chinese merchants . Dutch interests in the archipelago were managed from Batavia (later renamed Jakarta), a fortified port town built on the north-west coast of Java by the United East India Company in the 17th century . " Through most of Indonesia's modern history, Jakarta has served as a Dutch trading centre and colonial capital . During the first few decades of this century, Jakarta's population surpassed that of Surabaya, in cast Java (the traditional trading centre of the archipelao) . Jakarta's population growth also helped generate the rapid development of nearby Bandung from a colonial hill station to a city of over 1 .5 million . After Indonesia's independence, Jakarta became the capital of the new republic and the administrative centre of a growing and highly centralized bureaucracy . The percentage of Indonesia's population residing in urban areas is offically estimated at a relatively low 22!0, but this figure probably underestimates the actual number of people who commute regularly between urban and rural areas and/or are dependent upon urban jobs, services and facilities ." Since the turn of the century the urban population has been increasingly concentrated in the country's largest cities, located along the coasts and major rivers of Java and Sumatra . Of the 32 cities in Indonesia with populations greater than 10(1 000, 18 are on the island of Java (Figure 1) . Between 1960 and 198(1 the number of cities with over 500 000 people has jumped from three to eight ." About 45%, of Indonesia's urban population now resides in these eight largest cities ; only 124„ resides in the 28 cities with populations between 100 000 and 500 000, and the remaining 43% live in the more than 50(1 small cities and towns with populations between 5 000 and 1(1(1 000 ." , Boundary changes and the underhounding and overhounding of many urban areas in Indonesia between 1960 and 1980 have made rural to urban migration rates difficult to measure . During the 1960s the natural increase of urban populations averaged about 22 per thousand and accounted for two-thirds of urban population growth ." During the 1970s, with the exception of Jakarta, natural urban growth rates decreased while net population transfer gains between urban and rural areas increased, indicating an increase in the rate of urbanization . ' x There are, however, marked differences in the causes of urban population growth between urban areas in the inner and outer islands, with the latter having a higher percentage of growth due to in-migration as a result of resource extraction activities . Migration to Indonesia's largest cities has been influenced by a number of factors, including :

p 65 .

16 Hendropranoto Suselo, 'Experiences in providing urban services to secondary cities in Indonesia', unpublished paper presented to the Ninth Africa Conference on Hosuing and Urban Development, Dakar, Senegal, 9-13 April 1984, p 7. 17 Graeme J . Hugo et al, op cit, Ref 15, pp 69-71 . 18 1bid, p 75 .

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• • • •

increased access to services concentrated in urban areas, such as secondary schools and hospitals ; improved transport linkages between urban and rural areas : greater trading activites between port cities ; decreasing labour demands in the agricultural sector due to the green revolution ;

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L/1hernizuti0n Irithin the Indonesian econmeo 20

15

0 0

500

1000

0

5

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00

PEMATANGSIAANTAA PAKANBARU`. PAOANG \JAM I

SAMARINOA . .BALI KPAPAN KALONGAN BANJARMARSIN PALEMBANG ~"~ TANJUNGKARANG TEGAL PEKALONGAN CIREBON SEMARANG UJUNG PANDAND JAKARTA SURABAYA P P OB Ot .l t BOGOR . SUKABUMI JEMBA c BANDUNG MA LANG TASIKAMALAVA KED ;RI MAGELANG IUN YOGYAKARTA SURAKAR 1

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Figure 1 . Distribution of cities within Indonesia with population over 100 000 in 1980 .

rising consumer demand for goods produced or traded by urbanbased enterprises . l '1 Conspicuously absent from this list is manufacturing, which has not played a major role in influencing Indonesian urbanization- The rapid growth of Indonesia's largest cities, particularly those in Java, has resulted in extremely complicated problems, most notably a lack of adequate housing_ severely strained public ini'rastructure (such as waste disposal facilities) and increasing air and water pollution .

.Jakarta and the urban problem Jakarta . Indonesia's capital and Southeast Asia's largest city, epitomizes the lopsided urban hierarchy in the country . Jakarta has steadily increased its primacy over the other large cities of Indonesia since the turn of the century . but especially during the last two decades (Figure

"Mike Douglass, 'National urban development strategy scenarios', unpublished paper for the United Nations National Urban Development Strategy Project, .Jakarta . Indonesia, 1984, pp 10-11 . `'The urban region around Jakarta has, for planning purposes, been classified as an administrative unit with the acronym JABOTABEK .

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2) . .1akarta . located in West Java, had a 1984 population of almost eight million and has a projected population of 16 million by the year 2000 . If the three kubupeten (subprovincial districts) surrounding Jakarta are included in its urban lield, its present population juntps to over 13 million, with a projected population of 23 .5 million by the year 2000 .' 0 Hugo summarizes Jakarta's dominance . While ccounting for only 4 .1"G, of the nationnt population . Jakarta has a quarter of the total employment in manufacturingceives nearly two-thirds

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Urbanization within tire Indonesian economy 10 000

0 0 0

Figure 2. Rank size distribution of Indonesia's 20 largest cities, 1961, 1971, 1980 . Source : Graeme J . Hugo et al, op cit. Per 15, Table 38 . The 1980 population used in this table is a preliminary estimate and thus varies slightly From the actual census figures for these cities . In addition, many cities had their boundaries ex-

100

panded in the 1960s thereby automatically in-

creasing their urban populations. of Indonesia's imports, accounts for a quarter of its private investment and a half of foreign investment outside of raw material extraction, it contains two-thirds of the top two grades of public service, half of the money in circulation, it has more than a quarter of the registered vehicles, 30i, Of the telephones, 30'% of the doctors, etc . . . Jakarta dominates the pattern of urban growth in Indonesia . . . during the 1960s . . . it accounted for 82% of the total net migration recorded by municipalities in Indonesia . ' I

21 Graeme J . Hugo et al, op cit, Ref

15, p 30 . 22 Graeme J . Hugo, 'Indonesia : migration

to and from Jakarta', in Robin Pryor ed, op cit, Ref 3 . 23 Sidik Noormohamed, 'Housing for the

poor in Jakarta', in Ross Garnaut and Peter McCawley, ads, op cit, Ref 7, pp 501-2 .

'"Nick Devas, 'Indonesia's kampung improvement program : an evaluative case study', Ekistics, No 286, 1981, p 21 . Most kampungs, despite their ramshackle appearance, are not squatter settlements as residents usually have legally recognized land tenure .

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Jakarta's socioeconomic supremacy in Indonesia's urban hierarchy has been accompanied by a rapidly growing population caused by high rates of natural increase and the arrival of rural migrants who have come in search of employment, education, and/or bright lights . Many of these migrants end up living in sprawling kampungs (urban villages) and working in what has been loosely defined as informal sector activities . Rural migrants, contrary to the predictions of the Todaro-Harris model, often do not come for permanent employment in the formal sector, but rather for temporary employment during slack periods in the agricultural cycle . Relatively cheap and efficient public transport between urban and rural areas helps to account for the high levels of circular migration between such metropolises as Bandung, Surabaya and Jakarta and rural villages in Java ." Jakarta's rapid population growth has created serious infrastructural problems : groundwater sources, on which the majority of Jakarta residents rely for drinking water, are often polluted ; frequent floods inundate many kampungs ; only half of the city's garbage is collected, the remainder is left in vacant lots, roads and drainage canals ; there is no separate water-borne sewer system ; and most families live in temporary or semi-permanent structures with no private toilets, electricity or piped water .' Jakarta's kampungs, although predominantly single storey . have high population densities, typically between 400 and 500 persons per hectare (Figure 3) . Kantpungs house most of the 65% of Jakarta residents whose incomes place them below the absolute poverty line .`'

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Urhaaization nddun the Indonesian econonrt

Figure 3 . Jakarta landscape .

25 Hendropranoto Suselo, 8.

22 4

op crt,

Ref

16, p

World Bank assisted urban development projects, such as the Kampung Improvement Program (KIP) . have improved the physical environments of some karnpungs in Jakarta and other selected cities . The KIP has been primarily directed at improving basic infrastructure in and around krunpungs, such as the construction of roads . bridges, public toilets and drainage canals . The national government also has a housing development corporation, Peumnas, but it has had Little effect on the inadequate housing supply in urban areas, with only 150 000 units, most of which are occupied by public employees . 25 . The influence of these accommodationist policies on urban population growth has been marginal . because they are directed at the infrastructIll'al consequences of population growth rather than the socioeconomic causes of growth . The Jakarta government has attempted a number of policies to limit the in-migration of rural villagers . In the early 1970s the municipal administration required residency permits for all new in-migrants which would only he granted upon proof of a job and some type of lodging . Often, however, in-migrants ignored the permit regulations, obtained permits through bribes, purchased counterfeit permits . or claimed only temporary residence in the city (after which they would leave, return after a short period and apply for a new temporary permit) . Another policy which had an indircer effect on in-migrants was the offical ban on hecaks (pedicabs) from the heart of the city . Becakdriving requires little capital (hecaks can he rented out day by day) and thus is a popular means of temporary employment for rural in-nmgrants . The restriction of hecaks to peripheral routes through the city is enforced primarily to decrease traffic congestion in the urban core but the ban also removes a convenient source of urban employment . The banned hicycle-powered hecaks, however, have been replaced by motorcycle-powered pedicabs (called hajaj), which arc allowed in the urban core . Other urban government actions which have attempted, either directly or indirectly, to discourage in-migration into Jakarta have included urban renewal projects which have bulldozed illegal karnpungs and police harrassment of krtki lima (pavement sellers) and owners of

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Urbanization within the Indonesian economy warung (makeshift stalls) . These government sanctioned actions make life dificult for Jakarta's petty traders ; but it is questionable whether they have any measurable effect on in-migration . 21 For many inmigrants the meagre incomes earned in Jakarta's informal sector is more than they could earn in their home villages ; some in-migrants even manage to support families back in their rural village with remittances ?7 Needless to say, the flow of in-migration has from their urban jobs . not diminished and is probably underestimated in census figures which have overlooked circular migration ."

Rural development and urbanization The solution to unemployment and underemployment, poor housing, traffic congestion, and inadequate sewage facilities in Indonesia's big cities does not, of course, lie with urban governments alone . In an agricultural country like Indonesia the fate of urban areas is closely linked with the fate of rural areas . In Java the majority of farms are less than half a hectare, a size which permits, at best, little more than a subsistence income . Clearly . push factors play an important role in Indonesia's rural to urban migration .

°Lea Jellinek, 'The life of a Jakarta street trader', in Janet Abu-Lughod and Richard Hay Jr, eds, Third World Urbanization, Maaroufa Press, Chicago, IL, USA, 1977 . 27 Graeme J . Hugo, 'Indonesia: migration to and from Jakarta', in Robin Pryor, ed, op cit, Ref 3, p 210 . 2BGraeme J . Hugo, 'The impact of migration on villages in Java', in Robin Pryor, ed, op cit, Ref 3, p 202 . 29 Benjamin White, Political Aspects of Poverty, Income Distribution and their Measurement : Some Examples from Rural Java, Agro-Economic Survey, Rural Dynamics Study Series No 5, Bogor. Indonesia, 1978, p 19 . 3OBarbara L .M . Schiller, 'The "Green Revolution" in Java : ecological . socioeconomic and historical perspectives', Prisma, English edition, No 18, 1980. 3, William L . Collier, 'Food problems, unemployment, and the Green Revolution in rural Java', paper submitted for publication in Prisma, 1978, p 16. 32 Michael Lipton, Why Poor People Stay Poor - A Study of Urban Bias in World Development, Harvard University Press, Cambridge, MA, USA, 1977 ; Michael Todaro and Jerry Stilkind . City Bias and Rural Neglect: The Dilemma of Urban Development, Population Council, NY, USA, 1981 . 33 Gavin Jones. 'Population growth in Java', in Ross Garnaut and Peter McCawley, eds, op cit, Ref 7, p 51 B .

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During the 1970s and early 1980s the government subsidized rice production through price subsidies on fertilizers, pesticides and high yielding varieties of seeds and through the establishment of agricultural extension services and cooperative rice mills . The result has been an increase in rice production but the benefits to rural villagers have been mixed, with some of the wealthier farmers increasing their landholdings at the expense of poorer neighbours ." Changes in rice production methods, most noticeably the replacement of farm labour from local villages with small tractors and gangs of professional harvesters, has deprived many landless rural peasants of their livelihood and has forced many of them to migrate to urban areas . 3 ' In addition . local rice marketing entrepreneurs have been eclipsed by government agencies . Finally, the high cost of rice on the government-regulated market increases rural income disparities between owners of sawah, who reap the profits from high prices, and landless peasants, who have to spend an increasing percentage of their already dwindling incomes on buying rice, the staple of their diet .' The economic development literature of the last decade has focused on the urban bias of development investments, the necessity of some type of basic human needs programme in rural areas and the importance of diversified economics in rural areas .'' The Indonesian government has also made some recent progress in implementing a more rural orientation in its development programmes . I lealth care, for example, has improved so that infant mortaility has decreased by 40`70 in the last two decades ; life expectancy, however, still varies by as much as 15 years between upper (income) and lower classes ." Primary education has also been made available to increasing numbers of rural children through the Inpres programme . In addition, rural infrastructure such as roads, electricity and irrigation systems have been improved . Unfortunately, improvements in rural health care, education and infrastructure by no means guarantee a decrease in rural to urban migration . Indeed, the opposite result can occur as improved communication and transport linkages between urban and rural areas increase interest in urban-based economic and cultural activities and

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Urbanization wilhin the bulonesuui econon»'

decrease the cost of rural to urban migration . 'I n complicate matters . most of the noteworthy improvements in basic needs have been paid for by oil revenues_ What will happen to Indonesia's rural development projects if the revenues from oil exports continue to decline in the next few years? The prospect of long-term depressed oil revenues is quite possible given the recent drop in oil prices on the world market and the lack of major oil discoveries in Indonesia within recent years ." If oil-financed agricultural subsidies and rural development programmes are eliminated, rural to urban migration streams could increase substantially, thereby compounding already difficult problems in urban planning and management .

Economic growth policies and urbanization

34Joseph P . Riva Jr, 'The petroleum prospects of Indonesia', in World Petroleum Resources and Reserves, Westview Press, Boulder, CO, USA . 1983 .

35'Harry Richardson, 'Defining urban population distribution goals in development planning', in United Nations, Population Distribution Policies in Development Planning, United Nations, NY, USA, 1981 . 3 Roland Fuchs, 'Government policy and population distribution', in John I . Clarke, ed, Geography and Population . Approaches and Applications, Pergamon Press, NY, USA, 1984. s7

HLA Myint, 'Inward and outward-looking

countries revisited : the case of Indonesia' . Bulletin of Indonesian Economic Studies, Vol XX . No 2, 1984, pp 39-52 . 38 Gavin Jones, 'Links between urbaniza-

tion and sectoral shifts in employment in Java' . Bulletin of Indonesian Economic Studies. Vol XX . No 3, 1984, p 153 . 33 Sugiianto Soegijoko, 'Growth centred development within the framework of prevailing development policies in Indonesia', in Growth Pole Strategy and Regional Development Planning in Asia, Proceedings of the Seminar on Industrialization Strategies and the Growth Pole Approach to Regional Planning and Development . The Asian Experience, 4-13 November 1975, Nagoya, Japan, United Nations

Centre for Regional Development, Nagoya. 1978 . t0A tour of Jakarta's affluent suburbs, such as Kebayaron Baru, will quickly reveal the material rewards of

donesia's urban elite .

2 26

membership of In-

In most countries development policies directed at urban and/or rural areas have been of secondary importance to national economic policies .` Explicit economic policies, usually designed to stimulate economic growth, such as the designation of currency exchange rates, can have broad effects on the marketplace : policies such as the implementation of import tariffs on certain commodities can have narrow effects on selected sections . The implications of these national economic policies for urbanization are poorly understood and/or ignored . It is riot surprising then that most national governments are dissatisfied with their population distribution patterns and yet have failed to influence urbanization trends adequately . "' Since the inauguration of the Socharto administration in 1965, the Indonesian government has been committed to a general policy of export-based economic growth . During the last two decades economic growth has been sustained primarily through the export of highly valued petroleum products . Other resources and markets have also been open to the penetration of multinational cot porations, both local and foreign . The Indonesian government, under Socharto's New Order, has combined an open door foreign investment policy with protectionist industrialization and foreign trade policies .' 7 Both of these niacroecono-

mic orientations have exacerbated the country's urban problems . For example, the government's overvaluation of the rupiah between 1971 and 1978 . the imposition of tariffs, and the numerous bureaucratic regulations related to foreign trade have favoured import-substitution industries, located, for the most part, in the largest cities ." At the same time, foreign private investments in non-natural resource sectors, such as textiles and chemicals, have been concentrated in Jakarta, Bandung and Surabaya . thereby increasing urban concentration and regional income disparities ." The national government and those closely associated with it have invested heavily in capital-intensive industries and large plantations . Urban-based businessmen and local politicians with the right connections have reaped enormous profits from the government's public investments .'" As described earlier, much of the economic activity in Indonesia is managed from the big cities, particularly Jakarta . Within this framework it is unrealistic to expect landless or near landless rural peasants to stay away from the cities which are the centres of economic activity- Urbanization policies which deny rural peasants access to cities . without providing equivalent opportunities elsewhere, are products of government hypocrisy . On the one hand, the national government has

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Urbanization within the Indonesian eronomy

committed itself to a highly centralized economy and has generously rewarded influential local elites, most of whom live in Jakarta . On the other, the rural majority is expected to subsist quietly in hinterland regions . As a result of Indonesia's highly centralized economy .. explicit population distribution policies, such as Indonesia's Transmigration Program and the Jakarta government's closed city policy, have failed to channel population growth away front the large cities and densely populated areas- The Transmigration Program's principal objective, for example . has already shifted from population redistribution towards area development in the outer islands .' The circular migration of rural peasants between villages and the large cities will continue because it serves important economic functions in both places . Rural migrants to cities . regardless of whether they intend to he permanent or temporary residents, play a central role in the urban economy by providing a wide range of cheap services and goods . In addition, migrants with urban jobs send back remittances which help to sustain many rural households .' Despite their important contribution to urban and rural economics, most of Indonesia's rural to urban migrants are condemned to poverty and grossly inadequate housing and public infrastructure . A highly centralized economy drastically limits the effectiveness of explicit policies aimed at directing migration away from principal urban areas . Potential migrants will always weigh any government incentives to locate away from an urban area against the perceived economic benefits of an urban residence . Within a centralized economy, rapid population growth rates in the largest cities should be expected and accommodated within the limited means of the municipal government . 13 In such a macroeconomic framework, even benign neglect of inmigrants by municipal governments is preferable to punitive actions against them and their enterprises . The price of laissez-faire urban policies, however, is increasing urban chaos . As long as there is a steady flow of in-migrants, municipal governments will face increasingly critical infrastructural shortages . In brief, Indonesia's urban problems will get worse . The key future issue for Indonesia's largest cities will then be how much inconvenience the urban elite will tolerate before they pressure municipal governments into draconian policies against the urban poor and in-migrants .

Conclusion

41 Gavin Jones, op cit, Ref 3 . 92 Graeme J . Hugo, op tit, Ref 28 . 93 Aprodicio Laquian, 'Review and evaluation of urban accommodationist policies in population distribution', in United Nations, op cit, Ref 35 . 44 Michael Todaro and Jerry Stilkind, op tit, Ref 32 .

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Explicit urbanization policies which have attempted to grapple with Indonesia's urban issues without altering the economic status quo have proven to be unjust . costly or generally ineffective . The solution, if there is one, lies not with municipal governments but within the national government, which alone has the power to restructure the national economy and thereby influence urban growth patterns . For example, policies aimed at discouraging urban-based industrailization and/or the import of capital-intensive machinery could eliminate some of the economic attractions of cities over rural areas but they could also have a negative influence on national economic growth 44 The Indonesian Government is thus left with the difficult decision of whether urbanization trends and urban growth problems are serious enough to warrant major macroeconomic changes .

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