Investment Climate: Jakarta Administration Revokes Principle Permits for Island Reclamation Project, What Can Investors Learn from This?

While former Jakarta Governor Basuki Tjahaja Purnama (2014-2017), who is better known as Ahok, was a supporter of the land reclamation project as it would solve several problems that are being faced by Jakarta (most notably the scarcity of available land), his successor, Anies Baswedan, repeatedly emphasized that he opposed the project as it would impact negatively on the livelihoods of local fishermen.

For the involved developers it is a major setback to see their principle permits being revoked. Some had already invested heavily in the project, and it remains unknown whether they will see some compensation. Therefore, it is important to see whether investors can learn lessons from this particular case.

Politics and Infrastructure Projects

The land reclamation project was not the first infrastructure project under the administration of former Jakarta Governor Ahok that met resistance from local communities and political opponents. Another well-known example is the eviction of hundreds of local residents living (most of whom illegally) in Jakarta’s Ciliwung riverbank. Their eviction was part of a massive flood-mitigation project to widen and deepen Jakarta's largest river. Flooding is one of the key problems that bedevils Jakarta, a low-lying megacity that is slowly sinking into the sea, and therefore the flood mitigation project is regarded an important one.

All evicted residents were offered low-rent apartments (but rather far – around 16 kilometers - away from Jakarta) as well as free public transportation or compensation in the form of cash money. However, many lacked the desire to leave the location where they had lived for many years – some for decades - and where their social lives and livelihoods are.

Former Governor Ahok was therefore known as ruthlessly efficient; a relatively small group of people were “sacrificed” for the greater benefit of the city (Indonesian President Joko Widodo has also shown this approach when it comes to important infrastructure projects).

Problematically, however, was that Ahok was also notoriously blunt (which is in stark contrast to the usually soft-spoken Javanese politicians who dominate the ruling class) and therefore he generated much resistance. And even more problematic was that Ahok is Christian and an ethnic Chinese individual. For the more conservative Muslim communities – in and outside Jakarta – it is a very sensitive issue to have a non-Muslim leader in a Muslim-majority city.

For a political opponent of the ruling governor or ruling administration the above-mentioned context (for example the land reclamation project or Ciliwung flood mitigation project) gives an opportunity to present himself as the “peoples’ man” because the victims of infrastructure projects are usually the poorer communities (who often have no land ownership documents and work in the informal sector). Therefore, it is assumed to be a strategic move of Baswedan to side with the victims of important infrastructure projects. It is probably not so much the project itself that is opposed but there is an opportunity to gain votes by presenting oneself as the righteous “peoples’ man”.

Read the full article in the September 2018 edition of our monthly research report. You can purchase this report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number +6287884106944

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