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Urban Studies1–22� Urban Studies Journal Limited 2018Reprints and permissions:sagepub.co.uk/journalsPermissions.navDOI: 10.1177/0042098018756556journals.sagepub.com/home/usj

Jakarta’s great land transformation:Hybrid neoliberalisation andinformality

Suryono HerlambangUniversitas Tarumanagara, Fakultas Teknik, Indonesia

Helga LeitnerUniversity of California Los Angeles, USA

Liong Ju TjungUniversitas Tarumanagara, Fakultas Teknik, Indonesia

Eric SheppardUniversity of California Los Angeles, USA

Dimitar AnguelovUniversity of California Los Angeles, USA

AbstractWe analyse dramatic land transformations in the greater Jakarta metropolitan area since 1988:large-scale private-sector development projects in central city and peri-urban locations. Thesetransformations are shaped both by Jakarta’s shifting conjunctural positionality within global politi-cal economic processes and by Indonesia’s hybrid political economy. While influenced by neoliber-alisation, Indonesia’s political economy is a hybrid formation, in which neoliberalisation coevolveswith long-standing, resilient oligarchic power structures and contestations by the urban majority.Three persistent features shape these transformations: the predominance of large Indonesianconglomerates’ development arms and stand-alone developers; the shaping role of elite informalnetworks connecting the development industry with state actors; and steadily increasing foreigninvolvement and investment in the development industry, accelerating recently. We identify threeeras characterised by distinct types of urban transformation. Under autocratic neoliberalisingurbanism (1988–1997) peri-urban shopping centre development predominated, with largeIndonesian developers taking advantage of close links with the Suharto family. The increased

Corresponding author:

Eric Sheppard, Department of Geography, University of

California Los Angeles, Bunche Hall, Los Angeles, CA

90095, USA.

Email: esheppard@geog.ucla.edu

indebtedness of these firms became debilitating after the 1997 Asian Financial Crisis. Thus post-Suharto democratic neoliberalising urbanism (1998–2005) was a period of minimal investment,except for shopping centres in DKI Jakarta facilitating a consumption-led strategy of recoveryfrom 1997, and the active restructuring of elite informality. Rescaled neoliberalising urbanism(2006–present) saw the recovery of major developers, renewed access to finance, including for-eign capital, and the construction of ever-more spectacular integrated superblock developmentsin DKI Jakarta and peri-urban new towns.

Keywordselite informality, hybrid political economies, neoliberalising urbanism, real estate mega-projects,urban transformation

Received August 2017; accepted December 2017

Across South-east Asia, the landscapes ofmajor metropolitan areas have experienceda remarkable transformation during the last30 years, as large-scale residential develop-ments, catering to a newly emergent, aspira-tional middle class, shoulder aside informalsettlements housing the urban majority. Inthe mid-1980s Jakarta’s landscape was dom-inated by kampungs, with just a handful ofhigh-rise hotels, office towers and shoppingcentres scattered along major thoroughfares.

Today, its booming real estate market (theworld’s hottest in 2013) is dominated bymega-developments driven by large andwell-connected Indonesian developers: agreat land transformation. Each is marketedas more spectacular than the last, feeding aseemingly insatiable demand. These rangefrom land-extensive peri-urban new towns,to single block multi-use towers, industrialestates with residential districts, and multi-facility mega-projects offering residents

1988

1988-1997

1997 1998-2005

1997 2006

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everything from cradle to grave – supplemen-ted by planned offshore residential islands.

Such spatial transformations have to beunderstood within the context of changes inthe dominant political economic regime,including complex formal and informal rela-tions between private capital and the state,making it necessary to attend to the conjunc-ture of local and global processes. Locally,Jakarta’s urban landscape is still redolent ofthe colonial and post-colonial processes thatgenerated a city where the majority of resi-dents live in kampungs located between themajor thoroughfares: the desakota landscapeconceptualised by McGee (Armstrong andMcGee, 1985; McGee, 1991), inhabited byan urban majority whose complex livelihoodpractices have been documented by Simone(2010, 2014). Nationally, Indonesia’s politi-cal economy remains dominated by a large,unwieldy and opaque state apparatus, seek-ing to control land development but shotthrough with formal and informal connec-tions to the development industry (Hudalahand Woltjer, 2007). The national state alsohas a particular, longstanding interest in pre-senting Jakarta, the national capital, as anational model. Globally, since the end ofcolonialism Indonesia has sought to shape,but also has been shaped by, global develop-ment imaginaries. Under Sukarno,Indonesia was at the centre of attempts tocraft a post-colonial ‘third world’ develop-ment imaginary – an alternative to NorthAtlantic capitalism and Euro-Asian com-munism – initiated at the 1955 BandungConference. In contrast, Suharto’s auto-cratic regime was characterised by a geopoli-tical turn to the USA and the WashingtonConsensus, a tendency that has continued inthe post-Suharto era. Today, Jakarta is ahybrid shaped by neoliberal global urbanismand place-specific formal and informalpower structures.

In this paper, we analyse the trajectorytaken by these land transformations across

greater Jakarta’s urban landscape since1988, by which time neoliberalisation wascirculating in Indonesia. First, we summarisecurrent thinking on the spatially variegatednature of processes of neoliberalisation andinformality, leading into a discussion of theirevolution in Indonesia and Jakarta. Weemphasise two aspects: how neoliberalisingurbanism reflects the shifting positionality ofa city within globalising capitalism, and theenduring significance of place-specific infor-mal power structures.

The second main section provides anempirical overview of these transformations,seeking also to explain them. We divide thischronologically into three eras: 1988–1997(the New Order decade of autocratic neoli-beralising urbanism, culminating in the Asianfinancial crisis and the fall of Suharto); 1997–2006 (democratic neoliberalising urbanism:the first phase of national reformasi, charac-terised by limited post-crisis real estateinvestment); and 2007–present (rescaled neo-liberalising urbanism: characterised by arenewed desire of large developers to reinvestin real estate, and the devolution of politicalauthority over spatial planning to regenciesand municipalities). For each period, we ana-lyse the spatio-temporal evolution of large-scale private property development projects,and examine how shifts in political economicregime – including both formal and informalrelations between private capital and the state– but also Indonesia and Jakarta’s integra-tion into the global economy are implicatedin Jakarta’s great land transformation. Therole of international influence over thesetransformations, attenuated in a nation-statethat makes foreign ownership of propertyvery difficult, is reserved for a separatesection.

Our analysis is part of an ongoingresearch project examining these land trans-formations. The bulk of the data comesfrom a historical database of all major devel-opment projects (new towns, superblocks

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and shopping malls) created by Herlambangand Liong, documenting the location, size(parcel, gross floor area and floor arearatio), form and function of these projects,the years they opened, and their ownership(including foreign involvement) and majorcommercial tenants. This was assembledfrom documents acquired and relevant web-sites for each project, as well as interviewsconducted by the authors with developers ofselected projects. The authors made site vis-its to many of these development projectsand undertook 20 interviews with the devel-opers and consultants involved in selectedprojects.

Neoliberalisation and Jakarta’surban transformation

In this section, we summarise recentscholarship on neoliberalisation and neoli-beralising urbanism, applying it to discussthe hybrid forms taken by neoliberalisationin Indonesia.

Neoliberalisation: Spatialities andinformality

Neoliberalism never approximates the idealpresented in the discourses of its most ardentproponents – from Hayek to RonaldReagan, Margaret Thatcher and DavidCameron – of a free market capitalist econ-omy with at most a nightwatchman state(Nozick, 1974). Karl Polanyi (1944) madethis point long ago, analysing why Britishfree market capitalism of the long 19th cen-tury was unsustainable. Jamie Peck (2010)and his co-authors have repeatedly arguedthat this incompleteness also implies spatio-temporal variegation:

neoliberalization [is] a variegated form of regu-latory restructuring: it produces geoinstitu-tional differentiation across places, territories,and scales . as a pervasive, endemic feature

of its basic operational logic. Concomitantly,we emphasize the profound path dependency

of neoliberalization processes: insofar as theynecessarily collide with regulatory landscapesinherited from earlier rounds of political con-testation (including Fordism, national devel-opmentalism, and state socialism), their formsof articulation and institutionalization are het-erogeneous. Thus, rather than expecting somepure, prototypical form of neoliberalization .we view variegation . as one of its essentialfeatures. (Peck et al., 2012: 269, emphasis in

original)

Building on Polanyi’s insight that marketmechanisms can only function through theirembeddedness in society more generally,neoliberalism requires state support andfacilitation. Since the state varies from onenational context to the next, so will neoliber-alisation. Yet, as Peck and Theodore (2007)emphasise in their sympathetic critique ofthe varieties of capitalism literature, a geo-graphical approach to neoliberalisationshould be multi-scalar if it is to avoid theterritorial trap of methodological national-ism (Agnew, 1994). Trajectories of neoliber-alisation may vary between national andurban scales, with those at any one scalerelationally affecting those at other scales.Adopting a geographical sensibility alsomeans attending to connectivity and mobi-lity: to how the socio-spatial positionality ofplaces, and the mobility and mutation of fastneoliberal policy, shape the local particulari-ties of neoliberalisation (Peck and Theodore,2015; Sheppard, 2002).

Two practical implications follow fromthis geographical perspective. First, the vari-ous spatialities of neoliberalisation are inter-dependent. The form taken byneoliberalisation in any particular territorydepends not only on the local place-basedcontext but also on relations with otherplaces and across scales (Peck andTheodore, 2010, 2015; Sheppard, 2016).Second, these spatialities are not fixed

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contextual features: inter alia, neoliberalisa-tion produces spatialities that themselvesshape its subsequent spatio-temporal trajec-tories. In the case of urban land transforma-tion, the built environment shaped bypolitical economic processes may itself influ-ence future political economic trajectories.For example, as we discuss below, greaterJakarta’s 1990s debt-ridden urban develop-ment boom deepened the 1997 financial cri-sis – dubbed Krismon in Indonesia – thattoppled President Suharto. The experiencesand attitudes of new generations of peoplegrowing up in middle-class gated commu-nities with their own schools and universi-ties, self-segregated from the urban majority,also will no doubt shape further landtransformations.

While we endorse a variegated approachto neoliberalisation, and how context shapesvariegation, this framework reproduces neo-liberalisation as the master concept. We wishto move beyond this to suggest that thereare occasions – as neoliberalisation articu-lates with other place-specific political eco-nomic formations – when we no longer areobserving a variegated form of neoliberalisa-tion but a hybrid formation that has featuresaspects of both neoliberalisation and its oth-er(s) (Leitner et al., 2007; Peck, 2015). Weargue that the Indonesian political economyis one such hybrid, in which neoliberalisa-tion coevolves with both long-standing andresilient oligarchic power structures and con-testations by the urban majority – forms ofinformality.

As scholars studying neoliberalisingurbanism from the Global South have pro-liferated, the pervasiveness of urbaninformality among the urban majorityin metropolitan areas across the post-colony has received considerable attention(Alsayyad and Roy, 2004; McFarlane andWaibel, 2012a). As McFarlane and Waibelput it (2012b: 2): ‘Informality occupies acontradictory and epistemologically

external space, in that [it] is often viewed asa product of urban modernity and liberali-zation – assumed to be domains of the ‘‘for-mal’’ – but at the same time often visiblyappears to lack the products of those proj-ects.’ Indeed, scholars seeking to inject apost-colonial sensibility into critical urbantheory regularly reference this prevalence ofinformality as exemplifying the need to pro-vincialise urban theory (Roy, 2016;Sheppard et al., 2013, 2015). But informal-ity cannot be reduced to the habitationsand occupations of the urban poor. It isalso the domain of political and economicelites (Alsayyad, 2004; Roy, 2005), particu-larly influential in the kinds of urban landtransformations studied here. ExaminingIndian cities, Ananya Roy identifies eliteinformality as shaping urban real estate,noting its role within the state (e.g. corrup-tion), but also how elites work through andaround the state and market. As she argues:‘informality exists at the very heart of thestate and is an integral part of the territorialpractices of state power’ (Roy, 2009: 84).Such elite vectors of informality are counte-nanced and valorised, even as those pur-sued by the urban majority are denigrated:‘[E]lite informality is often legitimized .Thus, the new towns on the peri-urban edgeof Kolkata exist in direct violation of thestate’s own proclaimed policies of protect-ing agricultural land and wetlands . Butrarely are they seen to be informal or ille-gal’ (Roy, 2011: 270). As we will demon-strate, developers’ and officials’ practices ofinformality have had a distinct impact alsoon Jakarta’s great land transformation.

Neoliberalisation in Indonesia and Jakarta

The context within which neoliberalismentered the stage in Indonesia dates back toSuharto’s 1965–1967 violent accession topower. This was more than a domestic tiff.Under President Sukarno, Indonesia had

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became a leader in the project of newly inde-pendent post-colonial nations to craft a‘third world’, a third way development alter-native to both the capitalist first world andthe communist second world. Suharto’scoup marked simultaneously an aversion toChinese influence (anti-communist pogromsaccompanying the coup killed some 500,000)and a realignment toward US foreign policy(making good on the failed 1958 US-ledcoup against Sukarno). In the 1980s, withUS politicians and policymakers initiating a‘supply-side’ neoliberal revolution, Suhartotook up the neoliberal cause but tailored tohis autocratic, nationalist vision:

The measures of deregulation and de-bureaucratization are designed to put the statein its most appropriate place for development.They are certainly not measures to abolish therole of the state. It is definitely not a steptowards liberalism. The role of the state remainsvery important in providing guidance andencouragement to people’s initiative and crea-tivity for achieving development goals. This isprecisely the reason why our development isimplemented through planning. (Suharto, 1990)

By this time, Suharto and his family, sur-rounded by army officials and a network ofChinese-Indonesian businessmen, had solidi-fied power over the Indonesian politicaleconomy, with state officials embedded evenin the villages from where they reported backon actions deemed inimical to Suharto’s rule.

By the 1980s, . the families of powerful offi-cials and military officers . directly enteredthe world of business in their own right asowners of capital and as shareholders . [T]heway was led by the president’s family, whichconstructed a vast business empire thatextended from banking, forestry, and agricul-ture to automobiles and petro-chemicals.(Hadiz and Robison, 2013: 47)

With respect to land, Suharto reinterpretedthe Basic Agrarian Law (No. 56/1960) from

the Sukarno era, whose article 6 states that‘[a]ll land rights have a social function’, to‘equate the people’s well-being with thestate’s capital-intensive developmentalistprogram’ (Lucas and Warren, 2013: 8).Large tracts of state-held land were awardedto well-connected business conglomerates,along with newly created development rights(Izin Lokasi), in the name of the nationalinterest. ‘Permits would allow developers ofhousing and industrial projects to sequestervast amounts of land, ranging from 200 to30,000 hectares’ (Wallace, 2008: 195).Indeed: ‘By the 1990s the land issue hadbecome the single most prominent cause ofconflict between the government and theheavily repressed society under the NewOrder’ (Lucas and Warren, 2013: 9).

In the aftermath of the 1997 Krismon,Suharto was deposed and Indonesia’s politi-cal economy underwent reformasi: democra-tisation combined with the politicaldevolution of power to regencies and local-ities. Seemingly also a moment for market-led neoliberalisation, this posed challengesfor the oligarchs who had worked withSuharto. Yet, as Hadiz and Robison (2013)argue, oligarchy remains a persistent feature:

Despite the starkness of the ‘lessons’ of thefinancial crisis and the huge leverage of theIMF and other agencies in pressing for specificreforms in policy and governance, oligarchyand its major players were ultimately able tosurvive. The key to this ‘success’ was the resili-ence of the networks of political authority andeconomic interest that underpinned and definedoligarchy and permeated the institutions of thestate itself. Neoliberal reformers and their allieswere never able politically to dismantle these.(Hadiz and Robison, 2013: 50)

Within this national context, Jakarta playsa special role as Indonesia’s nationalcapital and prime metropolitan region. Sinceindependence, the president has closely over-seen the morphology and development of

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Jakarta. Under Sukarno, Jakarta was rebuiltinto a landscape redolent of national iden-tity, autonomy and modernity. Monas (thenational independence monument) was con-structed, surrounded by institutions of thenational state, and now-iconic socialist rea-list statues were commissioned to mark keyintersections of the newly rebuilt thorough-fares. Under Suharto, the vast tracts of landhanded over to well-connected developersmade possible the development of sprawlingnew towns for the middle class, south andwest of DKI Jakarta. Firman (2004: 354)argues that the proliferation of new townswas ‘induced by land speculative undertak-ings by several private developers on the onehand, and uncontrolled land permits grantedby the National Land Agency (BPN) forhousing development . on the other hand’.The key to obtaining these land permits waswhat Cowherd (2005) has dubbed the‘Cendana–Cukong alliance’ (Arai, 2015): theclose informal networks between theSuharto family (residing in a modest familycomplex called Cendana in the formerlycolonial elite Menteng residential district)and Indonesian economic elites (Cukongloosely translates from Bahasa Indonesia asbroker/capitalist/well-to-do financier).

After Suharto, Indonesia’s economicrecovery from Krismon was predicated onreviving middle-class consumption (Firman,1999; Fukuchi, 2000). Institutionally, Arai(2015: 460) argues that the Cendana–Cukong informal alliance was replaced by amore ‘formal’ coalition: a revolving doorbetween GOLKAR (once the state party ofSuharto), Real Estate Indonesia (REI – thereal estate business association) and theIndonesian Chamber of Commerce andIndustry (KADIN). ‘The consequence isvery clear. It is highly implausible that thegovernment would take measures againstbig businesses controlling land’ (Arai, 2015:461). This analysis is consistent withHadiz and Robison’s discussion of the

persistence of oligarchy within Indonesianneoliberalisation.

With the slow devolution of politicalpower under reformasi from central to localstate officials, gaining traction after 2005,Jakarta’s political economy was increasinglyshaped by the imaginary and policies of itsgovernors. This implies some deviation fromthe national agenda discussed above,although DKI Jakarta’s governors areclosely linked to national political parties.Fauzi Bowo (2007–2012) maintained a tightrelationship with developers. Jokowi’s briefterm (2012–2014) was more populist,oriented toward kampung residents’ priori-ties, whereas Basuki Tjahaja Purnama(Ahok; 2014–2017) personalised a moremuscular no-nonsense regime of good gov-ernance, private-sector development, andevictions from ‘illegal’ kampungs.

The political economic dynamicof Jakarta’s great landtransformation

The evolution of Jakarta’s land transforma-tion can be parsed into three eras: Autocraticnationalist urbanism of the New Order(1988–1997), post-crisis democratic neoliber-alising urbanism (1998–2006), and rescaledneoliberalising urbanism (2007–present).Each era was characterised by a distinctivefocus in terms of land transformations: Peri-urban new towns, DKI Jakarta shoppingcentres, and metropolitan-wide super-blocks,respectively. The following sections describethese trends, analysing how they are shapedby the conjunctural context.

The New Order: Autocratic nationalisturbanism meets neoliberalism (1988–1997)

This period was dominated by a prolifera-tion of new towns across the peri-urbanareas of greater Jakarta (Hudalah and

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Firman, 2012). The majority of new townsoriginated in this period (Figure 1), many ofthem on large tracts of land ranging in sizebetween 1000 ha and 6000 ha (Bumi SerpongDamai (BSD) new town’s). New towns wereconstructed for emergent middle and upperclasses, by the development arms of mostlyChinese–Indonesian conglomerates andlarge independent real estate developers, onformerly agricultural and plantation landacquired through connections with Suharto(Firman, 1997). With households seekingmultiple properties for residential and invest-ment purposes, developers saw new towns ashighly profitable investments. In many cases,these developers hold development rightsover much larger areas of land than havebeen built on to date: land banks that remainheld as reserves for future development(Leaf, 1994; Winarso and Firman, 2002).1

The general pattern of development reflectsa lack of coordination with infrastructureplanning or with the other new towns. Theyalso are far from major employment centres,exacerbating Jakarta’s transportation chal-lenges (Firman, 2009).

The majority of new towns are gatedcommunities, with walls and fences enclos-ing generally low density residential areas:single family homes, row houses and somehigh-rise apartment buildings, as well ascommercial centres, and diverse services forresidents that include places of worship,recreational facilities, schools and universi-ties (Firman, 2004). Initial developmentswere in the western part of the metropolitanarea (Tangerang), followed by the south,expanding more recently also in the east(Bekasi Regency) where developers arediversifying planned industrial estates byadding residences and other commercialproperty (e.g. Lippo Cikarang, Jababeka,and Delta Mas: Figure 2).

Under autocratic nationalist neoliberal-ism, the Indonesian economy was domi-nated by large, politically well-connected

Chinese–Indonesian conglomerates, makingimmense profits in the natural resource sec-tor, that were turning to land and real estateas an attractive investment opportunity. Interms of the state, Jakarta’s status as capitalcity and a major attraction for migrantsmeant that population growth had long out-stripped housing supply, and central citycongestion had become debilitating, under-mining Jakarta’s image as a symbol ofnational progress. In response, the govern-ment sought to promote peri-urban housingdevelopment, with developers taking advan-tage of this opportunity. The 1992 Housingand Settlement Law introduced a 1-3-6 pro-vision (three middle income and six lowincome units for every high income housingunit), as a stick to compel private-sectordevelopers to alleviate the shortage ofaffordable housing.

The main neoliberal policy instrumentfacilitating the realisation and sale of theselarge real estate projects was a financialderegulation policy (the 1988 PacketOctober: Pakto) allowing private banks tooperate alongside state banks. This policyenabled the large conglomerates (e.g. Salim

Figure 1. New town development trends: DKIJakarta, 1989–2011.Source: Authors’ calculations.

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Group, Lippo, Sinar Mas) to establish theirown banks, and more generally made it eas-ier for developers to raise funds by issuingstocks. By the mid-1990s many developershad become highly debt-leveraged, startingnew housing projects in the hope of payingoff existing debts.

The 1992 Spatial Planning Act (Law #24/1992) required local governments to producemaster plans. Yet they were unprepared todo so or even to regulate development, awindow of opportunity that developers tookadvantage of to build when and where theypleased – effectively privatising the masterplanning process (Dielman, 2011). They alsocircumvented the 1-3-6 regulation: buildingthe required low income housing elsewhere,or not at all.

Elite informality was crucial to these landtransformations, as illustrated by the case of

Bumi Serpong Damai (BSD) new town.Peter Gotsch (2009: 158) notes that ‘BumiSerpong Damai emerged in a setting ofsemi-legality and political ‘‘distortion’’’. Itwas initially developed by a consortium often major Indonesian developers, led by theSalim Group (under Sudono Salim, a.k.a.Liem Sioe Liong), the Sinar Mas Group(under Eka Tjipta Widjaja) and theMetropolitan Group (under Ciputra). Salimbrought political connections to the colla-boration, Sinar Mas the financing, andCiputra the construction expertise. Salimwas part of Suharto’s inner circle, andSudwikatmono, an Indonesian businessman,cousin of Suharto and commissioner on sev-eral of Salim’s companies, was appointed asBSD’s Chief Executive Advisor (Silver,2007). The 6000-ha former rubber planta-tion was granted to the group by Suharto,

Figure 2. Middle-class and elite real estate projects, DKI Jakarta, 1987–1998.

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justified by his reinterpretation of the BasicAgrarian Law, and overriding objectionsfrom Jakarta’s then-governor Sadikin topersonally endorse BSD (Gotsch, 2009).This was the largest new town of this era,yet to be surpassed (Figure 2). Initially, BSDwas conceived as a stand-alone, socially inte-grated community (Santoso, 1992), con-forming to Indonesia’s 1-3-6 ratio of high,middle and low income housing. Althoughthe government underwrote the financing ofBSD with ‘enormous government subsidies’(Gotsch, 2009: 153), this was not deemedadequate to support this initial vision. Itsdevelopers ran into trouble during theKrismon (receiving massive governmentsupport to rescue them from bankruptcy),Sinar Mas Group bought out their partners,and the concept was changed to a moreexclusive new town for families working inJakarta, marketed as ‘Big City – BigOpportunity’. BSD also played an importantrole in shaping the future of land develop-ment elsewhere in the metropolitan area.Having learned that such ventures are highlyprofitable, its partners shifted substantialresources into real estate development.

Reformasi I: Towards a democraticneoliberalising urbanism (1998–2006)

The 1997 Krismon had a dramatic impacton the evolution of real estate developmentprojects in Jakarta. No new town projectswere started during this period; the onlyperi-urban new development projects werewithin the industrial estates to the east. Asdiscussed above, the aggressive expansion ofnew towns prior to the Krismon had leftdevelopers heavily indebted to domestic andoverseas banks. By 1998 many developerswere facing bankruptcy, and financial trans-actions in the property sector fell by two-thirds between 1996 and 1998 (Firman,2004: 330). In addition, the property indus-try consolidated through mergers and

acquisitions into a small number of largenational-scale developers. The developers’travails also contributed significantly to thebanking crisis engulfing the country in 1998(Firman, 2004), and thereby to the politicalcrisis that brought down Suharto (Hadizand Robison, 2005) – exemplifying how theproduction of space can shape political eco-nomic trajectories.

As developers began to recover finan-cially, the limited investment that occurredin the new towns largely focused on develop-ing facilities for current residents, such ashospitals, schools, and universities marketedas matching international standards. Withthe lack of employment opportunitiesnearby, and worsening traffic congestionbetween the new towns and Jakarta, develo-pers saw providing such facilities as vital forretaining new town residents.

The bulk of property sector activitybetween 1998 and 2006 occurred in DKIJakarta, and focused on shopping centredevelopment. While Ratu Plaza, the firstWestern-style upscale shopping centre,opened in 1980, there was a rapid expansionof shopping centres and trade centres withinDKI Jakarta after 2000 (Figures 3 and 4).2

This boom reflected a series of intersectingfactors. First, the promotion of consumptionwas an important part of the national eco-nomic strategy to recover from the Krismon.Second, shopping centres provided safe, air-conditioned consumption and quasi-publicspaces for an emerging middle class that hadexperienced street violence during thedownfall of Suharto. Third, DKI GovernorSutyoso took advantage of the powergranted by the 1999 Law on RegionalGovernment, which decentralised power,authority and responsibility to lower tiersof the state, to award favoured developersbuilding permits and higher floor arearatios (FAR) for shopping centre construc-tion.3 By the end of this period, shoppingcentres were overbuilt to the point that a

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moratorium on further construction wasunder discussion (eventually implementedin 2011).

Toward the end of this period, realisingthat new towns were failing to serve themetropolitan housing problem, successivepresidents introduced ambitious housingprogrammes. The Million Houses Program(2003) and the 1000 Tower Program (2006)promoted the construction of high-riseapartment buildings through public–privatepartnerships. Both programmes were short-lived, however, lasting little longer than theterm of the politician promoting them. The1000 Tower Program was an initiative ofJusuf Kalla, Vice President of Indonesiaunder Yodhoyono, who pressured develo-pers to build 1000 towers of affordable high-rise apartments within five years in major

Figure 3. Middle-class and elite real estate projects: DKI Jakarta, 1987–2007.Source: Authors.

Figure 4. Shopping centre development trends:DKI Jakarta, 1990–2014.Source: Authors’ calculations.

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Indonesian cities, with 60% in Jakarta.4 Yetthe programme was terminated in 2011,once a new Vice President came to power.Even though only a small fraction of theproposed housing was actually built, develo-pers nevertheless took advantage of the 1000Tower Program to finance, inter alia, theKalibata City super-block development insouth Jakarta (Kusno, 2012; Pathoni, 2012).

Reformasi II: Rescaled neoliberalisingurbanism (2007–present)

By 2007, developers that had weathered theKrismon – Ciputra and the developmentarms of large Indonesian conglomerates –started to buy and develop land for multiplereal estate projects, dubbed ‘superblocks’(Figure 5). A superblock is an integratedmegaproject that includes residential, com-mercial and recreational facilities within asingle development (ranging in scope from asingle block to an extensive cluster). The firstwere built in the 1980s (Arai, 2001), but theybecame the dominant model in this timeperiod. Superblocks are unevenly distributedacross DKI Jakarta, with concentrationsaround major traffic nodes in Central andSouth Jakarta. Their gross floor area ranges

between 250,000 and 1 million m2, with floorarea ratios between 4 and 20. This entailed amarked densification of land use in DKIJakarta, located closer to central Jakartathan the new towns (Figure 6).

After 2010 the superblock trend alsospread to new towns, where developersbegan to build high-rise multi-use CentralBusiness Districts such as CBD Alum Sutera(Alum Sutera), Millennium Village andOrange County (Lippo Group), and Q-Big/BSD city (Sinarmas Land). To attract buy-ers, superblock developers advertise theirprojects as integrated and diversified devel-opments, providing an ever-increasing vari-ety of facilities from cradle to grave in-place,with ever expanding floor area ratios – superspace-grabs (Table 1).

These superblock developments are oftenmarketed under US place names, such as‘Orange County – the new California City’,supplemented by imagery promising new res-idents the Western urban lifestyles theyaspire to. Much of this inter-referencing(Bunnell, 2015) cites global metropolisessuch as New York and Los Angeles, a place-marketing that brings global cities to Jakartawhile promoting Jakarta’s own status as aworld-class global city – ‘worlding’ Jakartain the image of global urbanism (Roy, 2011).

This superblock building boom has addedsome 10 million m2 of housing, commercialspace and offices since just 2006. This con-tinues to be fuelled by a seemingly insatiableIndonesian middle- and upper-class demandfor multiple properties. Particularly since thestock market crash that accompaniedKrismon, when many lost wealth overnight,property has come to be regarded as anattractive investment option also for house-holds. The development arms of conglomer-ates foster potential buyers through lowdown-payments and mortgages, via theirown corporate banks or arrangements withIndonesian state-owned and private banks.This speculative investment continues

Figure 5. Superblock development trends: DKIJakarta, 2006–2017.Source: Authors’ calculations.

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unabated, notwithstanding attempts by thegovernment to dis-incentivise householdsfrom purchasing multiple properties bymandating increased down-payment require-ments for second and third properties, and aluxury property tax.

Large developers have come to expect a30% rate of return on their investments, andhave little difficulty in accessing domesticand/or overseas funds to initiate these proj-ects. Global finance has turned to propertyand infrastructure development as an attrac-tive investment option in emerging marketsin the context of low interest rates in devel-oped economies, and by 2012 Jakarta hadbecome one of the hottest property marketsin the world (Knight Frank, 2014). Luxuryreal estate investment in Jakarta offered anestimated 37% return in 2012–2013, thehighest in the world (Chow, 2014). Supply

and demand proceeds apace: 17 offshoreislands have been gazetted for developmentoff Jakarta’s north shore, and in May 2017Lippo announced a massive new 2200-hacity called Meikarta (Beyond Jakarta), to bebuilt next to Lippo Cikarang (Figure 6), andbilled as costing US$20.8 billion (http://meikarta.com/dashboard/). Developers alreadyreport massive sales to households, years inadvance of completion.

This period saw a further concentrationof power in the real estate sector in Jakarta,with the development arms of large corpora-tions such as Lippo, Bakrie and Sinarmasdominating the market, especially in the newtowns. Their power and authority was indir-ectly increased by the Spatial Planning Law#26/2007, modified by Presidential DecreeNo. 54/2008, which stipulates that provincialand municipal governments must develop

Figure 6. Middle-class and elite real estate projects: DKI Jakarta, 1987–2016.Source: Authors.

Herlambang et al. 13

their own master plan and zoning regula-tions. With many municipalities still ill-equipped to do so, developers have steppedin, empowering themselves by providing thenecessary public infrastructure for theirdevelopments on the build–own–transfer

model. They draw up master plans and zon-ing regulations, and contract with the stateto operate and maintain infrastructure afterthey return it to public hands (Dielman,2011; Winarso, 2000). Taken together, thispreemption of spatial planning amounts to

Table 1. Super space-grabs: The expanding ambition of superblocks.

St. Moritz, Puri Kembangan,West Jakarta

Millennium Village,Lippo Karawaci, TangerangRegency (phase one)

Orange County,Lippo Cikarang, Bekasi Regency

Year 2008 2015 2016Size 12 ha, 1 million m2 70.45 ha total.

Phase 1: 20 ha, 1.95 M m2322 ha total.CBD: 82.3 ha, 16.5 M m2

Density FAR: 8.33 FAR: 9.75 FAR: 9

11 in 1 18 in 1 32 in 1

1 Condominium (luxury) Sky park Sky park2 Five-star hotel Shopping mall Shopping mall (390,000 m2)3 Club house F&B strip Condominium (luxury)4 Exotic spa Office tower Shopping street5 Exhibition Centre Hotel 5* Iconic office tower6 Shopping mall Boutique hotel Office tower7 Sea World Medical city Hotel 5*8 Office tower Condominium (luxury) Convention Centre9 Wedding chapel Serviced apartments Serviced apartments

10 International hospital Senior homes Sky lounge11 International grammar school University Sky bar12 School Club13 Urban & Sky Pedestrian Trail Cinemaxx14 Convention Centre Boutique hotel15 Art Museum & Gallery Fine dining16 Resort Country Club Entertainment centre17 Luxurious spa Wellness centre18 Grand chapel Grand chapel19 Soho20 Japanese Cultural Centre21 Korean Cultural Centre22 Senior homes23 Condotel24 Outdoor recreation centre25 Home furnishing centre26 University27 International school28 National school29 Dormitory30 Japan College31 Health City32 Helicopter service

Source: Authors.

14 Urban Studies 00(0)

an ongoing privatisation of the urban devel-opment process (Shatkin, 2008).

Developers’ lobbying also shaped the2011 New Housing and Settlement Act(Housing and Settlement Law #1/11), whichrelaxed the 1-3-6 restriction on housing to 1-2-3. This exacerbates the shortage of afford-able housing, and even when developerscomply with the regulation they often buildon cheaper land separated from their specta-cular super-block projects. In order toaddress the housing shortage, in 2015President Jokowi proposed his own OneMillion Houses programme. The first mil-lion is supposed to be supplemented by afurther million built by the private sector, inreturn for being granted higher floor arearatios for other developments, illustratingthe pervasiveness and popularity of public–private partnerships. By the end of 2015,60% of the public component was reportedto have been built nationwide, with plans toexpand it to ten million.

As discussed above, elite informal net-works continue to play an important role inthe reformasi era, becoming larger, moredecentralised and more complex. Centralactors in these networks are developer con-glomerates, business institutions such asReal Estate Indonesia and the IndonesianChamber of Commerce (KADIN), govern-ment officials and employees, and politicalparties. A revolving door sees individualsmoving between private-sector organisa-tions, political parties, government agencies,and the military.

In order to sustain their large-scale prop-erty development, facing a change in politi-cal landscape from a national to a localpermit system with enhanced local auton-omy since 2005, many large developers seekalliances with elite political parties andretired military generals. An effective way toinfluence local officials is via national-scaleelites linked to the major political partiesthat these officals affiliate with.

Consider the case of Lippo. Uniquely,Indonesian companies maintain a Board ofCommissioners. Commissioners, appointed bycompany executives or at a general sharehold-ers meeting, are appointed to carry out generalsupervision of the company, advise the boardof directors, examine annual reports, andapprove budget plans. Four of Lippo’s Boardof Commissioners have held positions in gov-ernment: President Commissioner Theo LSambuaga (minister of public housing duringthe Suharto era, Golkar Party), Vice PresidentCommissioner Surjardi Soedirdja andIndependent Commissioner Sutyoso (gover-nors of Jakarta 1992–1997 and 1997–2007),and Agum Gumelar (former minister of trans-portation and army general). IndependentCommissioner Farid Harianto, an economist,served as both special staff for the VicePresident of Indonesia and Deputy Chairmanof the Indonesian Bank Restructuring Agency(1998–2000) (https://www.lippokarawaci.co.id/leadership-team/board-of-commissioners,accessed 19 April 2017). Such Commissionersare exceptionally well-placed to informallylink Lippo with national and local politiciansand political parties, state agencies and thebanking sector.

Internationalisation and globalconsumption

Since the 1980s, Jakarta’s internationalisa-tion – the level of foreign involvement in itsland transformations – has mirroredIndonesia’s uncertain trajectory of political-economic restructuring and uneven globalintegration. Under autocratic nationalurbanism (1988–1997), Suharto liberalisedthe investment and finance regime under theauspice of IMF reforms, and global capitalflows increasingly shaped the broadermetropolitan landscape. Foreign investmentwas dominated by Japanese and newlyindustrialised South Korean, Taiwanese andSingaporean firms facing rising domestic

Herlambang et al. 15

production costs, investing in labour-intensive manufacturing for exports(Lindblad, 2015). These investments sup-ported the city’s emerging spatial develop-ment pattern, with industrial estates andnew towns on the periphery, and businessservices-oriented development in the CBD(Arai, 2001; Firman, 1998). WhileIndonesia’s 1960 Basic Agrarian Law pre-vents foreign nationals from obtaining free-hold land rights, companies registered asIndonesian corporate entities could effec-tively overcome this restriction, and a num-ber of Asian developers established an earlypresence in the property market in the 1980sand 1990s. A notable example is theJapanese contractor and real estate develo-per Kajima Corporation, which partneredwith various conglomerates and politicalelites in a plethora of developments acrossthe metropolitan area. These included theiconic, upscale Plaza Senayan shopping andliving complex at the heart of Jakarta’sCBD, whose shareholders included Chinese–Indonesian and Indonesian businessmen andone of Suharto’s daughters (exemplifyingthe Cendana–Cukong alliance). The rapidgrowth of foreign banks and loans in themid-1990s also supported Indonesian devel-opers’ speculative new town expansions, cul-minating in the financial crisis that broughtthe economy to a standstill (Firman, 1998).

Indonesia witnessed significant capitaloutflows during Reformasi I (1997–2006),with foreign direct investment only returningto pre-Krismon levels in 2005 (World Bank,2016). Indonesia underwent political-economic restructuring and was mired in tus-sles over the Indonesian Bank RestructuringAgency’s sale of bankrupt conglomerates’assets, especially the large bank holdingsthrough which they had financed their prop-erty developments, and investors opted forother ASEAN markets.5 Salim Group, thehardest hit, was forced to divest major realestate assets in Jakarta (such as BSD,

Pondok Indah and the World Trade Centercomplex), subsequently acquired by competi-tors Sinar Mas and the Berca Group.Restrictions on foreign property ownershipwere somewhat loosened in 1996, allowing for-eigners to purchase 25-year leaseholds, renew-able for up to 70 years. The Susilo BambangYudhoyono (SBY) presidency (2004–2008)sought to improve the investment climatethrough economic reforms, but ongoing regu-latory uncertainty at local and national scaleskept international investments in Jakarta atbay, and infrastructure projects such as themonorail and Mass Rapid Transit languished.As investor confidence slowly returned,buoyed by the China-driven commodity boomand growing middle-class demand for upscaleglobal consumer goods, proliferating shoppingcentres recruited major international retailersas anchor tenants, including Debenhams,Sogo, Metro, Lotte and Seibu.

Reformasi II (2006–present) witnessedincreased foreign involvement and foreigninvestment, as investors from around theglobe turned to higher yielding assets inIndonesian and other emerging capital mar-kets after 2008. With global property mar-kets increasingly interlinked, shifting localinvestments reflect macro-economic condi-tions and changing property marketdynamics in Jakarta and abroad. Seeking toboost a slowing economy, the Jokowiadministrations further eased restrictions onforeign property ownership in 2015(Regulation 103/2015), allowing non-Indonesians holding residency permits topurchase 30-year leases, renewable for up to80 years, on properties valued at more than2 billion Rupiah (US$150,000), with owner-ship transferable to their descendants. Yetproperty-related foreign direct investment ingreater Jakarta has maintained a distinctregional dimension: dominated by Japaneseand, to a lesser extent, Singaporean inves-tors, this period saw increasing penetrationof Chinese capital.

16 Urban Studies 00(0)

Japanese capital continues to dominatethe metropolitan landscape, from conveni-ence stores and shopping malls to infrastruc-ture development and manufacturing.Japanese conglomerates (sogo-shosha) suchas Sojitz, Mitsui, Itochu, Mitsubishi,Marubeni, Sumitomo and Toyota Tsushohave been particularly active in redevelopingthe industrial estates to the east, partneringwith the development arms of Indonesia’sconglomerates. Such ventures reflect largerJapanese outsourcing strategies, attracting ahost of Japanese manufacturers (particularlyautomotive) to take advantage of Jakarta’slarge consumer base, as well as more capital-intensive export-oriented manufacturing.The proliferation of Japanese motorbikesand automobiles on Jakarta’s gridlockedstreets is facilitated by Japanese leasing com-panies offering consumer credit, ensuringJapanese capital’s involvement across theentire production and consumption cycle.Developers such as Tokyu Land are alsobuilding residential high-rises, office towersand hotels in the metropolitan core, and innew towns to the east and west, whileJapanese consultancies and contractorsbuild the Mass Rapid Transit system criss-crossing Jakarta, financed by the JapaneseBank for International Cooperation.

Singaporean property firms also have sig-nificantly expanded their presence inIndonesia since 2007. The Singapore govern-ment implemented a number of measuresaimed at preventing a speculative bubble inthe overheated Singaporean propertymarket, driving investments to more lucrativemarkets abroad. Singaporean property giants,such as CapitaLand, Keppel Land, CityDevelopments, Pontiac and the sovereignwealth fund GIC, have completed real estatedeals in Jakarta, partnering with Indonesiangroups or undertaking their own develop-ments in office and residential markets.

Coinciding with China’s emergent geopo-litical and geoeconomic influence, and

notwithstanding lingering anti-Chinesexenophobia, Chinese capital also is becom-ing a significant market actor in Jakarta’sreal estate and infrastructure initiatives.Beginning under the presidency of SBY, andincreasingly under the present Jokowiadministration, Indonesia opened itself toand actively pursued Chinese investment.Changing market conditions in China com-bined with an overheated real estate markethas driven Chinese investment abroad, nowunder China’s Belt and Road Initiative.Seeking to build on this, the Jokowi admin-istration has invited Chinese bids to financeand build Indonesian infrastructure, often infierce competition with the Japanese, such asthe Jakarta–Bandung high-speed train proj-ect. In the process, Chinese developers, con-tractors and banks are linking propertydeals with a variety of local groups acrossthe metropolitan area.

As readily available space for superblocksdwindles within city limits, in collaborationwith foreign investors Indonesian developersare building dense mixed-use complexes andoffice towers in Jakarta’s Sudirman CentralBusiness District (golden triangle), alsoexpanding to areas strategically positionedto take advantage of emergent infrastructuredevelopments and transit links (e.g. theemerging business district of Simatupang).In peri-urban areas, seeking to leverage theirland banks, Indonesian developers haveentered into ventures with foreign partnersto develop branded clusters within newtowns and integrated developments.

Consider Orange County, one of Lippo’sflagship developments within its 3000-haLippo Cikarang integrated estate, comprisedof industrial, residential and, commercialcomplexes and located along Jakarta’sEastern Development Corridor (Figure 6).Much of the 1990s and early 2000s saw pie-cemeal development of industrial and semi-detached housing clusters in LippoCikarang. Lippo, founded in 1987, turned to

Herlambang et al. 17

mixed-used superblocks with the uptick ineconomic growth and capital flows duringReformasi II, selling cosmopolitan lifestyles(like many of its competitors). Lippo hasused a variety of mechanisms to finance thisdevelopment including corporate bonds,rights listings, and joint ventures with for-eign companies, increasingly a model for alllarge Indonesian developers. The 322-haOrange County is a joint venture betweenLippo and Mitsubishi Corporation: a 32-in-1 ‘new global city’ (Table 1) featuring a cen-tral business district with high-rises andshopping malls. Taking design cues fromsuch global city centres as Hudson Yards inNew York, Union Square in Hong Kongand Roppongi Hills in Tokyo, OrangeCounty also has attracted investment fromthe Japanese Toyota-Tsusho, Tokyu Landand SankoSoflan to develop luxury towersand hotels replete with Southern Californianplace-branding: Newport Tower andPasadena Suites. Outside Orange County,Lippo Cikarang’s various industrial clustersinclude a Japanese Small and MediumEnterprises Center, and an industrial parkdedicated to Chinese manufacturers in part-nership with Shenzhen Yantian Port Group(a state-owned Chinese port-operator) andCountry Garden Holdings (one of China’slargest developers).

Conclusion

While greater Jakarta’s urban land transfor-mation parallels transformations in largemetropolitan areas across the region nowknown as the Global South, the particularform this has taken in Jakarta reflects thecity’s shifting conjunctural positionalitywithin global-scale political economic pro-cesses and Indonesia’s hybrid politicaleconomy.

Three persistent features stand outthroughout Jakarta’s urban developmenttrajectory since 1988. First, reflecting the

influence of neoliberalising global urbanism,the large Indonesian firms dominating theprivate development industry have been themajor players shaping the transformation ofthe formal real estate market in greaterJakarta. National and Jakartan state institu-tions – intimately connected given Jakarta’sposition as national capital – continuallyhave walked the tightrope of enabling thedevelopment industry while also attemptingto contain excessive land speculation througha variety of regulations, laws and policies. Inthe breach, however, state institutions haveprioritised the interests of private capital, asin the consistent failure to stimulate private-sector provision of housing affordable to theurban majority. Second, reflecting Indonesia’shybrid political economy, elite informalnetworks connecting state actors with thedevelopment industry remain vital to the rea-lisation of real estate projects.

Third, notwithstanding state restrictionson non-Indonesian property ownership,large real estate projects are not simply dom-inated by Indonesian capital. Jakarta’s realestate industry has long been characterisedas homegrown, dominated by domestic cor-porations and finance. Yet there has been adramatic increase of foreign involvement andinvestment in the development industry inrecent years, particularly under Reformasi II.Non-Indonesian sensibilities also dominatethe architecture and design of real estateprojects, generally marketed as offering theIndonesian middle class a Western (e.g.Californian) and Singaporean urban lifestyle.

These shared features played out differ-ently across the three political eras analysedhere, generating distinct types and geogra-phies of real estate development. Underautocratic nationalist neoliberalisation,Jakarta’s urban land transformations weredominated by low-density new townslocated somewhat haphazardly across theperi-urban periphery, on land that politicallyconnected developers had been able to

18 Urban Studies 00(0)

access and bank through the Cendana–Cukong alliance. The influence of foreigncapital was muted. After 1997, Indonesiaentered a crisis triggered by internationalfinance. Suharto was deposed, and the firstten years of reformasi were marked by slow-moving democratisation and devolution ofpower from central to local state authorities,as Indonesia sought to extricate itself fromeconomic crisis by stimulating middle-classconsumption, and its debt-ridden developerssought to survive bankruptcy. Elite informalnetworks decentred from the President’soffice and became more complex, entailingrevolving doors between real estate, nationalpolitical parties and the military. Landtransformations were muted, dominated byoverbuilt privatised spaces of upscale shop-ping centres within DKI Jakarta, anchoredby fashionable foreign brands.

By 2007, reformasi was deepening, themajor real estate developers had written offtheir debt and were ready to reinvest, elitesand middle-class consumers were speculat-ing increasingly in real estate, and devolu-tion was beginning to bite. Developersfigured out how to influence local authori-ties via reconstituted informal networkingwith political elites, triggering a seeminglyinsatiable boom of larger and ever morespectacular, full-service superblock develop-ments that offer the elite and middle classrespite from the perceived chaos of the restof Jakarta. Foreign firms’ partnerships withlocal developers deepened through invest-ments in branch plants in industrial areas,expanded opportunities for foreign anchortenants in shopping centres and educationalinstitutions in superblocks, and bidding onmajor infrastructure projects also servinglarge real estate developments. The regionalfocus on international capital expandedfrom Japanese toward Singaporean and nowChinese capital.

Overall, and notwithstanding significantshifts between these periods, there has been

a persistent path dependency in the urbandevelopment trajectory, whereby each era islayered on the one before. The developersfavoured by Suharto remain influentialtoday and will no doubt shape the ongoingtransformation of Jakarta into a mega-region. Lippo’s recently announced mas-sively ambitious Meikarta city project, withsub-developments inter-referencing differentworld regions and cities, is the latest incar-nation of developer- and global finance-driven urban land transformations.

Acknowledgements

We acknowledge the assistance of MeyrianaKesuma and Nur Mawaddah for their help withdata collection, and Andi Saputra for cartography.

Funding

We acknowledge the intellectual and materialsupport of UCLA and Tarumanagara University,and the US National Science Foundation (grantnumber BCS-1636437).

Notes

1. A land permitting system administered by the

National Land Agency (BPN) enabled devel-opers to aggregate small individually ownedplots into land banks (Leaf, 1994: 345).

2. Whereas space in shopping centres is leased,in trade centres it is owned by retailers/wholesalers.

3. The FAR is the ratio of a building’s grossfloor area (GFA) to the area of land on whichit is built.

4. In addition to political power – as ministerunder the Wahid and Megawati administra-tions and vice president under the SBY andJokowi presidencies – his Kalla Group isinvolved in construction, engineering, energy,property, and finance, and he cultivates exten-sively informal networks (e.g. as regionalchairman of the Indonesian Chamber ofCommerce).

5. Salim Group’s Bank Central Asia, SinarMas’Bank Internasional Indonesia, and Lippo’sLippo Bank.

Herlambang et al. 19

ORCID iD

Eric Sheppard https://orcid.org/0000-0002-6635-0965.

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