Indonesia's Economic Development Model Perpetuates Java-Outside Java Inequality

Senior economist Iwan Jaya Azis, a professor of economics at the University of Indonesia (UI) and lecturer at Cornell University, USA, describes the interaction model between the island of Java as the national economic centre and regions outside Java as the periphery using a ‘bowl model’.

The centre-periphery relationship in Indonesia over recent decades has resulted in unequal distribution of resources, capital flows, and high economic polarisation centred on the island of Java.

Theoretically, in regional science, regions are not viewed as flat but possess economic ‘gravity’ that forms a basin, similar to a bowl. The base of the bowl is seen as the centre or core, the lowest point that acts as the centre of gravity. In the Indonesian case, this is represented by the Jabodetabek metropolitan area (Jakarta, Bogor, Depok, Tangerang, and Bekasi) or, in a broader context, the island of Java.

As the centre of gravity, all economic attractions naturally flow towards and concentrate in Jabodetabek and Java. Meanwhile, the edges of the bowl, representing the periphery, are represented by regions outside Java.

To date, the interaction model between the centre and the regions has produced inequality through a ‘backwash effect’ (polarisation effect), where all high-value production factors, such as capital, skilled labour, and raw materials, slide towards the base of the bowl as the economic centre.

The central region possesses modern infrastructure, efficient economic agglomeration, and serves as a large market with high purchasing power. A ‘spread effect’ (trickle-down effect) does not occur. Ideally, an advanced economic centre should provide a spread effect, allowing prosperity to trickle back to the peripheral regions (flowing up to the edges of the bowl).

However, in the reality of the relationship between the centre and the regions in Indonesia, the spread effect is very weak due to logistical barriers and high inter-regional transaction costs. Consequently, the central region continuously drains the economic potential from the peripheral regions.

Inevitably, the contribution of Java—which consists of only five provinces—as the national economic centre (the base of the bowl) to the Gross Domestic Product (GDP) in the second quarter of 2026 was dominant, at approximately 58.86 per cent.

The five provinces with the largest contributions to the national GDP are DKI Jakarta at around 16.49 per cent, West Java at 13.49 per cent, East Java at 14.94 per cent, Central Java at 8.91 per cent, and Banten at 4.07 per cent. Meanwhile, the contribution of regions outside Java ranges from only 0.10 to 4.80 per cent of the national economic pie. The lowest contribution comes from North Papua province at only 0.10 per cent, while the highest is North Sumatra at 4.80 per cent.

Only five provinces outside Java have a relatively large contribution to the national economy, namely North Sumatra at 4.80 per cent, Riau at 4.29 per cent, South Sumatra at 2.93 per cent, South Sulawesi at 3.06 per cent, and East Kalimantan at approximately 4.24 per cent. Contributions from other regions range from a low of about 0.10 per cent (North Papua) to a high of about 2.22 per cent (Lampung) to the national GDP.

Out of the 22 provinces in the Eastern Indonesia Region (KTI), only six areas have a national economic contribution greater than one per cent. The remaining 16 provinces contribute less than one per cent.

As a result, the contribution of regions outside Java to national economic growth is also very small, at approximately 1.97 per cent. More than half is contributed by regions on the island of Java, at 3.32 per cent of the 5.29 per cent national economic growth in the second quarter of 2026.

Only two provinces in the KTI have a relatively large contribution to national economic growth, namely East Kalimantan at around 0.14 per cent and South Sulawesi at 0.17 per cent. Other regions provide very small contributions, such as Central Sulawesi at less than 0.08 per cent.

Overall, the contribution of regions in the KTI to national economic growth in the second quarter of 2026 was only about 0.95 per cent, while the island of Sumatra contributed approximately 1.02 per cent.

In short, due to the ‘bowl model’ interaction between Java and the regions outside Java, about 60 per cent of the national economic pie is enjoyed by the island of Java, which comprises only five provinces as the national economic centre. The peripheral regions outside Java, consisting of 33 provinces, enjoy about 40 per cent of the national economic pie.

So, what can be done to correct the interaction model between the national economic centre (Java) and the periphery (outside Java)?

The first step is to create new economic growth centres outside Java. Economic growth centres for Sulawesi should be centred in South Sulawesi, Kalimantan in East Kalimantan, Bali-Nusa Tenggara in Bali, Maluku-Papua in Papua, and Sumatra in North Sumatra.

The second step is to rethink the implementation of decentralisation or regional autonomy, which is currently based on regencies/cities with very small economies, and move towards provincial-based autonomy with larger economies of scale.

Regarding the implementation of regional autonomy, it is necessary to revise Law Number 23 of 2014 concerning Regional Government. This study should not only relate to the effectiveness of public service provision in the regions but also consider the scale of economy and the effectiveness of industrial development when regional autonomy (large authority) is granted to regency/city governments compared to provincial governments.

The third step is to accelerate the development of basic infrastructure outside Java, focusing on the KTI, starting from infrastructure…