Jakarta's Global City Ambitions Hampered by Low Investment Efficiency
JAKARTA — The government has prepared Jakarta to become a Global City. However, behind this ambition, challenges remain, including investment efficiency.
Jakarta no longer holds the status of national capital, which has moved to IKN Nusantara. Jakarta's status is now that of a special region. The government plans to design Jakarta as a global city that is welcoming to all forms of investment.
Data from Bank Indonesia's (BI) Jakarta Provincial Office reveals that Jakarta's Incremental Capital Output Ratio (ICOR) in 2023 stood at 7.86 — above the national average of 6.33. A high ICOR reflects persistently low investment efficiency.
"A high ICOR means wasteful, inefficient. That's essentially what it means," explained BI Jakarta head Arlyana Abubakar during a presentation on Jakarta's Economic Development and Prospects in Central Jakarta on Thursday (8/5/2025).
Despite this, data from the Ministry of Investment/Investment Coordinating Board (BKPM) for the January–March 2025 period shows Jakarta recorded the highest investment realisation nationally in Q1/2025, valued at Rp69.8 trillion. This achievement contributed 15% of total national investment.
The realisation encompassed 114,451 investment projects, representing a significant increase compared to the same period last year, which recorded Rp58.4 trillion.
Jakarta Provincial Investment and One-Stop Integrated Services Agency (DPMPTSP) head Benni Aguscandra stated that Jakarta remains the largest contributor to Domestic Direct Investment (PMDN) with Rp42.2 trillion or 18% of the national total. For Foreign Direct Investment (PMA), Jakarta attracted US$1.7 billion, equivalent to 11.9% of total national FDI.
"Cumulatively, PMDN and PMA investment realisation in Jakarta during Q1/2025 reached Rp69.8 trillion," Benni said in an official statement on Wednesday (30/04/2025).
**Pointless If Not Efficient**
Senior economist Aviliani noted that a high ICOR reflects investment that has yet to produce optimal economic output. "Indeed, Jakarta's ICOR is among the highest — nearly 7% — indicating that what is being invested is not yielding optimal results," she said at the Jakarta Connect launch event in Central Jakarta on Monday (12/5).
Aviliani assessed that Jakarta has significant potential to become a trading hub for other regions across Indonesia. One strategic step she recommended is improving port infrastructure. Access to ports also needs improvement to reduce costs, enabling large incoming investments to deliver more efficient results.
Furthermore, Aviliani believes Jakarta has potential as an entertainment hub. She cited the example of the Taylor Swift concert in Singapore, which boosted the hospitality sector. "We already have large venues in Kemayoran and several other locations, but they haven't been optimised or integrated with accommodation facilities," she said.
She also referenced approaches taken by South Korea and China in organising travel systems, describing this as an ecosystem. Aviliani expressed optimism that Jakarta could enhance this potential by improving all related infrastructure.
"Otherwise, no matter how much investment comes in, the results won't be optimal and the ICOR cannot be reduced," she said.
**Jakarta's Forward Prospects**
Bank Indonesia projects Jakarta's economy to grow at the lower end of the 4.60%–5.40% range (year-on-year) in 2025, compared to 4.90% in 2024. Inflation is also projected to remain under control.
Arlyana said that from the expenditure side, investment — particularly from the private sector — is expected to drive Jakarta's economy in 2025, in line with the continuation of strategic projects, especially multi-year ones.
"From the business sector perspective, growth prospects are supported by the construction sector in line with increasing investment," she said during the presentation on Thursday (8/5).
Nevertheless, BI cautioned that several global risks need monitoring, including a global economic slowdown, widening trade fragmentation, and continuing geopolitical tensions.
Meanwhile, Jakarta's inflation for the whole of 2025 is expected to remain controlled within the target of approximately 2.5% (yoy). This projection is supported by controlled food inflation, aided by more favourable weather conditions and the strengthening of the National Food Inflation Control Movement (GNPIP) programme.
Despite this, Arlyana warned of lingering inflation risks, particularly from global geopolitical uncertainty.
Jakarta no longer holds the status of national capital, which has moved to IKN Nusantara. Jakarta's status is now that of a special region. The government plans to design Jakarta as a global city that is welcoming to all forms of investment.
Data from Bank Indonesia's (BI) Jakarta Provincial Office reveals that Jakarta's Incremental Capital Output Ratio (ICOR) in 2023 stood at 7.86 — above the national average of 6.33. A high ICOR reflects persistently low investment efficiency.
"A high ICOR means wasteful, inefficient. That's essentially what it means," explained BI Jakarta head Arlyana Abubakar during a presentation on Jakarta's Economic Development and Prospects in Central Jakarta on Thursday (8/5/2025).
Despite this, data from the Ministry of Investment/Investment Coordinating Board (BKPM) for the January–March 2025 period shows Jakarta recorded the highest investment realisation nationally in Q1/2025, valued at Rp69.8 trillion. This achievement contributed 15% of total national investment.
The realisation encompassed 114,451 investment projects, representing a significant increase compared to the same period last year, which recorded Rp58.4 trillion.
Jakarta Provincial Investment and One-Stop Integrated Services Agency (DPMPTSP) head Benni Aguscandra stated that Jakarta remains the largest contributor to Domestic Direct Investment (PMDN) with Rp42.2 trillion or 18% of the national total. For Foreign Direct Investment (PMA), Jakarta attracted US$1.7 billion, equivalent to 11.9% of total national FDI.
"Cumulatively, PMDN and PMA investment realisation in Jakarta during Q1/2025 reached Rp69.8 trillion," Benni said in an official statement on Wednesday (30/04/2025).
**Pointless If Not Efficient**
Senior economist Aviliani noted that a high ICOR reflects investment that has yet to produce optimal economic output. "Indeed, Jakarta's ICOR is among the highest — nearly 7% — indicating that what is being invested is not yielding optimal results," she said at the Jakarta Connect launch event in Central Jakarta on Monday (12/5).
Aviliani assessed that Jakarta has significant potential to become a trading hub for other regions across Indonesia. One strategic step she recommended is improving port infrastructure. Access to ports also needs improvement to reduce costs, enabling large incoming investments to deliver more efficient results.
Furthermore, Aviliani believes Jakarta has potential as an entertainment hub. She cited the example of the Taylor Swift concert in Singapore, which boosted the hospitality sector. "We already have large venues in Kemayoran and several other locations, but they haven't been optimised or integrated with accommodation facilities," she said.
She also referenced approaches taken by South Korea and China in organising travel systems, describing this as an ecosystem. Aviliani expressed optimism that Jakarta could enhance this potential by improving all related infrastructure.
"Otherwise, no matter how much investment comes in, the results won't be optimal and the ICOR cannot be reduced," she said.
**Jakarta's Forward Prospects**
Bank Indonesia projects Jakarta's economy to grow at the lower end of the 4.60%–5.40% range (year-on-year) in 2025, compared to 4.90% in 2024. Inflation is also projected to remain under control.
Arlyana said that from the expenditure side, investment — particularly from the private sector — is expected to drive Jakarta's economy in 2025, in line with the continuation of strategic projects, especially multi-year ones.
"From the business sector perspective, growth prospects are supported by the construction sector in line with increasing investment," she said during the presentation on Thursday (8/5).
Nevertheless, BI cautioned that several global risks need monitoring, including a global economic slowdown, widening trade fragmentation, and continuing geopolitical tensions.
Meanwhile, Jakarta's inflation for the whole of 2025 is expected to remain controlled within the target of approximately 2.5% (yoy). This projection is supported by controlled food inflation, aided by more favourable weather conditions and the strengthening of the National Food Inflation Control Movement (GNPIP) programme.
Despite this, Arlyana warned of lingering inflation risks, particularly from global geopolitical uncertainty.