Walking through the gleaming Ciputra World 1 mixed-use development in downtown Jakarta was an eye-opener. The Indonesian capital has always been known as a retail destination, but things have been seriously upgraded, with international designer boutiques and premium lifestyle stores lining the spacious Lotte Shopping Avenue department store.
Further inside the massive 2.2-hectare luxury complex are two major international hotels – the 173-room Raffles Jakarta and the 185-room Ascott Kuningan Jakarta – a high-end art gallery, plus a theatre, where Broadway-hit Shrek the Musical enjoyed a sold-out opening night.
It’s a far cry from the last time I visited Jakarta, 20 years ago, and an appropriate illustration of the leaps and bounds the Indonesian capital has made in developing itself as an important global city.
Indonesia currently boasts the largest economy in Southeast Asia, while the World Bank ranks it as the tenth largest economy in the world (in terms of purchasing power). Other economic indicators of the country’s rising success include the drastic change in the country’s gross national income per capita – rising from US$560 in 2000 to US$3,630 in 2014.
Much of Indonesia’s rapid growth can be attributed to its strength in financial services, trading and manufacturing. Commodities such as oil and gas have also played a major role in the country’s fortunes, although global downturns in recent times have allowed other areas to take centre stage.
Political changes have also helped to foster an economically friendly atmosphere. The 30-year iron rule by President Suharto, dubbed “the most corrupt leader of all time” by Transparency International, was plagued by controversy. But as the 21st century has progressed, Indonesia has transitioned from an authoritarian regime to a democracy, and is now proudly referred to by locals as the most democratic Muslim country in the world.
New president Joko Widodo won the election in October 2014, ushering in a feeling of optimism with grand plans to reboot the country’s economy, by cutting red tape, stimulating the rupiah and reducing the wealth gap.
In February this year, his administration underlined its commitment to these objectives by unveiling the “Big Bang” initiative, which aims to relax the restrictions imposed on nearly 50 sectors and encourage competition and foreign investment in an economy that has so long been dominated by powerful vested interests.
This was officially put into action in May, with large deregulation across the board, particularly focusing on e-commerce, tourism, transport and foreign business ownership of a range of industries.
Economic stability, political optimism and more foreigner-friendly policies have all contributed to Jakarta’s rise and attracted the attention of some of the world’s high rollers. According to the 2015 Global Cities Survey study conducted by Knight Frank, Indonesia’s capital was ranked the 23rd most important city to ultra high-net-worth individuals – placing it ahead of regional rivals Mumbai, Kuala Lumpur and Auckland.
A rising number of wealthy individuals and expats is evidenced by the growth of affluent residential districts like Pondok Indah – the “Beverly Hills of Indonesia” – where houses cost in excess of US$3 million, and tuition fees at the Jakarta International School that cost around Rp430 million (US$32,258) per year.
THE BIG HOTEL GAME
Hospitality is one area that has responded to the number of high-net-worth residents and visitors establishing their presence in Jakarta.
Fairmont Raffles Hotels International, whose portfolio consists predominantly of hotels positioned in the five-star luxury segment, opened its first Raffles and Fairmont hotels in the capital last year. In June the Four Seasons Hotel Jakarta opened, while another upscale property on the horizon is the Regent Jakarta. Slated for a 2018 debut, the 126-room hotel will be part of Mangkuluhur City – a mixed-use development comprising the hotel, serviced residences and office space.
But while the increased number of international visitors continues to drive demand for high-end accommodation, Martijn Decker, director of sales and marketing at Raffles Jakarta explains that there is also a healthy appetite for mid-range accommodation to cater to the vast domestic market.
“Jakarta is still very much a developing market when compared to other cities in the region, where the corporate market is more established. The market here is still very much comprised of local and domestic businesses.”
Earlier this year, Intercontinental Hotel Group celebrated the opening of the budget Holiday Inn Express Jakarta Wahid Hasyim, while Starwood Hotels & Resorts Worldwide announced the signing of Aloft Jakarta Simatupang – its third property under the midscale brand in the Indonesian capital.
According to Rajit Sukumaran, Starwood’s senior vice president for acquisition and development, the group’s continued investment in Jakarta is “a great testament to what investors and industry are seeing.
“Starwood believes Jakarta has a long runway of growth, given the size of the population, rising wealth and growing importance of the city to Indonesia as well as other international economies.
“We are looking at a city that has great potential from both domestic and international markets. Given these fundamentals, Starwood has been aggressively growing its footprint and has witnessed significant growth opportunities in Jakarta. We currently have five hotels in operation and will add another seven hotels in the next three years.”
A report by Statistics Indonesia has revealed that a total of 9.7 million travellers visited the world’s largest archipelago in 2015 – popular holiday hotspot Bali leading the way with 3.9 million visitors, followed by Jakarta with 2.3 million arrivals.
Indonesia is aiming to increase this figure to 20 million by 2020, and like the rest of the world is primarily looking to court the growing middle class in China and India.
Development around the country are well under way, improving connections to the city to facilitate this growth, with Indonesia’s minister of transportation Ignasius Jonan committed to adding 15 new airports in the country by 2018.
The new “Terminal 3 Ultimate” extension at Soekarno-Hatta International Airport is slated to open in July and will begin operating Garuda Indonesia’s domestic flights. According to state-owned airport operator Angkasa Pura II, full functionality of the terminal, including dedicated premises for international operations, should be completed by March 2017 – at which time it will be able to accommodate up to 25 million passengers annually and encourage new relationships with international carriers.
“Air transportation is a critical success factor for Indonesia. Therefore, to attract as many foreign tourists to visit the country, we have to cooperate with major airlines that have an extensive worldwide network,” said Indonesia’s minister of tourism, Arief Yahya.
In order to achieve these goals, there are a number of challenges that need to be addressed. Security continues to be an issue. Indonesia has suffered from numerous “acts of terror” in the past; most recently the ISIS attack in March, which took seven lives. The country is still identified as a high-risk destination by many governments’ foreign offices.
But arguably the number one problem faced by most travellers to Jakarta is the city’s nightmare congestion, with hour-long traffic jams the norm. Measures to counteract this have included the Trans-Jakarta bus service and a “3-in-1” carpool ruling, although both have failed to combat the crippling traffic – with the latter rule being recently abolished.
However, there are new transportation development projects in the works, with Jakarta set to see its first underground rail service beginning operation in 2018.
“Once work on the first line of the MRT (Mass Rapid Transit) is complete, it should ease the congestion problems that Jakarta faces, and hopefully become a reliable infrastructure that will help the city reach its growth potential,” says I Putu Susenayasa, general manager of Alila Jakarta.
It’s a very welcome development, and locals remain hopeful that this will not become one of the frustrating “start-stop” projects that Jakarta has faced in the past because of regulatory obstacles and financing issues, such as the US$5.5 billion China high-speed railway to link Jakarta and Bandung in 40 minutes that was projected to begin construction this year, but has been delayed indefinitely due to licensing issues.
For those who prefer getting around in a car, Uber and Grab have recently launched in Jakarta and taken the city by storm, as hailing a taxi is next to impossible. These transport service apps are a doubly attractive choice for foreigners as it’s easy to input the destination, remove language barriers and enjoy competitive fare prices.
Other plans to ease the unbearable levels of commuter traffic include moving developments out of the city centre. The new satellite town BSD City (Bumi Serpang Damai) is an example of ambitious urban planning by the government, as it looks to provide commercial housing, business and properties in a relatively undeveloped part of the city.
Located just beyond South Jakarta, BSD City encompasses a total area of 6,000 hectares and represents a unique investment opportunity. While the project is due to be fully completed in 2035, new developments are already up and running, including retail outlets, malls and the Indonesia Convention Exhibition (ICE), the largest exhibition and convention centre in the city. The impressive facility consists of ten exhibitions halls covering 50,000 sqm, an additional 50,000 sqm of outdoor exhibition space, a 4,000 sqm convention hall, 29 meeting rooms and more than 12,000 sqm of pre-function space.
Since opening for business last year, ICE has played host to a number of high-profile events including “Southeast Asia’s biggest auto show”, Indobuild Tech Expo 2016, and even Indonesia’s first 24-hour book fair. ICE’s main advantage over other convention options in Jakarta is a counter-intuitive one, says Adrian Nugraha, ICE sales manager exhibition.
“In terms of connectivity, we are actually very well placed in Jakarta. Despite being located away from the main CBD, the overground train services that link BSD City with Central Jakarta only take 45 minutes, which makes it a lot more convenient than braving the traffic in the city centre.”
MICE travellers flying into Jakarta are also attracted by the prospect of being based away from the chaos of the city. According to Nugraha, connectivity from Soekarno-Hatta International Airport to BSD City is better than a drive into Central Jakarta. “Despite being located farther away [from the airport than Central Jakarta], the travel time is actually significantly shorter as there is much less traffic when driving to BSD City.”
Jakarta’s future appears to be bright, as the country seeks to reinvent itself as a politically stable and economically thriving capital. Recent measures are already creating positive results, with an increase in foreign investment and higher inbound visitor numbers. Although the city will have to work hard to achieve its potential and address inherent issues that continue to slow down progress, the signs are good and optimism once again runs through Jakarta’s business landscape.