Written by Amanda Dara Amadea
The views and opinions expressed in this article are those of the authors and do not necessarily represent the official position of Institute of International Studies Universitas Gadjah Mada.
Last February, the Institut Teknologi Bandung (ITB) hosted an international panel of smart cities in Bandung, in partnership with the European Union. The panel seminar that pivoted its discussion on the foreseeable implementation of smart city system in Indonesia’s major city like Bandung drew many attentions. For the past five years, many cities in Indonesia have progressed significantly; this rapid development takes investors to shift their attention to Indonesia’s cities, as signaled by the five ambassadors of EU countries in the seminar panel, which iterates on EU’s interest on investing in Indonesia’s smart cities, through technological know-how transfer, and development partnership.
Smart city is an urban concept that is aimed to answer all urban problems that are common in the 21st century, moreover in big city with high density of population. The concept has been developed in many big cities all around the world, from India, Lithuania to Indonesia. So are there any definitions on what is smart city? Experts have claimed that there are no strict definitions on what is smart city, as its scope of definition relies heavily on the needs of the city, which varies from one region to another. In Indonesia alone, a group of professionals, consultants and experts has established a body called Smart City Indonesia claims “to provide platform and vehicle for collaboration between the government, education, industry and communities to create innovative, and creative products or ideas that could be implemented in better livability of Indonesian cities”. While, the government of India with its Smart City Mission describes smart city as “cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and a sustainable environment and application of ‘Smart’ Solutions”, to which such concept is translated by the government of India into: adequate water supply, assured electricity supply, sanitation, and many other eco-urban development. This roughly taken as a concept of city with high livability that is attentive to the needs of its citizens, not only in a short run but a visionary development as well.
Currently, Indonesian cities like Bandung (which gains public recognition for the stellar performance of its Mayor, Ridwan Kamil) is in the process of reforming Bandung’s urban development to be more citizen-friendly, through the utilization of informational technology to cater services or the citizens, and the development of ergonomic public infrastructure.
However, smart city is not restricted to infrastructure development only, the reformation on transparent administrative and bureaucratic process is also attended as smart city’s variable, as seen from East Java’s city of Bojonegoro, which was chosen recently to be city model for Open Government Partnership (OGP), representing Asia with South Korea’ Seoul and Georgia’s Tsibilisi. OGP pushes cities’ public sector management to be more transparent, encourages public participation, as well as alleviating accountability.
As Indonesia’s cities are beginning to thrive forward to achieve bigger public accountability, investors are starting to take line, as seen through the recent partnership between West Java’s city of Cirebon with the government of Lithuania, where an agreement on joint-development program that enables Lithuania to transfer its technological know-how and appliances for Cirebon’s urban development has been surmounted. This marks a new phase of EU investment into Indonesia that shifts from FDI in manufacturing to technological-based investment. This also showcases point anew, where the Indonesian government is actively and directly involved in this public goods investment. Indonesia is about to change, however sadly its legal structure hinders it from doing so.
By 2015, European Union sets as the second biggest investor in Indonesia with USD 2.26 Billion and 17% of FDI realization by 2010, however the drive for bigger investment is discouraged by the abundance of constricting legal boundaries for new business and foreign investment licensing. This effectively decreases the investment confidence from the EU member states to Indonesia, as reported by BBC last January. It dropped for 21%, from 71% on 2014, to 50% on early 2016. This was not taken lightly by the Indonesian government, as President Widodo start to sound out for deregulation after bringing to the surface the initiative on his first months of presidency. To furthermore secure larger investment, this April the Minister of Trade and the Minister of Foreign Affairs will head for Brussels to discuss on the scooping paper that will mark a foundation before further investment negotiation.
The complex regulation of Indonesia’s bureaucratic process has been source of dilemmatic issues. Currently Indonesia’s business licensing process’ efficiency is lower than Vietnam, as reported by Jakarta Post, the overlapping business licensing policies between the regional and national laws in Indonesia make harder the issuance of business license, discouraging both medium to small level entrepreneurs until foreign investors interested in opening business in Indonesia. Not only that this discourages the incoming of hard currency to Indonesia, this will also slow down the opening of greater employment field while also undermining the spirit of competition that becomes President Widodo’s main anthem for Indonesia’s economic development.
National-wide deregulation on business licensing will reform the face of Indonesia’s economic in the future. With no government’s tight grip, not only big businesses that will benefit, but it will also encourage the spirit of entrepreneurship on community level. Deregulation will enable business to determine their own operational system as well as flexible price based on supply and demand curve, making it more responsive and competitive in attending to the consumers’ behavior. The expansion of businesses will also be freed without overbearing government’s regulation, not to mention the efficiency of service and goods provider.
Government’s regulation on business in Indonesia was based on the consideration of keeping small to medium businesses from predatory big business, however in practice this aim is widely misdirected from its original aim by bureaucratic unnecessities and instead hampering businesses’ growth and discourage beneficial investment. There are many cases, where businesses failed to operate efficiently due to the slow bureaucratic process, like applicant’s minor mistake in submitting a black and white photocopy of documents, when it should be in color. This becomes the epitome of misdirection on regulations’ purposes in Indonesia. Many times also, the discrepancies between local and national laws make it impossible for businesses’ expansion. In March 2016, the Interior Minister released a statement that shows currently there 3.226 regional regulations that are not in line with the national regulations, resulting in the stagnation on business and investment growth.
With its unemployment rate rising, and the opening of new businesses apprehended by bureaucratic process jam, in a decade Indonesia will surely fall into stagnancy. The incoming of foreign investors shall be regarded as a beneficial opportunity and not be discouraged by complex red tape. A clear-cut regulation shall be implemented strategically, so its impact will benefit those that government is aiming to nurture economically. European Union’s massive interest to establish a further economic partnership should be regarded as a suitable vehicle in alleviating domestic competitiveness and drive for innovation. The President’s upcoming visit to Brussels should be attributed with full awareness of Indonesia’s need in the diversification on form on investment, though its great benefits, FDI that focuses on manufacture might be outdated in answering urban challenges of Indonesia’s great cities. By 2015 alone, 56% of Indonesians reside and work in cities, and as this number might increase in years time coming, the investment on smart cities development become the most viable answer in facing socio-economic challenges of the future.
Amanda Dara Amadea is undergraduate student in Department of International Relations Universitas Gadjah Mada. She currently work as Media Researcher in Programme on European Studies, Institute of International Studies Universitas Gadjah Mada. She can be reached via daramadea@gmail.com