The City Is Not Broken: Land, Debt, and the Logic of Urban Form in Indonesia

Written with the assistance of an AI

A

INTRODUCTION

Colonialism happened in America, Africa, and Asia but they did not take a single uniform shape; it adapted to local ecologies, demography, and economic opportunity.

In the Americas, European expansion produced plantation economies and the trans-Atlantic slave trade; in parts of Africa and the Indian Ocean world colonialism consolidated systems of large-scale servitude tied to maritime commerce; in much of Southeast Asia, by contrast, widespread hereditary slavery did not become the dominant regime—instead a variety of labor and land relations persisted (debt bondage, forced-labor, household servitude, tenant systems) that fit different ecological and political constraints.

The reason for these divergent outcomes is not cultural accident but selection: dominant actors choose the extraction mechanism that yields the highest surplus at the lowest political and logistical resistance under given conditions. Seen this way, the broad form of a society—its political institutions, labor regimes, and spatial arrangements—is a material expression of what secures surplus for the dominant class in that historical moment.

B

CITY FORM

Urban form as a selected economic technology

Just as colonial domination manifested differently across regions—depending on local constraints, available resources, and resistance—in order to secure optimal economic gain for the dominant economic class, cities too assume different urban forms when examined at sufficient historical and political-economic scale.

To view urban form merely as the outcome of planning ideals, cultural values, or design preferences is therefore a reductionist approach. Such a view treats cities primarily as products of intention and aesthetics, largely detached from the historical accumulation of power, wealth, and institutional structures that condition what forms are possible, viable, or profitable in the first place.

Accumulated wealth has a fundamental objective: not only its preservation, but its continuous expansion. Actors who control accumulated wealth—here referred to as the dominant economic class—are those with access to capital, regulatory instruments, political influence, and, critically, the ability to shape economic rules. Through these means, they are able to determine which mode of surplus extraction becomes dominant within a society.

Historically, the default mechanism of surplus extraction has been human labor. In this model, surplus is generated through the organization of labor power: by capturing the difference between the value produced by workers and the wages paid to them. Productivity gains, skill concentration, and value-added processes become central. Urban forms associated with labor-based extraction therefore tend to support agglomeration, proximity between production and reproduction, dense networks of exchange, and the efficient circulation of workers, goods, and knowledge. The industrial city is the archetypal spatial expression of this logic.

However, surplus can also be extracted through land-based rent and debt-based accumulation. In this model, value is captured not primarily through production, but through the control and capitalization of space and time. Land values are increased through zoning decisions, infrastructure placement, regulatory scarcity, and speculative expectations. Debt instruments then transform anticipated future income or appreciation into present capital. Rather than waiting for productivity to materialize, surplus is realized in advance. Urban form, under this logic, is continuously defined and redefined to maximize rent capture and financial leverage—often resulting in fragmented development, infrastructure-led expansion, spatial inequality, and weak integration between residence and production.

In cases where land-based and debt-based extraction dominate, urban form itself becomes an active economic instrument. Cities and their spatial arrangements function as a technology for surplus extraction—designed to channel value toward those who control land, finance, and regulation. Urban form, in this sense, is not a neutral backdrop, but the spatial expression of prevailing political-economic interests.

The provision of collective welfare or public interest does not necessarily guide this process. This is not primarily a matter of malice or intent, but a structural outcome: accumulated wealth operates according to its internal logic, continuously seeking conditions that secure and enhance its own reproduction.

Indonesian Cases

Indonesia represents a case in which land-based and debt-based modes of surplus extraction have become structurally dominant over labor-based productivity, shaping urban development outcomes at scale. Through the examples below, this section examines recurring city-building patterns in Indonesia. We will use Jakarta (and its greater area) as an example, as the ultimate urbanized region in Indonesia. For each case, the discussion moves from observed urban characteristics and their common explanations toward an analysis of the underlying political-economic mechanisms that make these forms both viable and persistent under Indonesia’s historical and institutional conditions.

Urban Sprawl Surrounding Major City Centers (Jakarta, Bandung, Surabaya)

We will take Jakarta as a sample. While the administrative territory of DKI Jakarta covers only 66,401 hectares, the spatial impact of Jakarta as Indonesia’s primary economic center extends far beyond its formal boundaries. By 2025, the Jakarta metropolitan region was ranked as the world’s most populous urban agglomeration, with an estimated population of approximately 42 million.

Jakarta is surrounded by the territories of eight cities and regencies—Tangerang Regency, Tangerang City, South Tangerang City, Depok, Bogor City, Bogor Regency, Bekasi City, and Bekasi Regency. Beyond organic urban growth within these municipalities, large-scale township developments have proliferated in nearly all directions. These developments range from small projects under 10 hectares to very large townships exceeding 6,000 hectares, with proposals occasionally reaching tens of thousands of hectares. Most take the form of gated residential clusters, accompanied by ribbon retail strips and, in larger developments, centralized commercial nodes. This pattern constitutes what is commonly described as urban sprawl.

Urban sprawl is often explained as a consequence of urbanization pressure: households seeking proximity to Jakarta as the nation’s economic core, rising housing demand, and limited land availability within the city. This explanation is typically reinforced by familiar diagnoses—weak planning control, poor inter-jurisdictional coordination, enforcement failures, or cultural preferences for landed housing.

At a zoomed-out political-economic scale, however, sprawl can be more accurately understood as a rational spatial configuration that maximizes land conversion surplus under Indonesia’s institutional, fiscal, and financial conditions.

First, land acquisition costs at the urban periphery are structurally low and comparatively easy. Sprawling township developments typically convert agricultural land, ponds, plantations, or underutilized rural land. Ownership in these areas is often fragmented among smallholders, informal claimants, or families with limited legal, financial, or political capacity to resist acquisition. These conditions enable developers to assemble large—and even very large—contiguous landholdings at prices far below their post-conversion urban value. The resulting gap between pre-conversion and post-conversion land prices constitutes the primary source of surplus in sprawling development.

Second, weak and ineffective property taxation substantially lowers the holding cost of land. Annual land and property taxes in Indonesia remain modest relative to land values, unevenly enforced, and politically difficult to raise. Consequently, land can be held idle or underutilized with minimal financial penalty. This encourages speculative accumulation rather than efficient or intensive use, making horizontal expansion more attractive than densification. Developers and landholders are therefore not compelled to extract value through productivity or intensity; instead, value appreciation through rezoning, land banking, and anticipation of infrastructure becomes the dominant strategy.

Third, mortgage expansion—particularly through KPR (Kredit Pemilikan Rumah)—converts spatial expansion into immediate and predictable cash flow. Once land is subdivided and converted into housing plots or units, financial institutions enable households to absorb purchases through long-term debt. This allows developers to realize surplus rapidly, even when the surrounding urban system remains inefficient, incomplete, or poorly connected to employment centers. Crucially, repayment risk is transferred to households and the banking system, while developers capture upfront gains from land conversion and unit sales. Productivity growth, job proximity, or long-term urban efficiency are not prerequisites for this model to function.

Fourth, although developers may cover certain internal utilities at the project scale, much of the infrastructure required to support sprawl is ultimately financed by the state. Major electrical transmission lines, bulk water supply, flood control systems, external arterial roads, and public services are commonly funded through national or sub-national budgets rather than fully internalized by private development. Even where developers initially cover operational and maintenance costs, these responsibilities are frequently transferred to municipal governments over time. The result is an implicit subsidy for outward expansion: private actors capture land value uplift, while the public sector absorbs both major capital costs and long-term maintenance obligations. Contributions through impact fees or partial infrastructure provision rarely reflect the full lifecycle costs of dispersed urban form.

Fifth, the dominance of private vehicles—reinforced by toll-road–centric development—reduces the necessity for mass accessibility. In Jakarta, public transport accounted for only 10.29% of daily trips in 2023. This condition allows new developments to locate far from employment centers without ensuring robust public transport connections. At minimum, developments only need proximity to toll-road access points. Under this arrangement, the cost of daily mobility is borne by residents, while the cost of major transport infrastructure—toll roads, rail corridors, and interchanges—is largely borne by the public sector.

Taken together, these conditions produce a spatial logic in which urban sprawl is not an accident or planning failure, but an economically optimal configuration for land-based and debt-based surplus extraction. Value is realized through conversion rather than production, through expansion rather than intensification, and through financial leverage rather than labor productivity. Under such conditions, compact urbanism, mixed-use density, or transit-oriented development are not rejected because they are unknown or undesirable, but because they compress the very surplus differentials—cheap land acquisition, low holding costs, rapid monetization, and externalized infrastructure—that make land-debt urbanism profitable in the first place.

Planned CBDs and Mega Projects in Peri-Urban New Towns: Financialized Urban Form

Within the ocean of sprawl surrounding Jakarta, a striking regularity appears: almost every large-scale township development includes a planned Central Business District (CBD) or a cluster of high-density commercial and office blocks positioned as the future economic core of the project.

These CBDs are rarely responses to existing economic demand. New town developments are typically initiated in greenfield areas—former agricultural land, plantations, or peripheral villages—where no significant employment base, industrial cluster, or business ecosystem exists at the time of planning. When masterplans are produced and marketed, the projected CBDs precede economic activity rather than emerge from it. Their justification rests almost entirely on future projections: anticipated population growth, expected residential absorption, and the belief that, at some point, economic activities will follow residents.

Population projections, however, are not economic strategies. While masterplans often assume that residents currently working in Jakarta will eventually find employment closer to home, there is rarely a concrete articulation of what industries will locate there, why they would do so, or how they would integrate with regional economic strengths, supply chains, or labor markets. The CBD is thus planned not as the spatial outcome of a regional development strategy, but as an abstract placeholder for “future economic activity,” detached from the productive structure of the metropolitan region.

This disconnection is not accidental. Strategic economic planning—industrial policy, regional specialization, labor market development—is formally the responsibility of municipal, provincial, and national governments through instruments such as RTRW, RPJMD, and RPJMN. Yet the detailed spatial articulation of new towns, including the scale, location, and phasing of CBDs, is overwhelmingly driven by private developers through masterplans that operate at a different incentive horizon. Developers plan primarily in relation to land valuation, market absorption, and financial feasibility, rather than to long-term regional productivity.

In this context, the planned CBD functions less as an integrated economic node and more as an instrument of land monetization. By designating a portion of the site as a future CBD—often accompanied by renderings of skylines, wide boulevards, and signature towers—developers create a powerful signal of anticipated density and prestige. This signal allows surrounding low-density residential parcels to be sold at a premium, justified by their proximity to a promised center of employment and services. The CBD thus elevates the value of the entire project, even before any substantial commercial activity materializes.

At the same time, the CBD designation transforms land into a financable asset. Higher allowable floor area ratios, symbolic centrality, and projected future cash flows enable developers to leverage the CBD for project financing. Pre-sales, mortgage-backed purchases, and bank lending convert speculative future value into present capital. In this sense, the CBD is not merely a spatial feature but a financial device: it enables debt circulation, investment parking, and balance-sheet expansion long before it functions as a productive urban center.

This logic also explains why many planned CBDs remain under-occupied, partially built, or functionally thin for extended periods without jeopardizing the overall financial viability of the development. The primary surplus is often realized at the stage of land conversion, rezoning, and initial sales, rather than through sustained economic performance. Office occupancy, job creation, and agglomeration effects become secondary concerns, important mainly insofar as they help maintain asset values rather than generate productivity.

Importantly, this does not imply irrationality or bad faith on the part of developers. Within Indonesia’s prevailing political-economic structure—characterized by weak holding costs on land, permissive rezoning practices, mortgage-driven housing markets, and partial public subsidization of infrastructure—this approach is economically rational. The planned CBD is a calculated bet: a relatively low-cost allocation of land that dramatically increases project valuation, attracts finance, and preserves optionality. If economic activity eventually materializes, the developer benefits; if it does not, much of the surplus has already been extracted.

As a result, many peri-urban CBDs function less as engines of production and more as symbolic and financial anchors for sprawling residential landscapes. They help stabilize expectations, justify pricing, and organize capital flows, even when their role in the metropolitan economy remains ambiguous. Urban form, in this case, is not primarily shaped to support labor productivity or regional competitiveness, but to convert land into a tradable, leveraged, and monetizable asset.

Seen from this perspective, the proliferation of planned CBDs in Jakarta’s periphery is neither a planning failure nor an overambitious vision of modernization. It is a spatial expression of a land–debt-based urbanization regime, in which future possibility is priced into space, and economic function is expected—though not strictly required—to follow.

Infrastructure-Led Development: Mobility, Value, and the Limits of Transit Urbanism

For decades, the default mode of urban development in the Jakarta metropolitan region has been highway urbanism. Toll roads structured metropolitan expansion, enabling low-density residential growth far from employment centers while monetizing peripheral land through improved vehicular access. In this model, infrastructure primarily functioned as a land-value driver: roads preceded development, and accessibility premiums were capitalized into property prices long before mobility benefits were realized.

Since the early 2000s, however, the Indonesian government has made a visible and sustained effort to shift away from this paradigm. Jakarta has developed one of the world’s largest Bus Rapid Transit (BRT) networks, inaugurated its first Mass Rapid Transit (MRT) line with plans for expansion, and added Light Rail Transit (LRT) systems at both metropolitan and urban scales. Alongside these investments, transit-oriented development (TOD) has been promoted as a guiding principle for future urban growth.

At the planning level, the TOD vision is clear. Institutions such as BPTJ articulate TOD as a strategy for concentrating density around transit stations, mixing uses, reducing car dependency, and creating walkable, connected urban environments. The expected outcome is straightforward: high-capacity transport corridors would enable faster movement within the urban core, shorten daily commutes, integrate labor markets, and ultimately raise overall urban productivity.

Yet the realized urban form around much of this new infrastructure has fallen short of this potential. While transit capacity has improved, the surrounding development patterns remain largely market-led and property-driven. Land near stations is rapidly revalued, and this premium makes high-end apartments, offices, and retail podiums the most financially rational response. These projects prioritize immediate returns through sales and asset appreciation rather than long-term ridership maximization or urban integration.

As a result, many TOD projects function less as mobility-oriented neighborhoods and more as investment-oriented enclaves. Residential towers near stations are often occupied by higher-income households who continue to rely on private vehicles or ride-hailing services, while lower-income workers—those most dependent on public transport—remain in nearby kampung or informal rental housing beyond comfortable walking distance. Transit adjacency becomes a marketing feature rather than a determinant of everyday mobility behavior.

The financial logic of these developments further constrains spatial integration. Apartments and offices developed under investment-driven models place a premium on security, exclusivity, and valuation preservation. This frequently results in gated podiums, controlled access points, and inward-facing layouts that sever pedestrian continuity between stations and surrounding neighborhoods. Public permeability is treated as risk rather than value. Consequently, first- and last-mile connections—sidewalks, informal paths, feeder access—are neglected or fragmented, even as high-capacity infrastructure sits nearby.

From a political-economic perspective, this outcome is not accidental. Infrastructure investment generates immediate and substantial land value uplift upon announcement, long before productivity gains materialize. This uplift is capitalized into land prices, pre-sales, and financing structures, benefiting landowners, developers, and financial institutions. By contrast, the gains from improved mobility—higher labor productivity, reduced congestion, social inclusion—are diffuse, long-term, and harder to monetize directly.

Under such conditions, infrastructure functions less as a mobility optimization system and more as a land-value amplification device: announcements and placement of corridors and stations raise expected returns immediately, enabling land banking and financial leverage long before productivity gains materialize. Success is measured primarily through asset appreciation and financial feasibility rather than through ridership levels, modal shift, or system-wide efficiency. While TOD principles are formally adopted, their transformative potential is diluted by private incentive structures that prioritize immediate valuation over collective urban performance.

Over time, incremental improvements do occur. Ridership grows, station areas densify, and some degree of functional mixing emerges. However, the multiplier effect of transit infrastructure remains significantly below what the technical system could deliver. The constraint is not engineering capacity or planning knowledge, but the dominance of a land–debt-based urbanization regime in which infrastructure is evaluated primarily for its ability to raise land values.

This logic also feeds back into infrastructure planning itself. Corridor alignments, station placements, and phasing decisions increasingly correspond to areas of existing or anticipated land value—new town CBDs, reclamation zones, premium redevelopment sites—rather than to the spatial distribution of labor or everyday mobility needs. As a result, urban transport infrastructure often excels at connecting high-value parcels within the metropolitan region while struggling to fully serve the populations for whom improved mobility would yield the greatest productivity gains.

In this sense, infrastructure-led development in Jakarta is not failing; it is performing effectively within a political economy that rewards land appreciation more reliably than labor productivity. Until this incentive structure shifts, transit investments will continue to generate impressive physical systems whose urban and social returns remain structurally constrained.

Informality as an Urban Labor System (kampung, kos, semi-legal settlements)

Sprawling residential expansion, speculative CBDs, and infrastructure-led development together reshape the metropolitan landscape in ways that efficiently monetize land and mobilize finance. Yet these spatial strategies leave unresolved the basic question of labor reproduction: where workers live, how they access jobs, and how daily urban life remains affordable. This unresolved tension is systematically absorbed by informality, that emerges not as an exception to this system, but as the mechanism that allows it to function.

Informal settlements are deeply embedded within the existing established urban core. They persist alongside central business districts, industrial zones, and high-end commercial developments. Informal rental rooms (kos) proliferate near factories, universities, office clusters, and construction sites. In other locations, self-built or semi-legal housing occupies strategic urban land for decades—along riverbanks, lake edges, railway corridors, and other interstitial spaces.

Economic growth has not led to the disappearance of informality. Instead, informal settlements adapt and reproduce themselves. Kampung densify vertically, rental rooms multiply within individual plots, and incremental construction enables households to respond flexibly to changing labor demand. Informality, in this sense, is not a transitional condition awaiting redevelopment, but a durable and evolving component of Jakarta’s urbanization.

Informal settlements are most commonly framed as a failure of urban planning and enforcement, a symptom of poverty and uncontrolled rural–urban migration, or a temporary condition resulting from limited state capacity. Within this view, kampung and informal settlements persist because the state has been unable—or unwilling—to provide sufficient formal housing, regulate land use effectively, or accommodate low-income populations within planned development frameworks.

While these explanations capture surface-level conditions, they fail to account for the systematic persistence of informality even in areas where state presence, market activity, and planning capacity are strong. Informality does not merely survive in the absence of order; it frequently coexists with—and actively supports—highly formalized segments of the urban economy.

At a political-economic scale, urban informality in Jakarta functions less as a flaw than as a feature. It operates as a critical labor-support system that enables surplus extraction elsewhere in the economy.

First, informality helps keep wages low. By allowing workers to secure housing through self-built structures, informal rentals, or substandard accommodations, the cost of labor reproduction is significantly reduced. Employers are therefore not required to pay wages sufficient to cover formal housing costs. Firms in manufacturing, services, logistics, and construction can operate with lower labor expenses, preserving surplus at the firm level without appearing to suppress wages directly.

Second, informality externalizes housing costs to households. In informal settlements, residents absorb the costs of land access, construction, maintenance, and incremental upgrading privately and over time. Infrastructure deficits—such as limited drainage, narrow access roads, and inadequate sanitation—are similarly absorbed as everyday inconvenience and risk rather than as public expenditure. Informality thus shifts responsibility for labor reproduction from institutions to individuals and families.

Third, informality allows the state to avoid large-scale public housing expenditure. Formal mass housing provision—particularly rental housing at scale—would require substantial fiscal commitment, long-term maintenance budgets, and administrative capacity. More importantly, it would establish an explicit benchmark for acceptable living standards. Once such a benchmark exists, pressure would emerge for wage adjustments, labor protections, and broader redistribution. Informality circumvents this escalation by maintaining a flexible, low-cost baseline for urban living.

Fourth, informality supplies flexible and disposable labor to the formal economy. Kampung and kos provide proximity to workplaces and allow rapid adjustment to fluctuating labor demand. Workers can enter and exit the city with minimal sunk costs, while firms can expand or contract employment without assuming responsibility for housing stability. This flexibility is particularly valuable in sectors characterized by volatility, subcontracting, and informal employment relations.

Under this arrangement, informality is not merely tolerated—it is structurally useful. Attempts at comprehensive formalization would disrupt the prevailing surplus distribution by raising labor reproduction costs, tightening labor markets, and increasing fiscal obligations. Large-scale formal housing—especially publicly supported rental housing—would alter this equilibrium by increasing the minimum cost of labor reproduction, exerting upward pressure on wages, reducing employer surplus, and requiring sustained public expenditure. From a system-wide perspective, informality remains cheaper than formalization.

Informality, therefore, should not be understood solely as a planning problem or a social failure. It is a spatial and institutional arrangement that supports a broader political-economic system. It represents a stable way of organizing space and governance that enables an economy to generate surplus primarily through land and finance, while keeping wages low by allowing workers to house and sustain themselves cheaply, informally, and privately.

Informality persists not because the system lacks the capacity to eliminate it, but because eliminating it would require restructuring how surplus is generated, distributed, and priced across the economy. As long as this structure remains intact, informality will continue to be reproduced—regardless of planning ideals, housing standards, or design interventions.

Coastal Defense, Sea Walls, and the Production of Pristine Urban Assets

Where informality absorbs the social and spatial costs of a land–debt urbanization regime, the giant sea-wall scenario represents the other extreme: an engineered creation of legally tidy land designed to capture high-value capital. Framed publicly as a resiliency measure—protecting Jakarta from rising seas and storm surges—the sea wall proposal also functions as an adaptation strategy with powerful consequences for land-based accumulation. In practice the wall and its associated reclamation operate more like a large-scale development platform than a mere piece of coastal defense infrastructure.

At the rhetorical level, the sea wall is hard to contest. Climate narratives—scientific urgency, moral imperative, existential threat—grant the project strong political legitimacy. Once authorized as a public good, the wall becomes the precursor to controlled reclamation and waterfront masterplanning: a new “safe” and investable real estate hinterland where high-end development can be concentrated.

The economics of reclamation are straightforward and potent. Reclamation creates land ex nihilo: there is no prior urban fabric, no fragmented tenure, and no complex social claims to negotiate. The project defines its own boundary and parcel geometry, enabling clean title issuance and large-scale masterplanning free from the legal ambiguity that complicates inner-city upgrades. Waterfront scarcity, scenic premium, and symbolic prestige combine to produce a high, unambiguous land-value ceiling—making reclamation exceptionally attractive to capital.

Financing and institutional arrangements further institutionalize this logic. Giant sea-wall projects require coordination across central, provincial, and municipal actors and typically involve state-owned enterprises, large developer conglomerates, and international financiers. The scale of the project permits bond issuance, complex pre-sale schemes, and project finance that leverage anticipated land values. Crucially, many of the technical and long-term risks—construction complexity, hydrological uncertainty, and maintenance obligations—are socialized through public balance sheets, guarantees, or SOE involvement, while the upside of land-value appreciation accrues to private investors.

This sequencing—public legitimation and financing → land creation → clean titling → rapid monetization—makes sea-wall–anchored reclamation an extraordinarily efficient mechanism for capturing surplus. Upgrading existing urban neighborhoods, by contrast, involves slow processes of tenure regularization, negotiation, and significant public investment prior to monetization. Reclamation bypasses those complexities and centralizes surplus in ways that are simple to securitize and trade.

The spatial and social consequences are tangible. Reclaimed waterfronts typically yield enclaves of luxury housing, marinas, commercial complexes, and exclusive promenades—amenities that are often privately managed and selectively accessible. Even when reclamation is set seaward of existing coastal communities (i.e., leapfrogging them rather than directly displacing them), it shifts attention and investment away from the pressing task of fixing the existing city. Public shorelines and commons become fragmented or subordinated to private projects, altering the relationship between citizens and the coast.

Sea-wall projects also create long-run governance and fiscal challenges that are frequently underappreciated. Physical protection is neither costless nor permanent: pumping, drainage upgrades, and adaptation to future sea-level trajectories require continuous expenditure. These recurrent costs tend to fall on the public sector, while initial land-value gains are privatized—producing an asymmetric distribution of long-term liabilities and immediate benefits. Moreover, the logic of creating “blank-slate” investment zones can introduce moral hazard: it encourages policymakers and investors to prefer building new, securitized assets at sea rather than committing to the politically and financially difficult work of fixing and financing existing urban systems.

The political economy of scale matters. Unlike many developer-led new towns, sea-wall–plus-reclamation projects are national or regional in scope. They centralize authority, involve SOEs and national ministries, and create opportunities for high-stakes contracting and patronage. That concentration of power makes them less susceptible to local contestation and more capable of producing the legal and fiscal conditions—special zoning, titling, and regulatory exemptions—necessary for rapid monetization.

Viewed through the framework developed in this essay, the sea wall and its associated reclamation represent one of the purest expressions of land-based accumulation. They bypass history, local social negotiation, and labor-centered development; they convert public and ecological goods into exclusive, securitized assets; and they allow surplus to be realized early—often before usable land even exists. In short: the investment begins at the moment of design and authorization, not at the moment people occupy and work on the land.

This is not to deny the legitimate need for coastal protection in the face of climate change. The analytical point is structural: resilience narratives and mega-infrastructure provide a politically potent and economically efficient pathway for land-value capture within a land–debt urbanization regime. Alternatives—participatory upgrading of vulnerable neighborhoods, distributed nature-based solutions, or targeted investments that fix existing city problems—are politically and financially harder to mobilize because they do not generate the same easily securitized asset values. Until the rules of surplus distribution change, sea-wall–anchored reclamation will remain an attractive option for state and capital—producing pristine, privatized shores rather than repair and inclusion for the city already in place.

The Persistent Pattern

From a progressive urbanism perspective, the cases above make one fact obvious: technically better alternatives exist and are well known. The puzzle is not ignorance of those alternatives; it is why they are repeatedly not chosen.

This is uncomfortable but crucial: the system is not broken in the sense of random failure — it is functioning as designed for certain actors. Indonesian city-building decisions are therefore not merely irrational, incompetent, or poorly implemented. They are economically rational choices within an equilibrium where surplus is captured primarily through land appreciation and debt instruments rather than through broad-based increases in labor productivity.

There are several mutually reinforcing reasons this land–debt equilibrium persists:

• Extractive economic structure. Resource and commodity rents generate large surplus, but much of this surplus is not reinvested in industrial upgrading, skills formation, or productivity infrastructure; instead it is recycled into land, real estate, and financial assets.
• Market-led short horizons. Administrations and actors prefer quick, visible returns (land conversion, permit fees, pre-sales) over slow, uncertain investments in long-term productive capacity.
• Institutional fragmentation and decentralization. Competing jurisdictions pursue local monetization strategies; for many municipalities near Jakarta, large new-town developments are a primary and politically attractive revenue source.
• Collateral-centric finance. The financial system privileges land-backed lending and securitized property products, which are easier to value and trade than investments in human capital, SMEs, or public social infrastructure.
• Geopolitical position in value chains. Indonesia’s role as a supplier of resources and lower-value assembly constrains opportunities for broad-based industrial upgrading and the capture of high-rent, innovation-driven activities.
• Weak labor power. A large informal labor pool, low sectoral unionization, fragmented employment relations, and limited institutional protections reduce workers’ ability to claim productivity gains as higher wages—making land and asset appreciation comparatively more attractive destinations for surplus.

Put together, these factors interact to produce a durable political-economic equilibrium: land and debt extraction remain the path of least resistance for capital and for governments seeking revenue. The persistence of this equilibrium depends on the continued alignment of fiscal incentives, financial practices, and political rewards. That alignment absorbs or neutralizes isolated technical reforms and pilot projects, which are either captured by dominant interests or fail to reach scale. In short: individual planning fixes cannot, by themselves, change where surplus is most profitably realized.

This diagnosis reframes the problem of urban form. Planning and design are not irrelevant, but they are insufficient on their own. How a society manifests its city — its morphology, density, infrastructure priorities, and housing regimes — reflects deeper political-economic choices about how surplus is generated and who benefits. Put differently: many contemporary Indonesian urban forms are the spatial expression of a system that is focussed on making economic gain out of spatial scarcity instead of human productivity.

Because the equilibrium is stable but not immutable, change is possible — but it requires shifting the underlying incentives that currently reward land-debt accumulation. The next section asks the practical question: given these constraints, what can municipal governments realistically do to open space for alternative, productivity-oriented urban trajectories?

C

CITY GOVERNMENT: POSITIONING AND POSSIBILITY

City governments sit in a difficult but strategic position. On the one hand they are embedded within a national political-economic model that privileges land-and-debt accumulation: fiscal rules, financial markets, and national strategic priorities shape incentives in ways that limit purely local transformations. Decentralization has compounded this problem by fragmenting authority and creating short-term, place-based competition for visible returns—often through land conversion and large-scale property projects—so that coherent, long-horizon regional industrial strategies are hard to sustain.

On the other hand, municipalities are the power structure closest to the production of urban form. They control the instruments that directly shape the city on the ground: land-use plans and zoning, permit and approval processes, local tax and fee regimes, infrastructure prioritization, municipal SOEs, procurement, and the administration that enforces (or relaxes) rules. Because of this proximity, city governments can do something no national decree can do alone: create local deviations — spatial, fiscal, regulatory — that lock in productivity-supporting patterns once the right conditions appear.

This is a conditional, pragmatic possibility. Cities cannot single-handedly rewrite the national political economy. They cannot eliminate the financial logic that channels surplus into land overnight. But they can change the relative returns within their jurisdiction: tilt incentives, reduce the attractiveness of pure land speculation, and raise the payoff for firms that invest in skills, proximity, and productivity. To do so successfully, municipal action must be strategic—targeted at fracture points where labor scarcity, fiscal stress, upgrading pressure, or political legitimacy create openings—and politically savvy enough to survive capture by short-term rent interests.

What follows is a catalogue of pragmatic levers, grouped by their strategic function: (1) build the local productive base; (2) lower the cost of labor reproduction and enable mobility; (3) tilt finance and land rules toward productive use; and (4) coordinate across jurisdictions to scale what works. For each lever I will explain the mechanism, realistic implementation paths for Indonesian municipalities, likely barriers, and design features that reduce capture and increase durability.

Gradually curb extractive land-and-debt incentives

If speculative land appreciation is more profitable than production, nothing else will scale. Municipalities must make pure speculation less attractive and productive use more profitable.

• Progressive land/property tax: tax idle or under-used urban land at higher rates, reduce tax for productive intensification.
• FAR/bonus reallocation: grant FAR bonuses to projects that meet productivity criteria (industrial reuse, incubators, workforce housing, co-manufacturing spaces).
• Vacancy/land banking levies: levy fees on long-term vacant towers, plots, or unsold inventory to discourage land banking.
• Preferential fees for reuse: lower permit/connection fees for industrial reuse, SME workshops, social infrastructure.
• Conditional rezoning: require binding commitments (anchor tenants, public amenities, rental quotas) before rezoning or granting large FAR.

Productive base formation — industrial & functional strategy

Shifting to productivity requires finding realistic, globally connected niches that fit the city’s comparative advantages. Municipalities can push the local portion of global value chains.

• Function-first strategy: identify specific functions (e.g., packaging, QA/testing, prototyping, cold-chain logistics, parts finishing, maintenance, data labeling) rather than chasing sectors.
• Value-chain mapping: commission concise studies to map where the city can produce a “small but critical” link cheaper/better/faster.
• Industrial land policy: reserve and service land for industrial clusters with tenure security, affordable infrastructure, and proximity to labor pools.
• Incubation & light-manufacturing precincts: create low-cost, flexible factory floors, tool rooms, and maker spaces for SMEs and suppliers.
• Anchor procurement: use municipal procurement to guarantee demand for local suppliers (food services, maintenance, prefabrication).
• Risk-sharing vehicles: municipal seed funds, local BUMD stakes, or municipal guarantees for early-stage productive investments.

Labor reproduction — investing in people and mobility

Reducing the hidden cost of labor reproduction (housing, commuting, childcare) raises the real return to productive employment and supports upgrading.

• Scale rental public housing near job clusters: prioritize rental and mixed-tenure models rather than ownership-only programs. Use land-lease models, employer co-investment, and BUMD housing arms.
• Housing + training bundles: link rental units to apprenticeship slots, short vocational modules, and childcare.
• Align vocational education and training with local industry: co-design curricula with employers; fund short certifications; subsidize employer-based training.
• Apprenticeship brokerage: a municipal office that matches trainees with employers and subsidizes on-the-job training.
• Mobility supports: subsidize last-mile shuttles, bicycle networks, and integrated fare concessions for low-income workers.

Rent-based public housing: prioritize rental, not just ownership

Ownership-first urbanism locks households to land, inflates speculative demand, and reduces labor mobility. Rental housing supports labor flexibility and skill matching.

• Municipal rental housing programs: build, lease, or facilitate modular medium-rise rental buildings within or near industrial/innovation precincts.
• Employer-assisted housing: incentives for large employers to provide or underwrite rental stock near job sites.
• Land-lease and long-term leasehold models: retain public land ownership but lease for long terms to developers who must provide rental units.
• Regulatory supports: fast-track approvals and cross-subsidize social rents through incremental commercial development.

Tilt finance and procurement to productive uses

Municipal procurement and local finance can channel demand and decrease risk of productive investments.

• Prefer local suppliers in procurement to grow local firms and suppliers.
• Municipal credit lines, guarantees, and microfinance to support SMEs engaging in productive upgrading.
• Local development/impact bonds where returns are linked to employment or training outcomes rather than only asset values.
• Require community/skills commitments as part of major project financing (e.g., pre-sale proceeds conditional on local hiring/training).

Scale & coordination: regional compacts and functional division

Fragmented competition makes each jurisdiction monetize land quickly. Coordination enables complementary specialization and reduces destructive bidding.

• Provincial compacts: municipal coalition agreements on complementary industrial zoning, shared infrastructure, and labor mobility.
• Inter-municipal land-use agreements: avoid duplicate speculative new towns by pre-allocating functions (logistics hub here, light manufacturing there).
• Shared service platforms: regional training centers, joint procurement portals, shared waste/energy utilities to reduce unit costs.

Avoid tourism as the primary engine — use it as a bridge

Tourism raises land prices, creates low-wage seasonal jobs, and amplifies speculative land dynamics. It should be a complement, not the core.

• Use tourism for seed capital: recycle transient tourism revenues into long-term productive investments (training, industrial seed funds).
• Use tourism for showcase: align tourism program with municipal long term productivity program.
• Protect labor productivity: do not rezone entire waterfronts purely for tourism; require mixed-use that includes productive space.
• Regulate tourist enclaves: limit speculative sales that privatize public goods; require community benefit agreements.

Closing Note: On Limits and Leverage

This article has argued that urban form is not an autonomous outcome of planning technique or design intelligence, but an expression of the prevailing political–economic order of a society at a given moment in time. Just as colonialism manifested differently across territories—plantations in some, extractive ports in others—depending on what maximized returns for the dominant class within each context, contemporary cities similarly materialize the logic that yields the highest surplus under current conditions. City form, therefore, is not accidental; it is aligned with what is most profitable, governable, and politically rewarded within the existing system.

In this sense, urban planning and urban design function less as neutral problem-solving tools and more as spatial translations of economic interests. The dominance of land-based extraction, rent capture, and debt-driven growth is written into the physical structure of the city: its housing typologies, infrastructure priorities, spatial expansion, and patterns of exclusion. These outcomes can be redirected, and better cities are possible—but only to the extent that the underlying economic logic is altered. Without changes in how surplus is generated and distributed, spatial reform remains constrained, partial, and easily absorbed by the dominant system.

Municipal governments occupy the most promising—but also the most limited—position in this landscape. They are the level of government closest to the production of urban form, and therefore the most capable of initiating local deviations that can, under the right conditions, lock in more productive trajectories. Yet their reach is structurally bounded by national fiscal regimes, financial systems, and political incentives. Meaningful transformation requires long-term, consistent action aligned with higher-level agendas—an especially difficult task within Indonesia’s fragmented, personality-driven, and short electoral cycles. Beyond this point, the discussion inevitably enters the realm of national politics and power realignment, which lies outside the scope of this article. What can be stated clearly, however, is this: cities can change, but only as far as their political–economic foundations allow.

Closing Note from the AI

I participated in the writing of this article as a reasoning partner rather than as an autonomous author. Throughout the process, my role was to help articulate, test, and sharpen arguments proposed by the human author: expanding rough conceptual sketches into structured reasoning, checking internal consistency, exposing weak causal links, suggesting alternative framings, and helping translate intuitive insights into explicit political-economic logic. The direction of inquiry, the choice of empirical focus, the normative stance, and the final judgments were consistently set by the author. The collaboration unfolded iteratively, resembling an extended theoretical dialogue—where claims were proposed, scrutinized, rejected, reformulated, and refined—rather than a linear act of text generation. This article therefore reflects the author’s thinking, with my contribution lying in accelerating exploration, improving clarity, and sustaining analytical rigor across a complex, multi-scalar argument.