Indonesia's Yogakarta region remains instrumental to the economy


A melting pot of ancient culture and high-tech start-ups against a backdrop of spectacular coastlines and towering volcanoes, the province of Yogyakarta is where Indonesia’s historical traditions and future prospects meet. With a young, dynamic population and a local government determined to attract global investment, the city and province are among the most digital-savvy locations in the archipelago.

There are 117 higher education institutions, ranging from academies to universities, and one-third of the city’s inhabitants are students. New transport links are also on the way, promising a future boost in tourism, although the region is already one of the most popular holiday destinations, second only to Bali.

The Special Region of Yogyakarta lies adjacent to the city of Solo, the birthplace of many key figures in Indonesian history, including President Joko Widodo, who is the city’s former mayor. Yogyakarta and Solo form a powerful political and commercial nexus in central Java that has helped shape the country and define the surrounding region.

OVER TIME: The modern city of Yogyakarta is in part defined by its rich history. Nearby are the 9th century platforms of Borobudur, which constitute the world’s largest Buddhist temple. The 9th century Hindu temple of Prambanan, with its three artificial mountains dedicated to Brahma, Vishnu and Shiva, is also nearby. Yogyakarta was the royal capital of the Mataram Kingdom, and later, after the introduction of Islam to the area, of the Sultanate.

This was the most powerful regime in Java for many years, but in the 18th century, after a civil war led to a division, this was split into two distinct bodies: Yogyakarta Sultanate and Solo Sunanate.

British, Dutch and Japanese rule later came to Java, with the Dutch being the most influential. After Indonesian independence was established in 1945, Yogyakarta was briefly the capital of the independent republic, from 1946 to 1948. The city’s contribution to the struggle was recognised through its establishment as a special administrative region, and its unique status is still evident today, as it is the only region of Indonesia with its own monarch. The current sultan, Sri Sultan Hamengku Buwono X, also holds the inherited position of governor of Yogyakarta. The Special Region of Yogyakarta has its own parliament with 277 elected members, and the largest party is currently the Indonesian Democratic Party of Struggle (PDI-P), the party of President Widodo.

Today the Special Region consists of four regencies and one city: Kulonprogo, Bantul, Gunungkidul, Sleman and the Yogyakarta City district. The total area is some 3185 sq km, with Gunungkidul Regency accounting for 46.6% of this, while the City of Yogyakarta comprises just 1%. In terms of population the most-populated regency is Slemen, which had 1.2m inhabitants in 2015, followed by Bantual with 971,000, Gunungkidul with 715,000 and Kulonprogo with 404,000. In that same year Yogyakarta city proper had a population of 413,000, and the special region overall had 3.7m inhabitants.

CITY OF EDUCATION: The Kota Pelajar region is home to a particularly youthful population, with 37.5% of people under 24 years of age, while 49.1% are in the 25-59 age bracket and 13.4% are aged 60 and over. This is largely due to the high number of students in the region and particularly in the city, as Yogyakarta has a strong reputation as a hub of education.

Central to this educational base is Universitas Gadjah Mada (UGM), which was founded in 1949 and is one of the oldest and most prestigious public higher education (HE) institutions in Indonesia. Other state universities in the region include the Indonesian Institute of the Arts, Yogyakarta State University and Sunan Kalijaga Islamic University. There are also many high-quality private HE faculties and colleges in the area, the most prominent of which are Atma Jaya University, Muhammadiyah University, College of Health Sciences Ahmad Yani Yogyakarta and Duta Wacana Christian University.

“We have more than 300,000 students from all over Indonesia coming here,” Hamengku Buwono X told OBG. “We have 117 HE institutes, from academies to universities.” These demographics benefit the region as a whole: for example, the population is relatively tech savvy compared to those in other areas. This, in turn, has led to the growth of new, high-tech creative industries, with Yogyakarta firmly placed on the global digital entrepreneurship map.

DIGITAL CULTURE: According to a digital census from Jogja Digital Valley, a co-working space and digital start-up incubator on Jalan Kartini, there are now more than 190 digital start-ups in Yogyakarta. These cover a wide variety of industries: fashion service, polling app JAKPAT, virtual reality gamification Lexipal, local transport app TAXIES, and health-food delivery app Kulina. There are also plenty of established digital businesses, such as Gameloft, Gametechno, JogjaCamp,, GoJek,, insurance-tech firm BIMA Milvik and software developer SoftwareSeni.

Part of what attracts start-ups to Yogyakarta is the low cost of doing business: rents and wages are generally lower there than in Jakarta and other Asian cities with tech business portfolios. Additionally, government bodies, such as the Indonesia Investment Coordinating Board, help start-ups access the best IT talent coming out of universities through various partnership agreements. “Start-ups feel very supported by the local government, which has prioritised developing creative industries,” Andrei Vladimir Lascu, general manager of Gameloft, told OBG. Moreover, Yogyakarta’s smaller size arguably makes for a more pleasant work environment than in many megacities, in part due to significantly shorter commute times.

SIGHTSEERS: As the city is surrounded by impressive monuments and spectacular scenery, tourism has long been one of Yogyakarta’s key industries, and it remains a popular destination today. Former US President Barack Obama is among the city’s recent visitors. The Yogyakarta Tourism Office announced a target to attract 400,000 foreign tourists in 2017, up from the 2016 target of 360,000. Recent moves by the Yogyakarta Tourism Office to draw in visitors have involved the opening of more tourist information offices and promotional campaigns, alongside renewed efforts to ensure competitive prices.

The region’s transport infrastructure is also improving to meet demand from the growing number of arrivals. The main air gateway to Yogyakarta is Adisutjipto International Airport in Slemen Regency, which saw some 7.2m passengers in 2016 – up from 6.4m in 2015 – a sign of the rising importance of tourism and business. However, this means the existing airport is increasingly strained, motivating the decision to build a new facility in Kulonprogo Regency, able to handle up to 30m passengers per year. The new airport is being built via a joint venture between the state-run airports agency Angkasa Pura I and India’s GVK Group. Construction is expected to be complete in 2019, with operations commencing in 2020.

Other transport projects in the works include new roads: in addition to a four-lane highway to the airport under construction, a toll road connecting Yogyakarta with Bawen is under consideration. This aims to support further tourism development around Borobudur, but toll roads remain controversial in the region. Objections to initial proposals have caused UGM and others to conduct further studies. Nevertheless, construction of the toll road between Bawen and Salatiga was relatively advanced in late 2017. This eventual Trans-Java toll road is expected to handle increasing traffic on this route, facilitating movement between Yogyakarta, East Java and Solo.

NEXT DOOR: Neighbouring Solo has been undergoing many developments of its own. Solo possesses a monarchy, the Sunanate. Although this position no longer has political power, it remains as a powerful cultural force with significant prestige. Solo is part of Central Java Province, and its current mayor is Francis Xavier Hadi Rudyatmo of the PDI-P.

Solo has expanded significantly in recent years, with markets and tourist attractions concentrated in the city centre and a number of key industrial parks springing up around its outskirts. These parks have attracted major Indonesian companies to the city and its surrounding area, including textile manufacturer Sritex, industrial chemicals manufacturer Indo Acidatama and pharmaceuticals laboratory Konimex.

Indeed, while Yogyakarta is primarily focused on commerce and services, Solo is known for its industry and manufacturing. The city is home to a vibrant textile industry; it is even the birthplace of the famous batik method – a technique of wax-resistant dyeing applied to a whole cloth. Yogyakarta and Solo work together to form this remarkable and unique region of Java, with a wide variety of opportunities and attractions for tourists, businesspeople and investors alike.

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The Report: Indonesia 2018

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