Makassar's natural resources stimulate Indonesian growth

 

The provincial capital of South Sulawesi and a key pillar of Indonesia’s development, Makassar is seeing unprecedented growth in its economy, population, infrastructure and influence. An important centre for the fishing and seafood industries for decades, the city and its surrounding area are now also making a name for themselves in the digital and creative industries, tourism, and trade.

Covering some 46,000 sq km, the province encompasses 21 regencies and three cities, and covers a peninsula that runs from the mountainous Tana Toraja region in the north to the capital in the south. To the east lies the Gulf of Boni and to the west is the Makassar Strait, separating Sulawesi from Kalimantan. Directly south, across the Java Sea, the islands of eastern Indonesia tail off from Bali to Nusa Tenggara and Timor. This geography forms the historical trading grounds of two of the province’s main ethnic groups: the Bugis, making up 41.9% of the province’s population, and the Makassarese, who constitute 25.4%. The inhabitants of Toraja, at around 9%, make up the third-largest group. Islam is the dominant religion among South Sulawesians, except for in Toraja, where a majority is Christian.

According to archaeologists, the earliest inhabitants of the area date back to at least 30,000 years ago, although written records date back only to the 14th century. A number of different kingdoms existed on the island of Sulawesi back then, with one, Gowa, centred near Makassar. The lucrative local spice trade inspired a Dutch invasion around the late 15th century, which instigated rebellion into the 20th century. After independence, Sulawesi formed part of the State of East Indonesia, until being brought into the unitary Republic in 1950.

DEMOGRAPHIC CONTEXT: According to the Statistics Department of South Sulawesi, the largest of the 21 regencies is North Luwu, covering 7502 sq km. Makassar is the second-smallest regency, with 175.8 sq km, larger only than Parepare, which has 99.3 sq km. According to 2016 figures the total population of the province is 8.6m, with 1.5m people living in the Municipality of Makassar. The city has the highest population density of the province by far, with 8246 people per sq km. The next-largest population is in Bone Regency, which has around 747,000 inhabitants. Population growth rates are significant: for Makassar, this was 1.4% in 2015-16; for the province in general, the rate was 1%. Makassar is also a young city: around 50% of the population, or 733,000 people, is under the age of 25.

ADMINISTRATION: South Sulawesi has the House of Regions, with 85 members who are elected in for five-year terms. Makassar city has a mayor – currently Mohammad Ramdhan Pomanto – and a legislative assembly. South Sulawesi adjusted its administrative boundaries relatively recently, with the present divisions drawn in 2004, when five regencies were spun off to form West Sulawesi.

In terms of gross regional domestic product (GRDP), South Sulawesi has shown real per capita growth in recent years. In 2016 growth was 7.41%, following 7.17% the year before – significantly higher than the national 5.02% rate of GDP growth. The largest sector is agriculture, forestry and fisheries, which contributed 23.29% of total GDP in 2016; followed by the processing industry, with 13.92%; wholesale and retail trade, with 13.41%; and construction, with 12.53%. The greatest growth, however, was in financial services and insurance, which expanded 13.63%. Total GRDP in 2016, at current market prices, was Rp379.2trn ($28.6bn), up from Rp340.3trn ($25.7bn) the previous year.

The economy is also gradually transitioning from agriculture to other economic sectors, in terms of both value added and employment. Even so, the agriculture, forestry and fisheries sector continues to be a central source of both income and valuable produce. In 2016 almost 5.3m tonnes of paddy were cultivated from South Sulawesi’s wetlands, and 180,000 tonnes were produced from its drylands. South Sulawesi has historically been one of the key rice producers of the archipelago. Around 39,900 households were engaged in marine fisheries in 2016, producing over 279,000 tonnes of fish and seafood. Meanwhile, forestry in South Sulawesi consists primarily of logs, sawn timber and plywood.

Apart from agriculture, industry plays a major role in the regional economy, with the two major players being Bosowa Corporation and Kalla Group. Both of these are relatively large firms with operations spanning several sectors, but their industrial activities are very important to the economies of both Makassar and South Sulawesi in general.

PORT PROJECTS: There is a strong maritime tradition in South Sulawesi, and Makassar in particular. As a bustling trading centre that once sent ships to trade along the coasts of Australia, the city was once considered the “gateway to the East” as Surabaya now is. While Surabaya remains the commercial capital of eastern Indonesia, Makassar is competing to regain its previous title. Its promising port expansions, strong economic growth and strategic geographic location to field traffic via Kalimantan towards eastern and northern ports – including those in China – may allow the city to unseat Surabaya as a commercial capital of eastern Indonesia.

The port is receiving an investment boost: construction of Makassar New Port is being led by the state-run ports authority Pelindo IV. As of August 2017 construction was reportedly 28% complete, with phase one of the project due to begin operations in the third quarter of 2018. This will translate to a container port with a capacity of 1.5m twenty-foot equivalent units (TEUs), up from the current level of 700,000 TEUs. In the second phase of development capacity will be raised to 2m TEUs.

The New Port involves a 16-ha sea reclamation project, coming on top of another more controversial land reclamation scheme, Centre Point, which is now under way in Makassar. This aims to construct five artificial islands off the coast, on 75 ha of reclaimed land. The scheme – a joint venture between Yasmin Bumi Asri and Ciputra Surya – has caused concern among environmentalists and fishermen. New audits are likely to take place over sand mining on the Makassar coast. Fish and seafood processing are pillars of the local economy, so disruption caused by sand mining could have significant knock-on effects. The government in Jakarta is also keen to push Indonesia towards more downstream industry in fisheries, after receiving foreign interest in the construction of more fish-processing plants. South Sulawesi was one of several sites recently proposed by Russian and Japanese companies for these.

TECH-SAVVY GROWTH: The University of Makassar is one of the top-10 universities in Indonesia, which helps provide a solid supply of tech-savvy people to the economy. A variety of government services are to be digitised, facilitating a two-way flow of information and accessibility. Trials of smart public transport minibuses will take place, collecting valuable information on traffic and congestion issues. This system will also use GPS and Wi-Fi to try to persuade the city’s many motorcyclists to travel by public transport instead. Smart transport will be centrally monitored and will be able to circumvent congestion and traffic lights.

The region is also seeing a boom in digital services; Mayor Pomanto has pledged to make Makassar Indonesia’s smartest city. Digital technology is being employed to encourage development of local community vertical farms in alleyways. Farmers receive payment for their produce via electronic transfers, with revenue reinvested in local businesses. Meanwhile, medical patients have been given smart cards detailing their conditions, which doctors can then access using tablets. This enables remote diagnosis and prescription delivery, as well as more effective information gathering by medical professionals. The government also signed a deal with Singapore in November 2016, which stipulated that companies from Singapore would work with the Makassar government to help formulate a smart city plan.

HOLIDAYMAKERS: Another key sector for Makassar and South Sulawesi is tourism. Currently, the province is served by one main air gateway, Hasanuddin International Airport, located 20 km north-east of central Makassar, and named Most Improved Asia-Pacific Airport at the 2016 Airport Service Quality Awards. Main attractions include the Tana Toraja region, with its mountains, forests and distinctive culture; Pantai Bira, which offers unique diving opportunities and pristine sandy beaches; and Makassar itself. The next few years will likely see further development in these areas, as Makassar and South Sulawesi experience continued economic growth and resulting strong interest from investors.

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The Report: Indonesia 2018

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