market watch | Research Institute

The Two Faces of , Park, Kyung-suh _ Senior Principal Researcher, POSCO Research Institute Heaven ([email protected])

When visiting Jakarta, Indonesia, for the first time, you might be confused by the two totally different faces of the city. If you are used to clean interna- tional airports and fast immigration processing, you may be disappointed by the slow entry pro- cess and aging facilities at Jakarta’s Soekarno–Hat- ta International Airport. When you add the city’s sultry weather and exhaust fumes, your first im- pression of the city may not be positive. This disappointment, however, may turn to amazement once you see the magnificent, splen- did night scene in downtown Jakarta. You will be surprised once more at the kind staff and well- managed facilities at your hotel. However, this is where the illusion of Jakarta ends. In the morning, you look down at the residen- tial streets and find that the scene you saw last night is not there. Just beyond the hotel swimming pool, you see slums and streets filled with cars and motorcycles. The narrow roads with neither center lines nor traffic lights are crowded with mo- torcycles that dart in and out of the long lines of cars. Just as you are about to say to yourself, “This is the real Jakarta,” your eyes will widen once more at the sight of the city’s large shopping malls.

Ten-plus Large Malls in Downtown Jakarta

Jakarta is becoming known as a shopper’s para- dise. About ten malls, each drawing more than 10,000 daily customers, are located in downtown Jakarta. When the Indonesian middle class began to expand, international brands became popular, giving rise to large shopping malls in the heart of

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the city— , , , Grand Indonesia Shopping Mall, and . In addition, upscale depart- ment stores such as Seibu, Sogo, and Debenhams have opened branches. And June saw the arrival of Korea’s Lotte Department Store. Jakarta’s large shopping malls not only sell luxu- ry brands such as Gucci and Louis Vuitton but also feature showrooms for luxury vehicles such as Bentley and huge LED TVs to attract consumers. In the evening, high-end family restaurants are filled with young couples in their 20s and 30s, business- men, and large families with as many as ten mem- bers, making it difficult to get a table without a res- ervation. With the development of the retail and service industries, Indonesia’s domestic market has been growing at a double-digit clip every year.

Narrow the Wealth Gap to Solve Problems of Consumption-led Growth

Indonesia is a consumer-driven economy with pri- Bloomberg vate consumption making up 60% of its GDP. As of last year, it had the world’s fourth-largest popula- based on its domestic market, it must solve the Jakarta’s Main Shopping Malls tion with 251 million people. Fashion-conscious wealth gap. In this Southeast Asian country, those consumers, particularly those in their 20s and 30s, living on less than one dollar a day amount to ap- Area Name Size (㎡) Customers/Week Rent (㎡/month, USD) account for 71% of the population. Even though Ja- proximately 30 million, accounting for 13% of the Mall Pondok Indah 200,000 200,000 90~140 karta is home to approximately 10 million people, total population. Outside Jakarta’s large shopping Senayan City 220,000 200,000 60~245 making up less than 5% of the country’s total pop- centers, street vendors and snack carts wait for Grand Indonesia 130,000 175,000 60~200 ulation, its per capita GDP (USD 12,500) is more customers with only one or two agricultural and than three times the national everage (USD 3,800). industrial products on display. Narrowing the gap Mall Kelapa Gading 80,150 500,000 40~110 Fueled by consumption, Indonesia recorded a rel- between rich and poor, which would contribute to Emporium Pluit 201,000 300,000 45~100 atively high annual growth of 6% over the past five expanding the middle class or middle-income 176,000 400,000 45~110 years despite the global financial crisis. consumers, is critical for the Indonesian economy But in order for Indonesia to continue to grow to continue to grow. Central Park 243,000 450,000 45~110

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