Five years ago, property agent Daisul Akhyar took 20 minutes to drive to work in Pekanbaru, capital of Indonesia’s Riau province. Now, he can spend two hours in traffic after a surge in wealth transformed the city.
“If you live in Riau now, it’s like living in Jakarta, there are new residential and retail developments all over the city,” Akhyar, a director of local developer PT Asrindo Perdana Mandiri, said in Pekanbaru on Sumatera island. “Selling propertyin this place is like selling candy to children.”
The world’s fourth most-populous nation is seeing its economy reshaped as cities on islands including Sumatera and Borneo grow faster than Java, home to the nation’s capital, Jakarta. A transmigration program championed by former President Suharto in the 1980s, combined with China’s demand for palm oil, coal and iron from Indonesia’s rural provinces, helped outlying cities expand as much as 4 percentage points faster than the national average over the past decade.
As China’s expansion boosts incomes of miners and farmers in some of the sleepiest and most far-flung corners of Asia, companies from Unilever Plc (ULVR) to Toyota Motor Corp. (7203) are flocking to Indonesia’s second-tier cities to tap their rising demand. At the same time, increasing urbanization raises pressure on President Susilo Bambang Yudhoyono to improve infrastructure and strains environmental resources.
“In future, the nation’s economy will be supported by cities outside Java,” Perry Warjiyo, the central bank’s executive director for monetary policy and economic research, said in an interview. “This is in line with the government’s program to spread out economic growth to all the provinces.”