JAKARTA AND THE CENTRAL GOVERNMENT : FINDING A MIDDLE PATH FOR DEVELOPMENT

By KUSNANDAR & CO., Attorneys at Law – Jakarta, INDONESIA

 

Amid growing fiscal pressure, the Jakarta Provincial Government has found a different way forward. Governor Pramono Anung and Minister of Finance Purbaya Yudhi Sadewa have recently agreed on a creative financing scheme to support the construction of the new Bank Jakarta headquarters in the Sudirman Central Business District (SCBD).

 

Their meeting at City Hall on October 7, 2025, marks a new chapter in the fiscal relationship between the central and regional governments. It is no longer just about budget allocation, but about how both parties can collaborate through a win-win solution—finding financial balance in the midst of constraint.

 

After a Rp 15 trillion reduction in revenue-sharing funds (Dana Bagi Hasil or DBH), Jakarta’s regional budget dropped from Rp 95 trillion to Rp 79 trillion. Yet rather than pausing development, the provincial government chose innovation. The new Bank Jakarta building will be financed through a state asset utilization scheme: the central government will lease strategic land in SCBD to Bank Jakarta for 50 years, with a revenue-sharing agreement—30 percent for the central government, and the rest for the city-owned bank and the provincial government.

 

This model creates a dual benefit. The central government gains long-term economic value without spending on construction, while Jakarta can continue developing key infrastructure without straining its regional budget. Efficiency and fiscal sustainability meet in one creative policy.

 

Even more promising is the Finance Minister’s approval for Jakarta’s regional-owned enterprises (BUMD) to access part of the Rp 200 trillion fund managed by state-owned banks (Himbara). These funds can be channeled into productive sectors and small and medium enterprises (SMEs), potentially expanding the economic impact beyond SCBD’s skyscrapers to Jakarta’s broader business ecosystem.

 

Of course, every innovative policy requires caution. Leasing state assets for half a century must be governed with strong oversight to prevent legal disputes or misuse. Both the central and provincial governments need to ensure transparency in asset valuation, profit sharing, and project auditing. Likewise, Bank Jakarta must uphold sound governance so that the access to funding translates into genuine productivity, not idle capital.

 

Equally important is balance. While SCBD symbolizes Jakarta’s global ambitions, development must not become too concentrated in elite areas. The government must ensure that growth and opportunity reach the city’s outer regions and underserved communities.

 

Still, the collaboration between Pramono Anung and Purbaya Yudhi Sadewa deserves recognition. At a time when many regional leaders lament limited fiscal space, Jakarta has demonstrated that financial creativity can be a viable path forward. This partnership shows that development does not always depend on central government transfers, but on the ability of local governments to manage their resources intelligently and responsibly.

 

If carried out transparently and prudently, the Bank Jakarta project could stand as more than just another office tower—it could symbolize fiscal maturity and a new spirit of collaboration between the central and regional governments. It’s a reminder that, even under fiscal pressure, innovation and cooperation remain the true engines of progress.

K&Co - October 9, 2025