Infrastructure and Jokowi’s Development Model

The development model during Joko Widodo's (Jokowi) administration reflects the pragmatic adoption of New Institutional Economics (NIE) concepts or approaches. This approach emphasizes the importance of institutional reform and infrastructure strengthening to facilitate economic efficiency and investment. The NIE theory, developed by economists like Douglass North, posits that institutions—including laws, regulations, and social norms—play a crucial role in guiding economic behavior and influencing development outcomes (North, 1990). In the Indonesian context, large-scale projects such as the Trans Java toll road and the new capital city (IKN) are designed to be engines of economic growth. However, the application of NIE in Indonesia presents complex dynamics and invites controversy. Ambitious infrastructure development promises economic growth but often exacerbates inequality and increases social burdens, particularly for communities in affected areas.

This phenomenon is evident when analyzing how Jokowi's regime plans and executes these projects. The IKN project, designed to address Jakarta's congestion as the current capital, risks diverting attention from other fundamental issues, such as poverty, unemployment, and social inequality. Many are concerned that this grand ambition will overlook social and environmental aspects, potentially creating further injustice.

New Institutional Economics (NIE) Approach

NIE explains that changes in institutions—both formal and informal—can impact a country's economic performance. In Indonesia, weak institutions often hinder inclusive growth. For instance, legal uncertainty and corruption impede investment, while unclear land rights can trigger social conflicts. According to North (1990), effective institutions are those that can reduce transaction costs and provide appropriate incentives for individuals to participate in the formal economy.

In policy implementation, NIE highlights the importance of local stakeholders in the planning process. When the government ignores community voices, it not only undermines social justice but also hinders the success of development projects. A study by Ostrom (1990) indicates that successful management of common resources requires active community participation to achieve fair and sustainable outcomes.

Thus, to achieve sustainable economic growth, the Indonesian government must strengthen institutions that support public participation and transparency in every development project.

Economic Growth in Jokowi's Era

Under Jokowi's leadership, Indonesia has recorded some achievements in economic growth. According to the Central Statistics Agency (BPS), Indonesia's economic growth reached 5.17% in 2019 before the COVID-19 pandemic hit. This growth was fueled by several policies supporting investment, including regulatory reductions and infrastructure improvements, which were expected to foster a better and sustainable investment climate. Jokowi focused his administration on infrastructure development as a key pillar for economic growth, reflected in significant budget allocations for infrastructure projects.

For instance, the construction of toll roads, ports, and new dams across Indonesia has been planned and implemented to improve inter-regional connectivity. According to the Ministry of Public Works and Housing (PUPR), this infrastructure development not only creates thousands of jobs but also enhances accessibility and regional competitiveness.

Despite achievements in economic growth, many critics argue that the benefits of this growth are not evenly distributed. The informal sector still dominates the economy, and unemployment remains a serious challenge. According to a World Bank report, despite Indonesia experiencing growth, social and economic disparities remain concerning, and the availability of quality jobs is a critical issue that needs attention. The sustainability of Indonesia's economic growth heavily depends on advancements in improving job quality and access to education and health for all segments of society.

Implementation of Development: Economic Efficiency or Social Marginalization?

Jokowi employs the NIE approach to facilitate massive infrastructure development with hopes of increasing efficiency and attracting foreign investment. The IKN project and the Trans Java toll road construction are designed to streamline the distribution of goods and services, which, in turn, is expected to reduce logistics costs and boost economic growth. However, these projects often face issues, such as budget overruns and delays, indicating serious challenges in project management.

For instance, the IKN project is expected to cost over IDR 466 trillion, but criticism regarding transparency and accountability in budget use continues to rise. Some analysts worry that substantial spending on this project will sacrifice funding allocations for other more urgent sectors, such as education and health. Moreover, infrastructure development projects often overlook the local communities directly affected. Forced evictions without adequate compensation and agrarian conflicts become social impacts that cannot be ignored.

In this context, the NIE approach applied in Jokowi's development style merely serves as an instrument for economic and political elites to accumulate capital, while the lower-class communities fall victim to an unjust modernization process.

Furthermore, the development of toll roads and other infrastructure frequently involves land acquisition that harms local communities. Many residents lose their land without proper compensation, creating widespread dissatisfaction. Data show that around 30% of residents living in areas impacted by infrastructure projects experience eviction without adequate solutions (Amnesty International, 2021). This rapid development, while positively affecting overall economic growth, often results in significant losses for disadvantaged communities.

Inequality and Institutional Crisis

One of the main weaknesses of NIE implementation in Indonesia is the lack of institutional reform. Transparency and accountability—which should be fundamental principles of NIE—are not effectively functioning. Large projects often become grounds for corruption and nepotism. Reports indicate that the budget diversion for the IKN project faces significant challenges related to allegations of embezzlement and a lack of public control over fund allocation. Instead of strengthening institutions, this development deepens the power inequality between the center and the regions, as well as between the government and the public.

Inequality data show that Indonesia's Gini ratio, which measures income distribution, reached 0.39 in 2020, indicating worsening inequality (BPS, 2020). High inequality can be attributed to evictions and the marginalization of certain groups during the development process. Public trust in government institutions has also declined alongside ongoing projects perceived as unjust. This dissatisfaction poses a risk of social unrest and could worsen political conditions in the future. In this context, it is essential for the government to evaluate the development approaches used, not only to focus on economic outcomes but also to consider the social impacts produced.

Public Participation and Inclusive Development Challenges

The absence of public participation in the planning and implementation of development further weakens the legitimacy of Jokowi's projects. Decision-making processes dominated by government and private elites create social exclusion. Within the NIE framework, institutions must not only be efficient but also inclusive, as emphasized by Ostrom. Without community involvement, development policies are likely to end in resistance and conflict.

For example, the IKN project has triggered protests from local communities concerned about losing land and access to resources. When residents lose their homes and livelihoods without adequate compensation, dissatisfaction and a sense of injustice intensify. In this case, it is crucial for the government to establish better participation mechanisms that allow communities to engage in decision-making and benefit from development.

Ignoring public participation not only harms communities but can also hinder the success of the projects themselves. Development efforts without top-bottom schemes allow elites to dominate the process, including maintaining their interests. Institutions are not neutral mediums for formulating and executing policies; they are arenas for power interest struggles driven by capital accumulation.

Conclusion

Overall, Jokowi's leadership era presents a complex picture regarding the application of New Institutional Economics theory in Indonesia's development context. Despite significant efforts to strengthen infrastructure and stimulate economic growth, significant challenges remain concerning institutional reform itself. The NIE-style institutional development is ineffective when institutional actors are corrupt, exclusive, and greedy, ultimately leading to social inequality as a consequence of development. The injustices arising from development projects, which often neglect community voices, demonstrate that rapid economic growth does not always align with social justice.

To create inclusive development, the government must commit to strengthening institutions that support public participation and transparency. Building constructive dialogue with local communities and involving them in the planning process is a crucial step to minimize the negative impacts of development projects. Only in this way can Indonesia avoid the traps of inequality and ensure that the outcomes of economic growth are enjoyed by all segments of society. Sustainable development must balance economic interests and social welfare, considering that the strength of a nation lies in its ability to create justice for all its citizens.

By focusing on public participation and institutional reform in the implementation of development efforts, Indonesia has the potential to become a country that not only grows economically but is also just and inclusive for all its people.

References

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Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.

Amnesty International. (2021). Indonesia: “We’re Not Against Development”: A Report on the Impact of Infrastructure Development on Communities.

Central Statistics Agency (BPS). (2020). Indonesian Social Statistics.

World Bank. (2021). Indonesia Economic Quarterly: Resilience Amid Uncertainty.

Ministry of Public Works and Housing (PUPR). (2020). Annual Report.

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