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Oh, the good old days. When Jakarta was still cheap and you could buy a small bottle of coke for just Rp350 and a slightly larger one for Rp500. But now? Forget it. The horrors of flesh-eating inflation continue to gnaw away at disposal incomes and it’s difficult to get a small portion of fried rice from a kaki lima (street vendor) for less than Rp10,000.

My suspicions of a surging cost of living in Jakarta – despite ostensibly low inflation – are confirmed by a new survey undertaken by Mercer, a global consultancy and research firm, which places Jakarta as the 61st most expensive city in the world, up EIGHT places since the previous survey.

By comparison, Bangkok (in 81st place) or Kuala Lumpur (102nd) are far less expensive.

But why?

Well here are the reasons. Well the ones I can think of anyway!

1. Soaring property prices: a mushrooming population in and around Jakarta and a Jakarta-centric economic strategy are pushing property prices in Jakarta into the stratosphere.

Jakarta office property


Rp40 million a square meter?!!! WTF! At that price a simple 6x3 meter shack in a prime location kampung like Jalan Jaksa is potentially worth Rp720 million!

2. Traffic congestion: Fuel may be very cheap (it’s heavily subsidized) but if it takes you one hour to travel just a few kilometers, then most of the cheap fuel is just being burned for nothing. The lack of “political will” to build a half-decent public transportation system in Jakarta is nothing short of a disgrace.

3. Information asymmetry. Jakarta can often seem expensive because it’s difficult to find good information. Many vendors are not transparent in their selling prices and the same product may sell for widely different prices depending on where you buy it. Get the right info and pay Rp4,000 for a proper black coffee at a local coffee house rather than Rp35,000 for some sugary, cream-infused mush at Starbucks. Local knowledge saves both money and time.

4. Weak consumerism. Indonesian consumers are used to being mistreated, lied to and cheated - but they rarely complain (although some, admittedly, do get out their guns). Consumer law is virtually non-existent and fraud is widespread. Be careful and don’t pay good money for a piece of imitation garbage.

5. Inequality. According to a recent article in the Jakarta Post, the so-called inequality index (the Gini index) in Indonesia now stands at 0.41 (up from 0.31 in 1999), an indication of staggering levels of social injustice. I haven’t calculated the Gini index for myself, but a cursory look at tokobagus.com suggests it’s a reasonable estimate – among the luxury cars on sale are 61 Ferrari (WTF!), 60 Jaguar and 96 Hummer - at prices up to Rp10 billion a car!!!! Jakarta’s ultra rich are not price conscious and they're willing to pay more than something is worth - pushing up prices for everyone. But where does their money come from? See (6).

 Bentley in Jakarta

6. Corruption. The streets of Jakarta are now packed full of luxury cars and salaries in Jakarta are rarely above three or four thousand dollars a month – even for professionals. Go figure!!!





1 comments

Michael P. Shipley said... @ 14 June 2012 at 14:34

90% of price increases in Indo as well as the rest of the world is caused by money printing by the central bank (BI). BI prints trillions of rupiah, lends it to the govt, property speculators, and a bunch of other govt cronies and they spend it, causing prices to skyrocket. If the rupiah was tied to gold, prices would go down, not up.

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