Indonesia is one of the developing countries, which has experienced a tremendous urban growth. The percentage of population residing in the urban areas, for example, has increased dramatically in the last three decades, from 17 percent in 1971 to 41 percent in 2000. Most urban growth was in cities of more than 1 million in size. Jakarta’s population – 11.5 million in 1990 – was projected to rise to 16.9 million by 2000, which would make it the eleventh largest city in the world. This in turn will make the urban problems even worse.
There are two significant changes, which might contribute to the urban problems. The first one is the very dynamic social and economic condition especially since 1998. The financial and economic crisis, which hit the country at the end of 1997 turning into a multidimensional crisis later, has changed the life of the urban population. The crisis, which has set the Indonesian economy back to the 70s, hurt people’s life through the decreasing purchasing power, and also pushed many workers out of job. Some argue that those who lose their jobs in the formal sector tend to move to the informal sector and by that stimulate the growth of the urban informal sector. The second one is the implementation of a decentralization policy, which shifts the power from central to local governments. It has been a fact that the local government is inexperienced in being the main actor in governing social, economic, and political policy and its capacity to implement the decentralization policy is very limited. This may cause a serious social, economic and political problem in districts or cities. One of them is the problem of urban management, including public services. There is a need to develop a comprehensive urban policy for the district level and also to improve local government capacity to face the future challenges of urban management.