Financial sector actors, the state, and the rescaling of Jakarta’s extended urban region

This article analyzes the role of financial sector actors in recent plans for the expansion of the extended urbanizing region around Jakarta. An emergent literature on financialization has argued that, in the contexts of wealthy countries, the politics of the production of urban space has been transformed by capital switching to the urban built environment in the aftermath of the crisis of profitability of industry that deepened in the 1970s. Urban planning and policy, in this view, have increasingly been shaped by the interests of banks, hedge funds, pension funds, and other financial sector actors. This article argues that a focus on the changing role of financial sector actors is highly relevant to the Jakarta case, but that theories of the financialization of urban production must take into account two significant potential sources of variation in urban contexts in the Global South. These are: variation in the role of the state, and especially the national state, in fostering regulatory, fiscal, political, and institutional environments to attract international financial actors; and variation in the sources of finance that are shaping urban outcomes. In the extended Jakarta region, the recent wave of proposals for megaproject infrastructure investments have reflected a historically and contextually specific interaction between financial capital and national state actors who seek to extend their power by maximizing their ability to direct urban development in ways that build political coalitions and feed discourses of state developmentalism. These proposals also reflect the current moment of capital switching from China, which has provided the Indonesian state with an alternative source for, and model of, financing urban development, albeit one that poses distinct geopolitical and financial risks. The result of this combination of circumstances has been a state strategy of engagement of capital, in which the Indonesian state has sought to assert new economic powers through the empowerment of state-owned enterprises (SOEs) in urban development, and in which the state strategically tacks between various sources of capital to maximize its agency and autonomy. The paper illustrates these dynamics through an examination of the Jakarta-Bandung high speed rail project, a 142-kilometer rail project connecting Jakarta and the city of Bandung that is to be financed with loans from the China Development Bank and developed by a consortium if Indonesian and Chinese SOEs.