With millions of people moving from their place of residence every year, the impact of such mobility on economic development has become an important point for discussion, not only in terms of international migration, but also the impact on a country itself. Termed ‘internal migration’, it refers to the movement of residents from one to another areas within a country such as from rural to urban areas. In this blog, I provide insight into this issue, drawing specifically upon the role that internal migration has played in Indonesia.

Internal migration has long been seen as an important aspect of Indonesia’s regional economic development. In the 1970s and 1980s, transmigration, as a form of internal migration, was one of the government’s central policies to help reduce the massive gap in Indonesia’s regional development and to stimulate economic convergence. The policy was first introduced in 1951, preceded from the colonial era, and the full subsidy of 2.25 hectares of land area, transportation, training and basic needs for five years significantly boosted the number of participant in the 1970s and a substantial number of migrants moved from Java to other Indonesian provinces, especially Lampung, East Kalimantan and Bengkulu. Despite this, the voluntary movement of people to Java was still considerable, especially to the capital city Jakarta.

 In 1981, the price of oil began to plunge, affecting the Indonesian budget tremendously, and was partly responsible for changes to the transmigration program. The project was substantially reduced in the 1990s when central government changed the main strategy of offering full facilitation to only providing information about opportunities in potential destinations, resulting in a large reduction in the number of migrants that participated in this project. To be fair, this was not the only issue. The public image of transmigration deteriorated in the second half of the 1980s due to mismanagement, followed by increased conflict in the 1990s. The program was further constrained by the fall of Suharto in 1998, and then the decentralization process in the 2000s.

The pattern of internal migration in Indonesia changed considerably not only due to the changes in transmigration program, but also because of Indonesia’s economic strategy- a non-oil export oriented economy after the mid 80s. For example, Riau grew to be the main destination for internal migration from 1985 to 1990, as a result of increased industrial development in Batam and the beginning of the palm oil estate in Kampar. These changes, however, did not alter the fact that Jakarta was still one of the most popular destinations for migration. This was followed by large waves of out-migration from Jakarta to the surrounding areas, such as Bekasi and Tanggerang in West Java between 1985-1990 and 1995-2000.

There are several interesting points that can be seen from this internal migration pattern in Indonesia. First, although people did move to an area with higher income, the relationship between the two was not high in Indonesia’s case. Transmigration may lower this relationship but the movement of people from the big cities, especially Jakarta, to the surrounding areas, seemed to be the dominant factor. Second, these areas had higher unemployment rates, especially during the 1980-1985 and 1985-1990 periods. Theoretically, ample job opportunities might have been expected but high level unemployment may occur due the reluctance of citizens, including educated youth, to take any job below their expectations. Another argument is that migrants were strongly attracted to a region’s services and infrastructure, even if it meant facing the prospect of high unemployment. Third, the internal migration story cannot be separated from the human capital story as the education levels of those who moved were, on average, higher than those who stayed. Interestingly, the areas which have a human capital depleting migration pattern (those who went out had much higher education levels than those who came in) actually had an increase in human capital accumulation. This was most likely due to the higher motivation to seek education which enabled them to move.

So, where does this leave us concerning the impact of such migration patterns on economic development? The assessment using growth regression shows that net migration in Indonesia has a significant positive impact on economic growth, and this impact is more significant on the growth of relatively poor provinces than in those that have more wealth. Further, looking at this impact shows that the positive contribution of net migration is mainly due to the positive impact of in-migration, rather than the negative impact of out-migration. The positive impact of in-migration is significant in both high and low income provinces, while the negative impact of out-migration is only significant in relatively low income provinces. The surprising result comes from the test on whether the overall migration pattern in the period of transmigration reduced regional inequality in Indonesia. The answer is no. This may be puzzling but if you look at the overall amount of transmigration participants compared to voluntary migrants (the highest number of fully assisted transmigrants is just above 365,000 families in five years while the census estimates more than 4 million people have a different province of residence in five years), it is not so surprising. In addition, the education levels of those in the program at that time are generally lower than that of the voluntary migrants.

There are two policy implications of these findings. Firstly, the policy to encourage people to move from overcrowded, relatively low income economies does not necessarily improve the inequality between regions in Indonesia. Secondly, reducing the net out-flow of migrants from the relatively poor regions, rather than trying to stop the flow into the rich cities, is more beneficial for the development of those areas. This can be done by both increasing the in-flow of migrants by, for example, trying to attract established migrants to return to their home provinces, and increasing availability of employment opportunities. The side question will be whether this needs to be linked to increasing the existence of desirable lifestyle that may be crucial for the decision to migrate or return home. 

This article is a summary of an academic paper titled “Inter-provincial migration and 1975–2005 regional growth in Indonesia” that available in the early view of Papers in Regional Science, DOI: 10.1111/pirs.12120.