Spatial Interactions between Planned Settlements and Small Businesses: Evidence from the Jakarta Metropolitan Area, Indonesia

Abstract

Rapid urban growth is reshaping cities and promoting economic development in low and middle-income countries throughout Southeast Asia, with the prevalence of Micro-, Small-, and Medium-sized Enterprises (MSME) emerging as a crucial factor. This study explores the complex relationship between MSMEs and planned settlements within the Jakarta Metropolitan Area (JMA), Indonesia. Utilizing official government data and extensive GIS sources analyzed using a Spatial Lag Model, the research assessed the spatial interactions between MSMEs and sixteen variables, revealing the statistical significance of eight of these variables. Notably, the study identified a negative correlation between the prevalence of planned settlements and the number of MSMEs, indicating that areas with a higher proportion of planned settlement land use tend to have fewer MSMEs. Emphasizing the importance of land use and built environment policies, the findings underscore MSMEs’ preference for locations with a greater share of commercial land uses. Moreover, the research highlights the localized nature of MSMEs, suggesting a tendency to cluster in specific areas. As Indonesia and other Global South countries experience rapid urbanization and potential increases in planned settlements, the study underscores the need for policymakers to develop strategies that foster a synergistic relationship between planned settlement development and MSME growth to support sustainable urban development.