ECONOMIC PERFORMANCE OF CITIES IN INDONESIA: IMPACT ANALYSIS OF SMART CITY CONCEPT IMPLEMENTATION

Abstract

: Since 2012, many local governments in Indonesia have independently initiated city development by implementing the concept of ‘the smart city’. This concept uses technology to improve city performance by solving problems more effectively and efficiently. The smart city concept includes not only the use of technology but also human capital, social and environmental issues as indicators of smart city attributes. As the central government of Indonesia launched its programme ‘The Movement Towards 100 Smart Cities’ in 2017, it is important to measure the success of city development in terms of the smart city concept. This study aims to estimate the effect of smart city concept implementation on the economic performance of cities in Indonesia using the two stages least squares (2SLS) method. This study also uses instrument variables (IV) by applying city smartness indicators to control some factors which will affect smart city concept implementation. The smartness indicators used are smart economy, smart people, smart governance, smart environment, smart mobility and smart living. The results prove that the implementation of the smart city concept in districts or cities in Indonesia has a significant positive effect on the economic performance of cities in Indonesia.