The Dutch East India Company arrived in Java in the late sixteenth century and constructed a walled city, Batavia, near Jakarta Bay which served Dutch trading activities for the next three centuries. The Dutch altered the cultural and ethnic fabric of Jakarta by bringing in non-Javanese slaves from present day Sri Lanka, Myanmar and Japan, who were followed by migrants from Europe, Arabia, India, and China. The Dutch began building infrastructure, beginning with a series of canals and urban railways.
Jakarta was occupied by Japanese forces in 1942, and in 1945, after independence, it was chosen as the capital city of Indonesia. United Nations estimates put the 1995 population of Jakarta at 11.5 million people, a dramatic increase from only 530,000 in 1930.
Since the colonial period, Jakarta inhabitants have been engaged in non-agrarian activities and thus depend on imports for 94% of their food supply. Trade is the most important economic activity, while industries have had some difficulties growing in Jakarta compared to many other Asian cities.
Housing is considered to be one of the most serious problems in Jakarta due to the rapid population growth and the need to constantly replace temporary housing. Jakarta has an annual demand of approximately 200,000 units. The government has addressed this problem with programmes like the Kampung Improvement Programme, which seeks to improve public facilities such as water supplies, communal bathing and shower facilities, and roads.
The current piped system of drinking water is ineffective, therefore, 80% of Jakarta inhabitants use the underground water which has become steadily depleted. In low-lying North Jakarta, groundwater depletion has caused serious land subsidence, making the area more vulnerable to flooding and allowing sea water from the Java Sea to seep into the coastal aquifers.
Jakarta's environment has been deteriorating rapidly due greatly to the lack of a waterborne sewerage system. Furthermore, private transportation has increased faster than any other transport mode and calls for large investments of capital and scarce land to accommodate its growth.
In 1970 the Governor of Jakarta declared the "city closed." This policy continues to take effect, and requires all migrants into the city to produce identification, disclose their destination and guarantee their departure from the city. At the same time, squatter areas have been cleared, and random identity checks implemented.
In addition to discouraging migrants from coming to Jakarta, the Government sought to deal with the central city's population surplus through transmigration. A programme of decentralization aimed to channel new residents, industries and office complexes towards the east and west, where the environment was more conducive to growth.