In the rapidly urbanizing world, the informal settlement has been forming a significant part of the common urban scene in many cities in the developing countries. It holds a particular role in the city as it houses millions of urban poor who has no access to the public housing. However it does not only offer accommodation but also economic opportunities that enables the inhabitants to survive. The informal settlement displays a very specific and particular mechanism of survival that is significantly characterized by the notion of flexibility in term of production and spatial occupation. This research aims to investigate the local spatial economy or the spatial dynamic of survivability in the informal settlement. It focuses on the notion of space and locations of the process of survival in such settlement by analyzing the way the spaces are organized and negotiated as one of the most important tool of production and the place of production. It analyzes the dynamics by relating it to the notions of the social capital and the life chances in the informal settlement. Moreover in order to offer a deeper understanding of the problem, apart from the looking at the actual and the localized problem, it will also look at the root of the problems by relating it to its past as an element of a colonial city; and analyse the major economic forces that contribute to its creation by relating it with the Dual City theory in order to accentuate the nature of the problem and its position in the metropolitan context. The research employs the case of kampong to illustrate the case of the informal settlement in the city of Jakarta, Indonesia. The result of the research shows that the dynamic of the survivability in the informal settlement is characterized by a multi-tier relationship between the formal and the informal economy. The continuity of its production is related to the wider economic sector; namely the formal sector, that creates demands and economic opportunities for them. It is also strongly bounded with its actual location; dislocation would therefore destroy the local livelihood. The local economic activities are also determined by the flexibility of the local spatial organization and production. These particular characters enable the inhabitants to manoeuvre in order to survive amidst the limited capital and resource. The process of production is highly depended on the intensity social relation that makes the spatial negotiation and the flexible production possible to take place. The local survivability therefore is in the same time very flexible and fragile.