Indonesia’s new $30 billion capital is not planned

Jakarta, the current capital of Indonesia, is overpopulated and decayed.

Southeast Asia’s largest megacity is home to some 10.6 million people. However, 40% of the metropolitan area is below sea level, and the effects of climate change are increasingly causing flooding across the capital.

That’s why in 2019 the Indonesian government approved an ambitious plan to build a new capital 100 miles from Jakarta.

Nusantara, the new capital, is not expected to be fully completed until 2045. However, the city was expected to be operational as the new seat of government in time for the inauguration of the new president in October.

According to Bloomberg, this is becoming less and less likely.

Construction delays, funding concerns and cancellations have cast doubt on whether President Joko Widodo’s $30 billion megaproject will be completed before the end of his term.

For Nusantara to become the country’s new administrative capital, ministerial offices, a presidential palace and residential and office space for at least 10,000 civil servants must be built in East Kalimantan, a province on the Indonesian side of the jungle-covered island of Borneo.

Large areas around government buildings are still under construction. When it rains, the unpaved access roads become muddy and difficult for workers to navigate.

Nusantara’s autonomous high-speed rail system.

Xinhua/Getty News Agency

Water and electricity problems have also repeatedly delayed plans to move officials into new homes since March. Only one office building, which was supposed to house four government agencies, has been completed, Bloomberg reported.

The latest estimates are that the office and residential complexes will be ready by September. “But if they are not ready, we will postpone them,” President Widodo told reporters.

In June, two senior government officials overseeing the project resigned.

Even plans to celebrate Indonesia’s Independence Day in Nusantara on August 17 have been scaled back, with the guest list reduced from 8,000 to 1,300 due to logistical challenges, the Financial Times reported.

“Accommodation was not enough, nor was food, because the ecosystem had not yet been built here,” Widodo told a news conference, according to the FT.

Despite the setbacks, President-elect Prabowo Subianto has promised to continue the project once he takes office. But concerns have grown about how Nusantara is financed.

The Indonesian government has committed to covering only about 20% of the costs and has struggled to find other sources of cash. In March 2022, Japan’s SoftBank withdrew its investment in the project.

More than 400 companies have already signed letters of intent to invest, Jokowi said, but only about $3.5 billion has been committed so far.

Subianto’s involvement in the project could boost investor confidence. The government is also enticing investors with land concessions for up to 160 years and generous tax incentives.