Indonesia’s plan to move capital to East Kalimantan is ‘a long way to go’, analysts say – A special focus by The Straits Times

JAKARTA, March 20 (The Straits Times/ANN): Doubts are growing over whether Indonesia will move its administrative capital from Jakarta to East Kalimantan, as the government faces the costly task of supporting the country’s recovery from slowing the pandemic and keeping energy prices affordable. at home.

The project is estimated at 467 trillion rupees (44 billion Singapore dollars). Approximately 80% of the financing will come from private investors and third parties.

Softbank, however, recently withdrew its investment plan without disclosing any reason. The Tempo daily reported that Softbank listed conditions that Indonesia rejected, including setting a minimum number of people moving to the new capital.

“It needs huge funding and our current priority is pandemic-related measures and efforts to keep energy prices stable nationally. Gasoline price subsidy needs huge funding, while our fiscal room for maneuver is limited,” said Mr. and studies law in Jakarta, told the Straits Times. “It’s a long way to go (before such a plan can be realized).”

Rising global energy prices have put a strain on Indonesia’s state budget, with the government partially subsidizing domestic energy prices to keep them affordable.

The new Capital Law, passed in January 2022, requires the government to move the administrative capital to East Kalimantan, in a bid to spread out the distribution of income. Today, 58% of the country’s economic activities are concentrated on the most populous island of Java, where Jakarta is located.

The capital of Nusantara, located in the regency of Penajam Paser Utara, is expected to officially open by October 2024 when President Joko Widodo’s term ends. The complete completion of the mega project is expected within 15 to 20 years.

Jakarta, with a population of over 10 million, was for many decades the administrative capital, as well as the financial and commercial center.

A computer generated design illustration of the future Indonesian Presidential Palace in East Kalimantan. -AFP

Dhony Rahajoe, head of the Nusantara Capital City Authority, said the 60,000 civil servants, military and police who will move to the new capital will create demand for food, clothing and housing, as well as education, medical services, amusement parks and other facilities.

“All of these requests will be opportunities for investors,” Dhony told the Straits Times via mobile text messages.

Facilities to support the day-to-day running of government, as well as basic infrastructure such as a drinking water treatment plant will also be needed, he noted.

“We will open up a wide range of partnership opportunities (with any interested investors),” he said.

The government said the UAE has maintained interest in investing.

Urban planning expert Yayat Supriyatna of Trisakti University in Jakarta told the Straits Times that one of the challenges in attracting investors is the size of the population in the new capital and its major regions – the existing cities of Balikpapan and Samarinda.

The population is estimated at seven million by 2045, which will be dwarfed by the 170 million people projected in Java.

“We have high-speed train construction between Jakarta and Bandung, LRT (Integrated Rail Line) projects and others underway. Investors would rather be attracted to Java,” Yayat said.

Meanwhile, President Widodo and governors across the country inaugurated the site in a ceremony on March 14.

West Java Governor Ridwan Kamil said, “We have to think about who will live here. If we only relied on civil servants, it would be too quiet a place. The city must have adequate facilities that would make non-civil servant residents want to reside here.”

West Papua Governor Dominggus Mandacan praised the location of the new capital, saying it would make travel more convenient.

“We in eastern Indonesia today need five hours to get to Jakarta. The new capital would only require us to spend two to two and a half hours,” he said. – The Straits Times/ANN