Indonesia’s new capital

Moving an entire city to another place. Better yet, rebuild it from scratch. This would be an almost impossible undertaking for any government, especially for the capital. But Indonesia is willing to try. It will invest $37 billion to move its political, economic and commercial centre from Jakarta to a site in Kalimantan in the Indonesian part of Borneo island that is shared with Malaysia and Brunei.

Jakarta has grown so large and polluted that it has put the entire ecosystem of Indonesia’s smallest island of Java at risk. Hence the need to make Jakarta livable again, as well as guarantee a more viable economic future for the entire country.

So the government plans to build a new capital from scratch in a sparsely populated area, hosting not only public offices but also the main economic activities.

Jakarta’s problems

Despite being on a small island, Indonesia’s capital has experienced enormous economic and demographic development, turning it into a megalopolis of 10 million people. Infrastructure projects, particularly for water and sewage, have not kept pace with this growth. That means Jakarta is sinking. Unregulated depletion of the booming city’s aquifers to supply drinking water has plunged 40% of Jakarta below sea level. The government was consequently launched a series of very expensive projects, such as sea walls, to protect coastal areas from increasing erosion.

In addition, Jakarta suffers from chronic problems such as pollution and traffic congestion. According to the government, the only way to avoid a looming environmental disaster is to lighten this pressure on the city. Hence the idea for a modern, sustainable new capital. Many critics wonder, however, whether the new city will threaten Borneo’s ecosystem.

The capital of the future

Indonesian President Joko Widodo announced plans for the new city during a televised speech at the end of August.  
«The location is very strategic - it's in the center of Indonesia and the urban areas», he said, as reported by The Guardian newspaper. «The burden Jakarta is holding right now is too heavy as the center of governance, business, finance, trade and services».

Construction of the new city should begin as early as next year on an area covering 40,000 hectares. The government hopes to begin moving 1.5 million civil servants to offices and homes in the new city by 2024.

Investing in the future of Indonesia

Indonesia’s geography has a substantial impact on its economic development. The country is an archipelago made up of 17,000 islands in a small area, including regions of great environmental value such as the Borneo forest. Despite this unusual geography, economic development is strong. The government has launched an ambitious infrastructure investment plan aimed at modernising the country in a bid to turn it into the fastest growing economy in South East Asia. Development Minister Bambang Brodjonegoro announced a mega investment plan in May worth $412 billion between 2020 and 2024. According to Indonesia’s National Development Planning Agency, as much as 40% of the funds will come from the government, 25% from state-owned companies and the rest from the private sector.

About 60% of the funds will be spent on transport infrastructure, in particular motorways, railways, public transport networks, and airports. The rest will be divided among other sectors, with particular focus on the construction of power plants.

This spending, along with more efficient transport connections, will support economic growth which - according to government forecasts - should slow to a two-year low of 5.2% by 2020. The investments should push gross domestic product to an average of 5.6% to 6% a year between 2021 and 2024.
President Widodo is convinced that the investments – including the new capital -- will be a driving force for the country’s development.