Indonesia plans to build a new capital by 2024

Relocation of the seat of government to Kalimantan is expected to cost US$33 billion

President Joko Widodo wants to build a city from the drawing board for 1.5 million people. Never before has the plan for a new administrative metropolis been as concrete as this one.

Indonesian President Joko Widodo ("Jokowi") wants to move the government out of Jakarta into a new capital to be built. The concern seems, to him, to be serious because he did not even wait for the official final result of the presidential election on April 17, 2019, to present his plan and visit eligible places in person. From the elections, Jokowi emerged with 55.5% of the vote as the clear winner.

A promising location is Kalimantan (Borneo), the geographical center of the archipelago. Here, Jokowi most recently assessed the area around the 400,000-inhabitant capital of Central Kalimantan, Palangkaraya. The second possible location would be the region around Bukit Soeharto in the province of East Kalimantan. Located between the two major cities of Balikpapan and Samarinda and with an international airport and a harbor in the immediate vicinity, Bukit Soeharto is considered a favorite.

An alternative would be to relocate the seat of government within Java, which accounts for nearly 60% of Indonesia's gross domestic product and accommodates two-thirds of Indonesians. 160 million people live in Java on an area slightly larger than East Germany, and the pressure on the environment and infrastructure is already high there. In addition, the fact that Indonesia’s political and economic activities are centered on Java has always been seen as an obstacle to national unity. Possible options in Sulawesi and Sumatra seem to be out of the race.

The mega plan should not be a solo act by the president, but should be promptly presented in detail to the parliament and then transformed into a law to relocate the capital. So far, the president has met no significant opposition from the other political forces in the parliament.

Green building would be in demand
The driving force on behalf of the President is the National Planning Authority of Bappenas, which already includes the relocation of the seat of government in the Mid-Term Development Plan 2020-2024, which is being drafted. By 2024, that would be the end of Jokowi's term and the new administration should be operational. The move would be completed by 2030. This is a very optimistic scenario given the delays that many large infrastructure projects in Indonesia suffer from.

According to the plan, all government agencies, the military and police apparatus and the embassies should move. Institutions that work closely with the private sector, such as the central bank, financial regulator or investment authority, would remain in Jakarta. Bappenas has designed two cost scenarios: a complete relocation of government agencies to a newly built city would cost 466 trillion rupiah (US$33 billion) or a slimmed-down 323 trillion rupiah ($23 billion). Both options are less than the Rp 571 trillion ($40 billion) that Jakarta's governor has planned to build the capital's infrastructure by 2030.

About 1.5 million inhabitants will accommodate the new city. This figure is made up of the central government's 195,000 employees and 25,000 others from the military and police, as well as their families and the service sector around them. The construction of the administrative headquarters from planning to reality would require considerable consulting services and a modern infrastructure. Both would come to a large extent from abroad in lieu of limited domestic capacities.

In addition, the new city would have to meet "green" criteria, as Bappenas has already announced. In fact, environmental protection, energy efficiency and sustainability are now topics of great and growing importance in Indonesia as well and they carry prestige. Here, too, know-how would have to be brought in from abroad.

Jakarta is overloaded
Reason for the relocation of the seat of government is the overpopulation of Jakarta in combination with a sub-sized infrastructure. Essentially, it is about the traffic congestion that paralyzes the metropolis on a daily basis. According to Bappenas, they cost the country $7 billion a year. Finally, gasoline must be imported. The first metro line, opened in April 2019, does not create any appreciable relaxation of the situation.

Jakarta is home to 10 million people and is gradually growing closer to surrounding cities, creating a metropolitan area of 30 million people. Every day, an estimated 1.3 million people commute to work in the city. There are not enough roads, railways, water pipes or sanitary facilities. And because groundwater is illegally extracted in many places, the city is sinking steadily, increasing the risk of flooding. According to some experts, the bay of Jakarta will soon have to be turned into a lagoon with a gigantic dam to prevent the city from gradually sinking into the sea.

Critics of the project predict that the relocation will not be a respite for Jakarta. Finally, only 141,000 of the 17 million registered Jakarta vehicles (including motorcycles) are admitted to government agencies. Any vacant space on Jakarta's streets would immediately be taken over by a new vehicle.

Role models in Asia
The project to build a new Indonesian capital is anything but new. Already four heads of government before Jokowi had corresponding plans. The first president, Sukarno, started it when he also proposed Palangkaraya in Central Kalimantan in 1957. His successor, Soeharto, had chosen the region around the West Javanese city of Bogor as the location of the new capital and in 1997 brought a corresponding law on the way. Shortly thereafter, however, he had to resign. Probably never the prospects of a realization is as concrete as it is today.

Several Asian countries have already taken the step of rebuilding the seat of government. Malaysia founded Putrajaya in 1995 just outside Kuala Lumpur. In 2005, Myanmar outsourced its government to Naypyidaw, located 300 kilometers north of the capital, Yangon. And South Korea inaugurated Sejong near Seoul in 2012 as an administrative center.

GTAI is the foreign trade and inward investment agency of the Federal Republic of Germany. The organization advises foreign companies looking to expand their business activities in the German market. It provides information on foreign trade to German companies that seek to enter into foreign markets.