Indonesia revives vast capital city move from Jakarta to Borneo

Indonesia aims to kickstart President Joko Widodo’s ambitious plan to relocate its capital city to the island of Borneo by offering property contracts to investors this year.

The project could begin with construction work on a bird-shaped state palace, a minister has told Reuters.

The US$33 billion plan was put on the back burner last year due to the pandemic, but National Development Planning Minister Suharso Monoarfa said accelerating the project now should help a post-crisis recovery of Southeast Asia’s biggest economy.

The plan is, however, contingent on the success of Indonesia’s Covid-19 vaccination drive.

“If we can vaccinate one million people per day, I think we have a strong reason to get on with the new capital city,” Suharso said.

Indonesia aims to inoculate 70 million people by July, or nearly 40% of targeted vaccine recipients, in order to remove some restrictions and allow construction work to commence, he said.

In the period from mid-January to this Wednesday, authorities had fully vaccinated 2.7 million people.

The president, known as Jokowi, announced his plan to build a new capital in 2019, with civil servants due to move from congested and sinking Jakarta by the end of his term in 2024.

Suharso said debate on a bill to establish the legal basis for the project will start in parliament soon and preparations were being made for private sector contracts to build homes, offices, schools and hospitals for at least 200,000 civil servants and their families, in the as-yet unnamed city.

“Foreign investors can join, especially if they partner with domestic players,” he said, adding that the government will focus on basic infrastructure and security-sensitive premises.

Japan’s Softbank is among foreign companies that have previously been linked to the capital project, which the government has touted as a smart, green city.

The government also plans a groundbreaking design for a new state palace this year, with one of the proposed designs in the shape of the mythical Garuda bird – the state symbol – spreading its wings.

There have been concerns about the risk of corruption tied to the project, while environmentalists worry about damage to the environment in a forested area that is home to orangutans.

But more recently the criticism has been on the timing given how the pandemic has caused economic and health crises, straining Indonesia’s fiscal position.

Suharso said the cost for the government this year would be minimal with most investment coming from private developers, adding this should support the property sector and create jobs.

However, Bank Permata economist Josua Pardede told Reuters that for budget reasons it would be better to delay the project to at least 2022.

“You have to pay attention to business appetite in the middle of a pandemic for large, long-term projects,” he said.